-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AAK/UsS+fQdFz7iNog0rcVb3PmybKec8YxsPn6QrGd0Q4zWzjlQ05GCt4AaSdQxM vdcCZe6bjw7BxcdXnPArOA== 0001047469-97-009306.txt : 19980102 0001047469-97-009306.hdr.sgml : 19980102 ACCESSION NUMBER: 0001047469-97-009306 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 31 FILED AS OF DATE: 19971231 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED DEFENSE INDUSTRIES INC CENTRAL INDEX KEY: 0001051719 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522059782 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-43619 FILM NUMBER: 97747819 BUSINESS ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 BUSINESS PHONE: 7033126100 MAIL ADDRESS: STREET 1: 1525 WILSON BLVD STREET 2: SUITE 700 CITY: ARLINGTON STATE: VA ZIP: 22209-2411 S-4 1 S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ UNITED DEFENSE INDUSTRIES, INC. DELAWARE 3795 52-2059782 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of Classification Code Number) Identification incorporation or organization) No.)
Iron Horse Investors, L.L.C. Delaware 52-2059783 UDLP Holdings Corp. Delaware 52-2059780 United Defense, L.P. Delaware 54-1693796
1525 WILSON BOULEVARD, SUITE 700 ARLINGTON, VIRGINIA 22209-2411 (703) 312-6100 (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------------ FRANCIS RABORN 1525 WILSON BOULVARD, SUITE 700 ARLINGTON, VIRGINIA 22209-2411 (703) 312-6100 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT OF SERVICE) COPIES TO: MARK A. STEGEMOELLER LATHAM & WATKINS SEARS TOWER, SUITE 5800 CHICAGO, ILLINOIS 60606 (312) 876-7700 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE 8 3/4% Senior Subordinated Notes due 2007...................................... $200,000,000 100% $200,000,000 $59,000 Subsidiary Guarantees of the 8 3/4% Senior Subordinated Notes due 2007................... -- -- -- (2)
(1) Estimated solely for the purposes of calculating the amount of the registration fee pursuant to Rule 457. (2) Pursuant to Rule 457(n), no separate registration fee is payable with respect to the subsidiary guarantees. ------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
FORM S-4 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS - ------------------------------------------------------------------- -------------------------------------------------------- A. INFORMATION ABOUT THE TRANSACTION 1. Forepart of Registration Statement and Outside Front Cover Page Prospectus................................. Outside Front Cover Page; Cross Reference Sheet; Inside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus............................................ Inside Front Cover Page; Outside Back Cover Page 3. Risk Factors, Ratio of Earnings to Fixed Charges and other Information..................................... Prospectus Summary; Risk Factors; Unaudited Pro Forma Financial Data; Selected Historical Financial Data 4. Terms of the Transaction................................ The Exchange Offer; Certain Federal Income Tax Considerations; Plan of Distribution; Description of the Notes; The Acquisition 5. Pro Forma Financial Information......................... Unaudited Pro Forma Financial Data 6. Material Contacts with the Company Being Acquired....... Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters......... Not Applicable 8. Interests of Named Experts and Counsel.................. Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities........................................... Not Applicable B. INFORMATION ABOUT THE REGISTRANT 10. Information with Respect to S-3 Registrants............. Not Applicable 11. Incorporation of Certain Information by Reference....... Not Applicable 12. Information with Respect to S-2 or S-3 Registrants...... Not Applicable 13. Incorporation of Certain Information by Reference....... Not Applicable 14. Information with Respect to Registrants Other Than S-3 or S-2 Registrants.................................... Prospectus Summary; Risk Factors; The Exchange Offer; Use of Proceeds; Capitalization; Unaudited Pro Forma Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Principal Stockholders; Certain Transactions; Description of Certain Indebtedness; Description of the Notes; Financial Statements
CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
FORM S-4 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS - ------------------------------------------------------------------- -------------------------------------------------------- C. INFORMATION ABOUT THE COMPANY TO BE ACQUIRED 15. Information with Respect to S-3 Companies............... Not Applicable 16. Information with Respect to S-2 or S-3 Companies........ Not Applicable 17. Information with Respect to Companies Other Than S-2 or S-3 Companies......................................... Not Applicable D. VOTING AND MANAGEMENT 18. Information if Proxies, Consents or Authorizations are to be Solicited....................................... Not Applicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer........... Management; Certain Transactions; Principal Stockholders
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS OFFER TO EXCHANGE 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 (THE "EXCHANGE NOTES") FOR ALL OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 (THE "PRIVATE NOTES") OF UNITED DEFENSE INDUSTRIES, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON UNLESS EXTENDED. -------------------------- United Defense Industries, Inc. (the "Company") is offering (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its 8 3/4% Senior Subordinated Notes Due 2007 (the "Exchange Notes"), which exchange has been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement of which this Prospectus is a part (the "Registration Statement"), for each $1,000 principal amount of its outstanding 8 3/4% Senior Subordinated Notes Due 2007 (the "Private Notes"), of which $200,000,000 in aggregate principal amount was issued on October 6, 1997 and is outstanding as of the date hereof. The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the exchange will have been registered under the Securities Act, and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Private Notes under the Registration Rights Agreement (as defined), which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be entitled to the benefits of the Indenture (as defined). The Private Notes and the Exchange Notes are sometimes referred to herein collectively as the "Notes." See "The Exchange Offer" and "Description of the Notes." The Exchange Notes will bear interest at the same rate and on the same terms as the Private Notes. Consequently, the Exchange Notes will bear interest at the rate of 8 3/4% per annum and the interest thereon will be payable semi-annually on May 15 and November 15 of each year, commencing May 15, 1998. The Exchange Notes will bear interest from and including the date of issuance of the Private Notes (October 6, 1997). Holders whose Private Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Private Notes. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after November 15, 2002, at the redemption prices set forth herein plus accrued and unpaid interest thereon to the applicable redemption date. In addition, at any time prior to November 15, 2000, the Company may redeem up to 35% of the original aggregate principal amount of the Notes at a redemption price equal to 108.75% of the principal amount thereof plus accrued and unpaid interest thereon to the redemption date, with the net cash proceeds of one or more Public Equity Offerings (as defined); provided that at least 65% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. The Notes will also be redeemable by the Company in the event of a Change of Control (as defined) at any time prior to November 15, 2002, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined), plus accrued and unpaid interest thereon to the redemption date. In the event of a Change of Control, if the Company does not redeem all of the Notes, each holder of the Notes will have the right, at the holder's option, to require the Company to purchase the Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest thereon to the purchase date. See "Description of the Notes." The Notes will be general unsecured obligations of the Company subordinate in right of payment to all existing and future Senior Debt (as defined) of the Company, including all obligations under the Senior Credit Facility. The Notes will be guaranteed on a senior subordinated basis by the Company's parent, Iron Horse Investors, L.L.C. ("Iron Horse"), UDLP, UDLP Holdings Corp. and each of the Company's other subsidiaries that are also guarantors under the Senior Credit Facility (collectively, the "Guarantors"). As of November 30, 1997, the Company had approximately $428.5 million of Senior Debt outstanding (excluding outstanding letters of credit of approximately $157.0 million and unused commitments of approximately $111.0 million under the Senior Credit Facility, $50.0 million of which is available only to fund the repayment of the Seller Note) and $50.0 million outstanding under the Seller Note (which is PARI PASSU in right of payment with the Notes and will mature on the third anniversary of the Acquisition). See "Description of the Notes--Subordination" and "Capitalization." SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------------------- THE COMPANY WILL ACCEPT FOR EXCHANGE ANY AND ALL VALIDLY TENDERED PRIVATE NOTES NOT WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION DATE"). TENDERS OF PRIVATE NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. THE EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM PRINCIPAL AMOUNT OF PRIVATE NOTES BEING TENDERED FOR EXCHANGE. PRIVATE NOTES MAY BE TENDERED ONLY IN INTEGRAL MULTIPLES OF $1,000. IN THE EVENT THE COMPANY TERMINATES THE EXCHANGE OFFER AND DOES NOT ACCEPT FOR EXCHANGE ANY PRIVATE NOTES, THE COMPANY WILL PROMPTLY RETURN ALL PREVIOUSLY TENDERED PRIVATE NOTES TO THE HOLDERS THEREOF. -------------------------- The date of this Prospectus is , 1998 Based on an interpretation by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Private Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act; PROVIDED that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, and had no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Holders of Private Notes wishing to accept the Exchange Offer must represent to the Company, as required by the Registration Rights Agreement, that such conditions have been met. The Company believes that, to its knowledge, none of the registered holders of the Private Notes is an affiliate (as such term is defined in Rule 405 under the Securities Act) of the Company. Prior to the Exchange Offer, there has been no public market for the Private Notes. The Company does not intend to list the Exchange Notes on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the Exchange Notes will develop. To the extent that a market for the Exchange Notes does develop, the market value of the Exchange Notes will depend on market conditions (such as yields on alternative investments), general economic conditions, the Company's financial condition and certain other factors. Such conditions might cause the Exchange Notes, to the extent that they are traded, to trade at a significant discount from face value. See "Risk Factors--Absence of Public Market for the Notes." Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Private Notes where such Private Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has indicated its intention to make this Prospectus (as it may be amended or supplemented) available to any broker-dealer for use in connection with any such resale for the period required by the Securities Act. See "Plan of Distribution." The Company will not receive any proceeds from, and has agreed to bear the expenses of, the Exchange Offer. No underwriter is being used in connection with this Exchange Offer. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. 2 UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM. THE COMPANY EXPECTS THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE ISSUED IN THE FORM OF ONE OR MORE FULLY REGISTERED GLOBAL NOTES THAT WILL BE DEPOSITED WITH, OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC" OR THE "DEPOSITARY") AND REGISTERED IN ITS NAME OF CEDE & CO., AS ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY THE DEPOSITARY AND ITS PARTICIPANTS. AFTER THE INITIAL ISSUANCE OF SUCH GLOBAL NOTE, EXCHANGE NOTES IN CERTIFICATED FORM WILL BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTE IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH IN THE INDENTURE. SEE "DESCRIPTION OF NOTES--BOOK ENTRY, DELIVERY AND FORM." NOTICE REGARDING FORWARD-LOOKING INFORMATION This Prospectus includes "forward-looking statements." All statements other than statements of historical facts included in this Prospectus, including, without limitation, the statements under "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and located elsewhere herein regarding industry prospects and the Company's business plans, opportunities and financial position are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") are disclosed in the Prospectus, including, without limitation, in conjunction with the forward-looking statements in this Prospectus under "Risk Factors." All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. 3 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. FOR PURPOSES OF THIS PROSPECTUS, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "COMPANY" REFERS TO UNITED DEFENSE INDUSTRIES, INC. AND ITS CONSOLIDATED SUBSIDIARIES, INCLUDING UNITED DEFENSE, L.P. ("UDLP"), AFTER GIVING EFFECT TO THE TRANSACTIONS (AS DEFINED), AND HISTORICAL REFERENCES TO THE COMPANY INCLUDE THE BUSINESSES CONDUCTED BY UDLP PRIOR TO GIVING EFFECT TO THE TRANSACTIONS AND THE BUSINESSES CONDUCTED BY THE PREDECESSORS OF UDLP THAT WERE CONTRIBUTED TO UDLP UPON ITS FORMATION ON JANUARY 1, 1994. ALL REFERENCES TO "PRO FORMA" FINANCIAL INFORMATION GIVE EFFECT TO THE TRANSACTIONS, AS FURTHER DESCRIBED UNDER "UNAUDITED PRO FORMA FINANCIAL DATA." THE COMPANY The Company is a leading supplier of tracked, armored combat vehicles and weapons delivery systems to the U.S. Department of Defense and a number of allied military forces worldwide. The Company's products include critical elements of the U.S. military's tactical force structure. The Bradley Fighting Vehicle, recognized as one of the best-performing weapons systems in U.S. history, is the only domestically produced vehicle able to fulfill the dual role of troop transport and armored fighting vehicle. The Company has maintained its prime contractor position on the Bradley program since production began in 1981, and has added a number of technology-based upgrades and derivative vehicles that continue to extend the program's life-cycle. Building on over twenty years of experience on the M109 self-propelled howitzer and upgrades, the Company is also the prime contractor for the development of the Crusader Field Artillery System. The U.S. Army has identified the Crusader as its planned multi-billion dollar next-generation field artillery system and the largest U.S. military vehicle development program of this decade. For the twelve months ended September 30, 1997, the Company had pro forma revenues of approximately $1.2 billion and pro forma EBITDA (as defined) of $127.1 million. The Company enjoys strong, long-standing customer relationships as a result of its advanced design, engineering and manufacturing capabilities, competitive cost structure, diversified product portfolio, demonstrated upgrade capabilities, and reputation for program quality and service. Management believes that these characteristics provide a key competitive advantage in obtaining upgrade production contracts and in pursuing other domestic and international business opportunities with new and existing customers. In addition to the Bradley Fighting Vehicle and the M109 howitzer, the Company serves as the prime contractor for a number of mission critical military programs, several of which have spanned decades. The Company has been the prime contractor for several of these programs, including the M113 armored personnel carrier since 1960, the M88 tank recovery vehicle since 1960, and the U.S. Navy's Mk45 naval gun system since 1968. The Company is currently performing under more than 30 active contracts with original funded values in excess of $25 million each. The Company had a firm funded backlog of more than $1.6 billion as of November 30, 1997, a substantial majority of which is derived from sole-source, prime contracts. Management believes that the emphasis of the U.S. Department of Defense on enhancing military preparedness within a declining procurement budget environment has resulted and will continue to result in increased emphasis on upgrading and extending the life of existing equipment and systems, including those currently supplied by the Company. Management believes this trend favors large, established contractors such as the Company that are qualified to perform sole-source contracts for product design, development, manufacture, field service and support and subsequent upgrades. 4 The Company organizes its operations into three business areas: Armored Combat Vehicles, Armament Systems and International. ARMORED COMBAT VEHICLES. This business area is comprised of the Ground Systems, Paladin Production and Steel Products Divisions of the Company. GROUND SYSTEMS. The Company is the leading U.S. developer and manufacturer of medium/light tracked, armored combat vehicles, including the Bradley family of vehicles and derivatives (such as the Multiple Launch Rocket System carrier, the Fire Support Vehicle, the Command and Control Vehicle and the Stinger Fighting Vehicle), M109 self-propelled howitzers, M992 Field Artillery Ammunition Supply Vehicles, M88 Recovery Vehicles, Grizzly Breaching Vehicles, M9 Armored Combat Earthmovers, the M113 family of troop transport vehicles and derivatives, M8 Armored Gun System and LVTP7 Amphibious Assault Vehicles. PALADIN PRODUCTION. Through an innovative private sector/public sector partnership, the Company has partnered with the U.S. government to upgrade the M109 howitzer to the A6 configuration, known as the Paladin, creating a comprehensive and integrated package with modern battlefield capabilities. STEEL PRODUCTS. The Company is the largest U.S. designer and producer of track shoes for armored combat vehicles and components for suspension systems. The Company manufactures these products for nearly all of the tracked, armored combat vehicles produced in the U.S., including vehicles manufactured by its competitors. The Company also performs upgrades of the M113 family of vehicles through a cooperative relationship with the U.S. Army. ARMAMENT SYSTEMS. The Company provides integrated weapons delivery systems, subsystems and services to the U.S. armed forces and military customers worldwide. CRUSADER. The Company is the prime contractor and systems integrator for the Crusader under a $1.1 billion Demonstration and Validation contract, which is presently scheduled to be completed in 2001, and expects to become the prime contractor for the $1.0 billion Engineering and Manufacturing Development phase presently scheduled to begin in 2000. Management believes the expertise acquired through the design, development and engineering phases would give the Company a significant advantage in securing the $1.3 billion Low Rate Initial Production phase scheduled to begin in 2004 and any Full Rate Production contract ultimately awarded, if necessary funding is appropriated and the U.S. Army continues to proceed with the Crusader. NAVAL PROGRAMS. Since 1940, the Company has designed, developed and manufactured advanced guns and missile-launching systems for the U.S. Navy. The Company is the sole-source, prime contractor of the Mk45 five-inch naval gun, the U.S. Navy's primary gun for surface vessels, and produces the Mk41 Vertical Launching System, the Navy's primary surface vessel missile launcher, under a work-split agreement with Lockheed Martin Corporation. The Company is also actively involved in the development and testing of several new naval guns and missile launch systems, and provides complete overhaul, repair and maintenance of naval ordnance at the recently privatized Naval Ordnance Station at Louisville, Kentucky. INTERNATIONAL. The Company has expanded its international presence over the past several years, and its International Division operates joint ventures in Saudi Arabia and Turkey and co-production programs in Japan, Korea and Pakistan. The joint ventures have been awarded contracts to provide logistics support and training, vehicle modernization upgrades and new tracked, armored combat vehicle production. The Company provides training, technology and production kits to its co-production partners and assists them in building domestic production capability. 5 In addition to the International Division's operations, the Company had export sales directly and through the U.S. government's Foreign Military Sales program, comprising $194.2 million of 1996 revenues. Management believes the international market offers attractive opportunities to leverage established programs, which the Company is actively pursuing in a number of countries including Canada, Egypt, Israel, Kuwait, Malaysia, Spain, Taiwan and Thailand, although opportunities in Asia may be reduced or deferred by recent economic and political turmoil in that region. BUSINESS STRENGTHS The Company attributes its performance to several factors, including the following: COMPREHENSIVE CAPABILITIES IN ARMORED COMBAT VEHICLES. For more than half a century, the Company has remained at the forefront in the design, development and upgrade of medium/light tracked, armored combat vehicles, beginning with the primary amphibious vehicle used in World War II, followed in 1960 by the M113, the main troop transport vehicle used by the U.S. and other militaries with over 80,000 vehicles delivered worldwide. In 1981, the Company began initial production as the sole-source, prime contractor for the Bradley Fighting Vehicle. Management believes that these and other successes resulted from the Company's proven, comprehensive design and engineering experience in simulation, systems integration, armor, mobility and survivability, its demonstrated ability to infuse "information dominance technologies" into combat systems for enhanced information gathering, analysis and application in the battlefield environment, its demonstrated manufacturing and upgrade capability, and its reputation for service in the field. ABILITY TO LEVERAGE SYSTEMS INTEGRATION EXPERTISE INTO LONG-TERM PROGRAMS. The Company's experience and technological expertise afford it a continued position as team leader and prime systems integrator for the programs in which it participates, and positions the Company for the development and integration of other complex, critical weapons systems. For example, management believes the Company's position as the systems integrator on the Crusader played a significant role in the Company's recent success in being named gun weapons systems integrator for the Naval Surface Fire Support program, with responsibility for the development and integration of a new naval gun system. Management also believes that these capabilities create advantages in marketing to international customers seeking products compatible with systems used by the U.S. military. LARGE, INSTALLED BASE OFFERS SIGNIFICANT LIFE-CYCLE OPPORTUNITIES. The U.S. military is under budgetary constraints that provide incentives to upgrade and overhaul existing systems and vehicles to maximize system life. The Company's resident knowledge of its extensive domestic and international installed base of vehicles affords significant opportunities, through modernization upgrades, derivative vehicles that expand program capabilities, and logistical support services and spares, to effectively extend product life for many years after development. For example, the Bradley Fighting Vehicle has undergone three generations of upgrades and has fostered a number of derivatives, and the Company has upgraded its M109 howitzers to the A6 Paladin configuration and its M88 recovery vehicles to the Hercules configuration. Management believes these upgrades and derivatives, which comprise a substantial amount of the Company's funded backlog, are more predictable sources of revenue and cash flow than new products. STRONG INTERNATIONAL PRESENCE AND GROWTH POTENTIAL. In contrast to the declining U.S. procurement budget, military budgets of certain foreign governments have expanded due to general economic growth or regional geo-political pressures. Management believes the Company's proven design, development, engineering and manufacturing capabilities for the U.S. military have been the foundation for its International Division and export business. For example, management believes the domestic M113 program and prior co-production programs for Armored Infantry Fighting Vehicles in Europe were the basis for the award of contracts for similar vehicles to the Company's Turkish joint venture. Management also believes that the Company's existing product breadth and established manufacturing platforms provide it with certain cost advantages over smaller foreign competitors when pursuing typical lower volume foreign contracts. 6 INNOVATIVE PUBLIC/PRIVATE TEAMING RELATIONSHIPS. The Company has established relationships with key constituencies, including the U.S. Army, U.S. Navy and the Office of the Secretary of Defense, and is one of the leaders in working with the U.S. Department of Defense to rationalize the U.S. defense industrial base. The Company operates a significant portion of the recently privatized Louisville Naval Ordnance Station, and is partnering with the Letterkenny Army Depot to upgrade the M109 howitzer to the A6 Paladin configuration. The Company also has partnering arrangements with another U.S. government depot to upgrade the M113, the M88 and breaching vehicles. The Company believes these arrangements demonstrate the success that can be achieved through public/private partnerships. STRONG MANAGEMENT TEAM AND EXPERIENCED INVESTOR. The Company has a highly experienced and committed management team that has successfully adapted the Company's cost structures and manufacturing operations to the declining U.S. Department of Defense procurement budget and the significant transformation to a lower volume, higher technology manufacturing capability. Senior management has an average of more than 19 years with the Company and substantially all of the senior management team was directly involved with the initial formation and integration of UDLP in January 1994. Management will be given the opportunity to participate in the Company's potential success through an equity-based incentive program and direct investment. In addition, the management of the Company is complemented by the support of The Carlyle Group, an active investor in the defense and aerospace industries. BUSINESS STRATEGY Management intends to enhance its leading market position through the successful execution of the following objectives: CONTINUING TO PROVIDE PRODUCTS AND SERVICES ACROSS PROGRAM LIFE-CYCLES. The Company intends to continue to leverage its extensive range of products and services across entire program life-cycles through new technology developments, follow-on products, derivative vehicles, upgrades, logistics support and training. For example, the Company was recently awarded a Low Rate Initial Production contract for the third generation of upgrades to the Bradley Fighting Vehicle, the A3 configuration, which will incorporate a new core electronic architecture, including, among others, combat identification systems, situational awareness and battlefield digitization. In addition, the Company plans to continue building on the successful Bradley Fighting Vehicle program by further expanding its family of vehicles to include new armored vehicles, such as a maintenance vehicle, a treatment and transport vehicle, an engineering squad vehicle and a battle command vehicle. CAPITALIZING ON THE CRUSADER OPPORTUNITY. The Crusader program represents an important opportunity with the potential to become one of the U.S. Army's largest procurement programs over the next decade. The Company plans to devote all necessary resources to establish the Crusader's capabilities and develop successful prototypes in the Demonstration and Validation phase and to win, if awarded, the Engineering and Manufacturing Development and Low Rate Initial Production contracts. The Company's objective is to fully demonstrate the Company's engineering and cost-effective production qualifications so that the Company will be the sole-source, prime contractor for the Crusader if necessary funding is appropriated and the U.S. Army proceeds to Full Rate Production. PURSUING KEY INTERNATIONAL OPPORTUNITIES. The Company plans to capitalize on its established program base and expertise, and on its extensive international joint venture and co-production experience, in order to expand export sales and establish new joint ventures and co-production programs. Management believes this strategy will require minimal additional capital, and has the potential to diversify the Company's business base and enhance overall margins. 7 PARTICIPATING IN THE PUBLIC/PRIVATE DEFENSE INDUSTRIAL BASE CONSOLIDATION. The Company intends to continue working closely with its U.S. government customers to rationalize the public/private defense industrial base. Potential opportunities include further privatizations such as the outsourcing of logistics and training support and additional depot partnering relationships with the U.S. Department of Defense. MODERNIZING THE U.S. ARMY NATIONAL GUARD. A large portion of the U.S. Army's tracked, armored combat vehicle fleet is in the National Guard. The modernization of equipment and systems used by the National Guard generally lags behind that of the active armed services. The Company is pursuing a directed procurement program to assist the National Guard in obtaining funding for upgrades of its Bradley Fighting Vehicles, M113 family of vehicles and M109 howitzers, and to acquire new M992 Field Artillery Ammunition Support Vehicles and M9 Armored Combat Earthmovers. IDENTIFYING STRATEGIC ACQUISITION OPPORTUNITIES. Management expects that the continuing consolidation in the U.S. defense industry will result in strategic opportunities for the Company. The Company intends to be proactive in this environment and, on an opportunistic basis, pursue acquisitions both domestically and abroad that management believes will complement its key business strengths or further expand its capabilities. THE INVESTOR The Carlyle Group (together with its affiliates, "Carlyle") is a Washington, D.C.-based private merchant bank founded in 1987 and currently manages several investment funds, including a $1.3 billion private equity fund. Carlyle has made over 30 investments in select industries, including defense, aerospace, information technology and related services. Some of these investments include Howmet Corporation, a leading supplier of cast turbine engine components for the jet aircraft and industrial gas power generation markets; BDM International, Inc. (NASDAQ: BDMI), a multinational information technology company and provider of professional services to the U.S. Department of Defense and other government agencies (which Carlyle has agreed to sell to TRW, Inc.); Federal Data Corporation, a supplier of information technology services and products to the U.S. government; Magnavox Electronic Systems Company, a leading electronics systems supplier to the U.S. government and prime contractors (later sold to Hughes Electronics Corporation); GDE Systems Inc., a leading supplier of mission planning and information systems as well as test equipment to the U.S. government and prime contractors (later sold to Tracor, Inc.); Power Paragon Inc., a leading supplier of power distribution systems to the U.S. government and prime contractors (later sold to SPD Inc.); and Vought Aircraft Company, a leading supplier of major aircraft structures and subassemblies for commercial and military aircraft (later sold to Northrop Grumman Corporation). THE TRANSACTIONS United Defense Industries, Inc. was formed by Carlyle in August 1997 to acquire UDLP from FMC Corporation ("FMC"), Harsco Corporation ("Harsco") and Harsco UDLP Corporation (collectively with FMC and Harsco, the "Sellers"). On October 6, 1997 pursuant to a Purchase Agreement among the Sellers and the Company dated as of August 25, 1997 (the "Acquisition Agreement"), the Company acquired 100% of the Sellers' respective partnership interests in UDLP (the "Acquisition"). As part of the Acquisition, UDLP acquired certain assets of FMC's Corporate Technology Center ("CTC") in San Jose, California and hired certain FMC legal, audit and governmental affairs personnel. The aggregate purchase price paid in the Acquisition was approximately $850.0 million (the "Purchase Price"), plus related fees and expenses estimated to be approximately $30.0 million. The Purchase Price and such fees and expenses were funded with (i) $200.0 million of Senior Subordinated Notes due 2007 (the "Private Notes"); (ii) borrowings of $457.0 million under a senior credit facility (the "Senior Credit Facility"), which facility includes $495.0 million of term loan facilities (the "Term Loan Facilities") and a $230.0 million revolving credit facility (the "Revolving Credit Facility"); (iii) approximately $173.0 million of cash common equity (the "Equity Contribution"), representing an investment in the Company by an investor group formed by 8 Carlyle, including Carlyle and management; and (iv) a $50.0 million senior subordinated note payable to the Sellers (the "Seller Note"). The Purchase Price is subject to adjustment based on the balance sheet of UDLP as of October 6, 1997 (the "Closing Date"). If any such adjustment results in a decrease in the Purchase Price, borrowings under the Senior Credit Facility will be correspondingly reduced. If the Purchase Price is increased, the borrowings under the Revolving Credit Facility will be correspondingly increased. This purchase price adjustment is currently being negotiated by the Sellers and the Company. See "The Acquisition." If certain consents and acknowledgments are obtained, the Company will pay to the Sellers $50.0 million in cash in lieu of issuing the Seller Note, and the borrowings under the Term Loan Facilities would be increased by $50.0 million to effect such payment. See "Description of Certain Indebtedness." The Acquisition, the borrowings under the Senior Credit Facility, the issuance of the Private Notes, the Seller Note, the Equity Contribution and the payment of the related fees and expenses are referred to herein as the "Transactions." For a description of the Acquisition Agreement and related agreements, see "The Acquisition." The following table illustrates the sources and uses of funds in connection with the Transactions: ($ IN MILLIONS)
SOURCES OF FUNDS AMOUNT USES OF FUNDS AMOUNT - -------------------------------------- ----------- -------------------------------------- ----------- Revolving Credit Facility(1).......... $ 12.0 Acquisition Purchase Price............ $ 850.0 Term Loan Facilities(2)............... 445.0 Estimated Fees and Expenses........... 30.0 The Private Notes..................... 200.0 Seller Note(2)........................ 50.0 Equity Contribution................... 173.0 ----------- ----------- Total Sources..................... $ 880.0 Total Uses............................ $ 880.0 ----------- ----------- ----------- -----------
- ------------------------ (1) On the Closing Date, the Revolving Credit Facility had a remaining borrowing availability of approximately $64.0 million after giving effect to the issuance of approximately $154.0 million of letters of credit to replace outstanding letters of credit on or promptly after the Closing Date. (2) The Company believes that the Seller Note, which is due three years after the Closing Date, will be prepaid within one year from the Closing Date with $50.0 million of additional borrowings under the Term Loan Facilities. 9 THE EXCHANGE OFFER The Exchange Offer................ The Company is hereby offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Private Notes that are properly tendered and accepted. The Company will issue Exchange Notes on or promptly after the Expiration Date. As of the date hereof, there is $200,000,000 aggregate principal amount of Private Notes outstanding. See "The Exchange Offer." Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Private Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act; PROVIDED that the holder is acquiring Exchange Notes in the ordinary course of its business and is not participating, and had no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer--Resale of the Exchange Notes." Registration Rights Agreement..... The Private Notes were sold by the Company on October 6, 1997 (the "Closing Date") to Lehman Brothers Inc., BT Alex. Brown Incorporated and Chase Securities Inc. (the "Initial Purchasers") pursuant to a Purchase Agreement, dated October 1, 1997, by and among the Company and the Initial Purchasers (the "Purchase Agreement"). The Initial Purchasers subsequently sold the Private Notes to third parties. See "The Exchange Offer--Purpose of the Exchange Offer." Pursuant to the Purchase Agreement, the Company and the Initial Purchasers entered into a Registration Rights Agreement, dated
10 as of October 6, 1997 (the "Registration Rights Agreement"), which grants the holders of the Private Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such rights, which will terminate upon the consummation of the Exchange Offer. The holders of the Exchange Notes will not be entitled to any exchange or registration rights with respect to the Exchange Notes. See "The Exchange Offer--Termination of Certain Rights." Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended by the Company in its sole discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. See "The Exchange Offer--Expiration Date; Extensions; Amendments." Accrued Interest on the Exchange Notes and the Private Notes..... The Exchange Notes will bear interest from and including the date of issuance of the Private Notes (October 6, 1997). Holders whose Private Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Private Notes. See "The Exchange Offer--Interest on the Exchange Notes." Conditions to the Exchange Offer........................... The Exchange Offer is subject to the condition that, in the reasonable judgment of the Company, it does not violate applicable law, rules or regulations or an applicable interpretation of the staff of the Commission. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Private Notes being tendered for exchange. See "The Exchange Offer--Conditions." Procedures for Tendering Private Notes........................... Each holder of Private Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Private Notes and any other required documentation to Norwest Bank Minnesota, National Association, as exchange agent (the "Exchange Agent"), at the address set forth herein. By executing the Letter of Transmittal, the holder will represent to and agree with the Company that, among other things, (i) the Exchange Notes to be acquired by such holder of Private Notes in connection with the Exchange Offer are being acquired by such holder in the ordinary course of its business, (ii) such holder has no arrangement or understanding with any person to participate in a distribution of the Exchange Notes, (iii) that if such holder is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purposes of distributing the Exchange Notes, such holder will comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction
11 of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in no-action letters (see "The Exchange Offer--Resale of the Exchange Notes"), (iv) such holder understands that a secondary resale transaction described in clause (iii) above and any resales of Exchange Notes obtained by such holder in exchange for Private Notes acquired by such holder directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (v) such holder is not an "affiliate", as defined in Rule 405 under the Securities Act, of the Company. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act. If the holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, such holder will be required to acknowledge in the Letter of Transmittal that such holder will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer--Procedures for Tendering. " Special Procedures for Beneficial Owners.......................... Any beneficial owner whose Private Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Private Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Private Notes, either make appropriate arrangements to register ownership of the Private Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. See "The Exchange Offer-- Procedures for Tendering." Guaranteed Delivery Procedures.... Holders of Private Notes who wish to tender their Private Notes and whose Private Notes are not immediately available or who cannot deliver their Private Notes, the Letter of Transmittal or any other documentation required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Private Notes according to the guaranteed delivery procedures set forth under "The Exchange Offer--Guaranteed Delivery Procedures."
12 Acceptance of the Private Notes and Delivery of the Exchange Notes........................... Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept for exchange any and all Private Notes that are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered within five business days following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Withdrawal Rights................. Tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer--Withdrawal of Tenders." Certain Federal Income Tax Considerations.................. The exchange of Private Notes for Exchange Notes will be treated as a "non-event" for federal income tax purposes. As a result, no material federal income tax consequences will result to holders exchanging Private Notes for Exchange Notes. See "Certain Federal Income Tax Considerations." Exchange Agent.................... Norwest Bank Minnesota, National Association is serving as the Exchange Agent in connection with the Exchange Offer.
THE EXCHANGE NOTES The Exchange Offer applies to the entire aggregate principal amount of the Private Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the exchange will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Private Notes under the Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture. For further information and for definitions of certain capitalized terms used below, see "Description of the Notes." Interest Payment Dates:........... Interest on the Exchange Notes will accrue from the date of original issuance (the "Issue Date") and will be payable semi- annually on May 15 and November 15, commencing May 15, 1998. Maturity Date:.................... November 15, 2007. Optional Redemption:.............. The Exchange Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after November 15, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, thereon to the applicable redemption date. In addition, at any time prior to November 15, 2000, the Company may redeem up to 35% of the original aggregate principal amount of the Notes at a redemption price equal to 108.75% of the principal amount thereof plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more Public Equity Offerings, provided that at least 65% of the original aggregate principal amount of the Notes remains outstanding immediately after each such redemption. See "Description of the Notes--Optional Redemption." Change of Control:................ Upon a Change of Control (as defined), (i) the Company will have the option, at any time on or prior to November 15, 2002,
13 to redeem the Exchange Notes in whole but not in part, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium (as defined), plus accrued and unpaid interest, thereon to the redemption date, and (ii) if the Company does not so redeem the Exchange Notes, each holder will have the right, at the holder's option, to require the Company to purchase the Exchange Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, thereon to the purchase date. See "Description of the Notes--Repurchase at the Option of Holders--Change of Control." Ranking:.......................... The Exchange Notes will be general unsecured obligations of the Company subordinate in right of payment to all existing and future Senior Debt of the Company, and senior in right of payment to or PARI PASSU with all other indebtedness of the Company. As of November 30, 1997, the Company had approximately $428.5 million of Senior Debt outstanding (excluding outstanding letters of credit of approximately $157.0 million and unused commitments of approximately $111.0 million under the Senior Credit Facility, $50.0 million of which is available only to fund the repayment of the Seller Note) and $50.0 million outstanding under the Seller Note (which is PARI PASSU in right of payment with the Exchange Notes and will mature on the third anniversary of the Closing Date, although the Company expects the Seller Note to be prepaid prior to the first anniversary of the Closing Date). See "Description of the Notes--Subordination" and "Capitalization." Guarantees:....................... The Company's payment obligations under the Exchange Notes will be jointly and severally guaranteed on a senior subordinated basis by the Guarantors (the "Guarantees"). See "Description of the Notes--Guarantees." Certain Covenants:................ The indenture pursuant to which the Exchange Notes will be issued (the "Indenture") contains certain covenants that, among other things, limit the ability of the Company and certain of its Subsidiaries to (i) incur additional indebtedness and issue preferred stock; (ii) pay dividends or make certain other restricted payments; (iii) enter into transactions with affiliates; (iv) make certain asset dispositions; (v) merge or consolidate or transfer substantially all of its assets; (vi) encumber assets under certain circumstances; (vii) restrict dividends and other payments from subsidiaries; (viii) engage in sale and leaseback transactions; (ix) issue Capital Stock (as defined) of Controlled Subsidiaries (as defined); or (x) engage in certain business activities. See "Description of the Notes--Certain Covenants." In addition, under certain circumstances, the Company will be required to offer to purchase the Notes at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, thereon to the date of purchase, with the proceeds of certain Asset Sales (as defined). See "Description of the Notes--Asset Sales."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES, SEE "RISK FACTORS." 14 SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA The following table presents summary unaudited consolidated pro forma financial data of the Company and should be read in conjunction with the "Unaudited Pro Forma Financial Data" and the notes thereto, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements of UDLP, together with the related notes thereto, included elsewhere in this Prospectus. The following summary unaudited pro forma consolidated financial data for the year ended December 31, 1996, the nine months ended September 30, 1996 and 1997 and the twelve months ended September 30, 1997, give effect to the Transactions as if such transactions had occurred on January 1, 1996 with respect to the pro forma income statement and other data, and as of September 30, 1997 with respect to the pro forma balance sheet data. See "The Acquisition." The Company accounts for inventory using the LIFO method and incurred non-cash LIFO charges of $6.3 million, $7.1 million, $8.0 million and $7.2 million for the year ended December 31, 1996, the nine months ended September 30, 1996 and 1997 and the twelve months ended September 30, 1997, respectively. The pro forma consolidated financial data set forth below is not necessarily indicative of the results that actually would have been achieved had such transactions been consummated as of the dates indicated or that may be achieved in the future.
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, TWELVE MONTHS DECEMBER 31, ---------------------- ENDED SEPTEMBER 1996 1996 1997 30, 1997 ------------ ---------- ---------- --------------- ($ IN MILLIONS, EXCEPT RATIO DATA) INCOME STATEMENT DATA: Revenue................................................ $ 1,019.7 $ 738.6 $ 906.5 $ 1,187.6 Total expenses......................................... 985.0 711.5 875.0 1,148.5 Earnings from foreign affiliates....................... 31.9 31.3 13.5 14.1 ------------ ---------- ---------- --------------- Income from operations............................... 66.6 58.4 45.0 53.2 Interest expense....................................... 66.1 49.6 49.6 66.1 Other (income) expense................................. (2.0) (2.2) (1.4) (1.2) ------------ ---------- ---------- --------------- Income (loss) before income taxes.................... 2.5 11.0 (3.2) (11.7) Provision (benefit) for income taxes................... 1.0 4.4 (1.3) (4.7) ------------ ---------- ---------- --------------- Net income (loss).................................... $ 1.5 $ 6.6 $ (1.9) $ (7.0) ------------ ---------- ---------- --------------- ------------ ---------- ---------- --------------- OTHER DATA: EBITDA(1).............................................. $ 140.3 $ 113.2 $ 100.0 $ 127.1 Depreciation and amortization.......................... 73.7 54.8 55.0 73.9 Capital expenditures................................... 22.4 16.5 20.1 26.0 Ratio of EBITDA to cash interest expense(2)............ 2.0x Ratio of total debt to EBITDA.......................... 5.6x BALANCE SHEET DATA: Working capital........................................ $ (0.5) Total assets........................................... 1,306.1 Total debt............................................. 707.0 Stockholder's equity................................... 173.0
- ------------------------ (1) EBITDA represents income from operations plus depreciation and amortization. EBITDA is not a measure of performance or financial condition under generally accepted accounting principles, but is presented to provide additional information related to debt service capability. EBITDA should not be considered in isolation or as a substitute for other measures of financial performance or liquidity under generally accepted accounting principles. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. (2) For purposes of this computation, cash interest expense consists of pro forma interest expense before amortization of deferred financing costs of $2.0 million. 15 SUMMARY HISTORICAL FINANCIAL DATA The following table presents summary consolidated historical financial data and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements of UDLP, together with the related notes thereto, included elsewhere in this Prospectus. The historical consolidated financial data for the nine months ended September 30, 1996 and 1997 have been derived from UDLP's unaudited interim consolidated financial statements which, in the opinion of management, reflect all material adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of such data.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- ($ IN MILLIONS) INCOME STATEMENT DATA: Revenue...................................................... $ 1,076.3 $ 967.6 $ 1,029.3 $ 745.9 $ 913.9 Cost of sales(1)............................................. 809.8 746.7 820.8 595.8 755.0 Selling, general and administrative(2)....................... 131.8 122.7 128.4 90.0 91.4 Research and development..................................... 16.3 12.4 12.9 9.1 12.1 --------- --------- --------- --------- --------- Total expenses............................................. 957.9 881.8 962.1 694.9 858.5 Earnings from foreign affiliates(3).......................... 12.4 21.4 31.9 31.3 13.5 --------- --------- --------- --------- --------- Income from operations..................................... 130.8 107.2 99.1 82.3 68.9 Other (income) expense....................................... (2.6) (1.9) (1.9) (2.2) (1.5) --------- --------- --------- --------- --------- Income before income taxes................................. 133.4 109.1 101.0 84.5 70.4 Provision for income taxes(4)................................ 3.9 1.4 2.8 -- 1.5 --------- --------- --------- --------- --------- Net income................................................. $ 129.5 $ 107.7 $ 98.2 $ 84.5 $ 68.9 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- OTHER DATA: EBITDA(5).................................................... $ 159.8 $ 133.9 $ 138.1 $ 111.1 $ 97.9 Depreciation and amortization................................ 29.0 26.7 39.0 28.8 29.0 Capital expenditures......................................... 18.3 24.1 22.4 16.5 20.1 BALANCE SHEET DATA: Working capital.............................................. $ 4.2 $ 11.3 $ 46.6 $ 48.4 $ 3.1 Total assets................................................. 479.9 569.6 645.0 601.7 612.1 Partners' capital............................................ 123.7 156.4 179.6 187.9 131.0
- -------------------------- (1) Cost of sales includes non-cash LIFO charges of $5.6 million, $5.9 million and $6.3 million for the years ended December 31, 1994, 1995 and 1996, respectively, and $7.1 million and $8.0 million for the nine months ended September 30, 1996 and 1997, respectively. Cost of sales for the year ended December 31, 1996 and nine months ended September 30, 1996 includes a $14.3 million favorable settlement from the U.S. government on a government procurement contract. Cost of sales for the nine months ended September 30, 1997 includes approximately $13.5 million of non-cash charges recorded for the quarter ended September 1997 for changes in estimated contract profitability related to contractual issues with customers and other matters resulting from the periodic reassessment of the estimated profitability of contracts in progress. (2) Selling, general and administrative expense for the year ended December 31, 1994 includes a $7.4 million charge related to conforming Harsco's historical accounting policy to UDLP's accounting for inventory. (3) Earnings from foreign affiliates for the year ended December 31, 1996 and nine months ended September 30, 1996 includes a $3.8 million increase as a result of a change of accounting method for the investment in the Company's Saudi Arabia joint venture, FMC Arabia Limited, from the cost method to the equity method. (4) UDLP was taxed as a partnership for the periods presented. (5) EBITDA represents income from operations plus depreciation and amortization. EBITDA is not a measure of performance or financial condition under generally accepted accounting principles, but is presented to provide additional information related to debt service capability. EBITDA should not be considered in isolation or as a substitute for other measures of financial performance or liquidity under generally accepted accounting principles. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. See Note (6) to "Selected Historical Financial Data" for information concerning the Company's net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities for the periods indicated. 16 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS BEFORE DECIDING TO MAKE AN INVESTMENT IN THE NOTES OFFERED HEREBY. SUBSTANTIAL LEVERAGE AND DEBT SERVICE The Company incurred significant indebtedness as a result of the Transactions. See "The Acquisition." At November 30, 1997, the Company's consolidated total indebtedness was approximately $678.5 million (excluding outstanding letters of credit of approximately $157.0 million) and total stockholder's equity was approximately $173.0 million. The Indenture and the Senior Credit Facility permit the Company to incur additional Indebtedness, subject to certain limitations. For the year ended December 31, 1996 and the nine months ended September 30, 1997, the Company's earnings would have been insufficient to cover fixed charges by $1.3 million and $2.8 million, respectively. The Company's ability to make scheduled payments of the principal of, or interest on, or to refinance its indebtedness (including the Notes) depends on its future performance, which to a certain extent is subject to economic, financial, competitive, political and other factors beyond its control. Based upon the current level of operations, management believes that available cash flow, together with available borrowings under the Senior Credit Facility and other sources of liquidity, should be adequate to meet the Company's anticipated requirements for working capital, capital expenditures, interest payments on the Notes and scheduled principal payments under the Senior Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity, Capital Resources and Financial Condition." There can be no assurance, however, that the Company's cash flow will be sufficient to satisfy such requirements. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt and make necessary capital expenditures, the Company may be required to refinance all or a portion of its existing debt, including the Notes, to sell assets or to obtain additional financing. There can be no assurance that any such additional financing could be achieved. The Company's high level of debt will have several important effects on its future operations, including the following: (i) the Company will have significant cash requirements to service debt, reducing funds available for operations, capital expenditures, research and development, acquisitions and future business opportunities, and increasing the Company's vulnerability to adverse general economic and industry conditions, all of which could be exacerbated by the uncertainty inherent in government contracts and foreign operations and the future of military expenditures (as described below) and (ii) the financial covenants and other restrictions contained in the Senior Credit Facility and other agreements relating to the Company's Senior Debt and in the Indenture require the Company to meet certain financial tests and restrict its ability to borrow additional funds, to dispose of assets or to pay cash dividends. SUBORDINATION AND RANKING OF THE NOTES AND THE GUARANTEES The Notes and the Guarantees are general unsecured obligations of the Company and the Guarantors, respectively, and are subordinate in right of payment to all Senior Debt, including all indebtedness of the Company and the Guarantors under the Senior Credit Facility. As of November 30, 1997, approximately $428.5 million of Senior Debt (excluding outstanding letters of credit of approximately $157.0 million) was outstanding and the Company had no senior subordinated indebtedness outstanding other than the Notes and the Seller Note. On November 30, 1997, the Company had approximately (i) $61.0 million available for borrowing under the Revolving Credit Facility and (ii) $50.0 million available for borrowing under the Term Loan Facilities solely to fund the repayment of the Seller Note. The Indenture permits the Company and the Guarantors to incur additional Senior Debt, provided certain conditions are met, and the Company and the Guarantors expect from time to time to incur additional Senior Debt. In addition, the Indenture permits Senior Debt to be secured. By reason of the subordination provisions of the Indenture, in the event of the insolvency, liquidation, reorganization, dissolution or other winding-up of the Company or the Guarantors or upon a default in payment with respect to, or the 17 acceleration of, or if a judicial proceeding is pending with respect to any default under, any Senior Debt, the lenders under the Senior Credit Facility and other creditors who are holders of Senior Debt must generally be paid in full before a holder of the Notes and the Guarantees may be paid. In addition, the Seller Note matures and must be paid prior to the maturity of the Notes. Accordingly, there may be insufficient assets remaining after such payments to pay amounts due on the Notes and the Guarantees. See "Description of the Notes--Subordination." RISKS OF FURTHER REDUCTIONS OR CHANGES IN MILITARY EXPENDITURES Sales under contracts with the U.S. government's Department of Defense (the "DoD"), including U.S. government Foreign Military Sales ("FMS") or under subcontracts that identified the DoD as the ultimate purchaser, represented approximately 90% of the Company's sales in 1996. The U.S. defense budget has declined significantly since the mid-1980s, resulting in a slowing of new program starts, program delays and program cancellations. The reduction in the U.S. defense budget has caused most defense-related government contractors to experience declining revenues, increased pressure on operating margins and, in some cases, net losses. The Company has been adversely affected by these reductions, and underwent a significant restructuring and consolidation of its tracked combat vehicle manufacturing operations which began in 1994 and was substantially completed in 1996. The loss or significant curtailment of the Company's material U.S. or international military contracts (including without limitation those identified in "Business--Products and Systems"), or the failure to renew or replace material contracts upon expiration or completion as a result of budget cuts or for other reasons, would materially and adversely affect the Company's financial condition, results of operations and debt service capability. While a major portion of the Company's revenues have historically been derived from the production of new vehicles and the development of systems, in recent years and for the foreseeable future, a growing majority of its revenues have been and are likely to be earned through the upgrading of existing vehicles and systems, with correspondingly less revenues anticipated in the areas of new vehicle production and development in the near term. There is also a risk that the U.S. Army could elect to have any portion of its upgrade or overhaul work currently performed by the Company, instead performed by the U.S. Army's own industrial facilities, known as depots. A significant decline in military expenditures of the U.S. government or certain foreign countries, particularly expenditures allocated to the upgrading of any such country's military vehicles and armament systems, could materially adversely affect the Company's financial condition, results of operations and debt service capability. The current Demonstration and Validation contract for the Crusader, an advanced field artillery system for the U.S. Army, is for the design and development of the Crusader including delivery of two prototype self-propelled howitzers and resupply vehicles. While this contract is scheduled to continue into 2001, no assurance can be given that the Company will complete performance under the contract. Budget constraints could result in Congress not appropriating the funding contemplated by this contract. Additionally, the technical challenges associated with the Crusader may result in performance requirements that are cost prohibitive and ultimately result in the U.S. Army pursuing other alternatives for modernization. Finally, geo-political circumstances or a shift in the U.S. Army's or the U.S. government's current mission or strategy with respect to the U.S. Army could result in the U.S. Army reassessing its conflict and combat mission priorities and developing a new strategy that either does not require a new howitzer vehicle or instead requires a further upgrade of existing vehicles. If the U.S. Army decides to produce the Crusader, full scale production would not be expected to commence until at least 2005, and there can be no assurance that the Company will be named the prime contractor or otherwise participate in what could be a major competition for future production. Failure to secure future contract awards for Crusader development and production or loss or curtailment of any Crusader contract or the funding therefore could have a material adverse effect on the Company's financial condition, results of operations and debt service capability. 18 UNCERTAINTY INHERENT IN GOVERNMENT CONTRACTS Companies engaged primarily in supplying defense-related equipment and services to U.S. government agencies are subject to certain business risks peculiar to the defense industry. These risks include the ability of the U.S. government to unilaterally suspend its contractors from receiving new contracts in the event of certain violations of law or regulations. All of the Company's U.S. government contracts are, by their terms, subject to termination by the U.S. government either for its convenience or for the default of the contractor. In addition, certain costs and expenses are not allowable charges under U.S. government contracts. The Company, as a U.S. government contractor, is subject to financial audits and other reviews by the U.S. government of performance of, and the accounting and general practices relating to, U.S. government contracts. Costs and prices under such contracts may be subject to adjustment based upon the results of such audits and reviews. Like most large government contractors, the Company is audited and reviewed on a continual basis. Although adjustments arising from such audits and reviews have not had a material adverse effect on the Company's financial condition, results of operations or debt service capability in the past, there can be no assurance that the effects of future audits and reviews will not have such material adverse effects. See "Business--Government Contracts; Regulatory Matters." Congress usually appropriates funds for a given program on an annual basis even though contract performance may take more than one year. Consequently, at the outset of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future government fiscal years. Failure of Congress to appropriate expected funding for the Company's programs could have a material adverse effect on the Company's financial condition, results of operations and debt service capability. Additionally, approximately two-thirds of the Company's 1996 revenues were derived from fixed-price contracts. Inherent in such contracts is the risk that if a bid is submitted and a contract is subsequently awarded, actual performance costs may exceed the projected costs on which the fixed contract prices were based. To the extent that actual costs exceed such projected costs, the Company's profitability could be materially adversely affected. See "Business--Major Customers" and "--Government Contracts; Regulatory Matters." TECHNOLOGY IMPLEMENTATION RISKS The Company, like all defense businesses, is subject to risks associated with uncertain cost factors related to scarcity of technologically necessary components and human resources (such as software engineers and information resource professionals), the frequent need to bid on programs in advance of design completion (which may result in unforeseen technological difficulties and/or cost overruns), the substantial time and effort required for design and development, design complexity and the constant necessity for design improvement. For example, the Company is currently the prime contractor to develop the Crusader. To build the Crusader, the Company must integrate a number of sophisticated technologies while meeting challenging performance requirements and aggressive timetables. The integration of this array of diverse technologies involves complex tasks, many of which have not been previously attempted. The nature and complexity of the Crusader system is such that final confirmation of the ability of the system to function in the intended manner cannot be assured. As a result, there is a risk that the Crusader may not proceed into the next contracting phase or eventual production, which could have a material adverse effect on the Company's financial condition, results of operations and debt service capability. RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND JOINT VENTURES The Company participates in unconsolidated joint ventures in Turkey and Saudi Arabia and in selected co-production programs in several other countries. The Company's export sales, including FMS, totaled $194.2 million in 1996, representing approximately 19% of the Company's revenues. In addition, the Company's earnings from foreign affiliates were $14.1 million for the twelve months ended 19 September 30, 1997, representing approximately 11.1% of pro forma EBITDA (as defined). These proportions of revenue and EBITDA were higher in certain prior periods. The Company's strategy includes expansion of its international operations and export sales. In connection with its international operations and export sales, the Company is subject to risks associated with operating in and selling to foreign countries, including (i) devaluations and fluctuations in currency exchange rates; (ii) changes in or interpretations of foreign regulations that may adversely affect the Company's ability to sell certain products or repatriate profits to the United States; (iii) imposition of limitations on conversions of foreign currencies into dollars; (iv) remittance of dividends and other payments by foreign subsidiaries or joint ventures; (v) imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries; (vi) hyperinflation or political instability in certain foreign countries; (vii) imposition or increase of investment and other restrictions or requirements by foreign governments; (viii) the potential imposition of trade or foreign exchange restrictions or increased tariffs; and (ix) U.S. arms export control regulations and policies which govern the Company's ability to supply foreign affiliates and customers. To the extent the Company expands its international operations, these and other risks associated with international operations are likely to increase. Although such risks have not had a material adverse effect on the Company financial condition, results of operations or debt service capability in the past, no assurance can be given that such risks will not have any such material adverse effect on the Company in the future. The Company has contracts with government customers in Eastern Asia (including the governments of Japan, Taiwan and Thailand) and with Samsung, a large South Korean conglomerate. The Company also has accounts receivable from Samsung and is scheduled to receive periodic payments from its government customers in Eastern Asia. The Company's shipments to customers in this region are in certain cases supported by letters of credit, the largest of which has been issued by a major Korean bank. In addition, the Company's Turkish joint venture, FNSS-Turkey, has been seeking a contract with the government of Malaysia that would satisfy, in part, FNSS-Turkey's "offset" obligations, described below. There can be no assurance that the Company's counterparties in Asia will meet their obligations under existing contracts or that any such non-performance or the recent economic and political turmoil in this region will not have a material adverse effect on the Company's financial condition, results of operations or debt service capability. The Company is facing certain additional risks associated with its Turkish joint venture, FMC-Nurol Savunma Sanayii A.S. ("FNSS-Turkey"), which was formed for the purpose of providing vehicles and services to the Undersecretariat for Defense Industries of Turkey ("SSM"). First, FNSS-Turkey is required by its agreement with SSM to achieve a significant level of export sales from Turkey, (which are required in order to fulfill "offset" requirements) by 2000 or pay a penalty of 9% of the unsatisfied amounts of these offset obligations to SSM. Such payment could be as high as $32.0 million if further offset sales are not completed. There is no assurance that FNSS-Turkey will be able to successfully fulfill its offset obligations. Second, the vehicle production agreement between FNSS-Turkey and the Turkish government gives the government the right to terminate the agreement "if the interest of [FNSS-Turkey] shall devolve upon any person or corporation." The Company does not expect the Turkish government to assert the view that this provision entitles it to terminate the joint venture agreement, although no assurance can be given that the Turkish government will not do so. See "The Acquisition." Third, SSM has been unable to supply certain components to FNSS-Turkey according to an agreed schedule, which has resulted in production delays. While FNSS-Turkey has recently executed an extension to the contract production schedule, FNSS-Turkey's financial results may be unfavorably impacted and royalty and dividend payments to the Company could be reduced as a result of any future delays or extensions, and the value of such royalties and dividends could be materially adversely affected by the impact of any further deterioration in the value of the Turkish lira against the U.S. dollar unless pricing concessions are made in connection with any such extension. Termination of the vehicle production agreement, or adverse resolution of any of the matters discussed above, could have a material adverse effect on the Company's financial condition, results of operations and 20 debt service capability. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Joint Ventures--FNSS-Turkey." The Company also faces certain additional risks associated with its Saudi Arabian joint venture, FMC Arabia Limited ("FMC-Arabia"), including budgetary pressures on Saudi defense spending. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Joint Ventures--FMC-Arabia." NOVATION OF U.S. GOVERNMENT CONTRACTS The U.S. government has preliminarily indicated that, on account of the Acquisition, the Company should enter into a novation agreement with the U.S. government and UDLP in order to continue to be recognized as the contractor under its U.S. government contracts. A novation agreement is typically entered between the U.S. government, a contractor who transfers its assets (including its contracts) to a successor-in-interest, and that successor-in-interest. Applicable U.S. government regulations do not expressly require parties to enter into a novation agreement upon a transfer of control of a contractor, as opposed to the assignment of contracts. The U.S. government has from time to time taken the position that such agreements must be entered between the seller of the U.S. government contracts business and the buyer of the business, even when no change in business form (but only a change in ownership of the business) has occurred, and the Company believes that contractors often determine that their interests are best served by acquiescence to the U.S. government's interpretation. The novation process typically takes a matter of weeks or months, and can require up to or more than a year, to complete and would not be completed in any event prior to the consummation of the Exchange Offer. The Company knows of no reason why it could not successfully complete negotiation and execution of any novation agreement that might be required, but the Company can offer no assurance that such an agreement would ultimately be obtained. Failure to obtain any required novation could have a material adverse effect on the Company's financial condition, results of operations and debt service capability. COMPETITION Declining defense budgets and increasing pressures for cost reductions have precipitated a major consolidation in the defense industry. This consolidation has resulted in program cancellations, scope reductions and delays in contract funding or awards. The combination of increased competition and reduced funding have contributed, in some cases, to significant predatory pricing tactics throughout the industry in competitive bidding situations. Because some of the Company's current and potential competitors have significantly greater resources than the Company, the Company's ability to compete effectively in the consolidating defense industry could be adversely impacted. See "Business-- Competition." Approximately 90% of the Company's sales are derived from contracts with the U.S. government (including FMS sales) and its prime contractors. The Company from time to time encounters significant competition for its contracts, particularly internationally from other companies, some of which have financial, technical, marketing, manufacturing, distribution and other resources substantially greater than those of the Company. The Company's ability to compete for these contracts depends to a large extent on the effectiveness and innovativeness of its research and development programs, its ability to offer better program performance than its competitors at a lower cost to the U.S. government customer, and its readiness in facilities, equipment and personnel to undertake the programs for which it competes. In addition to competing for specific programs with other companies, the Company and its programs are subject to competition for availability of U.S. government funding in a declining procurement environment. This competition could result in curtailment or elimination of Company programs, even if those programs are meeting their functional objectives and even if other programs receiving continued or increased funding are completely unrelated to such Company programs. 21 The Company obtains military contracts through the process of competitive offers and through sole-source negotiations. While most of the Company's historical revenues have been derived from sole-source negotiations, contracts from which the Company has derived and expects to derive a significant portion of its sales (including contracts relating to certain program opportunities discussed or referenced herein) were or will be obtained through competitive bidding. There can be no assurance that the Company will continue to be successful in having its bids accepted or, if accepted, that awarded contracts will generate sufficient sales to result in profitability for the Company. Also, even as to those programs which the U.S. government has historically awarded to the Company on a sole-source basis, the U.S. government may in the future determine to shift such programs to a competitive bidding process. There can be no assurance that the Company will continue to be successful in remaining the sole-source contractor on various programs. The Company currently has a work-split agreement with Lockheed Martin Corporation for production of the Mk41 Vertical Launching System ("VLS"). Although the Company and Lockheed Martin are in discussions regarding the arrangement, they have had a number of disagreements, including a pending disagreement over certain matters relating to foreign sales. The current existence of the agreement provides no assurance it will continue beyond its scheduled expiration date of 1999 or that the U.S. Navy will continue this arrangement beyond the current VLS production contract, which expires in 2001 and will be substantially complete by mid-1999. There can be no assurance that the Company would prevail against Lockheed Martin or any other bidder in any future competition for any contracts relating to the VLS in the event of the expiration or termination of the work-split agreement. The Company is presently in discussions with Lockheed Martin and the U.S. Navy relating to a new VLS production contract for shipments beginning in late 1998 and, based on these discussions, which have included significant disagreements with the U.S. Navy, no assurance can be given that the Company will obtain a new VLS production contract. Additionally, the Company is currently in a sole-source position for the Mk45 5-inch gun system and certain other products and services for the U.S. Navy. There can be no assurance that the U.S. Navy will continue to negotiate for production of these systems solely with the Company. The U.S. Navy is testing a "mega-prime" procurement approach in an attempt to reduce costs and development time. This procurement method would require a single "mega-prime" contractor to deliver an entire and completed system to the U.S. Navy. This procurement approach may eventually apply to substantial portions of the U.S. Navy's budget in the future, and affect some or all of the Company's major U.S. Navy programs. Such an arrangement would require the Company to team with a "mega-prime" contractor and compete for participation on teams, which would in turn compete against other such teams for large future programs. The U.S. Army is pursuing major development programs in areas such as future scout vehicles and future combat systems which may require teaming with other major contractors to compete successfully. There can be no assurance that the Company will successfully team with other contractors, that any team in which the Company participates would be awarded any such "mega-prime" or major U.S. Army contracts, or that such arrangements would not have a material adverse effect on the Company's financial condition, results of operations and debt service capability. There can be no assurance that the Company will continue to compete successfully for specific program opportunities or for appropriation funding in a declining procurement environment, or that competition will not have a material adverse effect on the Company's financial condition, results of operations and debt service capability. VARIABILITY IN QUARTERLY AND ANNUAL PERFORMANCE The Company's operating performance and cash flow are dependent, to a material extent, upon the timing and amounts of U.S. government contracts and the work performed thereunder. Because the amounts payable under the Company's government contracts are substantial, the award or expiration of one or more contracts, or the timing for manufacturing and delivery of products under such contracts and 22 schedules, can materially affect the Company's operating results and cash flow for the periods affected by such contracts. The Company's operating results and cash flow can also be materially affected by the timing and amounts of dividends received from the Company's foreign joint ventures, which has generally resulted in higher earnings during the first quarter of the year when such dividends are received. Therefore, results for any particular period may vary significantly, and should not be considered indicative of longer term results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview--Variability in Quarterly and Annual Performance." BACKLOG The Company's backlog represents orders under contracts which are primarily with the U.S. government. The U.S. government enjoys broad rights to unilaterally modify or terminate such contracts. Accordingly, most of the Company's backlog is subject to modification and termination at the U.S. government's discretion. In addition, funding for orders from the U.S. government is subject to approval on an annual basis by Congress pursuant to the appropriations process. There can be no assurance that the Company's backlog will become revenues in any particular period or at all. Further, there can be no assurance that any contract included in backlog that does become revenue will be profitable. CONCENTRATION OF OWNERSHIP Entities controlled by Carlyle hold, in the aggregate, substantially all of the voting power of Iron Horse, the Company's parent. Consequently, Carlyle can control the election of the directors of the Company and the outcome of all matters submitted to a vote of the Company's stockholders. LACK OF INDEPENDENT OPERATING HISTORY Prior to the Acquisition, UDLP was managed by FMC. FMC provided an array of services to the Company including payroll and management of employee service related costs, such as human resource information network, medical, dental, life insurance, pension, 401(k) plan administration and workers compensation. The cost of these services were billed back to the Company based on actual usage. Additionally, FMC provided general and administrative services including tax, treasury, legal, audit and insurance. The cost for these services were allocated back to the Company. After the Acquisition, the Company operates independently of FMC and needs to provide these services internally or obtain them from other sources. Upon consummation of the Acquisition, the Company entered into a Transition Services Agreement pursuant to which FMC is providing certain of these services at costs consistent with past practices to the Company. See "The Acquisition." There can be no assurance that the actual cost incurred in operating the Company will not exceed historical charges or that upon termination of the Transition Services Agreement the Company will be able to obtain similar services on comparable terms. There can be no assurance that the Company will be able to operate effectively as an independent company or achieve the performance attained when it was owned by FMC and Harsco. ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state and local laws and regulations relating to, among other things, emissions to air, discharges to water, the handling and disposal of hazardous and solid wastes and the cleanup of hazardous substances ("Environmental Laws"). The Company continually assesses its compliance status and other obligations with respect to Environmental Laws and believes that its operations currently are in substantial compliance with Environmental Laws. Based on historical experience and its expectation that a significant portion of its ongoing environmental costs are recoverable from other parties or allowable as contract costs pursuant to the terms of many of the Company's contracts with the U.S. government, the Company does not believe that its obligations under Environmental Laws will have a material adverse effect on the Company's financial condition, results of operation or debt service capability. There can be no assurance, however, that the Company will not incur material 23 unrecoverable or unallowable costs in the future, including as a result of changes in Environmental Laws or changes in the Company's obligations under Environmental Laws, nor can any assurance be given that environmental costs expected to be reimbursed by other parties or allowed as charges in U.S. government contracts will be reimbursed or allowed as expected. See "Management's Discussion and Analysis of Financial Condition and Result of Operations--Environmental Matters" and "Business--Environmental Matters." RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS The Indenture restricts, among other things, the Company's and the Guarantors' ability to incur additional indebtedness, create liens, pay dividends or make other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, incur indebtedness that is subordinate in right of payment to any Senior Debt and senior in right of payment to the Notes or the Guarantees, as the case may be, impose restrictions on the ability of a subsidiary to pay dividends or make certain payments to the Company, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. In addition, the Senior Credit Facility contains other and more restrictive covenants and prohibits the Company from prepaying its other indebtedness (including the Notes). See "Description of the Notes--Certain Covenants" and "Description of Certain Indebtedness--Senior Credit Facility." The Senior Credit Facility also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. The Company's ability to meet those financial ratios and tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those tests. A breach of any of the foregoing covenants could result in a default under the Senior Credit Facility and/or the Indenture. Upon the occurrence of an event of default under the Senior Credit Facility, the lenders thereunder could elect to declare all amounts outstanding under the Senior Credit Facility, together with accrued and unpaid interest, to be immediately due and payable, which would, in turn, result in an event of default under the Indenture. LIMITATION ON CHANGE OF CONTROL OFFER Upon the occurrence of a Change of Control, if the Company does not exercise its right to purchase the Notes, each holder of Notes will have the right to require the Company to purchase all or a portion of such holder's Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon to the purchase date. If a Change of Control were to occur, there can be no assurance that the Company would have sufficient financial resources, or would be able to arrange financing, to pay the repurchase price for all Notes tendered by holders thereof. Further, the provisions of the Indenture may not afford holders of Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect holders of Notes, if such transaction does not result in a Change of Control. In addition, the terms of the Senior Credit Facility prohibit the Company from optionally purchasing any Notes and also identify certain events that would constitute a Change of Control that would result in a termination of the Senior Credit Facility. Any future credit agreements or agreements relating to other Indebtedness to which the Company or the Guarantors become a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when there are outstanding obligations under the Senior Credit Facility, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance such outstanding obligations. If the Company does not obtain such consent or repay such obligations, the Company would remain effectively prohibited from offering to purchase Notes. In such case, the Company's failure to offer to purchase Notes could become an Event of Default under the Indenture, which would, in turn, constitute a further default under the Senior Credit Facility and may constitute a default under the terms of other Indebtedness that the Company or the Guarantors may enter into from to time. See "Description of Certain Indebtedness--Senior Credit Facility" and "Description of the Notes-- Repurchase at the Option of Holders--Change of Control." 24 FRAUDULENT CONVEYANCE RISKS The incurrence by the Company of the indebtedness evidenced by the Notes and by the Guarantors of the obligations represented by the Guarantees is subject to review under relevant U.S. federal and state fraudulent conveyance statutes ("Fraudulent Conveyance Statutes") in a bankruptcy case or a lawsuit by or on behalf of creditors of the Company or the Guarantors. The statutes provide that if a court determines that at the time the Notes were issued and the proceeds applied, (i) the Company issued the Notes and applied the proceeds with the intent of hindering, delaying or defrauding creditors or (ii) the Company or the Guarantors received less than a reasonably equivalent value or fair consideration for issuing the Notes or the Guarantees, respectively, and, after so applying the proceeds, the Company or a Guarantor (A) was insolvent or rendered insolvent by reason of such transactions, (B) was engaged in a business or transaction for which its assets constituted unreasonably small capital or (C) intended to incur, or believed that it would incur, debts beyond its ability to pay as they matured (as the foregoing terms are defined in or interpreted under Fraudulent Conveyance Statutes), such court could subordinate all or a part of the Notes or the Guarantees to existing and future indebtedness of the Company or the Guarantors, recover any payments made on the Notes or the Guarantees or take other action detrimental to the holders of the Notes, including, under certain circumstances, invalidating the Notes or the Guarantees. Based upon the financial and other information currently available to it, each of the Company and the Guarantors believes that the indebtedness and obligations evidenced by the Private Notes and the Guarantees were incurred and proceeds of the Notes were used for proper purposes and in good faith. Each of the Company and the Guarantors believes that at the time of, and after giving effect to, the incurrence of the indebtedness and obligations evidenced by the Private Notes and the Guarantees, it was solvent and had sufficient capital to carry on its business and to pay its debts as they mature. No assurance can be given, however, that a court would concur with such beliefs and positions. The measure of insolvency for these purposes will vary depending upon the law of the jurisdiction being applied. Generally, a company will be considered insolvent for these purposes if the company is unable to pay its debts as they become due in the usual course of its business or the sum of the company's debts is greater than all of the company's property at a fair valuation or if the present fair salable value of the company's assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and mature. In rendering their opinion on the validity of the Private Notes and the Guarantees, counsel for the Company and the Guarantors and counsel for the Initial Purchasers expressed no opinion as to the effect of Fraudulent Conveyance Statutes or laws affecting the enforcement of creditors' rights generally. The holders of the Notes will have the benefit of the Guarantees. However, the Guarantees will be limited to the maximum amount which the Guarantors are permitted to guarantee under applicable law. As a result, a Guarantor's liability under its Guarantee could be reduced to zero, depending upon the amount of other obligations of the Guarantors. Notwithstanding such provision, such Guarantee may be subject to review by a court under relevant Fraudulent Conveyance Statutes and, if a court makes certain findings, it could take certain actions detrimental to the holders of the Notes. The Guarantees may also be released under certain circumstances. See "Description of the Notes--Guarantees." ABSENCE OF PUBLIC MARKET FOR THE NOTES There is no existing market for the Notes and, although the Notes are expected to be eligible for trading in the PORTAL market, there can be no assurance as to the liquidity of any markets that may develop for the Notes, the ability of holders of the Notes to sell their Notes, or the prices at which holders would be able to sell their Notes. Future trading prices of the Notes will depend on many factors, including, among other things, the Company's ability to effect the Exchange Offer, prevailing interest rates, the Company's operating results and the market for similar securities. The Initial Purchasers have advised the Company that they currently intend to make a market in the Notes offered hereby; however, the Initial Purchasers are not obligated to do so and any market making may be discontinued at any time without 25 notice. The Company does not intend to apply for listing of the Notes on any securities exchange or the Nasdaq National Market. FAILURE TO EXCHANGE PRIVATE NOTES Exchange Notes will be issued in exchange for Private Notes only after timely receipt by the Exchange Agent of such Private Notes, a properly completed and duly executed Letter of Transmittal and all other required documentation. Therefore, holders of Private Notes desiring to tender such Private Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor the Company is under any duty to give notification of defects or irregularities with respect to tenders of Private Notes for exchange. Private Notes that are not tendered or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. In addition, any holder of Private Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making activities or any other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. To the extent that Private Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Private Notes could be adversely affected due to the limited amount, or "float," of the Private Notes that are expected to remain outstanding following the Exchange Offer. Generally, a lower "float" of a security could result in less demand to purchase such security and could, therefore, result in lower prices for such security. For the same reason, to the extent that a large amount of Private Notes are not tendered or are tendered and not accepted in the Exchange Offer, the trading market for the Exchange Notes could be adversely affected. See "Plan of Distribution" and "The Exchange Offer." 26 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The Private Notes were sold by the Company on the Closing Date to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently sold the Private Notes, and the Company and the Initial Purchasers entered into the Registration Rights Agreement on October 6, 1997. Pursuant to the Registration Rights Agreement, the Company agreed that, unless the Exchange Offer is not permitted by applicable law or Commission policy, it would file with the Commission a registration statement under the Securities Act (a "Registration Statement") with respect to the Exchange Notes within 120 days after the Closing Date and use its best efforts to cause such Registration Statement to become effective under the Securities Act within 180 days after the Closing Date. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement. The Registration Statement is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement and the Purchase Agreement. RESALE OF THE EXCHANGE NOTES With respect to the Exchange Notes, based upon an interpretation by the staff of the Commission set forth in certain no-action letters issued to third parties, the Company believes that a holder (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchanges Private Notes for Exchange Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement with any person to participate, in a distribution of the Exchange Notes, will be allowed to resell Exchange Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the Exchange Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires Exchange Notes in the Exchange Offer for the purpose of distributing or participating in the distribution of the Exchange Notes or is a broker-dealer, such holder cannot rely on the position of the staff of the Commission enumerated in certain no-action letters issued to third parties and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Each broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection of resales of Exchange Notes received in exchange for Private Notes where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities. Pursuant to the Registration Rights Agreement the Company has agreed to make this Prospectus, as it may be amended or supplemented from time to time, available to broker-dealer for use in connection with any resale for the period required by the Securities Act. See "Plan of Distribution." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and the Letter of Transmittal, the Company will accept any and all Private Notes validly tendered and not withdrawn prior to the Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Private Notes surrendered pursuant to the Exchange Offer. Private Notes may be tendered only in integral multiples of $1,000. 27 The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the exchange will be registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to any of the rights of holders of Private Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture, which also authorized the issuance of the Private Notes, such that both series of Notes will be treated as a single class of debt securities under the Indenture. As of the date of this Prospectus, $200,000,000 in aggregate principal amount of the Private Notes are outstanding and registered in the name of Cede & Co., as nominee for DTC. Only a registered holder of the Private Notes (or such holder's legal representative or attorney-in-fact) as reflected on the records of the Trustee under the Indenture may participate in the Exchange Offer. There will be no fixed record date for determining registered holders of the Private Notes entitled to participate in the Exchange Offer. Holders of the Private Notes do not have any appraisal or dissenters' rights under the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Securities Act, the Securities Exchange Act of 1934 as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Private Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Private Notes for the purposes of receiving the Exchange Notes from the Company. Holders who tender Private Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Private Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "--Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will (i) notify the Exchange Agent of any extension by oral or written notice, (ii) mail to the registered holders an announcement thereof and (iii) issue a press release or other public announcement which shall include disclosure of the approximate number of Private Notes deposited to date, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make a public announcement of any delay, extension, amendment or termination of the Exchange Offer, the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. The Company reserves the right, in its sole discretion, (i) to delay accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any conditions set forth below under "--Conditions" shall not have been satisfied, to terminate the Exchange Offer by giving oral or written notice of such delay, extension or termination to the Exchange Agent. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders, and the Company will extend the Exchange Offer for a period of five 28 to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. INTEREST ON THE EXCHANGE NOTES The Exchange Notes will bear interest at a rate equal to 8 3/4% per annum. Interest on the Exchange Notes will be payable semi-annually on May 15 and November 15 of each year, commencing May 15, 1998. Holders of Exchange Notes will receive interest from the date of initial issuance of the Private Notes. Holders of Private Notes that are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Private Notes. PROCEDURES FOR TENDERING Only a registered holder of Private Notes may tender such Private Notes in the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile to the Exchange Agent at the address set forth below under "--Exchange Agent" for receipt prior to the Expiration Date. In addition, either (i) certificates for such Private Notes must be received by the Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Private Notes, if such procedure is available, into the Exchange Agent's account at the Depositary pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the holder must comply with the guaranteed delivery procedures described below. The tender by a holder that is not withdrawn prior to the Expiration Date will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner(s) of the Private Notes whose Private Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Private Notes, either make appropriate arrangements to register ownership of the Private Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal described below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Private Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a 29 Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized signature guarantee programs identified in the Letter of Transmittal (an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered holder of any Private Notes listed therein, such Private Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Private Notes. If the Letter of Transmittal or any Private Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Exchange Agent and the Depositary have confirmed that any financial institution that is a participant in the Depositary's system may utilize the Depositary's Automated Tender Offer Program to tender Private Notes. All questions as to the validity, form, eligibility (including time of receipt), compliance with conditions, acceptance and withdrawal of tendered Private Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Private Notes not properly tendered or any Private Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Private Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Private Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Private Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Private Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. While the Company has no present plan to acquire any Private Notes that are not tendered in the Exchange Offer or to file a registration statement to permit resales of any Private Notes that are not tendered pursuant to the Exchange Offer, the Company reserves the right in its sole discretion to purchase or make offers for any Private Notes that remain outstanding subsequent to the Expiration Date or, as set forth below under "--Conditions," to terminate the Exchange Offer and to the extent permitted by applicable law, purchase Private Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. By tendering, each holder of Private Notes will represent to the Company that, among other things, (i) Exchange Notes to be acquired by such holder of Private Notes in connection with the Exchange Offer are being acquired by such holder in the ordinary course of business of such holder, (ii) such holder has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iii) such holder acknowledges and agrees that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purposes of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters, (iv) such holder understands that a secondary resale transaction described in clause (iii) above and any resales of Exchange Notes obtained by such holder in exchange for Private Notes acquired by such holder directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and 30 (v) such holder is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. If the holder is a broker-dealer that will receive Exchange Notes for such holder's own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, such holder will be required to acknowledge in the Letter of Transmittal that such holder will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act. RETURN OF PRIVATE NOTES If any tendered Private Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Private Notes are withdrawn or are submitted for a greater principal amount than the holders desire to exchange, such unaccepted, withdrawn or non-exchanged Private Notes will be returned without expense to the tendering holder thereof (or, in the case of Private Notes tendered by book-entry transfer into the Exchange Agent's account at the Depositary pursuant to the book-entry transfer procedures described below, such Private Notes will be credited to an account maintained with the Depositary) as promptly as practicable. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Private Notes at the Depositary for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Depositary's systems may make book- entry delivery of Private Notes by causing the Depositary to transfer such Private Notes into the Exchange Agent's account at the Depositary in accordance with the Depositary's procedures for transfer. However, although delivery of Private Notes may be effected through book-entry transfer at the Depositary, the Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at the address set forth below under "--Exchange Agent" on or prior to the Expiration Date or pursuant to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Private Notes and (i) whose Private Notes are not immediately available or (ii) who cannot deliver their Private Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company setting forth the name and address of the holder, the certificate number(s) of such Private Notes and the principal amount of Private Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or a facsimile thereof), together with the certificate(s) representing the Private Notes in proper form for transfer or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Private Notes in proper form for transfer and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. 31 Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Private Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. To withdraw a tender of Private Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and principal amount of such Private Notes) and (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered (including any required signature guarantees). All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, whose determination shall be final and binding on all parties. Any Private Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Private Notes so withdrawn are validly retendered. Properly withdrawn Private Notes may be retendered by following one of the procedures described above under "The Exchange Offer--Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange the Exchange Notes for, any Private Notes, and may terminate the Exchange Offer as provided herein before the acceptance of such Private Notes, if the Exchange Offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the Commission. If the Company reasonably determines that such condition (that the Exchange Offer not violate applicable law, rules, regulations or interpretation of the Staff) is not satisfied, the Company may (i) refuse to accept any Private Notes and return all tendered Private Notes to the tendering holders or (ii) extend the Exchange Offer and retain all Private Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Private Notes (see "--Withdrawal of Tenders"). LIQUIDATED DAMAGES The Company, the Guarantors and the Initial Purchaser entered into a registration rights agreement (the "Registration Rights Agreement") dated as of October 6, 1997, pursuant to which each of the Company and the Guarantors agreed that they will, at their cost, for the benefit of the Holders, (i) to the extent not prohibited by any applicable law or applicable interpretation of the staff of the Commission (A) prepare and, on or prior to 120 days (the "Filing Date") after the date of original issuance of the Private Notes (the "Issue Date"), file with the Commission a Registration Statement under the Securities Act with respect to an offer by the Company to the holders of the Private Notes (the "Exchange Offer") to issue and deliver to such holders, in exchange for the Private Notes, a like principal amount of notes (the "Exchange Notes") guaranteed on a senior subordinated basis by each of the Subsidiary Guarantors, and identical to the Private Notes in all material respects, except that the such notes will not have provisions regarding restrictions on transfer, (B) use their best efforts to cause the Registration Statement relating to the Exchange Offer to be declared effective by the Commission under the Securities Act on or prior to 180 days after the Issue Date, and (C) commence the Exchange Offer and use their best efforts to issue, on or prior to the date (the "Consummation Date") that is 30 days immediately following the date that the Exchange Registration Statement shall have been declared effective, the Exchange Notes. The offer and sale of the Exchange Notes pursuant to the Exchange Offer shall be registered pursuant to the Securities Act on an appropriate form (the "Exchange Registration Statement") and duly registered or qualified 32 under all applicable state securities or Blue Sky laws and will comply with all applicable tender offer rules and regulations under the Exchange Act and state securities or Blue Sky laws. The Exchange Offer shall not be subject to any condition, other than that the Exchange Offer does not violate any applicable law or interpretation of the staff of the Commission. If (i) the Company and the Guarantors are not permitted to file the Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by any applicable law or applicable interpretation of the Staff of the Commission or (ii) any holder of a Private Note notifies the Company on or prior to the 20th day following the Issue Date that (A) such holder is prohibited by law or Commission policy from participating in the Exchange Offer, (B) Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Registration Statement is not appropriate or available for such resales by such holder or (C) such holder is a broker-dealer and owns Private Notes acquired directly from the Company or any of its Affiliates (each such event referred to in clauses (i) and (ii), a "Shelf Filing Event"), the Company and the Guarantors shall at their own expense use their best efforts to cause to be filed on or prior to 30 days after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement pursuant to clause (i) above or 30 days after the date on which the Company receives the notice specified in clause (ii) above, a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement")), relating to all Private Notes the holders of which have provided to the Company in writing, within 15 days after receipt of a request therefor, the information specified in item 507 of Regulation S-K of the Act and such other information as the Company shall reasonably request and shall use their best efforts to have the Shelf Registration Statement declared effective by the Commission on or prior to 90 days after the filing thereof. In such circumstances, the Company and the Guarantors shall use their best efforts to keep the Shelf Registration Statement continuously effective under the Securities Act, until (A) two years following the Issue Date or (B) if sooner, the date immediately following the date that all Transfer Restricted Notes (as defined) covered by the Shelf Registration Statement have been sold pursuant thereto or otherwise cease to be Transfer Restricted Notes (the "Effectiveness Period"). For purposes of the foregoing, a "Transfer Restricted Note" means each Private Note, until the earliest to occur of (a) the date on which such Private Note is exchanged in the Exchange Offer and entitled to be resold to the public by the holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Private Note has been disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Private Note is disposed of by a broker-dealer pursuant to the "Plan of Distribution" section hereof (including delivery of the Prospectus contemplated therein) or (d) the date on which such Private Note is distributed to the public pursuant to Rule 144 under the Act. If the Company and the Guarantors fail to comply with the above provisions or if the Exchange Offer Registration Statement or the Shelf Registration statement fails to become effective, then, liquidated damages (the "Liquidated Damages") shall become payable in respect of the Private Notes as follows: If (i) any Registration Statement required by the Registration Rights Agreement is not filed with the Commission on or prior to the date specified for such filing in the Registration Rights Agreement, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the date specified for such effectiveness in the Registration Rights Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the Exchange Offer has not been consummated within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by the Registration Rights Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable in connection with resales of Transfer Restricted Notes during the periods specified herein and is not succeeded within 30 days by another effective Registration Statement by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately; PROVIDED THAT such Registration 33 Statement shall not cease to be effective or useable in connection with resales of Transfer Restricted Securities for more than 30 days in any calendar year (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby jointly and severally agree to pay liquidated damages to each holder of Transfer Restricted Notes with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Notes held by such holder for each week or portion thereof that the Registration Default continues. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.25 per week per $1,000 principal amount of Transfer Restricted Notes; PROVIDED THAT the Company and the Guarantors shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Notes as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid by wire transfer of immediately available funds or by federal funds check and to holders of certificated securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. All obligations of the Company set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Note at the time such security ceases to be a Transfer Restricted Note shall survive until such time as all such obligations with respect to such security shall have been satisfied in full. No holder of Transfer Restricted Notes shall be entitled to Liquidated Damages payable in connection with any Shelf Registration Statement unless and until such holder shall have provided certain information reasonably requested by the Company for use in connection with such Shelf Registration Statement. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Registration Rights Agreement, a copy of which will be available upon request to the Company. TERMINATION OF CERTAIN RIGHTS All rights under the Registration Rights Agreement (including registration rights) of holders of the Private Notes eligible to participate in the Exchange Offer will terminate upon consummation of the Exchange Offer except with respect to the Company's continuing obligations (i) to indemnify such holders (including any broker-dealers) and certain parties related to such holders against certain liabilities (including liabilities under the Securities Act), (ii) to provide, upon the request of any holder of a transfer-restricted Private Note, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Private Notes pursuant to Rule 144A and (iii) to provide copies of the latest version of the Prospectus to broker-dealers upon their request for the period required by the Securities Act. 34 EXCHANGE AGENT Norwest Bank Minnesota, National Association has been appointed as Exchange Agent of the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: BY REGISTERED OR CERTIFIED MAIL: IN PERSON: Norwest Bank Minnesota, Northstar East Bldg. National Association 608 2nd Ave. S. Corporate Trust Operations 12th Floor P.O. Box 1517 Corporate Trust Ser. Minneapolis, MN 55480-1517 Minneapolis, MN BY HAND OR OVERNIGHT COURIER: BY FACSIMILE FOR ELIGIBLE INSTITUTIONS ONLY: Norwest Bank Minnesota, (612) 667-4927 National Association CONFIRM RECEIPT OF NOTICE OF Corporate Trust Operations GUARANTEED DELIVERY BY TELEPHONE: Norwest Center (612) 667-9764 Sixth and Marquette Minneapolis, MN 55479-0113
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company and are estimated in the aggregate to be approximately $300,000. Such expenses include registration fees, fees and expenses of the Exchange Agent and the Trustee, accounting and legal fees and printing costs, among others. The Company will pay all transfer taxes, if any, applicable to the exchange of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of the Private Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. CONSEQUENCE OF FAILURES TO EXCHANGE Participation in the Exchange Offer is voluntary. Holders of the Private Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take, and the Company takes no position with respect to the advisability of the Exchange Offer. 35 The Private Notes that are not exchanged for the Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Private Notes may be resold only (i) to a person whom the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii) in a transaction meeting the requirements of Rule 144 under the Securities Act, (iii) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, (iv) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (v) to the Company or (vi) pursuant to an effective registration statement and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction. ACCOUNTING TREATMENT For accounting purposes, the Company will recognize no gain or loss as a result of the Exchange Offer. The expenses of the Exchange Offer will be amortized over the term of the Exchange Notes. USE OF PROCEEDS The proceeds from the sale of the Private Notes were used in part to finance the Acquisition and related fees and expenses. See "The Acquisition." The Company will not receive any proceeds from the Exchange Offer. In consideration for issuing the Exchange Notes as contemplated in this Prospectus, the Company will receive in exchange Private Notes in like principal amount, the terms of which are identical to the Exchange Notes except that (i) the exchange will have been registered under the Securities Act, and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Private Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. The Private Notes surrendered in exchange for Exchange Notes will be retained by the Company and the Exchange Offer will not result in any increase in the indebtedness of the Company. CAPITALIZATION The following table sets forth the unaudited capitalization of the Company at September 30, 1997, as adjusted to give pro forma effect to the Transactions.
AT SEPTEMBER 30, 1997 ----------------------- ($ IN MILLIONS) Revolving Credit Facility(1)............................................................. $ 12.0 Term Loan Facilities(2).................................................................. 445.0 8 3/4% Senior Subordinated Notes due 2007................................................ 200.0 Seller Note(2)........................................................................... 50.0 ------ Total Debt........................................................................... 707.0 Stockholder's Equity..................................................................... 173.0 ------ Total Capitalization................................................................. $ 880.0 ------ ------
- ------------------------ (1) At November 30, 1997, the Revolving Credit Facility had a remaining borrowing availability of approximately $61.0 million, after giving effect to the issuance of approximately $157.0 million of letters of credit. (2) The Company believes that the Seller Note, which is due three years after the Closing Date, will be prepaid within one year after the Closing Date with $50.0 million of additional borrowings under the Term Loan Facilities. 36 UNAUDITED PRO FORMA FINANCIAL DATA The following unaudited consolidated pro forma financial data of the Company for the year ended December 31, 1996, for the nine months ended September 30, 1996 and 1997, and as of and for the twelve months ended September 30, 1997, give effect to the Transactions, (and certain related assumptions described in the notes hereto) and the application of the proceeds therefrom as if such transactions occurred on January 1, 1996, with respect to the pro forma income statement and other data, and as of September 30, 1997 with respect to the pro forma balance sheet data. See "The Acquisition." The consolidated pro forma adjustments are based upon currently available information and upon certain assumptions that management believes are reasonable. The Acquisition will be accounted for by the Company under the purchase method of accounting. The adjustments included in the unaudited pro forma financial data represent the Company's preliminary determination of those adjustments based on available information, although no appraisal or other valuation has yet been completed and such adjustments do not include many of the effects of purchase accounting. There can be no assurance that the actual adjustments will not differ significantly from the pro forma adjustments reflected in the pro forma financial data. The unaudited consolidated pro forma financial data are not necessarily indicative of either future results of operations or results that might have been achieved if the Transactions had been consummated as of the indicated dates. The unaudited pro forma financial data should be read in conjunction with the historical financial statements of UDLP, together with the related notes thereto, included elsewhere in this Prospectus. The Company accounts for inventory using the LIFO method and incurred non-cash LIFO charges of $6.3 million, $7.1 million, $8.0 million and $7.2 million for the year ended December 31, 1996, the nine months ended September 30, 1996 and 1997, and the twelve months ended September 30, 1997, respectively. 37 UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA TWELVE MONTHS ENDED SEPTEMBER 30, 1997
HISTORICAL PRO FORMA PRO FORMA STATEMENT ADJUSTMENTS STATEMENT ----------- ----------- ----------- ($ IN MILLIONS) INCOME STATEMENT DATA: Revenue................................................................ $ 1,197.3 $ 1.3(a) $ 1,187.6 (11.0)(b) Cost of sales.......................................................... 980.0 1.1(a) 981.1 Selling, general and administrative.................................... 129.8 0.4(a) 115.2 (15.0)(b) Research and development............................................... 15.9 1.6(a) 17.5 Amortization of goodwill............................................... -- 34.7(c) 34.7 ----------- ----------- ----------- Total expenses....................................................... 1,125.7 22.8 1,148.5 Earnings from foreign affiliates....................................... 14.1 -- 14.1 ----------- ----------- ----------- Income from operations............................................... 85.7 (32.5) 53.2 Interest expense....................................................... -- 66.1(d) 66.1 Other (income) expense................................................. (1.2) -- (1.2) ----------- ----------- ----------- Income before income taxes........................................... 86.9 (96.1) (11.7) Provision for income taxes............................................. 4.3 (9.0)(e) (4.7) ----------- ----------- ----------- Net income........................................................... $ 82.6 $ (89.6) $ (7.0) ----------- ----------- ----------- ----------- ----------- ----------- OTHER DATA: EBITDA (f)............................................................. $ 127.1 Depreciation and amortization (g)...................................... 73.9 Capital expenditures................................................... 26.0
YEAR ENDED DECEMBER 31, 1996
HISTORICAL PRO FORMA PRO FORMA STATEMENT ADJUSTMENTS STATEMENT ----------- ----------- ----------- ($ IN MILLIONS) INCOME STATEMENT DATA: Revenue................................................................ $ 1,029.3 $ 1.4(a) $ 1,019.7 (11.0)(b) Cost of sales.......................................................... 820.8 1.3(a) 822.1 Selling, general and administrative.................................... 128.4 0.4(a) 113.8 (15.0)(b) Research and development............................................... 12.9 1.5(a) 14.4 Amortization of goodwill............................................... -- 34.7(c) 34.7 ----------- ----------- ----------- Total expenses....................................................... 962.1 22.9 985.0 Earnings from foreign affiliates....................................... 31.9 -- 31.9 ----------- ----------- ----------- Income from operations............................................... 99.1 (32.5) 66.6 Interest expense....................................................... -- 66.1(d) 66.1 Other (income) expense................................................. (1.9) (0.1)(a) (2.0) ----------- ----------- ----------- Income (loss) before income taxes.................................... 101.0 (98.5) 2.5 Provision (benefit) for income taxes................................... 2.8 (1.8)(e) 1.0 ----------- ----------- ----------- Net income (loss).................................................... $ 98.2 $ (96.7) $ 1.5 ----------- ----------- ----------- ----------- ----------- ----------- OTHER DATA: EBITDA (f)............................................................. $ 140.3 Depreciation and amortization (g)...................................... 73.7 Capital expenditures................................................... 22.4
SEE NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA. 38 UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA NINE MONTHS ENDED SEPTEMBER 30, 1997
HISTORICAL PRO FORMA PRO FORMA STATEMENT ADJUSTMENTS STATEMENT ----------- ----------- ----------- ($ IN MILLIONS) INCOME STATEMENT DATA: Revenue ............................................................... $ 913.9 $ 0.9(a) $ 906.5 (8.3)(b) Cost of sales.......................................................... 755.0 0.8(a) 755.8 Selling, general and administrative.................................... 91.4 80.1 (11.3)(b) Research and development............................................... 12.1 1.0(a) 13.1 Amortization of goodwill............................................... -- 26.0(c) 26.0 ----------- ----------- ----------- Total expenses....................................................... 858.5 16.5 875.0 Earnings from foreign affiliates....................................... 13.5 -- 13.5 ----------- ----------- ----------- Income from operations............................................... 68.9 (23.9) 45.0 Interest expense....................................................... -- 49.6(d) 49.6 Other (income) expense................................................. (1.5) 0.1(a) (1.4) ----------- ----------- ----------- Income before income taxes........................................... 70.4 (73.6) (3.2) Provision for income taxes............................................. 1.5 (2.8)(e) (1.3) ----------- ----------- ----------- Net income........................................................... $ 68.9 $ (70.8) $ (1.9) ----------- ----------- ----------- ----------- ----------- ----------- OTHER DATA: EBITDA (f)............................................................. $ 100.0 Depreciation and amortization (g)...................................... 55.0 Capital expenditures................................................... 20.1
NINE MONTHS ENDED SEPTEMBER 30, 1996
HISTORICAL PRO FORMA PRO FORMA STATEMENT ADJUSTMENTS STATEMENT ----------- ----------- ----------- ($ IN MILLIONS) INCOME STATEMENT DATA: Revenue................................................................ $ 745.9 $ 1.0(a) $ 738.6 (8.3)(b) Cost of sales.......................................................... 595.8 1.0(a) 596.8 Selling, general and administrative.................................... 90.0 78.7 (11.3)(b) Research and development............................................... 9.1 0.9(a) 10.0 Amortization of goodwill............................................... -- 26.0(c) 26.0 ----------- ----------- ----------- Total expenses....................................................... 694.9 16.6 711.5 Earnings from foreign affiliates....................................... 31.3 -- 31.3 ----------- ----------- ----------- Income from operations............................................... 82.3 (23.9) 58.4 Interest expense....................................................... 49.6(d) 49.6 Other (income) expense................................................. (2.2) (2.2) ----------- ----------- ----------- Income before income taxes........................................... 84.5 (73.5) 11.0 Provision for income taxes............................................. 0.0 4.4(e) 4.4 ----------- ----------- ----------- Net income........................................................... $ 84.5 $ (77.9) $ 6.6 ----------- ----------- ----------- ----------- ----------- ----------- OTHER DATA: EBITDA (f)............................................................. $ 113.2 Depreciation and amortization (g)...................................... 54.8 Capital expenditures................................................... 16.5
SEE NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA. 39 NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT AND OTHER DATA (a) To reflect the operations of CTC acquired by UDLP pursuant to the Acquisition Agreement. (b) To reflect (i) elimination of cost allocations to the Company by FMC for general and administrative services including tax, treasury, legal, audit, and insurance, which will not result in incremental costs to be incurred by the Company after the Acquisition and (ii) inclusion of the anticipated management fee to be charged to the Company by Carlyle after the Acquisition. The requirement that the net cost savings be shared with the customer is reflected by a reduction in revenues. (c) To reflect amortization of goodwill associated with the Acquisition over an estimated life of 15 years. Actual goodwill amortization is expected to differ after completion of an asset valuation and application of purchase accounting adjustments. See Note (a) of "Notes to Unaudited Pro Forma Balance Sheet." (d) To reflect interest expense and other expenses related to the Senior Credit Facility, the Notes and the Seller Note. Interest expense associated with the Senior Credit Facility was calculated based on an average interest rate of 8.33% per year. Interest expense associated with the Notes and the Seller Note was calculated based on an interest rate of 8.75% per year. Interest expense includes the following:
TWELVE MONTHS ENDED NINE MONTHS ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1996 AND SEPTEMBER 30, AND SEPTEMBER 30, 1997 1997 --------------------- --------------------- ($ IN MILLIONS) Senior Credit Facility............................. $ 38.1 $ 28.6 The Notes.......................................... 17.5 13.1 Seller Note........................................ 4.4 3.3 Fees related to the Senior Credit Facility......... 4.1 3.1 ----- ----- 64.1 48.1 Amortization of deferred financing costs........... 2.0 1.5 ----- ----- $ 66.1 $ 49.6 ----- ----- ----- -----
(e) To reflect the estimated provision for income taxes assuming an effective income tax rate of 40% after the Acquisition. This amount includes the tax effect of all pro forma adjustments and the tax effect of accounting for the Company as if it were a C Corporation. (f) EBITDA represents income from operations plus depreciation and amortization. EBITDA is not a measure of performance or financial condition under generally accepted accounting principles, but is presented to provide additional information related to debt service capability. EBITDA should not be considered in isolation or as a substitute for other measures of financial performance or liquidity under generally accepted accounting principles. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. (g) Amortization includes amounts related to an Advance Agreement entered into with the U.S. Department of Defense in 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview--Advance Agreement." Actual depreciation and amortization are expected to differ from the pro forma amounts presented after completion of an asset valuation and application of purchase accounting adjustments. See Note (a) of "Notes to Unaudited Pro Forma Balance Sheet." 40 UNAUDITED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1997
HISTORICAL PRO FORMA PRO FORMA STATEMENT ADJUSTMENTS(A) STATEMENT ---------- -------------- ---------- ($ IN MILLIONS) ASSETS Current Assets: Cash and marketable securities.................... $ 11.1 $ (0.4)(c) $ 10.7 Short-term investments............................ -- -- -- Trade receivables................................. 77.9 1.7(b) 79.8 0.2(c) Inventories....................................... 330.2 (4.1)(b) 366.3 0.5(c) 39.7(d) Other current assets.............................. 4.8 0.1(c) 4.9 ---------- -------------- ---------- Total Current Assets............................ 424.0 37.7 461.7 Investments in affiliated companies............... 10.8 -- 10.8 Net property, plant and equipment................. 101.2 1.1(c) 102.3 Patents and deferred charges...................... 25.8 0.2(c) 42.4 16.4(e) Goodwill.......................................... -- 520.7(d) 520.7 Prepaid pension cost.............................. 50.3 117.9(d) 168.2 ---------- -------------- ---------- Total Assets.................................... $ 612.1 $ 694.0 $ 1,306.1 ---------- -------------- ---------- ---------- -------------- ---------- LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Accounts payable, trade and other................. $ 56.4 $ 0.2(c) $ 56.6 Advanced payments................................. 274.1 274.1 Accrued and other liabilities..................... 84.5 (0.4)(b) 85.2 1.1(c) Due to FMC Corporation............................ 5.8 -- 5.8 Current maturities of long-term debt.............. -- 40.5(f) 40.5 ---------- -------------- ---------- Total Current Liabilities....................... 420.8 41.4 462.2 Long-term debt, less current maturities........... -- 666.5(f) 666.5 Accrued pension cost.............................. 31.1 (31.1)(d) -- Accrued postretirement benefit cost............... 29.2 (24.8)(d) 4.4 ---------- -------------- ---------- Total Liabilities............................... 481.1 652.0 1,133.1 Stockholder's Equity: Capital stock..................................... -- 173.0(g) 173.0 Partners' capital................................. 131.0 (131.0)(h) -- ---------- -------------- ---------- Total Stockholder's Equity...................... 131.0 42.0 173.0 ---------- -------------- ---------- Total Liabilities and Stockholder's Equity...... $ 612.1 $ 694.0 $ 1,306.1 ---------- -------------- ---------- ---------- -------------- ----------
SEE NOTES TO UNAUDITED PRO FORMA BALANCE SHEET. 41 NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (a) A purchase accounting valuation of the Company's assets and liabilities has not been completed. Upon completion of such valuation, the Company will allocate the purchase price to the Company's assets and liabilities, both tangible and intangible, with the excess of the cost over the fair value of the net assets acquired allocated to goodwill. Management expects that, based on such allocation, additional purchase accounting adjustments will be made to the Company's assets and liabilities and, among other adjustments, property, plant, and equipment will increase and goodwill will decrease from the amounts presented herein. (b) To reflect adjustments pursuant to the Acquisition Agreement. (c) To reflect CTC assets acquired and liabilities assumed by the Company pursuant to the Acquisition Agreement. (d) To reflect purchase accounting adjustments as follows:
($ IN MILLIONS) Inventories.................................................................... $ 39.7 Goodwill....................................................................... 520.7 Prepaid pension cost........................................................... 117.9 Accrued pension cost........................................................... (31.1) Accrued postretirement cost.................................................... (24.8)
The adjustment to inventories is to increase inventories for the difference between inventories valued at LIFO and FIFO. The adjustment to prepaid pension cost, accrued pension cost, and accrued postretirement benefit cost adjusts historical balances to the difference between the assets of the plans and the related projected benefit obligations. The adjustment to goodwill is to record the remaining excess of acquisition cost over the net assets acquired. See Note (a) above. (e) To reflect deferred financing costs associated with the Senior Credit Facility and the Notes. (f) To reflect the financing of the Acquisition as follows:
($ IN MILLIONS) Senior Credit Facility......................................................... $ 457.0 The Notes...................................................................... 200.0 Seller Note.................................................................... 50.0 ------------- 707.0 Less current maturities........................................................ 40.5 ------------- $ 666.5 ------------- -------------
(g) To reflect the Equity Contribution. (h) To reflect the elimination of partners' capital. 42 SELECTED HISTORICAL FINANCIAL DATA The following table sets forth selected historical consolidated financial data of UDLP as of and for the years ended December 31, 1994 (the year of inception), 1995 and 1996, which have been derived from financial statements audited by Ernst & Young LLP, independent auditors. The selected historical financial data as of and for the years ended December 31, 1992 and 1993 have been derived from unaudited financial statements of FMC's Defense Systems Group and Harsco's BMY Combat Systems Division. The selected historical consolidated financial data as of and for the nine months ended September 30, 1996 and 1997 have been derived from unaudited interim consolidated financial statements which, in the opinion of management, reflect all material adjustments, consisting only of normal recurring adjustments, except as described below, necessary for a fair presentation of such data. The following information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements of UDLP, together with the related notes thereto, included elsewhere in this Prospectus.
NINE MONTHS ENDED SEPTEMBER YEAR ENDED DECEMBER 31, 30, --------------------------------------------------------------------------- --------- PREDECESSOR OPERATIONS(1) ------------------------------------------ FMC HARSCO FMC HARSCO 1992 1992 1993 1993 1994 1995 1996 1996 --------- --------- --------- --------- --------- --------- --------- --------- ($ IN MILLIONS, EXCEPT RATIOS) INCOME STATEMENT DATA: Revenue................................. $ 1,111.8 $ 384.9 $ 639.9 $ 348.0 $ 1,076.3 $ 967.6 $ 1,029.3 $ 745.9 Cost of sales(2)........................ 861.5 313.1 468.4 258.6 809.8 746.7 820.8 595.8 Selling, general and administrative(3)..................... 72.7 31.9 49.8 23.2 131.8 122.7 128.4 90.0 Research and development................ 21.0 1.8 11.4 2.1 16.3 12.4 12.9 9.1 --------- --------- --------- --------- --------- --------- --------- --------- Total expenses........................ 955.2 346.8 529.6 283.9 957.9 881.8 962.1 694.9 Earnings from foreign affiliates(4)..... 16.2 -- 10.3 -- 12.4 21.4 31.9 31.3 --------- --------- --------- --------- --------- --------- --------- --------- Income from operations................ 172.8 38.1 120.6 64.1 130.8 107.2 99.1 82.3 Other (income) expense.................. (7.1) 7.0 (2.3) (0.5) (2.6) (1.9) (1.9) (2.2) --------- --------- --------- --------- --------- --------- --------- --------- Income before income taxes............ 179.9 31.1 122.9 64.6 133.4 109.1 101.0 84.5 Provision for income taxes(5)........... 64.6 12.4 30.4 23.4 3.9 1.4 2.8 -- --------- --------- --------- --------- --------- --------- --------- --------- Net income............................ $ 115.3 $ 18.7 $ 92.5 $ 41.2 $ 129.5 $ 107.7 $ 98.2 $ 84.5 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- OTHER DATA(6): EBITDA(7)............................... $ 159.8 $ 133.9 $ 138.1 $ 111.1 Depreciation and amortization........... $ 26.5 $ 9.2 $ 23.9 $ 9.1 29.0 26.7 39.0 28.8 Capital expenditures.................... 18.0 4.8 17.8 5.1 18.3 24.1 22.4 16.5 Ratio of earnings to fixed charges(8)... 38.1:1 26.4:1 23.6:1 26.9:1 BALANCE SHEET DATA: Working capital......................... $ (56.6) $ 37.6 $ 2.2 $ 13.2 $ 4.2 $ 11.3 $ 46.6 $ 48.4 Total assets............................ 311.2 197.8 439.7 177.4 479.9 569.6 645.0 601.7 Partners' capital(9).................... 39.5 53.0 66.8 90.3 123.7 156.4 179.6 187.9 1997 --------- INCOME STATEMENT DATA: Revenue................................. $ 913.9 Cost of sales(2)........................ 755.0 Selling, general and administrative(3)..................... 91.4 Research and development................ 12.1 --------- Total expenses........................ 858.5 Earnings from foreign affiliates(4)..... 13.5 --------- Income from operations................ 68.9 Other (income) expense.................. (1.5) --------- Income before income taxes............ 70.4 Provision for income taxes(5)........... 1.5 --------- Net income............................ $ 68.9 --------- --------- OTHER DATA(6): EBITDA(7)............................... $ 97.9 Depreciation and amortization........... 29.0 Capital expenditures.................... 20.1 Ratio of earnings to fixed charges(8)... 19.2:1 BALANCE SHEET DATA: Working capital......................... $ 3.1 Total assets............................ 612.1 Partners' capital(9).................... 131.0
- -------------------------- (SEE FOOTNOTES ON FOLLOWING PAGE) 43 - -------------------------- (FOOTNOTES FROM PREVIOUS PAGE) (1) Prior to the formation of UDLP effective January 1, 1994, respective portions of the business were operated by FMC and Harsco. There was no change in the basis of assets contributed or liabilities assumed at the formation of UDLP. However, the financial information for 1992 and 1993 is based on the accounting principles followed by each of FMC and Harsco prior to the formation of UDLP, which differ in certain respects from the accounting principles of UDLP. (2) Cost of sales includes non-cash LIFO charges of $5.6 million, $5.9 million and $6.3 million for the years ended December 31, 1994, 1995 and 1996, respectively, and $7.1 million and $8.0 million for the nine months ended September 30, 1996 and 1997, respectively. Cost of sales for the year ended December 31, 1996 and nine months ended September 30, 1996 includes a $14.3 million favorable settlement from the U.S. government on a government procurement contract. Cost of sales for the nine months ended September 30, 1997 includes approximately $13.5 million of non-cash charges recorded for the quarter ended September 1997 for changes in estimated contract profitability related to contractual issues with customers and other matters resulting from the periodic reassessment of the estimated profitability of contracts in progress. (3) Selling, general and administrative expense for the year ended December 31, 1994 includes a $7.4 million charge related to conforming Harsco's historical accounting policy to UDLP's accounting for inventory. (4) Earnings from foreign affiliates for the year ended December 31, 1992 includes a $5.9 million increase as a result of a change in accounting method for the investment in FNSS-Turkey from the equity method to the cost method. Earnings from foreign affiliates for the year ended December 31, 1996 and nine months ended September 30, 1996 includes a $3.8 million increase as a result of a change of accounting method for the investment in FMC-Arabia from the cost method to the equity method. (5) Income taxes are presented prior to the formation of UDLP as if the operations were taxed as C corporations. After the formation of UDLP, income passed to FMC and Harsco and is taxable at the partner level, except for taxes payable on the income of UDLP's Foreign Sales Corporation subsidiary. (6) Net cash provided by operating activities was $166.0, $94.7, $81.1, $56.7, and $119.2 million for the years ended December 31, 1994, 1995 and 1996 and for the nine months ended September 30, 1996 and 1997, respectively. Net cash (used)/provided in investing activities was $(17.1), $(50.8), $(7.0), $(4.6) and $6.3 million for the years ended December 31, 1994, 1995 and 1996 and for the nine months ended September 30, 1996 and 1997, respectively. Net cash used in financing activities was $118.5, $74.9, $75.0, $53.0, and $114.4 million for the years ended December 31, 1994, 1995 and 1996 and for the nine months ended September 30, 1996 and 1997, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity, Captial Resources and Financial Condition." (7) EBITDA represents income from operations plus depreciation and amortization. EBITDA is not a measure of performance or financial condition under generally accepted accounting principles, but is presented to provide additional information related to debt service capability. EBITDA should not be considered in isolation or as a substitute for other measures of financial performance or liquidity under generally accepted accounting principles. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. EBITDA information is not presented for periods prior to the formation of UDLP because management believes such information is not meaningful. (8) For purposes of calculating the ratios of earnings to fixed charges, "earnings" represents income before income taxes less the excess, if any, of the equity in earnings of joint ventures over dividends received plus fixed charges. "Fixed charges" consists of interest expense, including amortization of deferred financing costs, plus that portion of operating lease rental expense (33%) which management believes is representative of the interest component of lease expense. Ratios of earnings to fixed charges are not presented for periods prior to the formation of UDLP because they are not meaningful due to differences in capital structure. (9) Prior to the formation of UDLP, the amounts represent the divisional equity of the predecessor operations of FMC and Harsco, respectively. 44 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the financial statements and related notes, and the other financial information, included elsewhere in this Prospectus. Unless otherwise indicated, the following discussion does not give effect to the Transactions or include pro forma financial information. OVERVIEW BUSINESS ENVIRONMENT Approximately 90% of the Company's 1996 sales were to the U.S. government, primarily to agencies of the DoD (including FMS sales), or through subcontracts with other government contractors. The U.S. defense budget has been declining in real terms since the mid-1980s, resulting in some delays in new program starts, program stretch-outs and program cancellations. These budget declines have adversely affected the Company's sales and earnings. However, the rate of budget declines has recently slowed and management believes that, while the DoD budget may continue to decline, any such declines in the near term should be at a lower rate than the rate of decline over the last decade. The majority of the Company's programs are funded under the Weapon & Tracked Combat Vehicles ("W&TCV") procurement budget, which includes personal and crew-served weapons and heavy TCVs, in addition to the medium/light class of TCVs that the Company produces. The W&TCV procurement reached its peak in the early 1980s, with over $6.0 billion in procurement funding for the U.S. government's fiscal year ended September 30 ("Fiscal"), 1983. The W&TCV procurement budget thereafter declined substantially as the Cold War receded and then ended, reaching $0.9 billion for Fiscal 1993 and Fiscal 1994. Such expenditures have been in the $1.1 billion to $1.5 billion range for Fiscal 1995 through Fiscal 1997. CONTRACTING PROCESS Government procurement initiatives for significant new armaments programs (including major upgrades) are generally completed in four primary sequential phases, each of which generally constitutes a separate authorization decision and a separate, progressively larger, business opportunity. The first award is a Demonstration and Validation ("DemVal") contract, for construction of prototypes and demonstration of performance capabilities and advantages. The second phase is an Engineering and Manufacturing Development ("EMD") contract, to demonstrate the ability to manufacture the systems cost-effectively on a large scale. The third phase, Low Rate Initial Production ("LRIP"), introduces the system into production for and delivery to U.S. government customers for final evaluation prior to the fourth phase, which is Full Rate Production ("FRP"). There is frequently competitive bidding at one or more phases, although the prime contractor at the DemVal and/or EMD phases often has a competitive advantage in successfully bidding on the LRIP and FRP phases. Each phase also represents a separate opportunity for the U.S. military to prioritize programs and reassess budgetary authority, and the annual appropriation for each phase also requires separate Congressional approval. PRODUCT LIFE-CYCLES The Company's major products typically undergo a product life-cycle from early development to mature production, including aftermarket support and upgrades. During this life-cycle, it is not uncommon for next generation or competing systems to begin to capture U.S. defense budget dollars. This has typically resulted in line-item budget dollar shifts between programs. For example, while the Company's production of the M109 self-propelled howitzer has declined as the program has evolved toward the end of its life-cycle, the Company's production of the A6 Paladin and development work for the Crusader has increased. Export sales and foreign joint venture and co-production businesses tend to mitigate the effect of these trends and extend product life cycles, as mature U.S. vehicles and systems frequently continue to 45 be attractive to international customers, allowing exporters to leverage their experience and capital base. See "Business--Products and Systems" and "--Backlog." RESTRUCTURING In October 1994, the Company entered into an advance agreement ("Advance Agreement") with the DoD. Under the terms of the Advance Agreement, the Company is permitted to defer certain costs that were incurred from January 1, 1994 through June 30, 1996 associated with consolidation and restructuring of its Ground Systems Division businesses. Costs deferred are being allocated ratably to contracts with the U.S. Department of Defense for thirty-six months beginning January 1, 1996. As of December 31, 1996, consolidation and restructuring costs incurred amounted to $38.3 million and are included in patents and deferred charges in the Company's balance sheet. Amortization relating to the Advance Agreement for the period ended December 31, 1996 was $12.7 million and is expected to continue at $12.7 million annually for 1997 and 1998. Because the costs incurred are allowable as costs under the Company's U.S. government contracts, they are generally reflected in the Company's pricing. The Company regularly considers other consolidation and cost reduction opportunities in response to declines in program spending or program changes and completions. For example, the Company has been consolidating certain operations from one of its California facilities to its York, Pennsylvania facility, with the transfer scheduled to be complete in the first quarter of 1998. Management considers it unlikely that any of these opportunities will approach the magnitude of the consolidation described above, or that any such opportunities will result in a related advance agreement with the DoD. VARIABILITY IN QUARTERLY AND ANNUAL PERFORMANCE The Company's operating performance frequently varies significantly from period to period, depending upon the timing, contract type and export sales, and, in particular, the award or expiration of one or more contracts, and the timing of manufacturing and delivery of products under such contracts. As a result, period-to-period comparisons may show substantial increases and decreases disproportionate to underlying business activity, and results for any given period should not be considered indicative of longer term results. Performance can also be materially affected by the timing and amount of dividends from the Company's Turkish and Saudi joint ventures, which has generally resulted in higher earnings during the first quarter of the year when such dividends are received. TAXES The Company will be taxed as a corporation for federal income tax purposes on the consolidated income of the Company and its wholly-owned subsidiary, UDLP Holdings Corp. As a limited partnership, UDLP's income or loss passes through to its partners (the Company and UDLP Holdings Corp.), and is taxable at the partner level. Accordingly, the income and loss of UDLP will be included in the Company's consolidated income. For federal income tax purposes, the income of UDLP's subsidiaries will generally be taxable at the subsidiary level. EXPORT SALES Export sales, including FMS, to foreign governments transacted through the U.S. government, were $194.2 million, $216.4 million and $433.2 million during 1996, 1995 and 1994, respectively. The substantial decline in 1995 from 1994 was due primarily to the completion of a Bradley Fighting Vehicle contract for Saudi Arabia in early 1995. Substantially all of the Company's export sales are made in U.S. dollars. In certain cases, the Company arranges to provide letters of credit to support advance payments that are received against future deliveries and in certain cases to provide performance guarantees. Increasingly, foreign governments have been demanding offset obligations when they award contracts. An offset involves purchasing goods or services from or otherwise providing value to the customer's 46 country. If the obligations are not met, the Company must pay a penalty to the foreign government for not meeting the obligations. As of June 30, 1997 the Company's offset exposure for foreign purchases was approximately $8.0 million, excluding offset obligations for the Company's foreign joint ventures. The Company has yet to incur a penalty on any of its offset obligations. RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 ("NINE MONTHS 1997") COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996 ("NINE MONTHS 1996") REVENUE. Revenue increased $168 million, or 22.5%, to $913.9 million for the Nine Months 1997 from $745.9 million for the Nine Months 1996. The primary reasons for the increase were the ramp-up of the Crusader program, revenue from the Company's involvement in the August 1996 privatization of the Louisville Naval Ordnance Station, an increase in sales resulting from the M109 A6 Paladin upgrade contract, the shipment of amphibious assault vehicles under a contract with Brazil, and initial shipments of M113 armored personnel carriers under a contract with Thailand. These increases were partially offset by lower sales of armored gun and composite armored vehicle development systems, which were essentially complete in 1996. GROSS PROFIT. Gross profit increased $8.8 million, or 5.9%, to $158.9 million for the Nine Months 1997 from $150.1 million for the Nine Months 1996. Gross margin declined to 17.4% of sales for the Nine Months 1997 from 20.1% for the Nine Months 1996. Gross profit for the Nine Months 1997 was favorably impacted by increased sales of new production units compared to the Nine Months 1996, and higher award fees on the Crusader program. This improvement was more than offset by approximately $13.5 million of non-cash charges recorded for the quarter ended September 1997 for changes in estimated contract profitability related to contractual issues with customers and other matters resulting from the periodic reassessment of the estimated profitability of contracts in progress. Additionally, gross profit for the Nine Months 1996 was favorably impacted by a $14.3 million price adjustment with the U.S. government on a gun and mount procurement contract. Gross profits were negatively impacted by a non-cash LIFO charge of $8.0 million for the Nine Months 1997 and $7.1 million for the Nine Months 1996. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased $1.4 million, or 1.6%, to $91.4 million for the Nine Months 1997 from $90.0 million for the Nine Months 1996. The increase is attributed to higher agent commissions related to foreign contracts, increased bid and proposal activity for the pursuit of new contracts, the costs associated with installing new automated business systems, and the costs related to the operation of the Louisville Naval Ordnance Station in 1997. Substantially offsetting these increases were the realization of the benefits of the consolidation of the Ground Systems Division business and the reclassification of certain costs in the Armament Systems Division business from general and administrative to cost of sales. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased $3.0 million, or 33.0%, to $12.1 million for the Nine Months 1997 from $9.1 million for the Nine Months 1996. The majority of the increased expense was for development work on new launching systems for the U.S. Navy, as well as modest spending increases on most other programs. EARNINGS RELATED TO INVESTMENTS IN FOREIGN AFFILIATES. Earnings from foreign affiliates decreased $17.8 million, or 56.9%, to $13.5 million for the Nine Months 1997 from $31.3 million for the Nine Months 1996. This decrease was due to an $18.5 million decrease in dividends received from FNSS-Turkey, primarily as a result of fire-related destruction of part of its production facility in February 1996. This decrease was partially offset by an increase of $0.8 million in earnings for the Nine Months 1997 primarily from the positive impact of a new contract at FMC-Arabia. This increase from FMC-Arabia would have been $4.6 million excluding the impact on the Nine Months 1996 of changing the accounting method for this investment from the cost method to the equity method beginning January 1996. 47 NET INCOME. As a result of the foregoing, net income decreased $15.6 million, or 18.5%, to $68.9 million for the Nine Months 1997 from $84.5 million for the Nine Months 1996. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 REVENUE. Revenue increased $61.8 million, or 6.4%, to $1,029.3 million for 1996 from $967.6 million for 1995. The primary reasons for the increase were increased revenue from the Crusader program, the continued ramp-up of sales on the M109 A6 Paladin upgrade program, sales on a new contract to privatize the operations of the Louisville Naval Ordnance Station and increased sales on the Mk41 VLS after resumption of production on the program. These increases were partially offset by lower sales due to a reduction of deliveries of new production units for tracked combat vehicle product lines, notably foreign sales of M109 howitzers. GROSS PROFIT. Gross profit decreased $12.4 million, or 5.6%, to $208.5 million for 1996 from $220.9 million for 1995. Gross margin declined to 20.3% of sales for 1996 from 22.8% of sales for 1995. The decrease in gross margin was due to a shift from a greater percentage of sales of higher margin new production units in 1995 to a greater percentage of lower margin engineering development and vehicle upgrade program sales in 1996. Also, royalties declined $9.0 million in 1996 due to a significant curtailment in deliveries by the joint venture in FNSS-Turkey as a result of fire-related destruction of part of its production facility in February 1996. These reductions were partially offset by the favorable impact of the 1996 settlement of a $14.3 million claim with the U.S. government on a gun and mount procurement contract. Gross profits were negatively impacted by non-cash LIFO charges of $6.3 million in 1996 and $5.9 million in 1995. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased $5.8 million, or 4.7%, to $128.5 million for 1996 from $122.7 million for 1995. The increase was due primarily to increases in employee benefit related costs, increased staffing costs related to the ramp-up of the Crusader program and increased costs related to operation of the Louisville Naval Ordnance Station, partially offset by reductions of expenses resulting from realization of the benefits of the consolidation of the Ground Systems Division business. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased $0.4 million, or 3.5%, to $12.9 million for 1996 from $12.4 million for 1995. EARNINGS RELATED TO INVESTMENTS IN FOREIGN AFFILIATES. Earnings from foreign affiliates increased $10.5 million, or 49.2%, to $31.9 million for 1996 from $21.4 million for 1995. Dividends received from FNSS-Turkey increased $3.9 million as a result of the shipment of more profitable units, while earnings related to FMC-Arabia increased by $6.6 million, of which $3.8 million was due to the effect of changing from the cost method to the equity method for this investment beginning January 1996 and $2.8 million was due to increased sales at FMC-Arabia. NET INCOME. As a result of the foregoing, net income decreased $9.5 million, or 8.8%, to $98.2 million for 1996 from $107.7 million for 1995. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 REVENUE. Revenue decreased $108.7 million, or 10.1%, to $967.6 million for 1995 from $1,076.3 million for 1994. The primary reason for the decrease was lower sales of new tracked combat vehicles, principally due to the completion of a multi-year Bradley Fighting Vehicle production contract in early 1995. These decreases in sales were partially offset by increased sales of Bradley Fighting Vehicle upgrades and M109 upgrades, and increased engineering development revenues related to the Crusader and the Bradley A3 programs. 48 GROSS PROFIT. Gross profit decreased $45.6 million, or 17.1%, to $220.9 million for 1995 from $266.4 million for 1994. Gross margin decreased to 22.8% of sales for 1995 from 24.8% of sales for 1994. The reduction in the gross margin was due primarily to a shift from a greater percentage of sales of higher margin new production units in 1994 to engineering development and vehicle upgrade program sales in 1995. The gross margin in 1995 also was adversely impacted by a loss provision on an amphibious assault vehicle contract with Brazil, which management expected at the time of signing. The Company completed delivery on this contract in 1997. Gross profits were negatively impacted by non-cash LIFO charges of $5.9 million for 1995 and $5.6 million for 1994. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased $9.1 million, or 6.9%, to $122.7 million for 1995 from $131.8 million for 1994. The decrease was due in part to personnel reductions resulting from the consolidation of the Ground Systems Division business. Selling, general and administrative expenses in 1994 also were unfavorably impacted by $7.4 million of costs previously capitalized in inventories under Harsco's historical accounting policy but charged against income after formation of the partnership to conform with UDLP's accounting policy of charging such costs to expense as incurred. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses decreased $3.9 million, or 23.8%, to $12.4 million for 1995 from $16.3 million for 1994. This decrease was primarily due to reductions in research and development spending, consistent with overall spending reductions by the Company. EARNINGS RELATED TO INVESTMENTS IN FOREIGN AFFILIATES. Earnings from foreign affiliates increased $8.9 million, or 71.5%, to $21.4 million for 1995 from $12.5 million for 1994. Dividends received from FNSS-Turkey increased $7.4 million due to increased vehicle deliveries and a more favorable product mix and FMC-Arabia recorded its initial dividend income of $1.5 million in 1995. NET INCOME. As a result of the foregoing, net income decreased $21.9 million, or 16.9%, to $107.7 million in 1995 from $129.5 million in 1994. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION The Company's liquidity requirements depend on a number of factors relative to the timing of production and deliveries under its U.S. government and direct foreign sales ("DFS") contracts. The Company generally receives progress payments on U.S. government contracts, including Foreign Military Sales, and it generally negotiates for the payment of advances from customers on DFS contracts. Advances on DFS contracts vary depending on the specific programs involved while progress payments on U.S. government contracts are at a percentage of contract expenditures. These payments reduce the need for Company-financed working capital, and changes in working capital between periods are frequently due to program status changes and the level of such payments for the specific programs by period. CASH PROVIDED BY OPERATING ACTIVITIES. Cash provided by operating activities was $119.2 million for the Nine Months 1997 compared to $56.7 million for the Nine Months 1996. The Nine Months 1996 was adversely impacted by a $83.6 million increase in inventories, primarily the result of an inventory build-up to support a DFS program in Thailand and FMS programs in Austria and Brazil, and the VLS launcher program. The Nine Months 1996 also was adversely impacted by a $38.2 million decrease in accounts payable due to the timing of spending and the payment cycle for major subcontractors for the Crusader program. Cash provided by operating activities was $81.1 million, $94.7 million and $166.0 million for the years ended December 31, 1996, 1995 and 1994, respectively. The decrease in cash from operations in 1996 as compared to 1995 was primarily the result of changes in inventories, accounts payable and advanced payments. The inventory build-up for 1996 of $113.5 million was primarily the result of the same programs that affected the Nine Months 1996 while the increase in 1995 was the result of a $49.3 million inventory build-up to support a program to build a component for a submarine and the VLS launcher program. The 49 negative impact on cash from operations of increased inventories was partially offset by increased advanced payments of $64.7 million in 1996, predominantly related to the various programs with increased inventories. Also impacting cash from operations for 1995 was the favorable effect of higher levels of accounts payable of $23.3 million in 1995 due to a difference in the timing of spending. Accounts payable returned to more normal levels in 1996 thereby adversely affecting 1996 operating cash flow by approximately $26.7 million. Operating cash flow for 1995 also was adversely impacted by approximately $23.5 million of costs related to the consolidation and restructuring of the Ground Systems Division businesses. This program incurred its highest expenditures in 1996. The decrease in cash from operations in 1995 as compared to 1994 resulted primarily from lower net income, the changes in inventories, restructuring costs, accounts payable, and advanced payments in 1995 as discussed above, and an increase in accrued and other liabilities in 1994. The increase in accrued and other liabilities in 1994 resulted from the establishment of employee-related accruals such as workers compensation since the initial formation of UDLP in January 1994 and the increase in a reserve to reimburse the government on a large production contract. CASH USED IN INVESTING ACTIVITIES. Cash used in investing activities for each period primarily reflects the Company's capital spending and short-term investments with FMC. Capital spending was $20.1 million for the Nine Months 1997 compared to $16.5 million for the Nine Months 1996. Capital spending was $22.4 million, $24.1 million and $18.3 million during the years ended December 31, 1996, 1995 and 1994, respectively. Capital spending is primarily related to spending for information technology and telecommunications equipment, simulation labs and expenditures relating to the Ground Systems Division consolidation. Capital expenditures for 1997 are expected to reach approximately $28 million, including significant outlays for a new integrated business information system during the second half of the year. The Company anticipates that its capital spending will be approximately $27.0 million in 1998 addressing, among other things, "year 2000" matters. FINANCING ACTIVITIES AND CAPITAL RESOURCES. Prior to the Acquisition, UDLP was financed primarily with cash flow from operations. Most of the operating cash flow not reinvested in the business was distributed to FMC and Harsco. Concurrently with the Acquisition, the Company entered into the Senior Credit Facility, consisting of $495.0 million of term loans, of which $445.0 million was outstanding initially, and a $230.0 million revolving credit facility, of which $12.0 million in borrowings and approximately $154.0 million in letters of credit were outstanding initially, and under which approximately $64.0 million were available for additional revolving credit borrowings. As of November 30, 1997, the outstanding term loans had been reduced by $28.5 million. The Company also issued the Notes and the $50.0 million Seller Note, which is expected to be repaid with $50.0 million of additional term loans under the Senior Credit Facility. If any adjustment results in a decrease in the Purchase Price for the Acquisition, borrowings under the Term Loan Facilities will be correspondingly reduced. If the Purchase Price is increased, the borrowings under the Revolving Credit Facility will be correspondingly increased. See "The Acquisition" and "Capitalization" for information relating to the financing for the Acquisition, and "Description of Certain Indebtedness". Based upon its current level of operations, management believes that the Company's cash flow from operations, together with available borrowings under the Senior Credit Facility, will be adequate to meet its anticipated requirements for working capital, capital expenditures, research and development expenditures, and interest payments and scheduled principal payments on its indebtedness (including the Senior Credit Facility and the Notes). There can be no assurance, however, that the Company's business will continue to generate cash flow from operations at or above current levels. If the Company is unable to generate sufficient cash flow from operations in the future to service its debt, it may be required to sell assets, reduce capital expenditures, refinance all or a portion of its existing debt (including the Notes) or obtain additional financing. The Company's ability to make scheduled principal payments to pay interest or to refinance its indebtedness (including the Notes) depends on its future performance and financial results, which, to a certain extent, are subject to general economic, financial, competition, legislative, regulatory, 50 and other factors beyond its control. There can be no assurance that sufficient funds will be available to enable the Company to service its indebtedness, including the Notes, or make necessary capital expenditures. NEW BASIS OF ACCOUNTING AND ACCOUNTING STANDARD NOT YET ADOPTED The basis of the Company's assets and liabilities will be adjusted upon the application of purchase accounting pursuant to the Acquisition on October 6, 1997. Accordingly, the Company's future consolidated financial position and results of operations will not be comparable to historical financial information. The Company anticipates changing the method of determining inventory cost after the Acquisition from the last in, first out basis to the actual production cost basis. The effect of these adjustments and the change in the method of determining inventory costs on future operating results has not been determined. See note (g) of Notes to Unaudited Pro Forma Income Statement and Other Data. In June 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information." This Statement requires financial and descriptive information about reportable operating segments in interim and annual financial reports. It also established the standards for related disclosures about products and services, geographic areas of operation and major customers. The Statement is effective for financial statements for periods beginning after December 15, 1997. The Company does not expect the impact of adopting this new accounting standard to be significant. INFLATION The effect of inflation on the Company's sales and earnings has historically been minimal. Although a majority of the Company's sales are made under long-term contracts, the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to be incurred in these future periods. In addition, some contracts provide for price adjustments through escalation clauses. Management believes the Company's risks associated with fixed-price contracts have primarily been associated with estimating program requirements, rather than the impact of price changes on those requirements. JOINT VENTURES FNSS-TURKEY The Company's investment in FNSS-Turkey is carried at cost since there is uncertainty regarding the Company's ability to control the repatriation of earnings. Royalties are reported as revenues, while dividends are reported as earnings from foreign affiliates. Dividends and royalties are paid in U.S. dollars. Turkey has experienced high inflation and its currency, the Turkish lira, has consistently fallen in value over several years against the U.S. dollar. FNSS-Turkey receives payments from SSM in Turkish lira, and pricing under the contract is calculated annually based on scheduled product deliveries pursuant to a formula designed to adjust such pricing for, among other things, fluctuations in the value of the Turkish lira against the U.S. dollar. Upon receipt of such payments, FNSS-Turkey promptly converts Turkish lira into hard currency. As a result, management believes that the terms of FNSS-Turkey's contract with the Turkish government have generally protected FNSS-Turkey against the impact of the devaluation of the Turkish lira. However, FNSS-Turkey is adversely affected by depreciation of the Turkish lira if there is a delay in payment after calculation of pricing under the contract. For example, when a delivery schedule is delayed, FNSS-Turkey is adversely affected unless a pricing adjustment is negotiated to give effect to any devaluation in the Turkish lira between the time the products were priced under the contract and the delayed delivery date. Such an adjustment was made after protracted negotiations when delivery schedules were first extended in 1996. 51 In February 1996, a fire occurred at the FNSS-Turkey vehicle production facility which destroyed a warehouse and the majority of production parts on site. The plant resumed production in late 1996; however, the work stoppage caused by the fire had a significant negative impact on royalties received from FNSS-Turkey in 1996 and has negatively impacted dividends received to date in 1997. The Turkish government, which is responsible for delivering turrets for one of the vehicle models produced by FNSS-Turkey, has experienced difficulties in meeting the production schedule and, as a result, has paid FNSS-Turkey for a number of vehicles that are parked and awaiting delivery of turrets. The Turkish government has refused to continue this practice, and has agreed to a revised delivery schedule along with corresponding pricing adjustments, which management believes will not have a material impact on royalty and dividend receipts. FNSS-Turkey is required by its agreement with SSM to achieve a significant level of export sales by 2000 to meet the 'offset' requirements of the contract or pay a penalty of 9% of the unpaid offset obligations to SSM. Such payment could be as high as $32.0 million if no additional offset sales are completed. A potential award which would approximately halve the remaining liability is being pursued, but is unlikely to be realized, if at all, earlier than 1999 due to the current economic turmoil in Asia. There can be no assurance that FNSS-Turkey will be able to complete this potential sale or fulfill its offset obligations. Management believes that the time frame for meeting the offset deadline may be extended to some extent to accommodate changes in the production schedule. FMC-ARABIA FMC-Arabia has two major FMS contracts through the DoD to provide services to the Royal Saudi Land Forces Infantry Corps, one for Contractor Logistical Support ("CLS") and the other for M113 modernization. The M113 contract will deplete the authorized funding amount by the end of the first quarter of 1998. The CLS program has already executed a demobilization order which has resulted in an 80% reduction in the training work force, and the current CLS contract is scheduled to expire in the first quarter of 1998. Additional funding for both programs is contemplated in an amendment to the pertinent agreement between the U.S. and Saudi Arabian governments, which covers both contracts, but the amendment has not received final approval. The receipt of such approval has been slower than management expected. If additional funding is not authorized by the end of the first quarter of 1998, both of FMC-Arabia's contracts will be terminated. Even if such authorization is received, management does not believe funding for the CLS program will be restored to historical levels. FMC-Arabia is treated as a partnership for United States tax purposes. UDLP is the beneficiary of a "tax holiday," granted by the Kingdom of Saudi Arabia, with respect to its proportionate share of FMC-Arabia's income and loss. The "tax holiday" granted by the Kingdom of Saudi Arabia expires in April 1999, and the Company is attempting to extend the tax holiday beyond April 1999. Due to the uncertainty of extending the tax holiday, UDLP may incur taxes on its proportionate share of FMC-Arabia's income at the Saudi Arabian statutory tax rate of up to 45% beginning in April 1999, although the Company should be eligible for a foreign tax credit with respect to such taxes. ENVIRONMENTAL MATTERS The Company's operations are subject to Environmental Laws. The Company spends certain amounts annually to maintain compliance with Environmental Laws and to remediate contamination, as required by certain Environmental Laws. Operating and maintenance costs associated with environmental compliance and prevention of contamination at the Company's facilities are a normal, recurring part of operations, are not significant relative to total operating costs or cash flows, and are generally allowable as contract costs under the Company's contracts with the U.S. government ("Allowable Costs"). Such costs have not been material in the past and, based on information presently available to the Company and on Environmental Laws and 52 U.S. government policies relating to Allowable Costs in effect at this time (all of which are subject to change), are not expected to have a material adverse effect on the Company's financial condition, results of operations or debt service capability. As with compliance costs, a significant portion of the Company's expenditures for remediation at its facilities consists of Allowable Costs. Management believes that it has sufficient reserves to cover remediation costs that are not allowable costs under its U.S. government contracts ("Non-Allowable Costs") and does not expect that such costs will materially adversely affect the Company's financial condition or debt service capability. Based on historical experience, the Company expects that a significant percentage of the total remediation and compliance costs associated with its facilities will continue to be Allowable Costs. In addition, pursuant to the terms of the Acquisition Agreement, the Sellers are required to reimburse the Company for 75% of certain remediation costs relating to operations prior to the Closing Date, that are Non-Allowable Costs. There can be no assurance, however, that the Sellers will reimburse the Company promptly or at all for future compliance and remediation costs or that the U.S. government will allow as Allowable Costs in the Company's contracts all or a significant portion of such future environmental costs. The Company's financial condition, results of operations and debt service capability could be materially and adversely impacted where the Company does not receive full and prompt reimbursements from the Sellers under the Acquisition Agreement, or contract costs in respect of environmental matters are not allowed by the U.S. government as expected. For additional information regarding environmental matters, see "Business--Environmental Matters." 53 BUSINESS OVERVIEW The Company is a leading supplier of tracked, armored combat vehicles and weapons delivery systems to the U.S. Department of Defense and a number of allied military forces worldwide. The Company's products include critical elements of the U.S. military's tactical force structure. The Bradley Fighting Vehicle, recognized as one of the best-performing weapons systems in U.S. history, is the only domestically produced vehicle able to fulfill the dual role of troop transport and armored fighting vehicle. The Company has maintained its prime contractor position on the Bradley program since production began in 1981, and has added a number of technology-based upgrades and derivative vehicles that continue to extend the program's life-cycle. Building on over twenty years of experience on the M109 self-propelled howitzer and upgrades, the Company is also the prime contractor for the development of the Crusader Field Artillery System. The U.S. Army has identified the Crusader as its planned multi-billion dollar next-generation field artillery system and the largest U.S. military vehicle development program of this decade. For the twelve months ended September 30, 1997, the Company had pro forma revenues of approximately $1.2 billion and pro forma EBITDA (as defined) of $127.1 million. The Company enjoys strong, long-standing customer relationships as a result of its advanced design, engineering and manufacturing capabilities, competitive cost structure, diversified product portfolio, demonstrated upgrade capabilities, and reputation for program quality and service. Management believes that these characteristics provide a key competitive advantage in obtaining upgrade production contracts and in pursuing other domestic and international business opportunities with new and existing customers. In addition to the Bradley Fighting Vehicle and the M109 howitzer, the Company serves as the prime contractor for a number of mission critical military programs, several of which have spanned decades. The Company has been the prime contractor for several of these programs, including the M113 armored personnel carrier since 1960, the M88 tank recovery vehicle since 1960, and the U.S. Navy's Mk45 naval gun system since 1968. The Company is currently performing under more than 30 active contracts with original funded values in excess of $25 million each. The Company had a firm funded backlog of more than $1.6 billion as of November 30, 1997, a substantial majority of which is derived from sole-source, prime contracts. Management believes that the emphasis of the U.S. Department of Defense on enhancing military preparedness within a declining procurement budget environment has resulted and will continue to result in increased emphasis on upgrading and extending the life of existing equipment and systems, including those currently supplied by the Company. Management believes this trend favors large, established contractors such as the Company that are qualified to perform sole-source contracts for product design, development, manufacture, field service and support and subsequent upgrades. BUSINESS STRENGTHS The Company attributes its performance to several factors, including the following: COMPREHENSIVE CAPABILITIES IN ARMORED COMBAT VEHICLES. For more than half a century, the Company has remained at the forefront in the design, development and upgrade of medium/light tracked, armored combat vehicles, beginning with the primary amphibious vehicle used in World War II, followed in 1960 by the M113, the main troop transport vehicle used by the U.S. and other militaries with over 80,000 vehicles delivered worldwide. In 1981, the Company began initial production as the sole-source, prime contractor for the Bradley Fighting Vehicle. Management believes that these and other successes resulted from the Company's proven, comprehensive design and engineering experience in simulation, systems integration, armor, mobility and survivability, its demonstrated ability to infuse "information dominance technologies" into combat systems for enhanced information gathering, analysis and application in the battlefield environment, its demonstrated manufacturing and upgrade capability, and its reputation for service in the field. 54 ABILITY TO LEVERAGE SYSTEMS INTEGRATION EXPERTISE INTO LONG-TERM PROGRAMS. The Company's experience and technological expertise afford it a continued position as team leader and prime systems integrator for the programs in which it participates, and positions the Company for the development and integration of other complex, critical weapons systems. For example, management believes the Company's position as the systems integrator on the Crusader played a significant role in the Company's recent success in being named gun weapons systems integrator for the Naval Surface Fire Support program, with responsibility for the development and integration of a new naval gun system. Management also believes that these capabilities create advantages in marketing to international customers seeking products compatible with systems used by the U.S. military. LARGE, INSTALLED BASE OFFERS SIGNIFICANT LIFE-CYCLE OPPORTUNITIES. The U.S. military is under budgetary constraints that provide incentives to upgrade and overhaul existing systems and vehicles to maximize system life. The Company's resident knowledge of its extensive domestic and international installed base of vehicles affords significant opportunities, through modernization upgrades, derivative vehicles that expand program capabilities, and logistical support services and spares, to effectively extend product life for many years after development. For example, the Bradley Fighting Vehicle has undergone three generations of upgrades and has fostered a number of derivatives, and the Company has upgraded its M109 howitzers to the A6 Paladin configuration and its M88 recovery vehicles to the Hercules configuration. Management believes these upgrades and derivatives, which comprise a substantial amount of the Company's funded backlog, are more predictable sources of revenue and cash flow than new products. STRONG INTERNATIONAL PRESENCE AND GROWTH POTENTIAL. In contrast to the declining U.S. procurement budget, military budgets of certain foreign governments have expanded due to general economic growth or regional geo-political pressures. Management believes the Company's proven design, development, engineering and manufacturing capabilities for the U.S. military have been the foundation for its International Division and export business. For example, management believes the domestic M113 program and prior co-production programs for Armored Infantry Fighting Vehicles in Europe were the basis for the award of contracts for similar vehicles to the Company's Turkish joint venture. Management also believes that the Company's existing product breadth and established manufacturing platforms provide it with certain cost advantages over smaller foreign competitors when pursuing typical lower volume foreign contracts. INNOVATIVE PUBLIC/PRIVATE TEAMING RELATIONSHIPS. The Company has established relationships with key constituencies, including the U.S. Army, U.S. Navy and the Office of the Secretary of Defense, and is one of the leaders in working with the U.S. Department of Defense to rationalize the U.S. defense industrial base. The Company operates a significant portion of the recently privatized Louisville Naval Ordnance Station, and is partnering with the Letterkenny Army Depot to upgrade the M109 howitzer to the A6 Paladin configuration. The Company also has partnering arrangements with another U.S. government depot to upgrade the M113, the M88 and breaching vehicles. The Company believes these arrangements demonstrate the success that can be achieved through public/private partnerships. STRONG MANAGEMENT TEAM AND EXPERIENCED INVESTOR. The Company has a highly experienced and committed management team that has successfully adapted the Company's cost structures and manufacturing operations to the declining U.S. Department of Defense procurement budget and the significant transformation to a lower volume, higher technology manufacturing capability. Senior management has an average of more than 19 years with the Company and substantially all of the senior management team was directly involved with the initial formation and integration of UDLP in January 1994. Management will be given the opportunity to participate in the Company's potential success through an equity-based incentive program and direct investment. In addition, the management of the Company is complemented by the support of The Carlyle Group, an active investor in the defense and aerospace industries. 55 BUSINESS STRATEGY Management intends to enhance its leading market position through the successful execution of the following objectives: CONTINUING TO PROVIDE PRODUCTS AND SERVICES ACROSS PROGRAM LIFE-CYCLES. The Company intends to continue to leverage its extensive range of products and services across entire program life-cycles through new technology developments, follow-on products, derivative vehicles, upgrades, logistics support and training. For example, the Company was recently awarded a Low Rate Initial Production contract for the third generation of upgrades to the Bradley Fighting Vehicle, the Bradley A3 configuration which will incorporate a new core electronic architecture, including, among others, combat identification systems, situational awareness and battlefield digitization. In addition, the Company plans to continue building on the successful Bradley Fighting Vehicle program by further expanding its family of vehicles to include new armored vehicles, such as a maintenance vehicle, a treatment and transport vehicle, an engineering squad vehicle and a battle command vehicle. CAPITALIZING ON THE CRUSADER OPPORTUNITY. The Crusader program represents an important opportunity with the potential to become one of the U.S. Army's largest procurement programs over the next decade. The Company plans to devote all necessary resources to establish the Crusader's capabilities and develop successful prototypes in the Demonstration and Validation phase and to win, if awarded, the Engineering and Manufacturing Development and Low Rate Initial Production contracts. The Company's objective is to fully demonstrate the Company's engineering and cost-effective production qualifications so that the Company will be the sole-source, prime contractor for the Crusader if necessary funding is appropriated and the U.S. Army proceeds to Full Rate Production. PURSUING KEY INTERNATIONAL OPPORTUNITIES. The Company plans to capitalize on its established program base and expertise, and on its extensive international joint venture and co-production experience, in order to expand export sales and establish new joint ventures and co-production programs. Management believes this strategy will require minimal additional capital, and has the potential to diversify the Company's business base and enhance overall margins. PARTICIPATING IN THE PUBLIC/PRIVATE DEFENSE INDUSTRIAL BASE CONSOLIDATION. The Company intends to continue working closely with its U.S. government customers to rationalize the public/private defense industrial base. Potential opportunities include further privatizations such as the outsourcing of logistics and training support and additional depot partnering relationships with the U.S. Department of Defense. MODERNIZING THE U.S. ARMY NATIONAL GUARD. A large portion of the U.S. Army's tracked, armored combat vehicle fleet is in the National Guard. The modernization of equipment and systems used by the National Guard generally lags behind that of the active armed services. The Company is pursuing a directed procurement program to assist the National Guard in obtaining funding for upgrades of its Bradley Fighting Vehicles, M113 family of vehicles and M109 howitzers, and to acquire new M992 Field Artillery Ammunition Support Vehicles and M9 Armored Combat Earthmovers. IDENTIFYING STRATEGIC ACQUISITION OPPORTUNITIES. Management expects that the continuing consolidation in the U.S. defense industry will result in strategic opportunities for the Company. The Company intends to be proactive in this environment and, on an opportunistic basis, pursue acquisitions both domestically and abroad that management believes will complement its key business strengths or further expand its capabilities. The Company is a Delaware corporation and UDLP is a Delaware limited partnership. The principal address of each is 1525 Wilson Boulevard, Suite 700, Arlington, Virginia 22209-2411 and the telephone number of each is (703) 312-6100. 56 PRODUCTS AND SYSTEMS The Company has five principal divisions, which are currently organized into three major business areas: Armored Combat Vehicles, Armament Systems and International. The table below summarizes the Company's principal products and systems. A "sole-source" contractor is the sole provider of specified products and systems to the customer, whether manufactured by the Company or integrated from other sources. A "prime contractor" has a direct contract with the customer, rather than another contractor.
SCOPE ------------------------------ SOLE- PRIME SOURCE CONTRACTOR DESCRIPTION ------ --------------- --------- ARMORED COMBAT VEHICLES: GROUND SYSTEMS - Bradley Fighting Vehicle # # - - BFV derivatives # # - - M109 Self-Propelled Howitzers # # - - M992 Field Artillery # # - Ammunition Supply Vehicle - M88 Recovery Vehicles # # - - M113 Armored Personnel Carrier # # - - M9 Armored Combat Earthmover # # - - Linear Obstacle Breacher* # # - - M8 Armored Gun System - # - LVTP7 Amphibious Assault - Vehicle # - Composite Armored Vehicle* - # PALADIN PRODUCTION - M109 A6 Paladin Howitzer # # - STEEL PRODUCTS - M113 Vehicle Upgrades - # - Vehicle Components # # - ARMAMENT SYSTEMS: - Crusader* # # - - Mk45 Naval Gun System # # - - Mk41 Vertical Launching System # - - Vertical Gun for Advanced - Ships* - Concentric Canister Launcher* - - Cocoon Launcher* - - Advanced Gun Technologies* - INTERNATIONAL: - FMC-Arabia Joint Venture # # - - FNSS-Turkey Joint Venture # # - - Co-Production Programs - * INDICATES NEW PRODUCTS AND SYSTEMS CURRENTLY BEING DEVELOPED BY THE COMPANY. ARMORED C GROUND - Tracked, armored vehicle with 25mm cannon, TOW missiles, stabilized turret and troop transport capabilities; current development focus is on the A3 upgrade program - Includes the Multiple Launch Rocket System carrier, Fire Support Vehicle, Command and Control Vehicle, Stinger Fighting Vehicle and others - Highly mobile field artillery system capable of delivering a rapid and high volume of firepower - Provides transport of ammunition, supplies and personnel to the battlefield in support of the M109 - Provides recovery of impaired tanks through its towing, lifting and pulling capabilities - Troop transport vehicle; recent activity limited to upgrades by the Steel Products Division and export sales - Fully-tracked, 18-ton, aluminum armored vehicles for use on the battlefield to bulldoze, rough grade, excavate, haul and scrape - The Grizzly is designed to clear mines and other complex obstacles - Lightweight, highly maneuverable armored gun systems, capable of high speeds and can be air dropped from a C130 aircraft - Landing vehicle tracked personnel amphibious assault vehicle - Fully operational, advanced technology demonstration vehicle PALADIN - Remanufacture and upgrade M109 with new turret and armament system STEEL P - Vehicle conversion, upgrade and manufacturing - Largest U.S. producer of cast and forged track shoes for armored combat vehicles and components for suspension systems ARMAMENT - Development of an integrated and fully-automated two-vehicle rapid deployment system consisting of a 155mm, self-propelled howitzer and an armored resupply vehicle - Production, overhaul and support of the 5-inch (127mm), 54-caliber, fully-automated naval gun - Mechanical components for naval missile launcher deploying anti-air Standard, Tomahawk, anti-submarine and ship self-defense Sea Sparrow missiles; produced in conjunction with Lockheed Martin - Next generation naval gun system consisting of an automated magazine containing two 155mm barrels and an extensive quantity of projectiles, and capable of shooting long ranges at high rates of fire - Missile launching system with integral gas management system design and ship-fit flexibility - Launcher designed to provide above-deck ship self-defense missile capabilities - Electromagnetic and electrothermal chemical technologies for guns INTERNATI - 51% beneficial interest in venture that provides logistics support and training to the Royal Saudi Land Forces, and has been contracted to upgrade and modernize Saudi Arabia's fleet of M113s - 51% interest in venture that produces and sells armored combat vehicles to the Turkish army under license from the Company - Co-production programs including the M113, MLRS carrier, LVTP7 and contractor logistic support in Japan, Korea and Pakistan under license from the Company * INDICAT
57 The revenues generated by each of the Company's principal products and systems in each of the past three years are set forth below.
YEAR ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 --------- --------- --------- ($ IN MILLIONS) ARMORED COMBAT VEHICLES: GROUND SYSTEMS: Bradley Fighting Vehicle and Derivatives..................................... $ 329.4 $ 270.8 $ 308.1 M88 Armored Recovery Vehicle................................................. 42.1 4.3 75.5 M109 Self-Propelled Howitzer................................................. 198.3 105.2 40.1 M9 Armored Combat Earthmover................................................. 23.4 87.2 37.1 M113 Armored Personnel Carrier............................................... 30.8 22.0 9.8 Other........................................................................ 146.6 97.2 85.3 --------- --------- --------- 770.6 586.7 555.9 PALADIN PRODUCTS............................................................... 4.7 57.7 102.1 STEEL PRODUCTS................................................................. 75.2 58.4 62.4 ARMAMENT SYSTEMS: Crusader..................................................................... 17.7 101.9 137.2 Mk41 Vertical Launching System............................................... 49.5 23.4 46.4 Mk45 Naval Gun System........................................................ 78.8 59.7 32.0 Overhaul, Repair, Maintenance and Other...................................... 77.9 66.5 102.0 --------- --------- --------- 223.9 251.5 317.6 INTERNATIONAL.................................................................... 49.3 49.3 42.0 Intercompany Eliminations........................................................ (47.4) (36.0) (50.7) --------- --------- --------- TOTAL REVENUE.................................................................... $ 1,076.3 $ 967.6 $ 1,029.3 --------- --------- --------- --------- --------- ---------
ARMORED COMBAT VEHICLES. The Ground Systems Division ("GSD") is a leading prime contractor of land-based military systems for the U.S. government and serves certain foreign military customers. GSD's capabilities include systems integration expertise, advanced engineering and technology development capabilities and flexible manufacturing and systems-conversion capacity for medium/light and certain heavy tracked combat vehicles. The Company also offers a full range of logistics support and training capabilities for vehicles it produces. The Company believes that its broad product line, its ability to service a vehicle throughout its life and its established prime contractor status provide a foundation for sustained, long-term programs. TRACKED COMBAT VEHICLES ("TCV"). TCVs are highly mobile vehicles that can cross natural and man-made obstacles and urban terrain in all weather conditions, while under fire from enemy combat forces. The U.S. Army and Marines use tracked combat vehicles for four basic missions: (i) close combat, where the combination of tanks, scout vehicles, fighting vehicles, armored personnel carriers and command and control vehicles provide the capability to present an integrated and flexible combat front to face enemy forces at close range; (ii) fire support, by providing lethal indirect firepower through self-propelled armament and multiple launch rocket systems; (iii) combat support, including the provision of operational assistance, such as crossing barriers, clearing or laying obstacles and recovering disabled systems; and (iv) amphibious assaults, in which amphibious assault vehicles are able to initiate attack from the sea and continue the attack on land. TCVs are classified into two weight classes: medium/light and heavy. The Company produces and services vehicles primarily in the medium/light class. Medium/light vehicles weigh less than 40 tons and normally are fabricated from aluminum. The medium/light class of vehicles made its first appearance 58 during World War II, with an amphibious assault vehicle produced by the Company. Since then, this vehicle class has expanded to include fighting vehicles, self-propelled artillery and specialty vehicles. THE BRADLEY FIGHTING VEHICLE ("BFV"). The Company has been the sole-source, prime contractor of the BFV to the U.S. Army since its initial production in 1981. Management believes that the Company's resident knowledge of the BFV, gained through years of experience in developing and manufacturing the vehicle, gives it a significant competitive advantage in pursuing upgrade opportunities for the BFV, developing derivatives and leveraging international sales opportunities. The latest fielded version, the BFV A2, is a tracked armored vehicle with a 25mm cannon, TOW missiles and a stabilized turret, and is the only domestically produced vehicle able to fulfill the dual role of troop transport and armored fighting vehicle. Weighing 35 tons, the BFV is outfitted with armor and day/night sights, and can transport up to nine people safely across rough terrain. The vehicle's combination of lethality, survivability and tactical and strategic mobility has established it as a critical component of the U.S. government's full-spectrum warfare strategy. A total of 6,742 BFVs have been built, of which 400 were for the Saudi Arabian Army. The BFV's mobility and fire power, as well its combination of both defensive and offensive capabilities, were most recently demonstrated in Operation Desert Storm ("ODS"). As a result of the live-combat experiences of ODS, the Company has developed an upgrade kit, named the BFV A2 ODS. This kit features eye-safe laser range finders, restowage, missile counter-measures and the addition of mounting provisions for the Battlefield Combat Identification System, a capability designed to electronically identify whether targets are friend or foe, thus reducing the risk of friendly fire casualties. Since 1995, the Company's BFV-related revenues have been derived primarily from such upgrades and sales of the derivative products and support services described below. The BFV A3, currently under development, incorporates all of the improvements made to the BFV A2 ODS, as well as providing enhancements to situation awareness capability, lethality, survivability and sustainability. The U.S. Army is currently upgrading a portion of its fleet of BFVs to the A2 ODS configuration, and has announced plans to further upgrade a portion of its fleet to the BFV A3 configuration. The LRIP contract for the BFV A3 was signed in July 1997, with deliveries scheduled from late 1998 through 1999. BFV DERIVATIVES AND SUPPORT. The BFV has served as a platform for a number of derivative vehicles developed by the Company. One such derivative, the Multiple Launch Rocket System ("MLRS") carrier, was developed to provide a carrier for a long-range rocket artillery system and is outfitted with rockets, a launcher and fire control system developed and produced by Lockheed Martin Vought Systems. The Company was awarded a contract to initiate an MLRS remanufacture program, with the first delivery completed in August 1997. Another derivative, the Fire Support Vehicle, supports armor and mechanized forces by pinpointing enemy targets using laser technology, which allows more accurate and timely calls for fire from the artillery. The Company is building the Fire Support Vehicle under an EMD contract awarded in 1995 and recently received an LRIP contract for 22 additional vehicles. The Command and Control Vehicle ("C2V") is a self-contained vehicle that keeps pace with armored maneuver forces while providing the crew with a protected environment. The Company was awarded an LRIP contract for 5 C2Vs in 1996 with customer options for 41 systems to be delivered between 1998 and 2001. The Stinger Fighting Vehicle integrates the BFV with Stinger missiles and adds improvements to turret fire control, target acquisition subsystems and survivability. The Company is under an LRIP contract for delivery of 85 such vehicles through 1998. Several other BFV derivatives are in the early stages of development. In addition, the Company plans to build on the successful BFV program by expanding the BFV family of vehicles in the future to include new armored vehicles such as a maintenance vehicle, a treatment and transport vehicle, an engineering squad vehicle and a battle command vehicle. In addition to the development and manufacture of BFV derivatives, the Company provides BFV upgrade kits and field services. Kits allow for the upgrade of BFVs to incorporate advancements in technology such as the ODS enhancements discussed above. The Company also deploys experts to provide on-site training and advice to customers, complete maintenance and repairs, and assess the necessity of 59 replacement parts. GSD is also under contract with the U.S. Army's Simulation, Training and Instrumentation Command for the development and demonstration of a prototype multi-purpose simulator/trainer for the BFV family of vehicles. M109 SELF-PROPELLED HOWITZER ("M109"). The M109 has been the most widely-used field artillery vehicle for the U.S. military and certain foreign governments since it was first produced by the Company in 1974. The M109 is widely recognized for its ability to deliver rapid and high volume artillery support and maximize survivability through mobility. The latest generation of the M109, the M109A6 Paladin (described below), is the most advanced M109 upgrade fielded today. The Company also designs and produces unique configurations of the M109 for, and offers M109 servicing and training to, various foreign governments including Austria, Egypt, Greece, Korea and Taiwan, with a number of funded contracts in place. M992 FIELD ARTILLERY AMMUNITION SUPPLY VEHICLE ("FAASV"). The single mission of the FAASV, the battlefield partner of the M109, is to safely transport ammunition, supplies and personnel to howitzer artillery vehicles on the battlefield during both firing and non-firing conditions. By utilizing synchronized and semi-automated resupply strategies and mechanisms to carry the M109 ammunition, the FAASV enables the howitzer to remain in the field longer and thereby increase its lethality. The FAASV accommodates all standard 155mm rounds and its heavily armored chassis provides ballistic protection to its munition supply crew. The Company is currently operating under an FRP contract for 96 vehicles scheduled to be delivered in 1998 and 1999. M88 ARMORED RECOVERY VEHICLE ("M88"). The M88 currently has an installed base of more than 3,240 vehicles, including more than 70 M88A2 ("Hercules") models, throughout the world. The M88 performs towing, lifting and pulling tasks in the recovery of impaired tanks or in basic tank maintenance. With the deployment at the beginning of this decade of the heavier M1 tanks by the U.S. Army, in 1991 the Company began the development effort for the Hercules upgrade. The Hercules is the only recovery vehicle worldwide that can safely recover 70-ton tanks (for example, the M1A1/A2), and has established itself as a critical element in the upkeep of a modern tank force. The U.S. Army has been awarding annual contracts for M88 upgrades over the past several years, and in June 1997, the U.S. Army awarded the Company a contract to upgrade 24 of its M88s to the Hercules configuration. M113 ARMORED PERSONNEL CARRIER ("M113"). The M113 has been the main troop transport vehicle used by the U.S. military and allied governments throughout the world, with more than 80,000 units delivered since initial production in 1960. The Company has produced various M113 models in cooperation with U.S. allies, including production of various configurations of the Armored Infantry Fighting Vehicle, historically produced in Europe and currently by FNSS-Turkey. The U.S. Army, which received its last delivery of new M113s from the Company in 1992, continues to upgrade its M113s to the latest A3 configuration. The installed base of M113s includes a number of derivative vehicles worldwide, and the Company is currently engaged in M113 upgrade programs in several countries around the world. This upgrade work currently occurs in the Company's Steel Products Division (described below), and continues to be a significant source of current and potential future revenues for the Company because of the large number of M113s currently in existence. Management expects the U.S. Army to modernize a portion of its M113 fleet to the A3 configuration over the next several years, and believes the National Guard may also implement an M113 modernization program. M9 ARMORED COMBAT EARTHMOVER ("M9 ACE"). The M9 ACE is an 18-ton, fully-tracked, aluminum armored vehicle, used on the battlefield to bulldoze, rough grade, excavate, haul and scrape. With a crew of one, the multi-purpose M9 ACE can attain road speeds of up to 35 miles per hour, and unlike a standard bulldozer, requires no transport vehicle. The M9 ACE can serve as the prime mover of vehicles weighing up to 39,000 pounds and can clear debris left in the wake of battles or civil disasters. The Company recently entered into an FRP contract for 51 vehicles, to be delivered through 1999, with a customer option for 51 additional vehicles. LINEAR OBSTACLE BREACHER ("GRIZZLY"). First delivered in 1995, the Grizzly is a 70-ton vehicle designed to clear mines and other obstacles. Mounted on a modified M1 chassis, the Grizzly features a mine-clearing blade 60 outfitted with complex software that provides automatic depth control. It is also equipped with a power-driven arm for digging, grappling and lifting, as well as external cameras for vision and remote operation, with full electronic integration. Management believes that Grizzly will be a critical component of modern battle strategy because of the prevalent use of complex obstacles such as land mines and other low-cost defense mechanisms by hostile nations. The Company recently completed its $70.0 million DemVal phase for the U.S. government, and was awarded the $129.0 million EMD phase through 2001. OTHER GSD PROGRAMS. The M8 Armored Gun System ("AGS") is a highly maneuverable, 25-ton light tank capable of being air dropped from a C130 aircraft. The AGS is outfitted with an automatically loaded, lightweight 105mm cannon that fires all NATO standard and enhanced ammunition at the rate of 12 rounds per minute. Due to cuts in defense funding, the U.S. government has canceled its AGS program; however, the Company is pursuing opportunities for sale of the AGS internationally. The LVTP7 Amphibious Assault Vehicle ("LVTP7") has been the U.S. Marine Corps' amphibious assault vehicle for over two decades with more than 1,500 vehicles delivered. The Company is currently producing 57 kits for delivery to Samsung Aerospace for final assembly in Korea. The Company believes that there may also be future upgrade opportunities for the United States Marine Corps' fleet of LVTP7s. PALADIN PRODUCTION DIVISION ("PPD"). PPD manufactures the M109A6 Paladin vehicle in partnership with the Letterkenny Army Depot, where it has located its production facility. The A6 Paladin is the latest and most advanced howitzer in the U.S. Army inventory and is steadily replacing prior generations of M109s. With its increased firepower and use of computerized navigation and gun positioning, the A6 Paladin upgrade provides a comprehensive and integrated package with modern battlefield capabilities. In addition to a multi-year contract for 713 upgrades (448 of which have been completed through August 1997), PPD has recently negotiated a contract with the U.S. Army for the upgrade of another 37 vehicles through May 1999 bringing the total up to 750, and the U.S. Army has an option for 72 additional vehicles which would extend the delivery period to May 2000. Management also believes that the Company has opportunities for international Paladin sales. PPD conducts the Paladin program through an innovative partnership with the U.S. Army Depot at Letterkenny, Pennsylvania. The Company's facility provides component parts for U.S. Army depot work, integrates sub-systems and components, including new GSD-fabricated turrets, and provides systems technical support for the U.S. Army artillery crews. The Company's experience in the manufacture of M109s gives the Company the background necessary to pursue opportunities in the upgrade of M109s to the A6 configuration, the manufacture of follow-on and upgrade kits, and the provision of spare parts and training. The Company is now pursuing a Fleet Management initiative, which is an integrated program providing engineering support, spare parts supply, inventory management and distribution and training and field maintenance support for the U.S. Army's fleet of M109 vehicles. STEEL PRODUCTS DIVISION ("SPD"). SPD's primary businesses are the production of track and suspension components for armored vehicles, and performing major upgrades of M113 armored vehicles for the U.S. Army. SPD is the largest producer of track and suspension components in the U.S., and has been designated by the U.S. Army as the design agent for nearly all track in the U.S. inventory. Approximately one third of SPD's track products are sold to international customers. SPD's operations as well as sophisticated engineering tools are used to manufacture products for commercial customers in a variety of special alloys. The M113 upgrade business involves the upgrade of existing M113 vehicles into the A3 configuration, and involves a variety of manufacturing and engineering operations. The Company entered into a partnering arrangement in 1997 with the Anniston Army Depot, which will perform any necessary upgrades of the M113 awarded by the U.S. Army and the National Guard, as described above. SPD's conversion technology, including a complete technical data and tooling package, can also be applied to M113 fleets elsewhere in the world. 61 ARMAMENT SYSTEMS DIVISION ("ASD"). ASD provides integrated weapon delivery system products and services to the armed forces of the United States and military customers worldwide. The division provides armament design, development, production, and support as well as advanced technology research and development. Specifically, ASD designs, develops and manufactures advanced guns and missile-launching systems for the U.S. Navy, and is the prime contractor and systems integrator in the development of the U.S. Army's next generation self-propelled howitzer, the Crusader. Additionally, ASD provides complete overhaul, repair and maintenance of naval ordnance. CRUSADER. The Crusader is an integrated and automated two-vehicle system consisting of a 155-mm, self-propelled howitzer and a resupply vehicle. The Company is the sole-source, prime contractor and systems integrator responsible for the design and development of the Crusader, including delivery of two prototype systems, under a $1.1 billion DemVal contract, which is presently scheduled to be completed in 2001. The Company expects to become the sole-source, prime contractor for the $1.0 billion EMD phase presently scheduled to begin in 2000. The Company would then seek to become the sole-source prime contractor for the $1.3 billion LRIP phase presently scheduled to begin in 2004. Management believes the expertise acquired through the DemVal and EMD phases would give the Company a significant advantage in securing a contract for the LRIP and ultimately the FRP phase if necessary funding is appropriated and the U.S. Army continues to proceed with the Crusader. The Crusader is designed to achieve the U.S. Army's stated objectives for the next-generation howitzer. These specifications include: (i) increased mobility; (ii) increased lethality; (iii) improved survivability; and (iv) better sustainability. The Crusader is being designed to be the first howitzer capable of keeping pace with the maneuver strike force, including M1 tanks and BFVs. The Crusader is also being designed to provide substantially greater responsiveness and high rates of fire through long-range and accurate firings enabled by the vehicle's advanced autoloading technology and actively-cooled cannon, thereby giving it a multiple round simultaneous impact capability. This firing capability is being designed to allow commanders to extend and dominate the battle space and set a higher tempo for land operations. The Crusader is being designed to enhance survivability and allow the vehicle to be run by a three person crew compared to the four person crew required for the M109. The Crusader is being developed with an embedded digitized command, control, communications and intelligence for enhanced situational awareness, and for new capabilities for battlefield movement and resupply. As prime contractor, it is the Company's role to integrate all Crusader modules, manage the entire program and develop key components, including the advanced gun system. Gun system and autoloader technologies have historically been a core capability of ASD, developed through its long history with Naval gun systems. NAVAL SYSTEMS. The U.S. Navy is implementing a variety of programs to increase its ability to support land forces, with pronounced changes expected to occur in the surface fleet. The U.S. Navy plans for additional missile launcher firepower in its surface combatant ship building program for the 21st century ("SC 21"). The identity of contractors and scope of terms for any production of launchers for the SC 21 program have not been determined, although significant competition will exist for any SC 21 contract. In addition, the U.S. Navy plans to bolster surface land attack capability with modifications to existing ships. The U.S. Navy's focus on land attack warfare is spurring the development of new and modified weapon systems, including (i) a modified naval gun system, the Mk45 Mod4; (ii) a new 155mm gun system; (iii) integrating land attack missiles into VLS, requiring new cannisters and missile integration; and (iv) new or modified launching systems. The Company expects that the design, engineering and production of these systems will be the primary focus of naval ordnance manufacturers for the foreseeable future. MK45 NAVAL GUN SYSTEM ("MK45"). The Mk45 is the U.S. Navy's sole 5-inch gun system, with more than 150 systems installed. The U.S. Navy installs one 5-inch gun for every Arleigh Burke DDG 51 ("DDG 51") class destroyer built. The U.S. Navy has indicated that, over the next five years, it expects to require approximately 15 new Mk45s to be installed on newly constructed DDG 51 destroyers. The U.S. Navy recently awarded the Company a sole-source, prime development contract to upgrade Mk45 guns from Mod2 to Mod4 configuration, which extends the Mk45's range and improves surface fire support 62 capability. Furthermore, the U.S. government recommends that foreign allied navies have compatible armaments, and has recently increased its support for the Company's efforts to place Mk45s on foreign ships. Management believes the improvements included in the Mod4 configuration will make the Mk45 more competitive internationally. The Company is also the lead agent for the gun weapons systems integration for the Naval Surface Fire Support program, with responsibility for the development and integration of a new naval gun system which includes managing the interfaces of other components with the gun weapons system. MK41 VERTICAL LAUNCHING SYSTEM ("VLS"). The VLS is the U.S. Navy's primary missile launcher on surface combatants, firing the anti-air Standard Missile, strike mission-related Tomahawk missile, anti-submarine VLASROC, and ship self-defense Sea Sparrow missile. The VLS is manufactured under a work-split agreement (scheduled to expire in 1999) with Lockheed Martin, which is the prime contractor of the VLS launcher. The Company is the designated mechanical subcontractor and, separately from the work-split agreement, is the sole-source, prime provider of VLS canisters, which hold a variety of missiles. The U.S. Navy places the VLS, like the Mk45, on all DDG 51s, each of which contains twelve 8-cell VLS modules. Management believes the foreign market is likely to require a significant number of VLS systems in the future, representing a potential growth opportunity for the Company. OVERHAUL, REPAIR, MAINTENANCE AND OTHER. The Company, the U.S. Navy and the local government recently privatized a significant portion of the Naval Ordnance Station, Louisville ("United Defense Louisville"), where the Company previously had no operations. United Defense Louisville provides service for the Mk45 and smaller caliber gun mounts, guided missile launching systems, surface vessel torpedo tubes, gun fire control systems, target and decoy launchers and other U.S. Navy equipment. United Defense Louisville's operations remain primarily keyed to the engineering, repair, upgrade, maintenance and logistic support of U.S. Navy shipboard guns and related ordnance systems, although at a reduced scale compared to the U.S. Navy's operation of United Defense Louisville prior to privatization. United Defense Louisville services are supported by the Company's broad-based naval ordnance design, production and overhaul experience. INTERNATIONAL DIVISION. The International Division specializes in the operation of joint ventures and management of selected co-production programs in countries throughout the world. The International Division does not represent all of the international export opportunities and international sales of the Company, many of which are in other divisions; the International Division includes only joint ventures and certain co-production programs requiring specialized international management expertise. Current operations include joint ventures in Turkey and Saudi Arabia, in each of which the Company owns a 51% interest, and co-production programs in Japan, Korea and Pakistan. The International Division also has co-production, upgrade and rebuild programs under development for several other countries. The Company's objective in setting up a joint venture or co-production program is to provide the host country with an indigenous production capability that will utilize the Company's developed programs, adapted to local requirements. The International Division uses project financing, letters of credit and offsets to structure programs that meet unique customer needs. FMC-ARABIA. The joint venture was formed in 1994 to pursue defense contracts within the Kingdom of Saudi Arabia. The Company's 51% interest in the joint venture is a beneficial interest, but record ownership has remained with FMC for administrative convenience. The initial contract was to provide logistics support and training to the Royal Saudi Land Forces Infantry Corps for BFVs previously purchased from the Company. This contract is scheduled to be complete in the first quarter of 1998. FMC-Arabia has submitted a 3-year contract proposal for follow-on with substantially the same scope as the existing contract. In early 1997, FMC-Arabia was awarded a 3-year contract to commence the modernization of 523 of Saudi Arabia's M113s (out of a fleet of approximately 1700 vehicles) to an A3 configuration and to design and construct a facility to perform the work, with the first vehicle deliveries to be scheduled for mid-1998. Both the future logistics support contract and the M113 modernization contract are subject to funding authorization from Saudi Arabia and there can be no assurance that such authorization will be obtained. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Joint Ventures--FMC-Arabia." 63 FNSS-TURKEY. The joint venture was formed in 1987 to pursue armored combat vehicle sales to the Turkish Army. Four types of armored vehicles using a common chassis are included in the contract: personnel carrier, fighting vehicle, tow missile vehicle and mortar vehicle. The initial production contract began in August 1989 and required FNSS-Turkey to deliver 1,698 vehicles, of which approximately 1,444 have been delivered to date. At the request of the Turkish government, the contract was modified in 1996 to extend the production and the delivery timetable to August 1999; however, due to problems with Turkish government furnished equipment, this completion date has been further extended. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Joint Ventures-- FNSS-Turkey." OTHER PROGRAMS. The Company is currently involved with co-production programs in Japan, Korea and Pakistan. Current co-production programs include the M113, MLRS carrier, LVTP7, and contractor logistics support. Under these arrangements, the Company provides training, technology and production kits to these countries until a domestic production capability is established, after which the Company continues to license its technology to the local manufacturer. RESEARCH AND DEVELOPMENT AND ENGINEERING CAPABILITIES The Company's ability to compete for defense contracts depends to a large extent on the effectiveness and innovativeness of its research and development programs. Among the DoD's procurement requirements is the research and development of new technologies for application to new weapon systems and upgrades. The Company's engineering capability has been a critical component of its success. The Company's experience in simulation, systems integration, armor, mobility, survivability and armaments, as well as its software development, engineering and electronics capabilities have allowed the Company to stay at the forefront of the development, manufacture and upgrade of its products. While most research and development is done at each of the Company's divisions, the Company also conducts some of its more sophisticated research and development at its Corporate Technology Center located in Santa Clara, California. CTC, which employs 60 engineering and research professionals (many of whom hold advanced degrees), provides state-of-the-art modeling simulation and testing to support UDLP's design, integration and production efforts. The Company has a number of systems in the early stages of development, which could provide long-term potential opportunities subject to successful development and testing, Congressional spending authorization and selection of the Company's products over those developed by competitors. The Vertical Gun for Advanced Ships ("VGAS") is the U.S. Navy's next-generation gun system and includes two 155mm barrels with a large number of projectiles in an automated magazine. The VGAS could replace or augment the Mk45 on future surface combatants. The Concentric Canister Launcher is a candidate for the U.S. Navy's next-generation launch system and could replace the current VLS. It has an integral gas management system design in which each cell is an individual launcher. The Composite Armored Vehicle integrates composite structures and lightweight armors into a fully-operational, advanced technology demonstration vehicle. The Company successfully completed this competitively awarded demonstration vehicle contract in 1997. The Cocoon Launcher is an on-deck system designed to launch the ship self-defense Evolved Sea Sparrow Missile. The Company has also invested in, and has received development contracts for, Electromagnetic and Electrothermal Chemical technologies related to advanced gun technologies, electric drive technologies and various advanced survivability technologies, including active defense. GOVERNMENT CONTRACTS; REGULATORY MATTERS Management expects that for the foreseeable future approximately 90% of the Company's sales will continue to result from contracts with the U.S. government, either directly, through prime contractors or pursuant to the U.S. government's Foreign Military Sales program. The Company's U.S. government business is performed under cost-plus contracts (cost-plus-fixed-fee, cost-plus-incentive-fee, or cost-plus-award-fee) and under fixed-price contracts (firm fixed-price, fixed-price incentive, or fixed-price-level-of-effort). 64 Cost-plus-fixed-fee contracts provide for reimbursement of costs, to the extent that such costs are allowable, and the payment of a fixed "fee", which is essentially the profit negotiated between the contractor and the U.S. government. Cost-plus-incentive-fee and cost-plus-award-fee contracts provide for increases or decreases in the contract fee, within specified limits, based upon actual results as compared to contractual targets for such factors as cost, quality, schedule and performance. Cost-plus contracts accounted for more than one-third of the Company's business in 1996. Under firm fixed-price contracts, the Company agrees to perform certain work for a fixed price and, accordingly, realizes all the benefit or detriment resulting from decreases or increases in the costs of performing the contract. Fixed-price incentive contracts are fixed-price contracts providing for adjustment of profit and establishment of final contract prices by a formula based on the relationship which final costs bear to target cost. Fixed-price-level-of-effort contracts are generally structured with a fixed price per labor hour subject to the customer's labor hour needs up to a contract cap. Fixed-price contracts accounted for approximately two-thirds of the Company's business in 1996. Almost all of the Company's fixed-price contracts in 1996 were firm fixed-price contracts. Under U.S. government regulations, certain costs, including certain financing costs, portions of research and development costs, lobbying expenses, certain types of legal expenses and certain marketing expenses related to the preparation of bids and proposals and FMS sales, are not allowable. The U.S. government also regulates the methods under which costs are allocated to U.S. government contracts. U.S. government contracts are, by their terms, subject to termination by the U.S. government either for its convenience or default by the contractor. Cost-plus contracts provide that, upon termination, the contractor is entitled to reimbursement of its allowable costs, and if the termination is for convenience, a total fee proportionate to the percentage of the work completed under the contract. Fixed-price contracts provide for payment upon termination for items delivered to and accepted by the U.S. government, and, if the termination is for convenience, for payment of fair compensation of work performed plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses, and a reasonable profit on the costs incurred. If a contract termination is for default, however, (i) the contractor is paid an amount agreed upon for completed and partially completed products and services accepted by the U.S. government; (ii) the U.S. government is not liable for the contractor's costs with respect to unaccepted items, and is entitled to repayment of advance payments and progress payments, if any, related to the terminated portion of the contract; and (iii) the contractor may be liable for excess costs incurred by the U.S. government in procuring undelivered items from another source. In addition to the right of the U.S. government to terminate, U.S. government contracts are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract performance may take many years. Consequently, at the outset of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years. Generally, the Company's DemVal, EMD and LRIP phase programs are performed under cost-plus contracts, while the FRP phase is awarded on a firm fixed-price basis. There are two principal contracting methods used to export defense equipment: Direct Foreign Sales and Foreign Military Sales. In a DFS, the contractor sells directly to the foreign country and assumes all risks in the transaction. In an FMS sale, the sale is funded for, contracted by and made to the U.S. government which in turn sells the product to the foreign country. Licenses are required from U.S. government agencies for DFS exports from the U.S. of nearly all of the Company's products. Certain of the Company's products may not be exported to certain countries. In common with other companies which derive a substantial portion of their sales from contracts with the U.S. government for defense-related products, the Company is subject to business risks, including changes in governmental appropriations, national defense policies or regulations, and availability of funds. Any of these factors could materially adversely affect the Company's business with the U.S. government in the future. 65 COMPETITION With respect to certain products and programs, the Company competes with one or more companies, most of which are multinational firms with substantial resources and capital. The Company from time to time faces competition from a number of competitors, both domestic and foreign, and in the tracked, armored combat vehicle market, the Company encounters General Dynamics Corporation most frequently. The Company's ability to compete for defense contracts depends to a large extent on the effectiveness and innovativeness of its research and development programs, its ability to offer better program performance than its competitors at a lower cost to its government customers, and its readiness in facilities, equipment and personnel to undertake the programs for which it competes. In some instances, programs are sole-sourced by the U.S. government to a single supplier, and in other cases involve a prime contractor and multiple suppliers. In cases where the Company is the sole-source provider, there may be other suppliers who have the capability to compete for the programs involved, but they can only enter or reenter the market if the U.S. government should choose to reopen the particular program to competition. The Company's customers, particularly depots, often compete for after-market business, such as Steel Products Division upgrade work and various overhaul and servicing work performed by the Company. Management believes that the Company will continue to be able to compete successfully based upon the quality, technological advancement and cost competitiveness of its products and services. However, all defense contractors are competing for a limited amount of budgeted funding. MAJOR CUSTOMERS The Company's sales are predominantly derived from contracts with agencies of the U.S. government. The various government customers exercise largely independent purchasing decisions. Sales to the U.S. government generally are not regarded as constituting sales to one customer. Instead, each contracting entity (including multiple contracting entities within the U.S. Army and U.S. Navy) is considered to be a separate customer. The Company's largest programs, representing approximately 30%, 13% and 10% of 1996 revenues were the BFV programs (including derivatives and represented by multiple contracts through multiple entities within the U.S. Army, with no such contract representing more than 13% of 1996 revenues), the Crusader program and the Paladin program, respectively. BACKLOG As of November 30, 1997 and November 30, 1996, the Company's funded backlog was approximately $1.6 billion. Funded backlog does not include the awarded but unfunded portion of total contract values. This backlog provides management with a useful tool to project sales and plan its business on an on-going basis; however, no assurance can be given that the Company's backlog will become revenues in any particular period or at all. A substantial majority of this backlog is expected to be earned as revenues by the end of 1998.
FUNDED BACKLOG AS OF NOVEMBER 30, ---------------------------------------- 1997 1996 ------------------- ------------------- ($ IN MILLIONS) Ground Systems Division............................ $ 817.4 $ 778.3 Armament Systems Division.......................... 488.4 438.5 Paladin Products Division.......................... 166.5 240.2 International Division............................. 93.0 124.1 Steel Products Division............................ 45.0 77.3 Headquarters, Elimination and Other................ (57.6) (79.7) -------- -------- Total............................................ $ 1,552.7 $ 1,578.7 -------- -------- -------- --------
INTELLECTUAL PROPERTY Although the Company owns a number of patents and has filed applications for additional patents, it does not believe that its operations depend upon its patents. In addition, the Company's U.S. government contracts generally license it to use patents owned by others. Similar provisions in the U.S. government contracts awarded to other companies make it impossible for the Company to prevent the use by other 66 companies of its patents in most domestic work. Additionally, the Company owns certain data rights in its products under certain of its government contracts. The protection of data developed by the Company from use by other government contractors is from time to time a source of negotiation between the Company and the U.S. government, and the extent of the Company's data rights in any particular product generally depends upon the degree to which that product was developed by Company, rather than U.S. government funds. The Company routinely enters into confidentiality and non-disclosure agreements with its employees to protect its trade secrets. EMPLOYEES At November 30, 1997, the Company had approximately 5,626 employees and approximately 280 contract workers (excluding employees of the foreign joint ventures). Approximately 1,680 of these employees at five locations are represented by six unions, including the Glass, Moulders, Pottery, Plastics and Allied Workers (Anniston); the International Association of Machinists (Louisville and San Jose); the United Automobile, Aerospace and Agricultural Implement Workers (Minneapolis); the International Guards (Minneapolis); the International Brotherhood of Teamsters (San Jose); and the United Steelworkers (York). These contracts are scheduled to expire between February 1998 and April 2000. The Company considers its relations with its employees to be generally good, and has not experienced a work stoppage since 1986. PROPERTIES The table below sets forth certain information with respect to the Company's manufacturing facilities and properties.
LOCATION LEASED/OWNED BUSINESS CONDUCTED(1) SQUARE FOOTAGE - ---------------------------------------------- ------------------ -------------------------- ----------------- Arlington, VA................................. Leased HQ 16,218 Anniston, AL.................................. Leased SPD 100,000 Anniston, AL.................................. Owned SPD 356,000 Aiken, SC..................................... Leased GSD 21,000 Aiken, SC..................................... Owned GSD 189,000 Aberdeen, SD.................................. Owned ASD 105,000 Chambersburg, PA.............................. Govt. Owned PPD 90,000 Fayette County, PA............................ Leased GSD 176,600 Fridley, MN................................... Govt. Owned ASD 1,712,240 Fridley, MN................................... Owned ASD 326,023 Louisville, KY................................ Leased ASD 1,047,800 Orlando, FL................................... Leased GSD 4,860 San Benito, CA................................ Leased GSD 1,218acres San Jose, CA 1125 Coleman................................ Leased* GSD 675,600 1205 Coleman................................ Leased* CTC 119,000 1450 Coleman................................ Leased* GSD 36,600 340 Brokaw.................................. Leased* GSD 4,400 328 Brokaw.................................. Leased* GSD 138,200 2830 De La Cruz............................. Leased GSD 86,785 2890 De La Cruz............................. Leased GSD 68,708 215 Devcon.................................. Leased GSD 48,700 150 Brokaw.................................. Leased GSD 48,666 York County, PA............................... Owned GSD 946,901
- ------------------------ * Indicates properties at which FMC is the lessor. (1) Indicates whether property is used for corporate headquarters ("HQ") or used by the Armament Systems Division, Ground Systems Division, Paladin Production Division, Steel Products Division or Corporate Technology Center. The U.S. Navy is currently in the process of divesting its Fridley, Minnesota facility that has historically been provided rent free to the Company for production of systems and spares for the U.S. government. The divestiture requires that the facility be available for use by the Company for government 67 production through 2000. The Company has the right of first refusal in the sale of the facility and the U.S. government has made an offer to sell its portion of the Fridley facility to the Company and negotiations relating to this offer have commenced. Depending on the outcome of these negotiations, the Company's historical occupancy costs associated with its operations at this facility and any lease obligations associated with operating after a sale of the facility may be affected. The Company is considering alternatives to a purchase including the sale of its portion of the facility with a leaseback of the portion it occupies. SOURCES AND AVAILABILITY OF RAW MATERIALS The Company's manufacturing operations require raw materials, primarily aluminum and steel, which are purchased in the open market and are normally available from a number of suppliers. The Company also purchases a variety of electronic and mechanical components for which the Company has multiple commercial sources. The Company has not experienced any significant delays in obtaining timely deliveries of essential raw materials. ENVIRONMENTAL MATTERS The Company's operations are subject to Environmental Laws. The Company continually assesses its compliance status and other obligations with respect to Environmental Laws and believes that its operations currently are in substantial compliance with Environmental Laws. Based on historical experience, the Company does not believe that its obligations under Environmental Laws will have a material adverse effect on the Company's financial condition, results of operation or debt service capability. There can be no assurance, however, that the Company will not incur material costs in the future as a result of changes in Environmental Laws or changes in the Company's obligations under Environmental Laws. Pursuant to the terms of the Acquisition Agreement, the Company has retained responsibility for environmental compliance at its facilities and may also incur significant remediation costs, portions of which are reimbursable by the U.S. government and the Sellers, associated with historical releases of hazardous substances and wastes at the facilities. Based on certain U.S. government contracting statutes and regulations, the Company expects that a significant portion of such environmental compliance and remediation costs will be Allowable Costs. In addition, under the environmental indemnification provisions of the Acquisition Agreement, the Sellers will retain responsibility for 75% of certain remediation costs relating to periods prior to the Closing Date that are Non-Allowable Costs. Based on historical experience, the Company expects that a significant percentage of the total remediation and compliance costs associated with its facilities will continue to be Allowable Costs. There can be no assurance, however, that the Sellers will reimburse the Company promptly or at all for future environmental costs or that the U.S. government will allow as Allowable Costs in the Company's contracts all or a significant portion of such future environmental costs. In such an event, the Company's financial condition, results of operation and debt service capability could be materially and adversely affected. For a more detailed discussion of the environmental indemnification provisions of the Acquisition Agreement, see "The Acquisition." Following is a summary of the principal environmental issues associated with the Company's facilities: SAN JOSE FACILITIES. The Sellers have conducted and expect to conduct in the future soil and groundwater investigation and remediation at the San Jose facilities to address historical releases of solvents and other substances. The California Regional Water Quality Control Board has issued administrative orders that govern the investigation and remediation. The Company and the California Department of Toxic Substances Control ("DTSC") has issued an order pursuant to the Resource Conservation and Recovery Act ("RCRA"), under which investigation and remediation are under way at a second section of the property. The Company submitted a RCRA Facility Investigation report to the DTSC in December 1996, which was approved in August 1997, and the Company expects that FMC will need to conduct significant additional investigative and remedial work at the property. The Acquisition Agreement provides that the Sellers will be responsible for 100% of all uninsured remediation costs incurred at the San Jose facilities but will be entitled to reimbursement from the Company for 78% of such costs, subject to certain limitations including a reimbursement ceiling of $16.7 million. The Company, in turn, expects to 68 be able to recover such costs from the U.S. government pursuant to the terms of a settlement agreement among FMC, the Company and DoD (the "Environmental Advance Agreement") under the terms of which 78% of remediation costs and 100% of compliance costs incurred by the Company at the San Jose facilities will be allowable as contract costs in the Company's contracts. FRIDLEY, YORK AND ANNISTON FACILITIES. At the Company's York and Anniston facilities, the Company has investigated soil and groundwater contamination, and in some cases, has undertaken remediation. On the portion of the Fridley facility that is owned by the Company, the Company is conducting soil and groundwater remediation to address solvent contamination. Additional investigative and remedial activities have been conducted by the U.S. Navy on certain Navy-owned portions of the Fridley facility. At the Company's York facility, soil and groundwater investigation and remediation are underway, including efforts related to contamination caused by a former on-site wastewater treatment plant. The groundwater remediation at the Fridley and York facilities focuses on preventing off-site migration of contaminants. The Anniston facility is the site of century-old forge and foundry operations, and soil and groundwater sampling has detected elevated levels of petroleum hydrocarbons at the facility. The Company is evaluating whether additional investigative or remedial activity will be required at this facility. The majority of costs associated with current remediation efforts at these facilities are considered to be Allowable Costs. In addition, under the Environmental Indemnity, the Sellers will reimburse the Company for 75% of Non-Allowable Costs associated with environmental remediation or noncompliance at these facilities where such Non-Allowable Costs arise out of pre-closing operations, so long as the Sellers are notified of the indemnified matters within three years of the Closing Date. LOUISVILLE FACILITY. The Louisville facility, which is among the facilities that the Company leases from the U.S. government, has been the site of manufacturing operations since the 1940s and is believed to have soil and groundwater contamination from such historical operations. The Company is the express beneficiary of an indemnification provision that provides that the U.S. government is responsible for all remediation costs incurred with respect to the Louisville facility other than those related to the Company's occupancy of the facility, and the provision creates a rebuttable presumption that environmental contamination discovered at the facility is not related to the Company's occupancy. CERCLA OBLIGATIONS. The Company is subject to liability under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and similar state statutes for investigation and remediation of environmental contamination of off-site locations at which it has arranged for the disposal of hazardous substances. The Company has been notified that it is a potentially responsible party in certain actions brought under CERCLA or similar state statues and is attempting to resolve these matters. Based on historical experience, management does not expect that liability for off-site CERCLA costs, either individually or in the aggregate, will have a material adverse effect on the Company's financial condition, results of operation or debt service capability. LEGAL PROCEEDINGS ALLIANT TECHSYSTEMS CLAIM. Alliant Techsystems Inc. ("Alliant Tech"), a subcontractor to UDLP in connection with UDLP's Paladin howitzer prime contract, has asserted a claim against UDLP alleging wrongful termination of that subcontract by UDLP. UDLP maintains that it terminated the Alliant Tech subcontract work in accordance with its termination rights under the applicable subcontract agreement and pursuant to a corresponding U.S. Army termination for convenience of the portion of UDLP's prime contract that covered the pertinent components supplied by Alliant Tech. In a letter dated September 19, 1996, Alliant Tech asserted its intention to pursue this claim against UDLP for approximately $17 million in damages. In October 1997, UDLP and Alliant Tech settled Alliant Tech's claim for certain costs under the termination for convenience provisions of the subcontract. Alliant retained the right to pursue breach of contract claims against UDLP but no such litigation has yet commenced. Management believes that UDLP has a valid defense to any such claim. However, no assurances can be given that UDLP will be successful in its defense of this claim, in the event that the claim were further pursued by Alliant. LITIGATION RETAINED BY SELLERS. UDLP is subject to, or involved in, certain litigation and governmental investigations (the "Retained Litigation Matters") for which the Sellers have retained responsibility and 69 agreed to indemnify UDLP and the Company for any liabilities relating to these proceedings. See "The Acquisition." The Retained Litigation Matters include, among other proceedings, a "QUI TAM" action asserted against FMC, the general partner of UDLP prior to the Acquisition and the former owner of a portion of UDLP's business, which relates to the conduct of the Ground Systems Division of UDLP prior to the formation of UDLP in 1994. The QUI TAM action was filed under seal in 1986 in the U.S. District Court for the Northern District of California by Henry Boisvert, a former employee of FMC (the "relator"), and is captioned UNITED STATES EX REL. HENRY J. BOISVERT V. FMC. The complaint alleges that the BFV failed to meet certain specifications contained in the BFV program contract and alleges the existence of certain other material and design defects. Trial of the case commenced on December 15, 1997 and is expected to continue into January 1998. Management does not believe that the Retained Litigation Matters will have a material adverse effect upon the financial condition or results of operations of UDLP because Sellers have agreed to indemnify UDLP and the Company for all losses and liabilities directly attributable to the Retained Litigation Matters. However, no assurances can be made that the Sellers will perform their indemnification obligations if these matters are adversely determined or that such adverse determination would not otherwise be disruptive to the Company's business. OTHER MATTERS. UDLP, in its ordinary course of business, is party to various other legal proceedings, some of which are covered by insurance. Management believes these these are routine in nature and incidental to its operations. Management believes that the outcome of such proceedings to which UDLP currently is a party will not have material adverse effects upon its operations, financial condition or liquidity. 70 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY The following table sets forth certain information with respect to the members of the Board of Directors and the executive officers of the Company. Executive officers of the Company are chosen by the Board of Directors and serve at its discretion. The Board of Directors does not maintain any committees.
YEARS WITH NAME(1) POSITION AGE COMPANY(2) - ------------------------------ ------------------------------------------------------------- --- ----------------- William E. Conway, Jr......... Chairman 47 -- Allan M. Holt................. Director 45 -- Peter J. Clare................ Director 32 -- Frank C. Carlucci............. Director 67 -- J.H. Binford Peay, III........ Director 57 -- Thomas W. Rabaut.............. President, Chief Executive Officer, Director 49 20 David V. Kolovat.............. Vice President, General Counsel and Secretary 52 9 Francis Raborn................ Director, Vice President and Chief Financial Officer 54 20 Arthur L. Roberts............. Vice President, General Manager--International Division 57 30 Frederick M. Strader.......... Vice President, General Manager--Armament Systems Division 44 17 Dennis A. Wagner, III......... Vice President, Business Development and Marketing 47 16 Peter C. Woglom............... Vice President, General Manager--Ground Systems Division 52 24
- ------------------------ (1) Prior to the Acquisition, Allan M. Holt was the sole director and President of the Company. Other directors and officers listed above were elected following the Acquisition. (2) Includes the Company and its predecessors. WILLIAM E. CONWAY, JR. was elected as a Director of the Company in 1997. He has been a Managing Director of The Carlyle Group, a Washington, D.C.-based private merchant bank, since 1987. Mr. Conway was Senior Vice President and Chief Financial Officer of MCI Communications Corporation from 1984 until 1987, and was a Vice President and Treasurer of MCI from 1981 to 1984. Mr. Conway presently serves on the Board of Directors of BDM International, Inc., GTS Duratek, Inc., Howmet International Inc., Nextel Communications, Inc., Tracor Inc. and several privately held companies. ALLAN M. HOLT was elected as a Director of the Company in 1997. He is a Managing Director of The Carlyle Group, a Washington, D.C.-based private merchant bank which he joined in 1991. Mr. Holt was previously with Avenir Group, a private investment and advisory group, and from 1984 to 1987 was Director of Planning and Budgets at MCI Communications Corporation, which he joined in 1982. Mr. Holt currently serves on the boards of several privately held companies. PETER J. CLARE was elected as a Director of the Company in 1997. He is currently a Principal with The Carlyle Group, a Washington, D.C.-based private merchant bank which he joined in 1992. Mr. Clare was previously with First City Capital, a private investment group. From 1987 to 1989, he worked in the mergers and acquisitions and merchant banking groups at Prudential-Bache. Mr. Clare currently serves on the boards of several privately held companies. FRANK C. CARLUCCI was elected as a Director of the Company in 1997. He is Chairman of The Carlyle Group, a Washington, D. C. based merchant bank. Prior to joining The Carlyle Group in 1989, Mr. 71 Carlucci served as Secretary of Defense from 1987-1989. Previously he had served as President Reagan's National Security Advisor in 1987. Mr. Carlucci serves on the following corporate boards: Ashland Inc.; BDM International, Inc.; East New York Savings Bank; Kaman Corporation; Neurogen Corporation; Northern Telecom Limited; The Quaker Oats Company; SunResorts, Ltd., N.V.; Texas Biotechnology Corporation; Pharmacia & Upjohn, Inc.; Westinghouse Electric Corporation; and the Board of Trustees for the RAND Corporation. J.H. BINFORD PEAY, III was elected as a Director of the Company in 1997. General Peay is a career U.S. Army officer who attained the rank of four star general and retired from the Army on October 1, 1997. He is the former Commander-in-Chief of the U.S. Central Command (1994-1997) and also served as Vice Chief of Staff, United States Army (1993-1994). Prior to serving as Vice Chief of Staff, he was Deputy Chief of Staff for Operations and Plans, Department of the Army and Senior Army Member, U.S. Military Committee, United Nations in Washington, D. C. (1991-1993) and was Commanding General, 101st Airborne Division (Air Assault) at Ft. Campbell, Kentucky (1989 to 1991). THOMAS W. RABAUT has been President and Chief Executive Officer of UDLP since its formation in 1994. Before joining UDLP, Mr. Rabaut worked at FMC since 1977 and held several executive positions including General Manager of FMC's Steel Products Division from 1986 to 1988, Operations Director and then Vice President and General Manager of FMC's Ground Systems Division from 1988 to 1993, and General Manager of FMC's Defense Systems Group, overseeing operations in the U.S., Turkey, Pakistan, and Saudi Arabia for U.S. and allied armies, navies, and marines from 1993 to 1994. In 1994, he was also elected Vice President of FMC. Mr. Rabaut graduated from the U.S. Military Academy at West Point and from the Harvard Business School. DAVID V. KOLOVAT has been Vice President and General Counsel of UDLP since its formation in 1994. He has also served as FMC's Associate General Counsel in charge of defense business legal work from 1988 until consummation of the Acquisition. Mr. Kolovat served as Vice President and General Counsel of Premisys, Inc. from 1986 to 1988, during which Premisys was acquired by Pacific Telesis Corp., and from 1984 to 1986 as Vice President and General Counsel of Robot Defense Systems, Inc. Mr. Kolovat received his undergraduate degree from the University of Iowa and his law degree from Stanford Law School. FRANCIS RABORN was elected as a Director of the Company in 1997. He has been Vice President and Chief Financial Officer of UDLP since its formation in 1994, with responsibility for financial, contract, administrative and government compliance matters. Mr. Raborn joined FMC in 1977 and held a variety of financial and accounting positions including Controller of FMC's Defense Systems Group from 1985 to 1993 and Controller of FMC's Special Products Group from 1979 to 1985. Mr. Raborn received a B.S. in Economics from the University of Pennsylvania's Wharton School and an MBA from UCLA. ARTHUR L. ROBERTS has been Vice President and General Manager--International Division of UDLP since its formation in 1994. His responsibilities include management of joint ventures in Turkey and Saudi Arabia, ongoing co-production programs in Pakistan and Japan and development of new co-production programs in Malaysia and Korea. Prior to joining UDLP, Mr. Roberts was General Manager of FMC's Defense Systems International Division since 1993. Mr. Roberts held a number of positions at FMC since 1967, including management of the Turkey joint venture program from its initial proposal in 1988 through 1992. Mr. Roberts holds a bachelor's degree in mechanical engineering from Yale University and an MBA from Harvard Business School. FREDERICK M. STRADER has been Vice President and General Manager--Armament Systems Division of UDLP since May 1994. Prior to joining UDLP, Mr. Strader was Division Manager of FMC's Agricultural Machinery Division from October 1992 to May 1994, and Manager of FMC's Strategic Planning Group from September 1991 to October 1992. Prior thereto, he held a number of operations, planning and financial positions at the Steel Products Division of FMC. Mr. Strader received his BA degree from Ripon College and his MBA degree from the Wharton School at University of Pennsylvania. 72 DENNIS A. WAGNER, III has been Vice President, Business Development and Marketing of UDLP since its formation in 1994 with responsibility for the development and coordination of worldwide strategies for the design, manufacture, and sale of combat vehicles, amphibious assault vehicles, and armament systems for the U.S. and Allied armed forces. Mr. Wagner joined FMC's Defense Systems Group in 1981 and held a number of marketing and management positions, including Division General Manager of FMC's Steel Products Division from 1989 to 1994 and Program Director for the M113 family of vehicles from 1987 to 1989. Mr. Wagner received a BS in General Engineering from the U.S. Military Academy and an MBA in Finance from the University of Detroit. PETER C. WOGLOM has been Vice President and General Manager--Ground Systems Division of UDLP since 1994. Prior thereto, he held a number of line and executive positions at FMC after joining FMC in 1973, including Vice President and General Manager of FMC's Ground Systems Division from 1993 to 1994, and Vice President and Director, Business Strategies and Initiatives for FMC's Defense Systems Group from 1990 to 1993. Mr. Woglom received BSCE and Master of Engineering degrees from Cornell University and an MBA from the University of Pittsburgh. 73 EXECUTIVE COMPENSATION The following table sets forth information with respect to the compensation paid by the Company for services rendered for the year ended December 31, 1996 to the Chief Executive Officer and to each of the four other most highly compensated executive officers of the Company (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS ------------------------------------------ ---------------- RESTRICTED NAME AND PRINCIPAL OTHER ANNUAL STOCK ALL OTHER POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) AWARDS(4) COMPENSATION(5) - -------------------------- --------- ---------- ------------ ---------------- ---------------- ---------------- Thomas W. Rabaut.......... 1996 $ 322,091 $ 171,525 $ -- $ -- $ -- President and CEO Peter C. Woglom........... 1996 234,665 79,648 -- 284,500 -- Vice President, General Manager-- Ground Systems Frederick M. Strader...... 1996 183,990 99,770 -- 213,375 -- Vice President, General Manager-- Armament Systems David V. Kolovat(6)....... 1996 202,196 63,078 -- -- -- Vice President, General Counsel and Secretary Arthur L. Roberts......... 1996 177,619 68,320 -- -- -- Vice President, General Manager-- International
- ------------------------ (1) Includes matching contributions under the Company's 401(k) plan for salaried employees or the FMC 401(k) plan in which the individual participated prior to the Acquisition. (2) The FMC management incentive plans in which the employee participated prior to the Acquisition. Such plans provided for both annual and three-year incentive bonuses. (3) Amounts less than $50,000 or 10% the Named Executive Officer's compensation are excluded. (4) Includes options to purchase and shares of restricted stock of FMC pursuant to FMC plans in which the Named Executive Officer participated prior to the Acquisition. (5) The Named Executive Officers participated in FMC's stock option plan. In 1996 Mr. Kolovat exercised 6,400 shares and realized $195,800 of value and Mr. Roberts exercised 4,300 shares and realized $265,876 of value. Messrs. Rabaut, Woglom, Strader, Kolovat and Roberts had $609,525, $296,663, $463,325, $71,250 and $369,550 of value, respectively, in exercisable in-the-money options at the end of 1996. Such Named Executive Officers had $291,194, $99,600, $145,910, $160,813 and $132,200, respectively, of presently unexercisable FMC options at such date that will vest upon consummation of the Acquisition. (6) 1996 compensation was paid by FMC. Mr. Kolovat became an employee of the Company upon consummation of the Acquisition. 74 EMPLOYMENT AGREEMENTS The Company expects to enter into employment agreements with certain key executive officers, including terms for salary, bonus opportunity, insurance, severance and non-competition. RETIREMENT PLAN Each Named Executive Officer is covered under the UDLP Defense Segment Pension Plan (the "Pension Plan") described below. The following table shows the estimated annual pension benefits under the Pension Plan, including amounts attributable to the Supplemental Retirement and Savings Plan ("SERP") described below for the specified compensation and years of service. PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF SERVICE INDICATED FINAL AVERAGE ---------------------------------------------------------- EARNINGS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS --------------- ---------- ---------- ---------- ---------- ---------- $ 150,000........................ $ 31,552 $ 42,070 $ 52,587 $ 63,104 $ 73,622 250,000........................ 54,052 72,070 90,087 108,104 126,122 350,000........................ 76,552 102,070 127,587 153,104 178,622 450,000........................ 99,052 132,070 165,087 198,104 231,122 550,000........................ 121,552 162,070 202,587 243,104 283,622 650,000........................ 144,052 192,070 240,087 288,104 336,122 900,000........................ 200,302 267,070 333,837 400,604 467,372 1,150,000....................... 256,552 342,070 427,587 513,104 598,622 1,300,000....................... 290,302 387,070 483,837 580,604 677,372 1,450,000....................... 324,052 432,070 540,087 648,104 756,122
Compensation included in the final average earnings for the pension benefit computation includes base annual salary and annual bonuses but excludes payments for most other compensation. Unreduced retirement pension benefits are calculated pursuant to the Pension Plan's benefit formula as an individual life annuity payable at age 65. Benefits may also be payable as a joint and survivor annuity or a level income option. Final average earnings in the above table means the average of covered remuneration for the highest 60 consecutive calendar months out of the 120 calendar months immediately preceding retirement. Benefits applicable to a number of years of service or final average earnings different from those in the above table are equal to the sum of (A) 1 percent of allowable Social Security Covered Compensation ($29,304 for a participant retiring at age 65 in 1997) times years of credited service and (B) 1.5 percent of the difference between final average earnings and allowable Social Security Covered Compensation times years of credited service. ERISA limits the annual benefits that may be paid from a tax-qualified retirement plan. Accordingly, as permitted by ERISA, the Company has adopted supplemental arrangements to maintain total benefits upon retirement at the levels shown in the table. Messrs. Rabaut, Woglom, Strader, Kolovat and Roberts currently have 20, 24, 17, 9 and 30 years of service under the Pension Plan, respectively. The Company also maintains a SERP designed to provide unfunded supplemental retirement benefits to certain Executive Officers of the Company. The SERP is designed to provide the selected employees a benefit at retirement equal to the benefit the participant would have received under the 401(k) plan and the pension plan if the Code and such plan did not require the exclusion of certain compensation from the determination of benefits under those plans. SERP benefits are offset by amounts the participant receives from certain other plans and Social Security. Currently, all Named Executive Officers participate in the SERP. 75 TRANSACTION INCENTIVE PAYMENTS The Company instituted an additional incentive plan in 1997 for the Named Executive Officers and certain other employees granting them significant incentive bonuses upon a successful sale of the Company. The incentives paid to the Named Executive Officers were as follows: TRANSACTIONS INCENTIVE PAYMENT
PERFORMANCE NAME INCENTIVE PREMIUM INCENTIVE - ------------------------------------------------------------------------ -------------------- ----------------- Thomas W. Rabaut........................................................ $ 250,000 $ 250,000 President and CEO Peter C. Woglom......................................................... 150,000 150,000 Vice President, General Manager--Ground Systems Frederick M. Strader.................................................... 150,000 150,000 Vice President, General Manager--Armament Systems David V. Kolovat........................................................ 100,000 -- Vice President, General Counsel and Secretary Arthur L. Roberts....................................................... 100,000 -- Vice President, General Manager--International
SEVERANCE ARRANGEMENTS In June 1997, the Company entered into executive compensation agreements with fourteen management employees, including each Named Executive Officer. These agreements generally provide that in the event the executive's employment is terminated by the Company other than for "cause" or by the executive with "good reason" (each as defined therein) within 2 years following a "sale of the company" (as defined therein) including the Acquisition, the executive will be entitled to (i) a payment equal to a multiple (ranging from one to three) of the executive's base pay and target bonus; (ii) Company-paid outplacement services; and (iii) the right to continue to participate in the Company's health, life and accidental death and dismemberment and long-term disability benefits plan for one year (or three years in the case of Mr. Rabaut) at the rates in effect for active employees. The Company also maintains a severance plan that generally covers most salaried and non-union hourly employees, and provides severance payments in the event of the employee's involuntary termination of employment due to a reduction in force. Severance payments are calculated as a percentage (up to 100% maximum) of base pay. STOCK OPTION PLAN The Company is adopting an option plan for key employees of the Company, pursuant to which options to purchase an aggregate of approximately 8% of the Company's fully-diluted common stock at the Closing Date will be granted, subject to vesting requirements based on performance and/or length of service after the options are granted. 76 CERTAIN TRANSACTIONS Prior to the Acquisition, UDLP contracted with FMC for various administrative and support services, including computer services, systems and programming, data communications, employee relocation support, payroll processing, research and development, insurance and general management support. During the years ended December 31, 1994, 1995 and 1996 and the nine months ended September 30, 1997, UDLP paid $42.4 million, $39.8 million, $35.2 million and $22.3 million, respectively, to FMC for such support. This contract was terminated at or prior to the Closing Date. The Company also leases office and manufacturing facilities in San Jose, California from FMC. Under the lease agreement during the years ended December 31, 1994, 1995 and 1996, UDLP paid $4.2 million, $3.9 million and $3.7 million, respectively. In connection with the Acquisition, UDLP amended the lease to provide for a $4.0 million annual base rent. UDLP sales of inventory to FMC during the years ended December 31, 1994, 1995 and 1996 and the nine months ended September 30, 1997 were $2.8 million, $1.5 million, $1.1 million and $0.9 million, respectively. Management believes that such transactions were consummated on terms substantially similar to those that would arise in transactions with unrelated third parties. Sales to Harsco were not material. During 1995, UDLP entered into an agreement with FMC and Harsco whereby UDLP's excess cash balances of up to $40 million were invested with FMC. Interest on these funds was earned based on the average monthly cost of FMC's U.S. dollar revolver-related short-term borrowings for such month. In addition, UDLP made short-term loans, not to exceed ninety days, to FMC at rates equal to FMC's average overnight borrowing rate for the period of the loan. Interest on all loans to FMC totaled $1.8 million and $1.1 million in 1996 and 1995, respectively. This agreement terminated on the Closing Date. Concurrently with the closing of the Acquisition, the Company entered into a management agreement (the "Management Agreement") with TCG Holdings, L.L.C. (or another affiliate of Carlyle) for certain management and financial advisory services to be provided to the Company and its subsidiaries. The Management Agreement provides for the payment to Carlyle an annual management fee of $2.0 million. In addition, the Company may retain Carlyle or any third party for the provision of certain corporate administrative services or transactional services on terms and conditions to be agreed upon on an arm's length basis including fees for assisting the Company with the future acquisitions, dispositions, financing transactions and other similar transactions. Pursuant to the Management Agreement, Carlyle received a fee of $4.5 million and will receive an additional $2.0 million in 1998 for advisory and other services provided in connection with the Transactions. 77 PRINCIPAL STOCKHOLDERS All of the capital stock of the Company is held by Iron Horse. The following table sets forth certain information regarding the beneficial ownership of Iron Horse by each person known by the Company to be the owner of 5% or more of Iron Horse's equity interests ("Units"), by each person who is a director or Named Executive Officer of the Company and by all directors and executive officers of the Company as a group.
PERCENTAGE OF NUMBER OF ALL OUTSTANDING BENEFICIAL OWNER(1) UNITS UNITS - -------------------------------------------------------------------------------------- ----------- --------------- TCG Holdings, L.L.C.(2)(3)............................................................ 1,000 100.0% William E. Conway, Jr.(3)............................................................. -- * Allan M. Holt(3)...................................................................... -- * Peter J. Clare(3)..................................................................... -- * Frank C. Carlucci(3).................................................................. -- * J.H. Binford Peay, III(4)............................................................. -- * Thomas Rabaut(4)...................................................................... -- * Peter C. Woglom(4).................................................................... -- * Frederick M. Strader(4)............................................................... -- * David V. Kolovat(4)................................................................... -- * Francis Raborn(4)..................................................................... -- * Arthur L. Roberts(4).................................................................. -- * All Directors and Executive Officers as a group (12 persons).......................... -- *
- ------------------------ * Denotes less than 1% beneficial ownership. (1) Beneficial ownership is determined in accordance with the rules of the SEC. Except as otherwise indicated, each beneficial owner has the sole power to vote, as applicable, and to dispose of all Units owned by such beneficial owner. (2) Carlyle Partners II, L.P., a Delaware limited partnership, Carlyle Partners III, L.P., a Delaware limited partnership, Carlyle International Partners II, L.P., a Cayman Islands limited partnership, Carlyle International Partners III, L.P., a Cayman Islands limited partnership, and certain additional partnerships formed by Carlyle (collectively, the "Investment Partnerships") and certain investors with respect to which TC Group, L.L.C. or an affiliate exercises investment discretion and management constitute all of the members of Iron Horse. TC Group, L.L.C. is the sole general partner of the Investment Partnerships and TCG Holdings, L.L.C., a Delaware limited liability company, is the sole managing member of TC Group, L.L.C. (3) The address of such person is c/o The Carlyle Group, 1001 Pennsylvania Avenue, N.W., Washington, D.C. 20004. (4) The address of such person is c/o United Defense Industries, Inc., 1525 Wilson Boulevard, Suite 700, Arlington, Virginia 22209-2411. 78 THE ACQUISITION ACQUISITION AGREEMENT The Company entered into the Acquisition Agreement with the Sellers on August 25, 1997 for the acquisition by the Company of all of FMC's and Harsco's respective partnership interests in UDLP. The aggregate Purchase Price paid in the Acquisition was $850.0 million. The Company paid the Purchase Price with $800.0 million of cash and the Seller Note. The Purchase Price is subject to adjustment following the closing based upon the difference (if any) between the net worth of UDLP as of the Closing Date (as adjusted as provided in the Acquisition Agreement) and the adjusted net worth of UDLP as of June 30, 1997. If any adjustment results in a decrease in the Purchase Price for the Acquisition, borrowings under the Term Loan Facilities will be correspondingly reduced. If the Purchase Price is increased, the borrowings under the Revolving Credit Facility will be correspondingly increased. Sellers and the Company are currently negotiating this adjustment. The Seller Note is subordinate in right of payment to all existing and future Senior Indebtedness (as defined in the Seller Note) and PARI PASSU in right of payment with all other senior subordinated indebtedness of the Company, including the Notes. For a description of the terms of the Seller Note, see "Description of Certain Indebtedness--Seller Note." The Acquisition Agreement contains representations, warranties and covenants of the Sellers concerning the business of UDLP and its subsidiaries. The Sellers have agreed to indemnify UDLP and the Company and their respective affiliates and each of their respective officers, directors and employees for certain breaches of representations or covenants of the Sellers contained in the Acquisition Agreement and for certain liabilities relating to the business of UDLP being retained by the Sellers, including certain litigation to which UDLP is a party or which relates to the business of UDLP prior to the Closing Date. For a discussion of certain litigation being retained by the Sellers, see "Business--Legal Proceedings." Subject to limited exceptions, no claims under such indemnity may be asserted by UDLP or the Company for breach of any representation or warranty unless the aggregate amount of all such claims asserted by UDLP or the Company exceed $10.0 million, in which event the Sellers shall only be obligated to indemnify the Company and UDLP for the amount of such claims in excess of $10.0 million. The aggregate recovery of UDLP and the Company for breaches of the representations and warranties of the Sellers contained in the Acquisition Agreement is limited to 10% of the Purchase Price (as adjusted). The Acquisition Agreement also provides for the allocation as between the Sellers and the Company of costs and liabilities relating to certain environmental matters in connection with the business of UDLP prior to the Closing Date ("Pre-Closing Environmental Matters"). The Acquisition Agreement provides that FMC will be responsible for 100% of all remediation costs incurred at UDLP's San Jose/Santa Clara facilities and will be entitled to reimbursement by the Company or UDLP for 78% of such uninsured costs subject to certain limitations. Management believes that most of UDLP's share of these costs will be allowable as contract costs under its contracts with the U.S. government pursuant to the Environmental Advance Agreement among FMC, UDLP and DoD. The parties agreed in the Environmental Advance Agreement to the allocation of remediation costs between defense and commercial activities at UDLP's San Jose/Santa Clara Facilities and established that, subject to certain limitations, 78% of such allowable costs will be subject to recovery from the U.S. government through UDLP's cost plus contracts. The aggregate amount of remediation costs related to the San Jose/Santa Clara facilities for which the Company is required to reimburse FMC is capped by the Acquisition Agreement at $16.7 million with certain limitations on yearly expenditures. With respect to all other real property owned or leased by the Company or otherwise relating to UDLP's business, the Company and UDLP will be responsible for all costs of remediation relating to Pre-Closing Environmental Matters and will be entitled to reimbursement from the Sellers of 75% of all such costs which (i) are not allowable costs under applicable U.S. government contracting statutes and regulations; (ii) relate to matters of which the Sellers are notified in writing before the third anniversary of the Closing Date; and (iii) are identified on or before the tenth 79 anniversary of the Closing Date. For additional information concerning these environmental matters, see "Business--Environmental Matters." OTHER ANCILLARY AGREEMENTS Concurrently with the Company's acquisition of UDLP, UDLP acquired certain assets of, and assumed certain liabilities related to, FMC's Corporate Technology Center in San Jose, California. CTC is presently a separate business unit of FMC which provides research and testing services to UDLP and certain other FMC commercial business units. No additional consideration is required to be paid for CTC, and FMC agreed to purchase $9.0 million of services from CTC, in the aggregate, in the three years following the Closing Date. At the closing of the Acquisition, UDLP, FMC and Harsco entered into several ancillary agreements relating to the period following the closing. These ancillary agreements include (i) a Transition Services Agreement; (ii) a Technology and Environmental Services Agreement; (iii) the FMC and Harsco Intellectual Property Agreements; and (iv) a lease for certain real property in San Jose. Under the Transition Services Agreement, FMC provides certain services to UDLP, in a manner and amount historically provided prior to the closing pursuant to a management services agreement. The Transition Services Agreement will continue for a term of six months from the Closing Date or such shorter or longer term as the parties may agree. The services to be provided to the Company are expected to include, among other things, accounts payable, accounting processing, benefits administration, payroll processing, insurance, employee relocation, expatriate employee administration and human resource information systems. The Technology and Environmental Services Agreement sets forth the terms and conditions pursuant to which FMC will purchase certain services from CTC after the closing. The Intellectual Property Agreements grant UDLP a license to use in UDLP's business certain intellectual property which was retained by FMC and Harsco at the time UDLP was formed, as well as certain intellectual property used by CTC on or prior to the Closing Date. The Intellectual Property Agreements also grant FMC and Harsco a license to use the intellectual property which was transferred to UDLP at the time of formation for uses outside of UDLP's core business. FMC also leases to UDLP the land, buildings, fixtures and improvements at the San Jose facility currently used by UDLP and CTC for an aggregate annual base rent of approximately $4.0 million and the payment of certain expenses relating to the operation and maintenance of such facilities. The lease has an initial term of four years, and UDLP has an option to renew the lease for a portion of the premises for one additional four-year term. The production agreement between FNSS-Turkey and the Turkish government gives the government the right to terminate the agreement "if the interest of [FNSS-Turkey] shall devolve upon any person or corporation." The Company does not expect the Turkish government to assert the view that this provision entitles it to terminate the joint venture agreement, although no assurance can be given that the Turkish government will not do so. 80 DESCRIPTION OF CERTAIN INDEBTEDNESS SENIOR CREDIT FACILITY In connection with the Acquisition, the Company entered into a new senior secured credit agreement that closed contemporaneously with the offering of the Private Notes. The Senior Credit Facility is among the Company, Iron Horse, various lending institutions including Lehman Commercial Paper Inc. and Citibank, N.A. as Documentation Agents, and Bankers Trust Company as Administrative Agent and as Syndication Agent. The Senior Credit Facility consists of an "A Term Loan Facility" in an aggregate principal amount of $150.0 million, a "B Term Loan Facility" in an aggregate principal amount of $175.0 million, a "C Term Loan Facility" in an aggregate principal amount of $170.0 million and a Revolving Credit Facility in an aggregate principal amount of $230.0 million, including subfacilities for letters of credit and swingline loans. Loans made pursuant to the A Term Loan Facility ("A Term Loans") mature six years after the closing date of the Senior Credit Facility (the "Senior Credit Facility Closing Date"), with equal quarterly amortization payments of $6.25 million. Loans made pursuant to the B Term Facility ("B Term Loans") mature eight years from the Senior Credit Facility Closing Date and during the first six successive one year periods following the Senior Credit Facility Closing Date require annual amortization equal to 1% of the initial aggregate principal amount of B Term Loans (payable in four equal quarterly installments per year). The remaining aggregate principal amount of B Term Loans incurred is subject to equal quarterly amortization payments during the seventh and eighth years after the Senior Credit Facility Closing Date. Loans made pursuant to the C Term Facility ("C Term Loans") mature nine years from the Senior Credit Facility Closing Date and during the first eight successive one year periods following the Senior Credit Facility Closing Date require annual amortization equal to 1% of the initial aggregate principal amount of C Term Loans (payable in four equal quarterly installments per year). The remaining aggregate principal amount of C Term Loans incurred is subject to equal quarterly amortization payments in the ninth year. Loans made pursuant to the Revolving Credit Facility ("Revolving Loans") will be utilized for general corporate and working capital requirements and for transaction fees in connection with the Acquisition. The Revolving Credit Facility will be available for the issuance of standby and trade letters of credit (collectively "Letters of Credit") to support obligations of the Company and its subsidiaries in types to be specified in the credit documentation. Maturities for Letters of Credit will not exceed twelve months, renewable annually thereafter and, in any event, will not extend beyond the fifth business day prior to the maturity of the A Term Loan Facility. At no time will (x) the aggregate principal amount of Revolving Loans outstanding pursuant to the Revolving Credit Facility exceed $150.0 million or (y) the aggregate principal amount of Revolving Loans together with any outstanding Letters of Credit and any unpaid drawings with respect thereto exceed the commitments then in effect pursuant to the Revolving Credit Facility. The Revolving Credit Facility matures on the date that the A Term Loan Facility matures. All outstanding loans under the Senior Credit Facility are guaranteed by Iron Horse and certain of the Company's subsidiaries and are secured by a lien on all the assets (present and future, tangible and intangible) of the Company and its domestic subsidiaries and by a pledge of all of the stock of the Company and its domestic subsidiaries and two-thirds of the stock of certain of the Company's foreign subsidiaries and joint ventures. Mandatory prepayments and reductions of outstanding principal amounts under the Senior Credit Facility are required upon the occurrence of certain events. All outstanding loans under the Senior Credit Facility bear interest at the Company's option at (i) the base rate in effect from time to time plus an applicable margin ranging from 1 1/4% to 1 3/4% depending on 81 the type of loan or (ii) LIBOR (adjusted for maximum reserves) as determined by the agent for the respective interest period, plus an applicable margin between 2 1/4% and 2 3/4%, depending on the type of loan. The Senior Credit Facility contains customary covenants restricting the incurrence of debt, encumbrances on and sales of assets, limitations on mergers and certain acquisitions, limitations on changes of control, provisions for the maintenance of certain financial ratios and various other financial covenants and restrictions. SELLER NOTE In connection with the Acquisition, the Company issued the Seller Note to the Sellers in an aggregate principal amount of $50.0 million. The Seller Note bears interest at the same rate per annum as the Notes, payable quarterly in arrears on the last business day of each calendar quarter. The Seller Note is guaranteed by each entity that guaranteed the Notes and has substantially the same covenants and default provisions as the Notes, provided, however, that the maturity of the Seller Note may be accelerated only in the event of acceleration of the maturity of the Senior Credit Facility and the Notes. The Seller Note is subordinate in right of payment to all existing and future Senior Indebtedness (as defined in the Seller Note) and PARI PASSU in right of payment with all other senior subordinated or subordinated indebtedness of the Company, including the Notes. The Seller Note matures on the third anniversary of the issuance thereof and will be subject to a mandatory prepayment (with such prepayment expected to be made with the proceeds of term loans under the Senior Credit Facility) of outstanding principal and interest upon the receipt by the Company of certain consents or in certain other circumstances. The Company anticipates that mandatory prepayment of the Seller Note will likely occur within one year of issuance. If the Company suffers damages or losses in connection with the failure to receive certain consents as a result of the change in control of UDLP, the Company would have certain rights of set-off against payment on the Seller Note for such damages or losses. 82 DESCRIPTION OF THE NOTES GENERAL The Notes were issued pursuant to an Indenture (the "Indenture") by and among the Company, the Guarantors and Norwest Bank Minnesota, N.A., as trustee (the "Trustee"), in a private transaction that is not subject to the registration requirements of the Securities Act. See "Notice to Investors." The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of the material provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. Copies of the proposed form of Indenture and Registration Rights Agreement are available as set forth below under "Additional Information." The definitions of certain terms used in the following summary are set forth below under "--Certain Definitions." For purposes of this summary, the term "Company" refers only to United Defense Industries, Inc. and not to any of its Subsidiaries. The Notes are general unsecured obligations of the Company and are subordinated in right of payment to all current and future Senior Debt. The Notes rank PARI PASSU in right of payment with the Seller Note and with all other senior subordinated Indebtedness of the Company issued in the future, if any, and senior in the right of payment to all subordinated Indebtedness of the Company issued in the future, if any. As of September 30, 1997, on a pro forma basis after giving effect to the Transactions, the Company would have had approximately $457.0 million of Senior Debt outstanding (excluding outstanding letters of credit of approximately $154.0 million and unused commitments of approximately $114.0 million under the Senior Credit Facility, $50.0 million of which will be available only to fund the repayment of the Seller Note) and $50.0 million of PARI PASSU Indebtedness outstanding under the Seller Note (which will mature on the third anniversary of the Acquisition, although the Company believes the Seller Note will be prepaid prior to the first anniversary of the Acquisition). The Indenture permits the incurrence of additional Senior Debt in the future. As of the Issue Date, all of the Company's Subsidiaries were Restricted Subsidiaries, except for FNSS-Turkey, which is an Unrestricted Subsidiary. Under certain circumstances, the Company will be able to designate other current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indenture. PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $300.0 million, $200.0 million of which were issued in connection with the issuance of the Private Notes, and mature on November 15, 2007. Interest on the Notes accrues at the rate of 8 3/4% per annum and is payable semi-annually in arrears on May 15 and November 15, commencing on May 15, 1998, to Holders of record on the immediately preceding May 1 and November 1. Additional amounts may be issued in one or more series from time to time subject to the limitations set forth under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and restrictions contained in the Senior Credit Facility and any other agreement to which the Company is a party at the time of such issuance. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal and premium, if any, on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; PROVIDED that all payments of principal, premium and interest with respect to Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of 83 the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. SUBORDINATION The payment of principal of, premium, if any, and interest on the Notes is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full, in cash or Cash Equivalents, of all Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full, in cash or Cash Equivalents, of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt (whether or not an allowable claim)) before the Holders of Notes will be entitled to receive any payment with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full, in cash or Cash Equivalents, any distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive and retain (i) Permitted Junior Securities and (ii) payments made from the trust described under "--Legal Defeasance and Covenant Defeasance"). The Company also may not make any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described under "--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Company or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced unless and until (i) 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 90 days. The Indenture further requires that the Company promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of Notes may recover less ratably than creditors of the Company who are holders of Senior Debt. The Indenture limits, subject to certain financial tests, the amount of additional Indebtedness, including Senior Debt, that the Company and its Restricted Subsidiaries can incur. See "--Certain Covenants-- Incurrence of Indebtedness and Issuance of Preferred Stock." GUARANTEES The Company's payment obligations under the Notes is jointly and severally guaranteed (the "Guarantees") by the Guarantors. The Guarantee of each Guarantor is subordinated to the prior payment in full of all Senior Debt of such Guarantor (none of which, other than guarantees under the Senior Credit Facility, was outstanding on a pro forma basis as of September 30, 1997), and the amounts for which the Guarantors are liable under the guarantees issued from time to time with respect to Senior Debt. The 84 obligations of each Guarantor under its Guarantee is limited to the maximum amount the Guarantors are permitted to guarantee under applicable law. See, however, "Risk Factors--Fraudulent Conveyance Matters." The Indenture provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with such Guarantor unless (i) the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) except in the case of the merger of a Guarantor with or into another Guarantor or the Company, the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." Upon (i) the release by the lenders under the Senior Credit Facility, related documents and future refinancings thereof of all guarantees of a Guarantor and all Liens on the property and assets of such Guarantor relating to such Indebtedness, or (ii) the sale or disposition of a Guarantor (or all or substantially all of its assets) to an entity which is not a Subsidiary of the Company, which is otherwise in compliance with the Indenture, such Guarantor shall be deemed released from all its obligations under the Indenture and its Guarantee; PROVIDED, HOWEVER, that any such termination shall occur only to the extent that all obligations of such Guarantor under the Senior Credit Facility and all of its guarantees of, and under all of its pledges of assets or other security interests which secure, Indebtedness of the Company shall also terminate upon such release, sale or transfer. The Indenture provides that in the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) will be released and relieved of any obligations under its Guarantee; PROVIDED THAT the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See "--Repurchase at the Option of Holders--Asset Sales." OPTIONAL REDEMPTION The Notes are not be redeemable at the Company's option prior to November 15, 2002. Thereafter, the Notes are subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on November 15 of the years indicated below:
YEAR PERCENTAGE - -------------------------------------------------------------------------- ------------------ 2002...................................................................... 104.375% 2003...................................................................... 102.917% 2004...................................................................... 101.458% 2005 and thereafter....................................................... 100.000%
Notwithstanding the foregoing, at any time prior to November 15, 2000, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the Notes at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of any Public Equity Offering; PROVIDED that at least 65% of the aggregate principal amount of Notes originally issued on the Issue Date remain outstanding immediately after each occurrence 85 of such redemption; and PROVIDED, further, that each such redemption shall occur within 90 days of the date of the closing of such Public Equity Offering. At any time on or prior to November 15, 2002, the Notes may also be redeemed in whole but not in part at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days prior notice (but in no event more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium, plus accrued and unpaid interest, thereon to the redemption date (the "Redemption Date") (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). The Company may not redeem Notes pursuant to this paragraph if it has made a Change of Control Offer with respect to such Change of Control. SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption MANDATORY REDEMPTION Except as set forth below under "--Repurchase at the Option of Holders," the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any, to the purchase date (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so 86 tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED THAT each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Indenture provides that, prior to complying with the provisions of this covenant, but in any event within 60 days following a Change of Control, the Company will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Indenture requires that if the Senior Credit Facility is in effect, or any amounts are owing thereunder, at the time of the occurrence of a Change of Control, prior to the mailing of the notice to holders described in the third preceding paragraph, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full all Obligations under the Senior Credit Facility or offer to repay in full Obligations under the Senior Credit Facility and repay the Obligations under the Senior Credit Facility of each lender who has accepted such offer or (ii) obtain the requisite consent under the Senior Credit Facility to permit the repurchase of the Notes as described above. The Company must first comply with the covenant described in the preceding sentence before it shall be required to purchase Notes in the event of a Change of Control; PROVIDED that the Company's failure to purchase Notes in the event of a Change of Control after complying with the covenant described in the preceding sentence constitutes an Event of Default described in clause (iv) under the caption "--Events of Default and Remedies" below if not cured within 30 days after the notice required by such clause. As a result of the foregoing, a holder of the Notes may not be able to compel the Company to purchase the Notes unless the Company is able at the time to refinance all of the Obligations outstanding under the Senior Credit Facility or obtain requisite consents under the Senior Credit Facility. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. ASSET SALES The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value, or at least equal to 95% of the fair market value in the case of a sale and leaseback transaction permitted by the covenant described below under the caption "--Certain Covenants--Sale and Leaseback Transactions" (in each case as specified in an Officers' Certificate with respect to any Asset Sale of less than $3.0 million and as determined by the Board of Directors in good faith with respect to any Asset Sales in excess of $3.0 million), of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% (100% in the case of lease payments) of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary of the Company (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) 87 any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 30 days after consummation of such Asset Sale, shall be deemed to be cash for purposes of this provision. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or the Restricted Subsidiary, as applicable, may apply such Net Proceeds, at its option, (a) to repay Indebtedness under any Credit Facility (and to correspondingly permanently reduce the commitments with respect thereto in the case of revolving borrowings) or (b) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other assets that are not current assets, in each case, in Permitted Businesses. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit Facility or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall be required to make an offer (after complying with any asset sale offer requirement pursuant to the terms of any Senior Debt permitted to be incurred in accordance with the Indenture, and PRO RATA in proportion to the principal amount (or accreted value, if applicable) outstanding in respect of any asset sale offer required by the terms of the Seller Note and any other PARI PASSU Indebtedness incurred in accordance with the Indenture) to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds (after giving effect to any asset sale offer required under the terms of any Senior Debt or PARI PASSU Indebtedness as aforesaid), the Company may use any remaining Excess Proceeds for general corporate purposes including payment of Subordinated Obligations. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on A PRO RATA basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. This paragraph shall apply, but the preceding paragraph shall not apply, to the sale or liquidation of an interest in a Permitted Joint Venture or FNSS-Turkey pursuant to the exercise of call or rights by any party thereto, or the sale or other disposition of property or assets of a Permitted Joint Venture or FNSS-Turkey, in accordance with the terms of the agreement or agreements (as amended) governing such Permitted Joint Venture or FNSS-Turkey. CERTAIN COVENANTS RESTRICTED PAYMENTS The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate (other than Equity Interests of the Company or a Restricted Subsidiary in a Restricted Subsidiary or Permitted Joint Venture) of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Obligations, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above 88 being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company or any of its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (vi), (vii), (viii) or (ix) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter immediately following the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate Net Cash Proceeds received by the Company as a contribution to its common equity capital or from the issue or sale since the Issue Date of Equity Interests of the Company (other than Disqualified Stock), or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent not already included in Consolidated Net Income of the Company for such period without duplication, any Restricted Investment that was made by the Company or any of its Restricted Subsidiaries after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, or any Unrestricted Subsidiary which is designated as an Unrestricted Subsidiary subsequent to the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment or Unrestricted Subsidiary (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment or amount deemed to constitute an Investment in such Unrestricted Subsidiary. The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of Subordinated Obligations or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of Subordinated Obligations with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend or distribution by a Restricted Subsidiary of the Company or by a Permitted Joint Venture, (A) in the case of a Restricted Subsidiary that is not a Permitted Joint Venture, to the holders of its common Equity Interests so long as the Company or such Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests, and (B) in the case of a Permitted Joint Venture, to the holders of its Equity Interests so long as such dividend or distribution is made in accordance with the terms of the agreement or agreements or applicable legal requirements governing such Permitted Joint Venture and the Company and/or the applicable Restricted Subsidiary or Restricted Subsidiaries holding such 89 Equity Interests receive its or their share of such dividend or distribution as contemplated by such agreement or agreements or applicable legal requirements; (v) any payment by the Company or any Restricted Subsidiary of the Company, or any payment of a dividend or distribution by the Company to Iron Horse the proceeds of which are used, (a) in connection with repurchases of Equity Interests or Subordinated Obligations of the Company or Iron Horse following the death, disability or termination of employment of members of management of the Company or any Subsidiary of the Company or any Permitted Joint Venture, and (b) of amounts (to the extent such payments would otherwise constitute Restricted Payments) required to be paid by the Company or any of its Restricted Subsidiaries or Iron Horse to participants in employee benefit plans upon termination of employment by such participants, as provided in the documents related thereto, in an aggregate amount (for both clauses (a) and (b)) not to exceed $3.0 million in any fiscal year; PROVIDED that any unused amounts may be carried over to any subsequent fiscal year subject to a maximum amount of $6.0 million in any fiscal year; PROVIDED, FURTHER, that such amount in any fiscal year may be increased by an amount not to exceed (A) the cash proceeds from the sale of Equity Interests of the Company (or from the sale of Equity Interests of Iron Horse to the extent such proceeds are contributed to the Company by Iron Horse) to members of management, directors or consultants of the Company and its Subsidiaries that occurs after the Issue Date (to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (c) of the preceding paragraph) plus (B) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries after the Issue Date less (C) the amount of any Restricted Payments previously made pursuant to clauses (A) and (B); and PROVIDED, FURTHER that the cancellation of Indebtedness owing to the Company or Iron Horse from members of management of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Company or Iron Horse will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of the Indenture; (vi) repurchases of Equity Interests of the Company or a Restricted Subsidiary deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (vii) Restricted Investments in Subsidiaries or Permitted Joint Ventures that are made with Excluded Contributions; (viii) other Restricted Payments in an aggregate amount since the Issue Date not to exceed $10.0 million; (ix) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock issued after the Issue Date; PROVIDED, HOWEVER, that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance on a pro forma basis, the Company and its Restricted Subsidiaries would have had a Fixed Charge Coverage Ratio greater than 2.0 to 1.0; and (x) payments required pursuant to any indenture or agreement governing Subordinated Obligations in respect of any Change of Control or Asset Sale, provided that payment has theretofore been made with respect to all Notes tendered in response to a Change of Control Offer or Asset Sale Offer, as applicable, PROVIDED that, with respect to clauses (ii), (iii), (v), (viii), (ix) and (x) above, no Default or Event of Default shall have occurred and be continuing immediately after such transaction. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary of the Company, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors of the Company whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an Independent Financial Advisor if such fair market value exceeds $10.0 million. Not later than five Business Days after making any Restricted Payment in excess of $2.0 million, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant described above under the caption "--Certain Covenants--Restricted Payments" were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. 90 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary that is a Guarantor may incur Indebtedness (including Acquired Debt) or the Company may issue shares of Disqualified Stock if the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of Indebtedness under one or more Credit Facilities and related guarantees under any such Credit Facility; PROVIDED that the sum of the aggregate principal amount of all such Indebtedness outstanding under such Credit Facilities after giving effect to such incurrence, does not exceed an amount equal to $505.0 million minus an amount (the "Reduction Amount") equal to the difference between (a) $50.0 million and (b) the amount of Indebtedness incurred under the Senior Credit Facility to repay the Seller Note (provided that if the computation of the Reduction Amount results in a negative amount, the Reduction Amount shall be deemed to be zero); (ii) the incurrence by the Company or any Restricted Subsidiary of revolving credit Indebtedness under one or more Credit Facilities, letters of credit and related guarantees under any such Credit Facility; PROVIDED that the aggregate principal amount of all revolving Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) outstanding under such Credit Facilities after giving effect to such incurrence, does not exceed the greater of (a) $220.0 million and (b) the Borrowing Base, less the aggregate amount of Asset Sale proceeds applied to permanently reduce the availability of revolving credit Indebtedness under such Credit Facilities pursuant to the provisions described under the caption "--Asset Sales;" (iii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness (which Indebtedness is not contemplated to be repaid with the proceeds of the Offering) other than Indebtedness described in clause (i), (ii) or (viii) of this paragraph; (iv) the incurrence by the Company of Indebtedness represented by the Private Notes and the Exchange Notes issued in exchange for the Private Notes and the incurrence by the Guarantors of the Guarantees; (v) the incurrence by the Company of Indebtedness represented by the Seller Note and the incurrence by the Guarantors of guarantees thereof; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace Indebtedness incurred pursuant to this clause (vi), not to exceed $15.0 million at any time outstanding; 91 (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in respect of Indebtedness described in the first paragraph of this covenant or clause (iii), (iv) or (v) of this paragraph; (viii) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (x) any subsequent event or issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (y) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company that is a Guarantor shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (viii); (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred in the normal course of business or as required by any Credit Facility for the purpose of fixing or hedging currency, commodity or interest rate risk (including with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding) in connection with the conduct of their respective businesses and not for speculative purposes; (x) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company or a Permitted Joint Venture that was permitted to be incurred by another provision of this covenant "--Incurrence of Indebtedness and Issuance of Preferred Stock," PROVIDED that any such guarantee of Indebtedness is a Permitted Investment or otherwise permitted by the covenant described above under the caption "--Certain Covenants-- Restricted Payments"; (xi) Indebtedness incurred by the Company or any Restricted Subsidiary under performance bonds, letter of credit obligations to provide security for worker's compensation claims, payment obligations in connection with self-insurance or similar requirements and bank overdrafts incurred in the ordinary course of business; PROVIDED that any Obligations arising in connection with such bank overdraft Indebtedness is extinguished within five Business Days; (xii) Indebtedness incurred by the Company or any Restricted Subsidiary arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, from guarantees or letters of credit, surety bonds or performance bonds securing any Obligations of the Company or any Restricted Subsidiary pursuant to such agreements, in any case incurred in connection with the disposition of any business, assets, Subsidiary or Permitted Joint Venture (including, without limitation, an Asset Sale) other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets, Subsidiary or Permitted Joint Venture (including, without limitation, an Asset Sale) for the purpose of financing such acquisition, in a principal amount not to exceed the gross proceeds (with proceeds other than cash or Cash Equivalents being valued at the fair market value thereof as determined by the Board of Directors in good faith) actually received by the Company or any Restricted Subsidiary in connection with such dispositions; (xiii) the incurrence of Non-Recourse Indebtedness (A) by Permitted Joint Ventures or (B) constituting Acquired Debt of a Restricted Subsidiary not incurred in connection with such Restricted Subsidiary becoming a Restricted Subsidiary; and (xiv) the incurrence by the Company or any of its Restricted Subsidiaries or any Permitted Joint Ventures of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, which may, but need not, be incurred under a Credit Facility, not to exceed $50.0 million. 92 For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xiv) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness shall be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. LIENS The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness or trade payables (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under the Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company or the Company to (i)(x) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (y) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the Issue Date, or as amended thereafter on terms, taken as a whole, no less favorable to the Holders of the Notes than the terms of such Indebtedness as in effect on the Issue Date, (b) the Senior Credit Facility as in effect as of the Issue Date, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the Senior Credit Facility as in effect on the Issue Date, (c) the Indenture and the Notes, (d) applicable law (including without limitation the laws of any jurisdiction governing any Permitted Joint Venture), (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (f) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Indebtedness of Guarantors, PROVIDED that such Indebtedness was permitted to be incurred pursuant to the Indenture, (i) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (j) secured Indebtedness otherwise permitted to be incurred pursuant to the provisions of the covenant described under the caption "--Certain Covenants--Liens" that limit the right of the debtor to dispose of the assets securing such Indebtedness, (k) customary net worth provisions contained in leases and other agreements entered into in the ordinary course of business, (l) customary restrictions with respect to a Restricted Subsidiary pursuant 93 to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary, (m) provisions with respect to dividends and the disposition or distribution of assets or property, or transactions between or among the joint venture and the parties to such joint venture (including loans), in joint venture agreements and other similar agreements, (n) any other instrument governing Indebtedness incurred on or after the Issue Date or any refinancing thereof that is incurred in accordance with the Indenture, PROVIDED that the encumbrance or restriction contained in any such Indebtedness or any such refinancing thereof is no more restrictive and no more unfavorable to the holders of the Notes than that contained in the Senior Credit Facility as in effect on the Issue Date, (o) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, (p) Non-Recourse Indebtedness of any Permitted Joint Venture or other Indebtedness of a Permitted Joint Venture permitted to be incurred under the Indenture, and (q) the Seller Note. MERGER, CONSOLIDATION, OR SALE OF ASSETS The Company will not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States of America, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately before and after such transaction no Default or Event of Default shall have occurred; and (iv) except in the case of a merger of the Company with or into a Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." LIMITATION ON CAPITAL STOCK OF CONTROLLED SUBSIDIARIES The Company will not, if such action would cause a Restricted Subsidiary not to be a Controlled Subsidiary, (i) sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of a Controlled Subsidiary (other than Liens on such Capital Stock securing Obligations under Senior Debt) or (ii) permit any of its Controlled Subsidiaries to issue any Capital Stock, other, in any such case, than to the Company or a Controlled Subsidiary. The foregoing restrictions shall not apply to an Asset Sale made in compliance with the covenant described above under the caption "--Asset Sales" or the issuance or sale of Capital Stock of or by a Controlled Subsidiary that will result in the establishment of a Permitted Joint Venture. GUARANTEES OF CERTAIN INDEBTEDNESS The Company will not permit any of its Restricted Subsidiaries, directly or indirectly, to guarantee the payment of any Indebtedness under any Credit Facility under which the Company is a borrower or under which a Restricted Subsidiary is a borrower and guarantees Indebtedness of the Company under any 94 Credit Facility, unless such Restricted Subsidiary, the Company and the Trustee execute and deliver a supplemental indenture evidencing such Guarantee of the Notes, such Guarantee to be a senior subordinated unsecured obligation of such Restricted Subsidiary. Neither the Company nor any Guarantor shall be required to make a notation on the Notes to reflect any such subsequent Guarantee. Nothing in this covenant shall be construed to permit any Restricted Subsidiary of the Company to incur Indebtedness otherwise prohibited by the covenant described above under the caption "--Certain Covenants-- Incurrence of Indebtedness and Issuance of Preferred Stock". TRANSACTIONS WITH AFFILIATES The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of any such Person (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (x) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $3.0 million, a resolution of its Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of its Board of Directors and (y) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor; PROVIDED that none of the following shall be deemed to be Affiliate Transactions: (a) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary, as the case may be; (b) transactions between or among (A) the Company and/or its Restricted Subsidiaries that are Guarantors, Controlled Subsidiaries and/or Permitted Joint Ventures, and (B) any such entity and any other Restricted Subsidiaries or between or among such other Restricted Subsidiaries, which in the case of clause (B) are on terms that are no less favorable to the Company and/or such Subsidiary than those that would have been obtained in a comparable transaction by the Company and/or such Subsidiary with an unrelated Person; (c) Restricted Payments that are permitted by the covenant described above under the caption "--Certain Covenants--Restricted Payments"; (d) fees and compensation paid to members of the Board of Directors of the Company and any of its Restricted Subsidiaries and Permitted Joint Ventures in their capacity as such, to the extent such fees and compensation are reasonable and customary; (e) advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business and consistent with past practices; (f) provision of administrative or management services by the Company, its Subsidiaries or Permitted Joint Ventures or any of their officers to any of their respective Subsidiaries or Permitted Joint Ventures in the ordinary course of business; (g) arm's length transactions entered into in the ordinary course of business between or among the Company, any Restricted Subsidiary or any Permitted Joint Venture and any Affiliate of the Company; (h) transactions contemplated by any agreement as in effect as of the Issue Date or any amendment thereto so long as any such amendment is not disadvantageous to the Holders of the Notes in any material respect and so long as the amounts paid by the Company and the Restricted Subsidiaries under any such amended agreement do not exceed the amounts payable by the Company and the Restricted Subsidiaries on the Issue Date; and (i) fees, compensation and benefits paid to, and indemnity provided on behalf of, officers, directors or employees of the Company or any of its Restricted Subsidiaries, as determined by the Board of Directors of the Company or of any such Restricted Subsidiary, to the extent such fees, compensation and benefits are reasonable and customary. 95 SALE AND LEASEBACK TRANSACTIONS The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; PROVIDED THAT the Company may enter into a sale and leaseback transaction if (i) the Company could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph or clause (vi) or (xiv) of the second paragraph of the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to 95% of the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption "--Asset Sales." NO SENIOR SUBORDINATED DEBT The Indenture provides that, notwithstanding any other provision thereof, (i) the Company will not incur, create, issue, assume, guarantee or otherwise become liable directly or indirectly for any Indebtedness (including Acquired Debt) that is expressly subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes and (ii) no Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness (including Acquired Debt) that is expressly subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to the Guarantees, it being understood that Indebtedness will not be considered senior to other Indebtedness solely by reason of being secured. BUSINESS ACTIVITIES The Company will not, and the Company will not permit any of its Restricted Subsidiaries to, directly or indirectly, engage in any line of business other than a Permitted Business, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. PAYMENTS FOR CONSENT The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. REPORTS The Indenture provides that whether or not the Company is required by the rules and regulations of the SEC, so long as any Notes are outstanding and irrespective of whether the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective by the SEC, the Company will furnish to each of the Holders of Notes within the time periods specified in the SEC's rules and regulations, beginning with annual financial information for the year ended December 31, 1997, (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such financial information, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations " that describes the financial condition and results of operations of the Company and any consolidated Restricted Subsidiaries and, with respect to the annual information only, reports thereon by the Company's 96 independent public accountants (which shall be firm(s) of established national reputation) and (ii) all information that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described under the caption "--Certain Covenants--Merger, Consolidation, or Sale of Assets"; (iv) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice to comply with the provisions described under the captions "--Asset Sales," "--Repurchase at the Option of Holders--Change of Control," "--Certain Covenants--Restricted Payments," or "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"; (v) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (a) is caused by a failure to pay principal of such Indebtedness at final maturity prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $10.0 million or more; (vii) failure by the Company or any of its Significant Subsidiaries to pay final judgments aggregating in excess of $10.0 million (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed for a period of 60 days; (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries and (ix) except as permitted by the Indenture, any Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee (other than by reason of the termination of the Indenture or the release of any such Guarantee in accordance with the Indenture). If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 97 In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the principal intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to November 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to November 15, 2002, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator, partner, member or stockholder of the Company or any Subsidiary of the Company or any Permitted Joint Venture or any Guarantor, or of any member, partner or stockholder of any such entity, as such, shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "--Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated maturity or on the 98 applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (viii) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). 99 Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. In addition, any amendment to the provisions of Article 10 of the Indenture (which relate to subordination) will require the consent of the Holders of at least 75% in aggregate principal amount of the Notes then outstanding if such amendment would adversely affect the rights of Holders of Notes. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; HOWEVER, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture and Registration Rights Agreement without charge by writing to United Defense Industries, Inc., 1525 Wilson Boulevard, Suite 700, Arlington, VA 22209-2411, Attention: Chief Financial Officer. 100 BOOK-ENTRY, DELIVERY AND FORM The Notes will be represented by one or more global notes in registered, global form without interest coupons (the "Global Note"). The Global Note initially will be deposited upon issuance with the Trustee as custodian for the Depositary, in New York, New York, and registered in the name of the Depositary or its nominee, in each case for credit to an account of a direct or indirect participant as described below. Except as set forth below, the Global Note may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. Beneficial interests in the Global Notes may not be exchanged for Notes in certificated form except in the limited circumstances described below. See "--Depositary Procedures--Exchange of Book-Entry Notes for Certificated Notes." Transfer of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of the Depositary and its direct or indirect participants, which may change from time to time. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar. DEPOSITARY PROCEDURES The Depositary has advised the Company that the Depositary is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to the Depositary's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of the Depositary only through the Participants or Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of the Depositary are recorded on the records of the Participants and Indirect Participants. The Depositary has also advised the Company that pursuant to procedures established by it, (i) upon deposit of the Global Notes, the Depositary will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of Global Notes and (ii) ownership of such interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to Participants) or by Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes). The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interest in a Global Note to such persons may be limited to that extent. Because the Depositary can act only on behalf of Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having a beneficial interest in a Global Note to pledge such interest to persons or entities that do not participate in the Depositary system, or otherwise take actions in respect of such interests, may be affected by the lack of physical certificate evidencing such interests. For certain other restrictions on the transferability of the Notes see, "--Depositary Procedures--Exchange of Book-Entry Notes for Certificated Notes." EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Payments in respect of the principal, premium and interest on a Global Note registered in the name of the Depositary or its nominee will be payable by the Trustee to the depositary or its nominee in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the 101 Trustee will treat the persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the Company, the Trustee nor any agent of the Company or the Trustee has or will have any responsibility or liability for (i) any aspect of the Depositary's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interests in the Global Notes, or for maintaining, supervising or reviewing any of the Depositary's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Notes or (ii) any other matter relating to the actions and practices of the Depositary or any of its Participants or Indirect Participants. The Depositary has advised the Company that its current practices, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security such as the Global Notes as shown on the records of the Depositary. Payments by Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will not be the responsibility of the Depositary, the Trustee or the Company. Neither the Company nor the Trustee will be liable for any delay by the Depositary or its Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from the Depositary or its nominee as the registered owner of the Notes for all purposes. Interests in the Global Note will trade in the Depositary's Same-Day Funds Settlement System and secondary market trading activity in such interests will, therefore, settle in immediately available funds, subject in all cases to the rules and procedures of the Depositary and its Participants. Transfers between Participants in the Depositary will be effective in accordance with the Depositary's procedures, and will be settled in same-day funds. The Depositary has advised the Company that it will take any action permitted to be taken by a Holder of Notes only at the direction of one or more Participants to whose account the Depositary interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given direction. However, if there is an Event of Default under the Notes, the Depositary reserves the right to exchange Global Notes for legended Notes in certificated form, and to distribute such Notes to its Participants. The information in this section concerning the Depositary and its bookentry systems has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. Although the Depositary has agreed to the foregoing procedures to facilitate transfers of interests in the Global Note among Participants in the Depositary it is under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by the Depositary or its respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES A Global Note is exchangeable for definitive Notes in registered certificated form if (i) the Depositary (A) notifies the Company that it is unwilling or unable to continue as depository for the Global Note and the Company thereupon fails to appoint a successor depository or (B) has ceased to be a clearing agency registered under the Exchange Act or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause issuance of the Notes in certificated form. In addition, beneficial interests in a Global Note may be exchanged for certificated Notes upon request but only upon at least 20 days prior written notice given to the Trustee by or on behalf of the Depositary in accordance with customary procedures. In all 102 cases, certificated Notes delivered in exchange for any Global Note or beneficial interest therein will be registered in names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures). CERTIFICATED NOTES Subject to certain conditions, any person having a beneficial interest in the Global Note may, upon request to the Trustee, exchange such beneficial interest for Notes in the form of certificated Notes. Upon any such issuance, the Trustee is required to register such certificated Notes in the name of, and cause the same to be delivered to, such person or persons (on the nominee of any thereof). In addition, if (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depository and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in the form of certificated Notes under the Indenture, then, upon surrender by the Global Note Holder of its Global Note, Notes in such form will be issued to each person that the Global Note Holder and the Depository identify as being the beneficial owner of the related Notes. Neither the Company nor the Trustee will be liable for any delay by the Global Note Holder or the Depositary in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the Depositary for all purposes. SAME DAY SETTLEMENT AND PAYMENT The Indenture requires that payments in respect of the Notes represented by the Global Note (including principal, premium, if any, and interest) be made by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. With respect to certificated Notes, the Company will make all payments of principal, premium, if any, and interest by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. The Company expects that secondary trading in the certificated Notes will also be settled in immediately available funds. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "ACQUIRED DEBT" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control " (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED THAT beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess of (A) the present value at such time of (1) 103 the redemption price of such Note at November 15, 2002 (such redemption price being described under the caption "--Optional Redemption") plus (2) all required interest payments due on such Note through November 15, 2002, computed using a discount rate equal to the Treasury Rate plus 87.5 basis points, over (B) the principal amount of such Note. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than in the ordinary course of business (PROVIDED that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the covenants described above under the captions "--Repurchase at the Option of Holders--Change of Control" and "--Certain Covenants--Merger, Consolidation, or Sale of Assets" and not by the provisions of the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales"), and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2.0 million or (b) for Net Proceeds in excess of $2.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Restricted Subsidiary of the Company that is a Guarantor or to a Controlled Subsidiary or by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company that is a Guarantor or to a Controlled Subsidiary, (ii) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company that is a Guarantor, and (iii) (A) a Permitted Investment (including, without limitation, a Permitted Investment in a Permitted Joint Venture) or (B) a Restricted Payment that is permitted by the covenant described above under the caption "--Certain Covenants--Restricted Payments" will not be deemed to be Asset Sales. "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "BORROWING BASE" means, as of any date, an amount equal to the sum of (a) 90% of the net book value of the accounts receivable of the Company and its Restricted Subsidiaries as of such date resulting from sales in the United States of America, including sales pursuant to the U.S. Foreign Military Sales program (provided that no accounts receivable shall be included in such calculation if such receivable or any portion thereof is unpaid for more than 90 days after the date such receivable arises or is created), and (b) 60% of the net book value of the inventory, including work-in-process and raw goods (less progress payments or advanced payments from customers with respect to such inventory), owned by the Company and its Restricted Subsidiaries as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available quarterly or annual financial report for purposes of calculating the Borrowing Base. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participation, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership (whether general or limited) or membership interests and (iv) any other interest or 104 participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means (i) United States dollars, (ii) the local currency of any jurisdiction in which any Permitted Joint Venture conducts business, (iii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iv) certificates of deposit and eurodollar time deposits with maturities of not more than one year from the date of acquisition, bankers' acceptances with maturities of not more than one year from the date of acquisition and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $250.0 million and a Thompson Bank Watch Rating of "B" or better, (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (iii) and (iv) above entered into with any financial institution meeting the qualifications specified in clause (iv) above, (vi) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or one of the two highest ratings from Standard & Poor's Rating Group with maturities of not more than six months from the date of acquisition, and (vii) money market funds at least 95% of the assets of which are comprised of assets specified in clauses (i) through (vi). "CHANGE OF CONTROL" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture) unless immediately following such sale, lease, exchange or other transfer in compliance with the Indenture such assets are owned, directly or indirectly, by the Company or a Restricted Subsidiary of the Company that is a Guarantor; (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of the Indenture); (iii) the acquisition in one or more transactions, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) by (x) any Person or Group (other than a Group the majority in economic interests and voting or similar rights is owned by Permitted Holders) that either (A) beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, (I) at least 30% (or, in the case of a transaction or transactions approved before the consummation of same by a majority of the directors of the Company, 35%) of the Company's then outstanding voting securities entitled to vote on a regular basis for the board of directors of the Company and (II) a greater beneficial interest than the Permitted Holders, or (B) otherwise has the ability to elect, directly or indirectly, a majority of the members of the Company's board of directors, including without limitation by the acquisition of revocable proxies for the election of directors; or (iv) the first day on which a majority of the members of the Company's board of directors are not Continuing Directors. Clause (i) of the definition of "Change of Control" includes a sale, lease, exchange or other transfer of "all or substantially all" of the assets of the Company to a Group. There is little case law interpreting the phrase "all or substantially all" in the context of an indenture. Because there is no precise established definition of this phrase, the ability of a holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, exchange or other transfer of all or substantially all of the Company's assets to a Person or a Group may be uncertain. "CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that any such Fixed Charges were deducted in computing such Consolidated Net Income, plus (iv) depreciation and amortization (including amortization of goodwill, other intangibles and other asset write-ups resulting from the application of purchase accounting but 105 excluding amortization of prepaid cash expenses that were paid in a prior period commencing after the Issue Date) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income, plus (v) LIFO charges of such Person and its Restricted Subsidiaries for such period, plus (vi) other non-cash items reducing Consolidated Net Income (excluding any such charge which requires an accrual of or a cash reserve for cash charges for any future period), plus (vii) cash received with respect to any non-cash item previously deducted from Consolidated Net Income pursuant to clause (viii) below and minus (viii) non-cash items increasing such Consolidated Net Income for such period (including without limitation under any LIFO credit and excluding any reversal of any non-cash item to the extent such reversed non-cash item previously reduced an addition to Consolidated Cash Flow pursuant to the parenthetical to clause (vi) above). Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary, and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries (for such period, on a consolidated basis, determined in accordance with GAAP); PROVIDED THAT (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary that is a Guarantor, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, and (iv) the cumulative effect of a change in accounting principles shall be excluded. For purposes of the calculation in clause (c) of the covenant described under the caption "--Certain Covenants--Restricted Payments" only, the calculation of Consolidated Net Income shall exclude the effects of any amortization of goodwill, research and development, inventory and other asset write-ups, in each case as reflected on the Company's opening consolidated balance sheet after giving effect to the Acquisition as a result of the application of purchase accounting, with the amount of such exclusion (the "Excluded Amount") being reduced by an amount equal to the product of (A) the Excluded Amount and (B) the average effective consolidated federal, state and local income tax rate of the Company applied by the Company in its consolidated financial statements in accordance with GAAP over the period of determination expressed as a decimal. "CONSOLIDATED TANGIBLE ASSETS" means, with respect to any Person as of any date, the amount which, in accordance with GAAP, would be set forth under the caption "Total Assets" (or any like caption) on a consolidated balance sheet of such Person and its Restricted Subsidiaries, less all intangible assets, including, without limitation, goodwill, organization costs, patents, trademarks, copyrights, franchises and research and development costs. "CONTINUING DIRECTOR" means, as of any date of determination, any member of the Company's board of directors who (i) was a member of the Company's board of directors on the date of the Indenture or (ii) was nominated for election or elected to such board of directors with the approval of a majority of the 106 Continuing Directors who were members of such board of directors at the time of such nomination or election. "CONTROLLED SUBSIDIARY" of the Company means a Restricted Subsidiary of the Company (i) (x) 90% or more of the total Equity Interests or other ownership interests of which (other than Capital Stock constituting directors' qualifying shares or interests held by directors or shares or interest required to be held by foreign nationals, in each case to the extent mandated by applicable law) is at the time owned by the Company (directly or through one or more Controlled Subsidiaries of the Company), and (y) the remaining Equity Interests or other ownership interest of which (other than Capital Stock constituting directors' qualifying shares or interests held by directors or shares or interests required to be held by foreign nationals, in each case to the extent mandated by applicable law) is at the time owned by members of management of the Company or any of its Restricted Subsidiaries, directors of the Company or any of its Restricted Subsidiaries or consultants or suppliers to or customers of the Company or any of its Restricted Subsidiaries and (ii) of which the Company possesses, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting securities, by agreement or otherwise. "CREDIT FACILITIES" means, with respect to the Company or any Restricted Subsidiary, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facility with banks or other institutional lenders providing for revolving credit loans, other borrowings (including term loans), receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "DEFAULT" means any event that is or with the passage of time or the giving of notice (or both) would be an Event of Default. "DESIGNATED PREFERRED STOCK" means Preferred Stock of the Company that is issued for cash (other than to a Restricted Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate executed by the principal executive officer and the principal financial officer of the Company, on the issuance date thereof. "DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the Senior Credit Facility and (ii) any other Senior Debt permitted hereunder the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature, except to the extent that such Capital Stock is solely redeemable with, or solely exchangeable for, any Capital Stock of such Person that is not Disqualified Stock. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXCLUDED CONTRIBUTIONS" means net cash proceeds received by the Company after the Issue Date from (a) capital contributions and (b) the private sale of common stock of the Company to Carlyle or its Affiliates, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed by the principal executive officer and the principal financial officer of the Company on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, the cash proceeds of which are excluded from the calculation set forth in clause (c) of the first paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments". 107 "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facility and the Notes) in existence on the Issue Date, until such amounts are repaid. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings under any Credit Facility) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "FIXED CHARGES" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense (net of interest income) of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) but excluding amortization of debt issuance costs, (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, (iii) any interest expense on Indebtedness of another Person (excluding the Company or any Restricted Subsidiary) that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of Preferred Stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) and other than dividends paid or accrued for the benefit of the Company or a Restricted Subsidiary; PROVIDED that with respect to any series of Preferred Stock that is Disqualified Capital Stock or Designated Preferred Stock that has not paid cash dividends during such period but accrues dividends according to its terms during any period prior to the maturity date of the Notes, cash dividends will be deemed to have been paid with respect to such series of Disqualified or Designated Preferred Stock during such period, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FNSS-TURKEY" means FMC-Nurol Savunma Sanayii A.S., the Company's 51%-owned Turkish joint venture. 108 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the statements and pronouncements of the Financial Accounting Standards Board and such other statements by such other entities as have been approved by a significant segment of the accounting profession, which are applicable at the Issue Date. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTEE" means the guarantee of the Notes by each of the Guarantors pursuant to Article 11 of the Indenture and in the form of guarantee endorsed on the form of Note attached as Exhibit A to the Indenture and any additional guarantee of the Notes to be executed by any Restricted Subsidiary of the Company pursuant to the covenant described above under the caption "--Certain Covenants--Guarantees of Certain Indebtedness." "GUARANTORS" means (i) each of (a) United Defense, L.P., (after consummation of the Acquisition), (b) UDLP Holdings Corp. and (c) Iron Horse Investors, L.L.C., (ii) each of the Company's Subsidiaries which becomes a guarantor of the Notes pursuant to the covenant described above under "--Certain Covenants--Guarantees of Certain Indebtedness" and (iii) each of the Company's Subsidiaries executing a supplemental indenture in which such Subsidiary agrees to be bound by the terms of the Indenture; PROVIDED that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms thereof. "HEDGING OBLIGATIONS" means, with respect to any Person, the net payment Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements in the ordinary course of business designed to protect such Person against fluctuations in commodity prices, interest rates or currency exchange rates. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense, customer advance, progress payment or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the guarantee by such Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "INDEPENDENT FINANCIAL ADVISOR" means a reputable accounting, appraisal or investment banking firm that is, in the reasonable judgment of the Board of Directors, qualified to perform the task for which such firm has been engaged hereunder and disinterested and independent with respect to the Company and its Affiliates. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other Obligations), advances of assets or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any of its 109 Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary or Permitted Joint Venture of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a direct or indirect Restricted Subsidiary or Permitted Joint Venture of the Company, the Company or such Restricted Subsidiary, as the case may be, shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary or Permitted Joint Venture not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments." "INVESTMENTS" shall exclude extensions of trade credit by the Company and the Restricted Subsidiaries on commercially reasonable terms in the ordinary course of business. "ISSUE DATE" means the date on which the Private Notes were first issued and delivered. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds or Cash Equivalents received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of all costs relating to such Asset Sale (including, without limitation, legal, accounting, investment banking and brokers fees, and sales and underwriting commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. Net proceeds shall not include Asset Sale proceeds payable to a holder of Capital Stock of any Permitted Joint Venture other than the Company or any of its Restricted Subsidiaries in accordance with the terms of the joint venture agreement or similar agreements governing such Permitted Joint Venture. "NON-RECOURSE INDEBTEDNESS" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (other than Permitted Joint Ventures), (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), and (ii) the incurrence of which will not result in any recourse against any of the assets of the Company or its Restricted Subsidiaries (other than Permitted Joint Ventures). "OBLIGATIONS" means any principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or its Restricted Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including Liquidated Damages), guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof. 110 "PERMITTED BUSINESS" means the lines of business conducted by the Company and its Subsidiaries on the date of the Acquisition and businesses reasonably related thereto and reasonable extensions thereof, serving governmental, commercial or other customers. "PERMITTED HOLDERS" or "CARLYLE" means TC Group, L.L.C., a Delaware limited liability company, and its Affiliates, and any successors thereof that are Permitted Holders. "PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a Controlled Subsidiary or in a Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person engaged in a Permitted Business, if as a result of such Investment (i) such Person becomes a Controlled Subsidiary or a Restricted Subsidiary that is a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Controlled Subsidiary or a Restricted Subsidiary that is a Guarantor; (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) Investments arising in connection with Hedging Obligations that are incurred in the ordinary course of business consistent with past practices, for the purpose of fixing or hedging currency, commodity or interest rate risk (including with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding) in connection with the conduct of the business of the Company and its Subsidiaries; (g) loans or advances to employees in an aggregate principal amount not to exceed $500,000 at any time outstanding; (h) any Investment acquired by the Company or any of its Restricted Subsidiaries (x) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (y) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any Investment or other transfer of title with respect to any Investment in default; (i) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business; (j) Investments the payment for which consists of Equity Interests of the Company (exclusive of Disqualified Stock); PROVIDED, HOWEVER, that such Equity Interests will not increase the amount available for Restricted Payments under clause (c) of the first paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments"; (k) any Investments by the Company or any Restricted Subsidiary of the Company in Permitted Joint Ventures made after the Issue Date having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (k) that are at the time outstanding, not exceeding in the aggregate 10% of the Consolidated Tangible Assets of the Company as of the last day of the most recent full fiscal quarter ending immediately prior to the date of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (l) any Investment existing on the Issue Date; and (m) other Investments by the Company or any of its Restricted Subsidiaries in any Person having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (m) that are at the time outstanding, not to exceed $25.0 million at the time of such Investment (with the fair market value being measured at the time made and without giving effect to subsequent changes in value). "PERMITTED JOINT VENTURE" means any joint venture, partnership or other Person designated by the Board of Directors, and until designation by the Board of Directors to the contrary, (i) at least 50% of whose Capital Stock with voting power under ordinary circumstances to elect directors (or Persons having similar or corresponding powers and responsibilities) is at the time owned (beneficially or directly) by the Company and/or by one or more Restricted Subsidiaries of the Company and if the Company and/or such Restricted Subsidiary or Subsidiaries owns more than 50% of the Capital Stock of the Permitted Joint Venture, such Permitted Joint Venture is a Restricted Subsidiary of the Company, (ii) all of whose 111 Indebtedness is Non-Recourse Indebtedness or otherwise permitted to be incurred by such entity pursuant to clause (ii) and/or (xiv) of the second paragraph of the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and (iii) which is engaged in a Permitted Business. Any such designation or designation to the contrary shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt pursuant to the Indenture. "PERMITTED LIENS" means (i) Liens on assets of the Company or any of its Restricted Subsidiaries to secure Senior Debt permitted by the Indenture to be incurred; (ii) Liens on the assets of the Company or any of the Guarantors to secure Hedging Obligations with respect to Indebtedness under any Credit Facility permitted by the Indenture to be incurred; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition and only extend to the property so acquired; (v) Liens existing on the Issue Date; (vi) Liens to secure any Permitted Refinancing Indebtedness incurred to refinance any Indebtedness secured by any Lien referred to in the foregoing clauses (i) through (v), as the case may be, at the time the original Lien became a Permitted Lien; (vii) Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor; (viii) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $10.0 million in the aggregate at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Restricted Subsidiary; (ix) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds, deposits to secure the performance of bids, trade contracts, government contracts, leases or licenses or other obligations of a like nature incurred in the ordinary course of business (including, without limitation, landlord Liens on leased properties); (x) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted, PROVIDED that any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor; (xi) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (vi) of the second paragraph of the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with such Indebtedness; (xii) carriers', warehousemen's, mechanics', landlords' materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations not overdue for a period in excess of 60 days or which are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted; PROVIDED that any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor; (xiii) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not in any case materially detract from the value of the property subject thereto or do not interfere with or adversely affect in any material respect the ordinary conduct of the business of the Company and its Restricted Subsidiaries taken as a whole; (xiv) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business and other similar Liens arising in the ordinary 112 course of business; and (xv) leases or subleases granted to third Persons not interfering with the ordinary course of business of the Company or any of its Restricted Subsidiaries, (xvi) Liens (other than any Lien imposed by ERISA or any rule or regulation promulgated thereunder) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance, and other types of social security; (xvii) deposits, in an aggregate not to exceed $250,000, made in the ordinary course of business to secure liability to insurance carriers; (xviii) Liens for purchase money obligations (including refinancings thereof) permitted under the covenant described above under the caption "-- Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock", PROVIDED that (A) the Indebtedness secured by any such Lien is permitted under the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and (B) any such Lien encumbers only the asset so purchased; (xix) any interest or title of a lessor or sublessor under any operating lease; (xx) Liens under licensing agreements for use of intellectual property entered into in the ordinary course of business; (xxi) Liens on the assets of a Permitted Joint Venture securing Non-Recourse Indebtedness; (xxii) Liens securing industrial revenue bonds; (xxiii) Liens in favor of the Trustee under the Indenture and any substantially equivalent Lien granted to any trustee or similar institution under any indenture for Senior Debt permitted by the terms of the Indenture; (xxiv) Liens securing reimbursement obligations with respect to letters of credit which encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xxv) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Company or any Subsidiary in the ordinary course of business in accordance with past practices; (xxvi) any interest or title of a lessor in the property subject to any lease, whether characterized as capitalized or operating other than any such interest or title resulting from or arising out of a default by the Company or any Subsidiary of its obligations under such lease; (xxvii) Liens arising from filing UCC financing statements for precautionary purposes in connection with true leases of personal property that are otherwise permitted under the applicable indenture and under which the Company or any Subsidiary is lessee; (xxviii) Liens on assets or capital stock of Unrestricted Subsidiaries; and (xxix) any attachment or judgment Lien not constituting an Event of Default under clause (vii) of the first paragraph of the section described above under the caption "Events of Default and Remedies." "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); PROVIDED that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued and unpaid interest on, any Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable fees and expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or a Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. 113 "PREFERRED STOCK" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such person over the holder so the other Capital Stock issued by such Person. "PUBLIC EQUITY OFFERING" means any underwritten primary public offering of the Voting Stock of the Company pursuant to an effective registration statement (other than a registration statement on Form S-4, Form S-8, or any successor or similar form) under the Securities Act. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referenced Person that is not an Unrestricted Subsidiary; PROVIDED that, on the Issue Date, all Subsidiaries of the Company (other than FNSS-Turkey) shall be Restricted Subsidiaries of the Company. "SEC" means the Securities and Exchange Commission. "SELLER NOTE" means the Senior Subordinated Note, if any, outstanding on the Issue Date that was issued by the Company to certain former partners of United Defense, L.P., as in effect on the Issue Date. "SENIOR CREDIT FACILITY" means that certain Credit Agreement, to be dated as of October 6, 1997, by and among United Defense Industries, Inc., Iron Horse Investors, L.L.C., various lending institutions including Lehman Brothers Commercial Paper Inc. and Citibank, N.A. (as Documentation Agents), and Bankers Trust Company (as Administration Agent and as Syndication Agent) providing for up to $495.0 million of term loan borrowings and $230.0 million of revolving credit borrowings and letters of credit in each case, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, restated, refunded, replaced or refinanced from time to time and any agreement (and related documents) governing Indebtedness incurred to refund or refinance credit extensions and commitments then outstanding or permitted to be outstanding under such Senior Credit Facility or a successor Credit Facility, whether by the same or any other lender or group of lenders. The Company shall promptly notify the Trustee of any other lender or group of lenders. The Company shall promptly notify the Trustee of any such refunding or refinancing of the existing Senior Credit Facility. "SENIOR DEBT" means (i) indebtedness of the Company for money borrowed and all obligations, whether direct or indirect, under guarantees, letters of credit, foreign currency or interest rate swaps, foreign exchange contracts, caps, collars, options, hedges or other agreements or arrangements designed to protect against fluctuations in currency values or interest rates, other extensions of credit, expenses, fees, reimbursements, indemnities and all other amounts (including interest at the contract rate accruing on or after the filing of any petition in bankruptcy or reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding) owed by the Company under, or with respect to, the Senior Credit Facility or any other Credit Facility, (ii) the principal of and premium, if any, and accrued and unpaid interest, whether existing on the date hereof or hereafter incurred, in respect of (A) indebtedness of the Company for money borrowed, (B) express written guarantees by the Company of indebtedness for money borrowed by any other Person, (C) indebtedness evidenced by notes, debentures, bonds, or other instruments of indebtedness for the payment of which the Company is responsible or liable, by guarantees or otherwise, (D) obligations of the Company for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (E) obligations of the Company under any agreement to lease, or any lease of, any real or personal property which, in accordance with GAAP, is classified on the Company's consolidated balance sheet as a liability, and (F) obligations of the Company under interest rate swaps, caps, collars, options and similar arrangements and foreign currency hedges and (iii) modifications, renewals, extensions, replacements, refinancings and refundings of any such indebtedness, obligations or guarantees, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that such indebtedness, obligations or guarantees, or such modifications, renewals, extensions, replacements, refinancings or refundings thereof, 114 are not superior in right of payment to the Notes; PROVIDED that Senior Debt will not be deemed to include (a) any obligation of the Company to any Subsidiary (other than obligations pledged pursuant to the Senior Credit Facility, as security for the obligations of the Company thereunder), (b) any liability for federal, state, local or other taxes owed or owing by the Company, (c) advance payments and progress payments to customers and any accounts payable or other liability to trade creditors arising in the ordinary course of business, (d) any Indebtedness, guarantee or obligation of the Company which is expressly subordinate or junior by its terms in right of payment to any other Indebtedness, guarantee or obligation of the Company, (e) Indebtedness with respect to the Seller Note, (f) that portion of any Indebtedness incurred in violation of the covenant described above under the caption "--Certain Covenants-- Incurrence of Indebtedness and Issuance of Capital Stock" or (g) Indebtedness of the Company which is classified as non-recourse in accordance with GAAP or any unsecured claim arising in respect thereof by reason of the application of section 1111(b)(1) of the Bankruptcy Code. "SIGNIFICANT SUBSIDIARY" means each Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the Securities Act and the Exchange Act (as such regulation is in effect on the date hereof). "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBORDINATED OBLIGATIONS" means any Indebtedness of the Company which is expressly subordinated or junior in right of payment to the Notes. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person, (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or an entity described in clause (i) and related to such Person or (b) the only general partners of which are such Person or of one or more entities described in clause (i) and related to such Person (or any combination thereof) and (iii) any limited liability company, the sole managing member or the majority of the managing members of which are Persons described in clause (i) or (ii). "TREASURY RATE" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two business days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source or similar market date)) most nearly equal to the period from the Redemption Date to November 15, 2002; provided, however, that if the period from the Redemption Date to November 15, 2002 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to November 15, 2002 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) that is designated by the Board of Directors as an Unrestricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary; but only to the extent that the Subsidiary described in clause (i) and each of its Subsidiaries at the time of designation and thereafter (a) have no Indebtedness other than Non-Recourse Indebtedness; (b) are not party to any agreement, contract, 115 arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained, in light of all the circumstances, at the time from Persons who are not Affiliates of the Company; (c) are Persons with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Persons' financial condition or to cause such Persons to achieve any specified levels of operating results; (d) have not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries and (e) do not own any Capital Stock of or own or hold any Lien on any property of, the Company or any Restricted Subsidiary of the Company. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness under the first paragraph of the covenant described above under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock", (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing and (z) the Company certifies that such designation complies with the covenant described above under the caption "-- Certain Covenants--Restricted Payments." Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED SUBSIDIARY" means (i) a Restricted Subsidiary of the Company, 100% of the outstanding Capital Stock and other Equity Interests of which (other than Capital Stock constituting directors' qualifying shares or interests held by directors or shares or interests required to be held by foreign nationals, in each case to the extent mandated by applicable law) is directly or indirectly owned by the Company or by one or more Wholly Owned Subsidiaries of the Company. 116 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS In the opinion of Latham & Watkins, counsel to the Company, the following discussion describes the material federal income tax consequences expected to result to holders whose Private Notes are exchanged for Exchange Notes in the Exchange Offer. Such opinion is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service ("the Service") will not take a contrary view, and no ruling from the Service has been or will be sought with respect to the Exchange Offer. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations, and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. EACH HOLDER OF PRIVATE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS. The exchange of Private Notes for Exchange Notes will be treated as a "non-event" for federal income tax purposes. As a result, no material federal income tax consequences will result to holders exchanging Private Notes for Exchange Notes. PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer may be deemed to be an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with the resales of Exchange Notes received in exchange for Private Notes where such Private Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for the period required by the Securities Act, it will make this Prospectus, as amended or supplemented, available to any broker-dealer that requests such document in the Letter of Transmittal for use in connection with any such resale. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers or any other persons. Exchange Notes received by broker- dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealers and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company has agreed to pay all expenses incident to the Company's performance of, or compliance with, the Registration Rights Agreement and will indemnify the holders of Private Notes (including any broker-dealers), and certain parties related to such holders, against certain liabilities, including liabilities under the Securities Act. 117 LEGAL MATTERS The validity of the Exchange Notes offered hereby will be passed upon for the Company by Latham & Watkins, Chicago, Illinois. EXPERTS The consolidated financial statements of United Defense, L.P. and the balance sheet of United Defense Industries, Inc. (a wholly-owned subsidiary of Iron Horse Investors, L.L.C.) in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, to the extent indicated in their reports thereon also appearing elsewhere herein and in the Registration Statement. Such financial statements have been included herein in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. AVAILABLE INFORMATION The Company has filed with the Commission a Registration Rights Agreement on Form S-4 under the Securities Act with respect to the Exchange Notes offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus omits certain information, exhibits and undertakings contained in the Registration Statement. For further information with respect to the Company and the Exchange Notes offered hereby, reference is made to the Registration Statement, including the exhibits thereto and the financial statements, notes and schedules filed as a part thereof. As a result of the Exchange Offer, the Company will become subject to the informational requirements of the Exchange Act. The Registration Statement (and the exhibits and schedules thereto), as well as the periodic reports and other information filed by the Company with the Commission, may be inspected and copied at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, New York, New York 10048 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such materials may be obtained from the Public Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and its public reference facilities in New York, New York and Chicago, Illinois at the prescribed rates. The Commission also maintains a web site (located at http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Pursuant to the Indenture, the Company has agreed to furnish to the Trustee and to registered holders of the Exchange Notes, without cost to the Trustee or such registered holders, copies of all reports and other information that would be required to be filed by the Company with the Commission under the Exchange Act, whether or not the Company is then required to file reports with the Commission. As a result of this Exchange Offer, the Company will become subject to the periodic reporting and other informational requirements of the Exchange Act. In the event that the Company ceases to be subject to the information requirements of the Exchange Act, the Company has agreed that, so long as any Exchange Notes remain outstanding, it will file with the Commission (but only if the Commission at such time is accepting such voluntary filings) and distribute to holders of the Notes copies of the financial information that would have been contained in such annual reports and quarterly reports, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations," that would have been required to be filed with the Commission pursuant to the Exchange Act. The Company will also furnish such other reports as it may determine or as may be required by law. 118 INDEX TO FINANCIAL STATEMENTS UNITED DEFENSE INDUSTRIES, INC. Report of Independent Auditors................................................... F-2 Balance Sheet as of September 9, 1997............................................ F-3 Note to Financial Statements..................................................... F-4 UNITED DEFENSE, L.P. Report of Independent Auditors................................................... F-5 Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997 (unaudited)............................................................... F-6 Consolidated Statements of Income for the Years Ended December 31, 1994, 1995 and 1996 and Nine Months Ended September 30, 1996 and 1997 (unaudited)............. F-7 Consolidated Statements of Partners' Capital for the Years Ended December 31, 1994, 1995 and 1996 and Nine Months Ended September 30, 1997................... F-8 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996 and Nine Months Ended September 30, 1996 and 1997..................... F-9 Notes to Consolidated Financial Statements....................................... F-10
F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors United Defense Industries, Inc. We have audited the accompanying balance sheet of United Defense Industries, Inc. (a wholly-owned subsidiary of Iron Horse Investors, L.L.C.) as of September 9, 1997. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of United Defense Industries, Inc. at September 9, 1997 in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Washington, DC September 9, 1997 F-2 UNITED DEFENSE INDUSTRIES, INC. (A WHOLLY-OWNED SUBSIDIARY OF IRON HORSE INVESTORS, L.L.C.) BALANCE SHEET SEPTEMBER 9, 1997 ASSETS Cash................................................................................ $ 1,000 --------- Total assets.................................................................. $ 1,000 --------- --------- LIABILITIES AND STOCKHOLDER'S EQUITY Stockholder's equity: Common stock, par value $.01 per share Authorized--400,000 shares; Issued and outstanding--100,000 shares.............. $ 1,000 --------- Total liabilities and stockholder's equity.................................... $ 1,000 --------- ---------
See accompanying note. F-3 UNITED DEFENSE INDUSTRIES, INC. (A WHOLLY-OWNED SUBSIDIARY OF IRON HORSE INVESTORS, L.L.C.) NOTE TO FINANCIAL STATEMENTS AS OF SEPTEMBER 9, 1997 1. ORGANIZATION United Defense Industries, Inc. (the Company) is a newly formed corporation incorporated in Delaware and capitalized on September 8, 1997. The Company is 100% owned by Iron Horse Investors, L.L.C. The Company was formed to acquire (the Acquisition) directly or indirectly 100% of the partnership interests of United Defense, L.P. (the Partnership). The Partnership designs, develops and manufactures various tracked armored combat vehicles and a wide spectrum of weapons delivery systems for the armed forces of the United States and nations around the world. On August 25, 1997, the Company and the partners of the Partnership entered into a Purchase Agreement related to the proposed purchase of all of the outstanding partnership interests of the Partnership. The Acquisition has an aggregate purchase price, subject to provisions for adjustment, of $850 million. The Company's acquisition of the partnership interests of the Partnership is expected to take place on or after September 30, 1997 and will be accounted for as a purchase. There have been no operations of the Company as of September 9, 1997. Accordingly, statements of the Company's operations and cash flows have not been included herein. The Company expects to fund the Acquisition, including fees and expenses incurred in connection with the Acquisition, from a combination of approximately $175 million equity capital from Iron Horse Investors, L.L.C. and $925 million of debt facilities. F-4 REPORT OF INDEPENDENT AUDITORS Partners United Defense, L.P. We have audited the accompanying consolidated balance sheets of United Defense, L.P. and its subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, partners' capital, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Defense, L.P. and its subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Washington, DC January 15, 1997 F-5 UNITED DEFENSE, L.P. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31, ---------------------- SEPTEMBER 30, 1995 1996 1997 ---------- ---------- ------------- (UNAUDITED) ASSETS Current assets: Cash and marketable securities.......................................... $ 896 $ 23 $ 11,107 Short-term investment with FMC Corporation.............................. 30,350 19,497 -- Trade receivables....................................................... 98,929 85,483 77,883 Inventories (Note 3).................................................... 232,285 345,738 330,192 Other current assets.................................................... 9,165 4,021 4,776 ---------- ---------- ------------- Total current assets...................................................... 371,625 454,762 423,958 Investments in affiliated companies....................................... 7,662 7,192 10,869 Property, plant and equipment (Note 4).................................... 475,891 466,493 460,776 Less--accumulated depreciation............................................ 360,087 359,163 359,590 ---------- ---------- ------------- Net property, plant and equipment....................................... 115,804 107,330 101,186 Patents and deferred charges (Note 5)..................................... 39,132 34,194 25,841 Prepaid pension cost (Note 6)............................................. 35,381 41,501 50,284 ---------- ---------- ------------- Total assets.............................................................. $ 569,604 $ 644,979 $ 612,138 ---------- ---------- ------------- ---------- ---------- ------------- LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable, trade and other....................................... $ 98,385 $ 71,723 $ 56,454 Advanced payments....................................................... 194,276 258,990 274,072 Accrued and other liabilities........................................... 62,698 72,400 84,508 Due to FMC Corporation for current services............................. 5,011 5,094 5,787 ---------- ---------- ------------- Total current liabilities................................................. 360,370 408,207 420,821 Accrued pension cost (Note 6)............................................. 17,765 25,641 31,069 Accrued postretirement benefit cost (Note 7).............................. 35,036 31,493 29,246 ---------- ---------- ------------- Total liabilities......................................................... 413,171 465,341 481,136 Commitments and contingencies (Notes 9, 11, 12 and 13) Partners' capital: FMC Corporation......................................................... 122,989 136,889 106,649 Harsco Corporation...................................................... 33,444 42,749 24,353 ---------- ---------- ------------- Total partners' capital................................................... 156,433 179,638 131,002 ---------- ---------- ------------- Total liabilities and partners' capital................................... $ 569,604 $ 644,979 $ 612,138 ---------- ---------- ------------- ---------- ---------- -------------
See accompanying notes. F-6 UNITED DEFENSE, L.P. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, -------------------------------------- ---------------------- 1994 1995 1996 1996 1997 ------------ ---------- ------------ ---------- ---------- (UNAUDITED) Revenue: Sales.......................................... $ 1,076,259 $ 967,553 $ 1,029,333 $ 745,922 $ 913,925 Costs and expenses: Cost of sales.................................. 809,813 746,701 820,845 595,757 754,977 Selling, general and administrative expenses... 131,822 122,675 128,455 89,992 91,413 Research and development....................... 16,311 12,422 12,853 9,143 12,096 ------------ ---------- ------------ ---------- ---------- Total expenses............................... 957,946 881,798 962,153 694,892 858,486 Earnings related to investments in foreign affiliates................................... 12,471 21,393 31,916 31,243 13,521 ------------ ---------- ------------ ---------- ---------- Income from operations........................... 130,784 107,148 99,096 82,273 68,960 Other income (expense): Interest....................................... 2,569 2,744 1,933 2,024 1,456 Miscellaneous, net............................. 52 (798) -- 195 -- ------------ ---------- ------------ ---------- ---------- Income before income taxes....................... 133,405 109,094 101,029 84,492 70,416 Provision for income taxes (Note 2).............. 3,878 1,429 2,859 -- 1,523 ------------ ---------- ------------ ---------- ---------- Net income....................................... $ 129,527 $ 107,665 $ 98,170 $ 84,492 $ 68,893 ------------ ---------- ------------ ---------- ---------- ------------ ---------- ------------ ---------- ----------
See accompanying notes. F-7 UNITED DEFENSE, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (IN THOUSANDS)
FMC HARSCO TOTAL ---------- ---------- ----------- Initial partnership contributions as of January 1, 1994...................... $ 124,740 $ 29,600 $ 154,340 Distributions 1994........................................................... (90,117) (70,054) (160,171) 1994 net income.............................................................. 69,736 59,791 129,527 ---------- ---------- ----------- Balance, December 31, 1994................................................... 104,359 19,337 123,696 Distributions 1995........................................................... (37,117) (37,811) (74,928) 1995 net income.............................................................. 55,747 51,918 107,665 ---------- ---------- ----------- Balance, December 31, 1995................................................... 122,989 33,444 156,433 Distributions 1996........................................................... (36,999) (37,966) (74,965) 1996 net income.............................................................. 50,899 47,271 98,170 ---------- ---------- ----------- Balance, December 31, 1996................................................... 136,889 42,749 179,638 Distributions (Unaudited).................................................... (63,719) (50,690) (114,409) Liabilities transferred from FMC (Unaudited)................................. (1,872) (1,248) (3,120) Net income nine months ended September 30, 1997 (Unaudited).................. 35,351 33,542 68,893 ---------- ---------- ----------- Balance, September 30, 1997 (Unaudited)...................................... $ 106,649 $ 24,353 $ 131,002 ---------- ---------- ----------- ---------- ---------- -----------
See accompanying notes. F-8 UNITED DEFENSE, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------------- ---------------------- 1994 1995 1996 1996 1997 ---------- ---------- ----------- ---------- ---------- (UNAUDITED) OPERATING ACTIVITIES Net income.......................................... $ 129,527 $ 107,665 $ 98,170 $ 84,492 $ 68,893 Adjustments for noncash components of net income: Depreciation...................................... 28,993 26,728 26,327 19,316 19,331 Amortization of restructuring costs............... -- -- 12,667 9,500 9,673 Other............................................. 78 (3,543) 519 (4,560) (7,636) Changes in assets and liabilities: Trade receivables............................... 7,401 (17,678) 13,446 33,217 7,600 Inventories..................................... (2,609) (49,320) (113,453) (83,632) 15,546 Other current assets............................ (964) 780 5,144 6,052 (745) Prepaid pension cost............................ (5,898) (3,446) (6,120) (3,006) (8,783) Restructuring costs............................. (7,044) (23,498) (7,778) (7,778) -- Accounts payable, trade and other............... (2,290) 23,327 (26,662) (38,237) (15,278) Advanced payments............................... (8,613) 28,859 64,714 27,725 15,082 Accrued and other liabilities................... 21,912 4,038 9,702 (2,306) 11,626 Due to FMC Corporation for current services..... 2,513 2,498 83 13,033 693 Accrued pension cost............................ 6,072 5,419 7,876 -- 5,428 Accrued postretirement benefit cost............. (3,069) (7,171) (3,543) 2,875 (2,247) ---------- ---------- ----------- ---------- ---------- Cash provided by operating activities............... 166,009 94,658 81,092 56,691 119,183 ---------- ---------- ----------- ---------- ---------- INVESTING ACTIVITIES Capital spending.................................... (18,259) (24,124) (22,396) (16,504) (20,125) Disposal of property, plant and equipment........... 1,138 3,640 4,543 3,302 6,938 Short-term investment with FMC Corporation.......... -- (30,350) 10,853 8,600 19,497 ---------- ---------- ----------- ---------- ---------- Cash (used) provided in investing activities........ (17,121) (50,834) (7,000) (4,602) 6,310 ---------- ---------- ----------- ---------- ---------- FINANCING ACTIVITIES Cash contributions from Partners.................... 41,670 Partner distributions............................... (160,171) (74,928) (74,965) (52,985) (114,409) ---------- ---------- ----------- ---------- ---------- Cash used in financing activities................... (118,501) (74,928) (74,965) (52,985) (114,409) ---------- ---------- ----------- ---------- ---------- Increase (decrease) in cash and marketable securities........................................ 30,387 (31,104) (873) (896) 11,084 Cash and marketable securities, beginning of period............................................ 1,613 32,000 896 896 23 ---------- ---------- ----------- ---------- ---------- Cash and marketable securities, end of period....... $ 32,000 $ 896 $ 23 $ -- $ 11,107 ---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
See accompanying notes. F-9 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 1. FORMATION OF UNITED DEFENSE, L.P. On January 28, 1994, FMC Corporation (FMC) and Harsco Corporation (Harsco) announced completion of a series of agreements to combine certain assets and liabilities of FMC's Defense Systems Group (DSG) and Harsco's BMY Combat Systems Division (BMY). The effective date of the combination was January 1, 1994. The combined company, United Defense, L. P. (the partnership), operates as a limited partnership. FMC is the Managing General Partner with a 60% equity interest and Harsco Defense Holding is a Limited Partner holding a 40% equity interest. The partnership designs, develops and manufactures various tracked armored combat vehicles and a wide spectrum of weapons delivery systems for the armed forces of the United States and nations around the world. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements include the accounts of the partnership and its wholly owned subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. The financial information presented as of any date other than December 31 has been prepared from the books and records without audit. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting only of normal recurring adjustments, except as described herein, necessary to present fairly the partnership's financial position as of September 30, 1997, the results of its operations and its cash flows for the nine months ended September 30, 1997 and 1996, and the changes in partners' capital for the nine months ended September 30, 1997. The results of operations presented are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, in particular, estimates of contract cost and revenues used in the earnings recognition process. Actual results could differ from those estimates. REVENUE RECOGNITION FOR CONTRACTS-IN-PROGRESS Sales are recognized on most production contracts as deliveries are made or accepted. Sales under cost reimbursement contracts for research, engineering, prototypes, repair and maintenance and certain other contracts are recorded as costs are incurred and include estimated fees in the proportion that costs incurred to date bear to total estimated costs. Changes in estimates for sales and profits are recognized in the period in which they are determinable using the cumulative catch-up method. Claims are considered in the estimated contract performance at such time as realization is probable. Any anticipated losses on contracts are charged to operations as soon as they are determinable. During 1996, the partnership recognized a $14.3 million reduction in cost of sales as a result of a settlement with the U.S. government on the cost of a component supplied by the U.S. government on a F-10 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) group of related contracts. Cost of sales for the nine months ended September 30, 1997 includes approximately $13.5 million of non-cash charges recorded for the quarter ended September 1997 for changes in estimated contract profitability related to contractual issues with customers and other matters resulting from the periodic reassessment of the estimated profitability of contracts in progress. INVENTORIES Inventories are stated at the lower of cost or market value. Cost is determined on the last-in, first-out (LIFO) basis, except for inventories relating to long-term contracts. Inventoried costs relating to long-term contracts not valued on the LIFO basis are stated at the actual production cost incurred to date, reduced by amounts recognized as cost of sales. The costs attributed to units delivered under contracts are based on gross margins expected to be realized over the life of the related contract. Gross margins are based on the estimated revenue less the estimated cost of all units expected to be produced over the life of the related contract. Inventory costs include manufacturing overhead. Costs normally associated with general and administrative functions, independent research and bid and proposal are expensed as incurred. BMY had followed the accounting practice of capitalizing general and administrative expense in inventory. To conform with the partnership's accounting policy and the agreement between FMC and Harsco, $7.4 million of such expenses, which were included in the inventory contributed by Harsco, were charged against income during 1994. INVESTMENTS IN AFFILIATED COMPANIES The investment in a majority owned foreign joint venture in Turkey is carried at cost since there is uncertainty regarding the partnership's ability to control this venture or to repatriate earnings. Income is recognized as dividends are received. In 1996, the partnership changed its method of accounting for its investment in a foreign-owned joint venture in Saudi Arabia from the cost to the equity method. The impact on the partnership's results of operations was not material. Equity in earnings from this venture was $3.8 million for the year ended December 31, 1996 and $3.1 million and $8.2 million for the nine months ended September 30, 1996 and 1997. Dividends received related to investments accounted for using the cost method were $12.5 million, $21.4 million and $28.1 million during the years ended December 31, 1994, 1995 and 1996, respectively and $28.1 million and $5.3 million for the nine months ended September 30, 1996 and 1997. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is recorded at cost. Depreciation is provided principally on the sum-of-the-years digits and straight-line methods over estimated useful lives of the assets (land improvements-- twenty years; buildings--twenty to thirty-five years; and machinery and equipment--three to twelve years). Gains and losses realized upon sale or retirement of assets are included in other income. Maintenance and repairs are expensed as incurred. Expenditures that extend the useful life of property, plant and equipment or increase its productivity are capitalized and depreciated. F-11 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADVANCED PAYMENTS RECEIVED FROM CUSTOMERS Amounts advanced by customers as deposits on orders not yet billed and progress payments on contracts-in-progress are recorded as current liabilities. FINANCIAL INSTRUMENTS The fair values of financial instruments approximated their carrying values at December 31, 1995 and 1996. Fair values have been determined through information obtained from market sources and management estimates. ENVIRONMENTAL Under the Participation Agreement between FMC and Harsco each partner generally is financially accountable to the partnership for environmental conditions occurring prior to formation of the partnership at facilities or properties previously operated or used in their respective businesses, to the extent that costs incurred are not recovered from third parties or not covered by environmental accruals contributed by the parties at formation. At December 31, 1995 and 1996, $4.9 million and $4.2 million, respectively, of the FMC contributed accruals and $1.7 million and $1.4 million, respectively, of the Harsco contributed accruals are unused. INCOME TAXES As a limited partnership, income or loss passes to the partners and is taxable at that level, except for taxes payable on the income of the partnership's Foreign Sales Corporation (FSC) subsidiary. The FSC paid income taxes amounting to $3.6 million, $3.5 million and $1.8 million during 1994, 1995 and 1996, respectively. CASH FLOWS Marketable securities consists of investments with initial maturities of three months or less. IMPACT OF NEW ACCOUNTING PRONOUNCEMENT Effective January 1, 1994 the partnership adopted the provisions of FAS 112, "Employer's Accounting for Postemployment Benefits." This statement requires accrual of liabilities for postemployment benefits provided to former or inactive employees, their beneficiaries, and covered dependents after employment, but before retirement, if those liabilities can be reasonably estimated. Adoption of FAS 112 resulted in a charge to the partnership's 1994 earnings amounting to $826,000. RECLASSIFICATIONS Certain prior-year amounts have been reclassified in the accompanying financial statements to conform with the current year's presentation. 3. INVENTORIES The current replacement cost of LIFO inventories exceeded their recorded values by approximately $25.4 million and $31.7 million at December 31, 1995 and 1996, respectively. Inventories on long-term F-12 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 3. INVENTORIES (CONTINUED) contracts carried at actual production cost total approximately $25.0 million and $12.6 million at December 31, 1995 and 1996, respectively. 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is as follows:
DECEMBER 31, ---------------------- 1995 1996 ---------- ---------- (IN THOUSANDS) Buildings............................................................. $ 53,272 $ 55,305 Machinery and equipment............................................... 395,468 382,573 Land and improvements................................................. 16,798 17,008 Construction in progress.............................................. 10,353 11,607 ---------- ---------- 475,891 466,493 Less: Accumulated depreciation........................................ 360,087 359,163 ---------- ---------- Net property, plant and equipment..................................... $ 115,804 $ 107,330 ---------- ---------- ---------- ----------
5. ADVANCE AGREEMENT In October 1994 the partnership entered into an Advance Agreement with the U.S. Department of Defense. Under the terms of the Agreement, the partnership is permitted to defer certain costs associated with consolidation and restructuring of its ground systems businesses that are incurred from January 1, 1994 through September 30, 1996. Costs deferred will then be allocated ratably to contracts with the Department of Defense for thirty-six months beginning January 1, 1996. As of December 31, 1995 and 1996, consolidation and restructuring costs deferred amount to $30.5 million and $38.3 million, respectively, and are included in patents and deferred charges in the accompanying balance sheet. Accumulated amortization as of December 31, 1996 was $12.7 million. Costs amortized during the year ended December 31, 1996 and the nine months ended September 30, 1996 and 1997 were $12.7 million, $9.5 million and $9.7 million, respectively. F-13 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 6. RETIREMENT PLANS Substantially all of the partnership's domestic employees are covered by retirement plans. Plans covering salaried employees provide pension benefits based on years of service and compensation. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The partnership's funding policy is to make contributions based on the projected unit credit method and to limit contributions to amounts that are currently deductible for tax purposes. The following table summarizes the assumptions used and the components of the net pension cost for the years ended December 31, 1994, 1995 and 1996:
1994 1995 1996 ------------ ------------ ------------ Assumptions: Weighted average discount rate............................. 8.00% 8.00% 8.00% Rates of increase in future compensation levels............ 5.00% 5.00% 5.00% Weighted average expected long-term asset return........... 9.60% 9.62% 9.62% Components: (IN THOUSANDS) Service cost................................................ $ 9,976 $ 8,744 $ 9,191 Interest cost on projected benefit obligation.............. 16,967 18,008 19,826 Actual return on plan assets--investment gains............. (6,106) (76,878) (61,135) Net amortization and deferral.............................. (16,238) 55,886 34,918 ------------ ------------ ------------ Net pension cost............................................. $ 4,599 $ 5,760 $ 2,800 ------------ ------------ ------------ ------------ ------------ ------------
As part of the partnership's downsizing and consolidation program, an incentive benefit package, which lowered the early retirement penalty, was offered to salaried and non-union hourly employees who were at least fifty-five years of age with ten or more years of service. In addition to the voluntary program, early retirement penalties were also adjusted for certain salaried and hourly employees affected by the downsizing and consolidation Pension expense includes a $3.8 million, $3.7 million and $1.2 million charge related to special termination benefits (early retirement incentive) and a $0.9 million, $1.0 million and $0.4 million curtailment charge included in net amortization and deferral relating to the elimination of employees for 1994, 1995 and 1996, respectively. F-14 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 6. RETIREMENT PLANS (CONTINUED) The funded status of the plans and prepaid or accrued pension cost recognized in the partnership's financial statements as of December 31, 1995 and 1996 are as follows:
1995 1996 ------------------------ ------------------------ OVER- UNDER- OVER- UNDER- FUNDED FUNDED FUNDED FUNDED PLANS PLANS PLANS PLANS ----------- ----------- ----------- ----------- (IN THOUSANDS) Actuarial present value of benefits for service rendered to date: Accumulated benefit obligation based on salaries to date, including vested benefits of $197,675 for 1995 and $219,217 for 1996................................................... $ (102,852) $ (108,287) $ (106,965) $ (125,579) Additional benefits based on estimated future salary levels..................................................... -- (32,366) -- (37,115) ----------- ----------- ----------- ----------- Projected benefit obligation................................. (102,852) (140,653) (106,965) (162,694) Plan assets at fair market value (1)......................... 182,507 153,565 208,380 175,830 ----------- ----------- ----------- ----------- Plan assets in excess of projected benefit obligation........ 79,655 12,912 101,415 13,136 Unrecognized net transition asset............................ (10,640) 1,575 (8,512) 1,179 Unrecognized prior-service cost.............................. 2,776 7,535 5,756 6,550 Unrecognized net gain........................................ (36,410) (39,787) (57,158) (46,506) ----------- ----------- ----------- ----------- Net prepaid (accrued) pension cost........................... $ 35,381 $ (17,765) $ 41,501 $ (25,641) ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------ (1) Primarily equities, bonds and fixed income securities. 7. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS Substantially all of the partnership's employees are covered by postretirement health care and life insurance benefit programs. Employees generally become eligible for the retiree benefit plans when they meet minimum retirement age and service requirements. The cost of providing most of these benefits is shared with retirees. The partnership has reserved the right to change or eliminate these benefit plans. During 1995, the partnership's medical contributions for certain hourly employees were capped. This change, effective January 1, 1995, reduced the benefit obligation by $9.9 million, amortizable over the remaining years of service to full eligibility. Postretirement expenses in 1995 and 1996 include a $0.9 million gain. Postretirement expense in 1995 includes a $2.8 million curtailment gain as a result of the partnership's downsizing and consolidation program. F-15 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 7. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS (CONTINUED) The partnership funds a trust for retiree health and life benefits for employees previously covered under the FMC benefit plans. During 1995, the partnership began funding for benefits previously covered under the Harsco plan. Actuarial assumptions used to determine costs and the benefit obligation include a discount rate of 8% and weighted average expected return on long-term assets of 9% for 1994, 1995, and 1996. The assumed rate of future increases in per capita cost of health care benefits was 10% in 1995 and 1996, decreasing to 6% by the year 2001 and after. Increasing the health care cost trend rates by one percentage point would increase the accumulated benefit obligation by approximately $2.8 million and would increase annual service and interest costs by approximately $0.3 million. The following table summarizes the components of net postretirement benefit cost for the years ended December 31, 1994, 1995 and 1996:
1994 1995 1996 --------- --------- --------- (IN THOUSANDS) Service cost............................................................ $ 1,372 $ 1,412 $ 1,174 Interest cost on accumulated postretirement benefit obligation.......... 4,576 3,935 4,159 Actual return on plan assets--investment (gains) losses................. 364 (4,468) (4,916) Net amortization and deferral........................................... (2,203) (1,685) 981 --------- --------- --------- Net periodic postretirement benefit cost................................ $ 4,109 $ (806) $ 1,398 --------- --------- --------- --------- --------- ---------
The funded status of the plans and accrued postretirement benefit cost recognized in the partnership's financial statements as of December 31, 1995 and 1996 are as follows:
1995 1996 ---------- ---------- (IN THOUSANDS) Accumulated postretirement obligation: Retirees...................................................................... $ (33,135) $ (35,734) Fully eligible active participants............................................ (5,244) (5,515) Other active participants..................................................... (14,433) (14,905) ---------- ---------- Accumulated postretirement benefit obligation................................... (52,812) (56,154) Plan assets at fair market value (1)............................................ 32,164 38,630 ---------- ---------- Accumulated postretirement benefit obligation in excess of plan assets.......... (20,648) (17,524) Unrecognized net gains.......................................................... (14,388) (13,969) ---------- ---------- Accrued postretirement benefit cost............................................. $ (35,036) $ (31,493) ---------- ---------- ---------- ----------
- ------------------------ (1) Primarily equities and fixed income securities. F-16 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 8. EMPLOYEES' THRIFT AND STOCK PURCHASE PLAN Substantially all of the partnership's employees are eligible to participate in the partnership's defined contribution savings plans designed to comply with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and Section 401(k) of the Internal Revenue Code. Charges against income for matching contributions to the plans were $6.2 million, $6.6 million and $7.7 million in 1994, 1995 and 1996, respectively. 9. COMMITMENTS AND CONTINGENT LIABILITIES The partnership leases office space, plants and facilities, and various types of manufacturing, data processing and transportation equipment. Rent expense for 1994, 1995 and 1996 was $10.8 million, $12.8 million and $12.9 million, respectively. Minimum future rentals under noncancellable leases, excluding a related party lease (See Note 12), are estimated to be payable $8.4 million in 1997, $6.4 million in 1998, $3.5 million in 1999, $0.6 million in 2000, $0.5 million in 2001, and $0.6 million thereafter. The real estate leases generally provide for payment of property taxes, insurance and repairs by the partnership. The partnership is subject to claims and suits arising in the ordinary course of its operations. In the opinion of management, the ultimate resolution of any current pending legal proceedings will not have a material effect on the partnership's financial position or results of operations. At December 31, 1996, the partnership has outstanding letters of credit in the amount of $80.1 million as collateral for performance on long-term contracts. 10. PARTNERS' CAPITAL Under the agreements of formation of the partnership, FMC and Harsco were required to contribute net assets with an historical net book value of $154.3 million. The agreement provides for allocation of profits and losses and distribution of available cash generally on the basis of the partner's equity ownership interests, after giving effect to a limited partner preferred distribution and certain other items as agreed to by the partners. Under the terms of the partnership agreement the partnership is required to make quarterly tax distributions to each partner equal to the product of (i) such partner's share of the adjusted taxable income of the partnership times (ii) 40%. In addition, the partnership is required to make certain other distributions to the partners. Such required distributions are also made with reference to the partnership's adjusted taxable income. FMC has the option to purchase or cause the partnership to purchase Harsco's interest in the partnership for 110% of the appraised value of Harsco's interest in the partnership subject to adjustment, as provided for in the partnership agreement. Harsco has the option to require the partnership to purchase its interest in the partnership for 95% of the appraised value of its partnership interest similarly subject to adjustment as provided for in the partnership agreement. 11. SIGNIFICANT CUSTOMER AND EXPORT SALES Sales to various agencies of the U.S. Government aggregated $614.9 million, $719.1 million and $819.9 million during 1994, 1995 and 1996, respectively. At December 31, 1995 and 1996, trade accounts F-17 UNITED DEFENSE, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) AS OF DECEMBER 31, 1996 AND 1995 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 (INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED) 11. SIGNIFICANT CUSTOMER AND EXPORT SALES (CONTINUED) receivable from the U.S. Government totaled $77.4 million and $44.1 million, respectively. Export sales, including sales to foreign governments transacted through the U.S. Government, were $433.2 million, $216.3 million and $194.2 million during 1994, 1995 and 1996, respectively. 12. RELATED PARTY TRANSACTIONS The partnership has contracted with FMC for various administrative and support services. These services include computer services, systems and programming, data communications, employee relocation support, payroll processing, insurance and general management support. During the years ended December 31, 1994, 1995 and 1996, the partnership paid $42.4 million, $39.8 million and $35.2 million, respectively, to FMC for their support. The partnership leases office and manufacturing facilities in San Jose, California from FMC. Under the lease agreement monthly rent payments are comprised of fixed base rent plus depreciation on the facilities. Fixed base rent is $2.0 million per year and the lease expires December 31, 2003. During 1994, 1995 and 1996 the partnership incurred rent amounting to $4.2 million, $3.9 million and $3.7 million, respectively, under this lease. Sales of inventory to FMC during 1994, 1995 and 1996 amounted to $2.8 million, $1.5 million and $1.1 million, respectively. Management believes that such transactions were consummated on terms substantially similar to those that would arise in transactions with third parties. During 1995, the partnership entered into an agreement with FMC and Harsco whereby the partnership's excess cash balances up to $40 million are invested with FMC. Interest on these funds is earned based on the average monthly cost of FMC's U.S. dollar revolver-related short-term borrowings for such month. In addition, the partnership may offer short-term loans, not to exceed ninety days, to the partners if funds are not immediately needed for working capital. Interest on short-term borrowings is equal to LIBOR without premium. Interest on all loans to FMC totaled $1.1 million and $1.8 million in 1995 and 1996. 13. EVENT SUBSEQUENT TO DATE OF AUDITOR'S REPORT Alliant Techsystems Inc. ("Alliant Tech"), a subcontractor to the partnership in connection with the partnership's Paladin howitzer prime contract, has asserted a claim against the partnership alleging wrongful termination of that subcontract by the partnership. The partnership maintains that it terminated the Alliant Tech subcontract work in accordance with its termination rights under the applicable subcontract agreement and pursuant to a corresponding U.S. Army termination for convenience of the portion of the partnership's prime contract that covered the pertinent components supplied by Alliant Tech. Alliant Tech has asserted in writing its intention to pursue this claim against the partnership for approximately $17 million in damages. Litigation has not yet commenced, and discussions between the partnership and Alliant Tech regarding the termination are ongoing. Management believes that the partnership has a valid defense to this claim. However, no assurances can be given that the partnership will be successful in its defense of this claim, in the event that the claim were further pursued by Alliant. F-18 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- No person has been authorized to give any information or to make any representations in connection with this offering other than those contained in the Prospectus, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Company. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to its date. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the securities to which it relates. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. --------------------- TABLE OF CONTENTS
PAGE ----- Prospectus Summary.............................. 4 Risk Factors.................................... 17 The Exchange Offer.............................. 27 Use of Proceeds................................. 36 Capitalization.................................. 36 Unaudited Pro Forma Financial Data.............. 37 Selected Historical Financial Data.............. 43 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 45 Business........................................ 54 Management...................................... 71 Certain Transactions............................ 77 Principal Stockholders.......................... 78 The Acquisition................................. 79 Description of Certain Indebtedness............. 81 Description of the Notes........................ 83 Certain Federal Income Tax Considerations....... 117 Plan of Distribution............................ 117 Legal Matters................................... 118 Experts......................................... 118 Available Information........................... 118 Index to Financial Statements................... F-1
UNITED DEFENSE INDUSTRIES, INC. 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 FOR ALL OUTSTANDING 8 3/4 SENIOR SUBORDINATED NOTES DUE 2007 --------------------- PROSPECTUS --------------------- , 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II: INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Company is a Delaware corporation and its Bylaws and Certificate of Incorporation provide for indemnification of its directors, officers, employees and agents to the fullest extent permitted by the Delaware General Corporation Law (the "DGCL"), as the same exists or may hereafter be amended. Section 145 of the DGCL provides in relevant part that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. In addition, Section 145 of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Delaware law further provides that nothing in the above-described provisions shall be deemed exclusive of any other rights to indemnification or advancement of expenses to which any person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Section 102(b)(7) of the DGCL eliminates the liability of a corporation's directors to a corporation or its stockholders, except for liabilities related to a breach of duty of loyalty, actions not in good faith, and certain other liabilities. ITEM 21 EXHIBITS AND FINANCIAL STATMENT SCHEDULES (a) Exhibits:
EXHIBIT NUMBER DESCRIPTION - --------- ------------------------------------------------------------------------------------------------------- 2.1 Purchase Agreement dated as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp. (a copy of the schedules to this agreement will be furnished supplementally upon request of the Commission).
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EXHIBIT NUMBER DESCRIPTION - --------- ------------------------------------------------------------------------------------------------------- *2.2 Supplemental Agreement No. 1 to Purchase Agreement dated as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp. 3.1 a Certificate of Incorporation of Iron Horse Acquisition Corp. (n/k/a) United Defense Industries, Inc. 3.1 b Certificate of Amendment of Certificate of Incorporation Before Payment of Any Part of the Capital of Iron Horse Acquisition Corp. (n/k/a United Defense Industries, Inc.) 3.1 c Certificate of Amendment of the Certificate of Incorporation of United Defense Industries, Inc. 3.2 By-laws of United Defense Industries, Inc. 3.3 Certificate of Incorporation of UDLP Holdings Corp. 3.4 By-laws of UDLP Holdings Corp. 3.5 Amended and Restated Agreement of Limited Partnership of United Defense, L.P. 3.6 Certificate of Amendment to Certificate of Limited Partnership of United Defense, L.P. 3.7 Certificate of Formation of Iron Horse Investors, L.L.C. 3.8 Limited Liability Company Agreement of Iron Horse Investors, L.L.C. 4.1 Indenture dated as of October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP Holdings Corp. and Norwest Bank Minnesota, National Association 4.2 Specimen Certificate of 8 3/4% Senior Subordinated Notes due 2007 (included in Exhibit 4.1 hereto) 4.3 Purchase Agreement dated October 1, 1997 among United Defense Industries, Inc., UDLP Holdings Corp., Iron Horse Investors, L.L.C., United Defense, L.P., Lehman Brothers Inc., BT Alex. Brown Incorporated and Chase Securities Inc. 4.4 Registration Rights Agreement dated as of October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP Holdings Corp., Iron Horse Investors, L.L.C., Lehman Brothers Inc., BT Alex. Brown Incorporated and Chase Securities Inc. 4.5 Credit Agreement dated as of October 6, 1997 among Iron Horse Investors, L.L.C., United Defense Industries, Inc., various lending institutions party thereto, Citicorp USA, Inc. and Lehman Commercial Paper Inc. as Documentation Agents, and Bankers Trust Company as Administrative Agent and as Syndication Agent *4.6 Seller Note dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP Holdings Corp., FMC Corporation, Harsco Corporation and Harsco UDLP 5.1 Form of Opinion of Latham & Watkins regarding the validity of the Exchange Notes *10.1 Lease Agreement dated as of June 1, 1994 among Calhoun Economic Development Council and United Defense, L.P. *10.2 Facilities contract number DAAC67-93-C-0021 dated April 21, 1993 among FMC Corporation and LetterKenney Army Depot for the use of the government owned facility located at Building 56 and 4 acres of land on LetterKenney Army Depot, Chambersburg, PA 17201. Assignment of rights from FMC Corporation to United Defense, L.P. accomplished by modification P00001.
II-2
EXHIBIT NUMBER DESCRIPTION - --------- ------------------------------------------------------------------------------------------------------- *10.3 Sub-Lease Agreement among the Louisville/Jefferson County Development Authority, Inc. and United Defense, L.P., as amended by that certain First Amendment to Sublease of Real and Personal Property Agreement among the Louisville/Jefferson County Development Authority, Inc. and United Defense, L.P. *10.4 Facilities contract number N00024-93-E-8521, dated November 16, 1992 among United Defense, L.P., Armament Systems Divisions and the U.S. Government Naval Sea Systems Command for the use of the government owned facility located at 4800 East River Road, Minneapolis, MN 55459. *10.5 Lease Agreement dated January 23, 1996 among Lewis F. Holmes III and United Defense, L.P. *10.6 Lease Agreement dated November 1, 1993 among Brier Hill Steel Company, Inc. and Harsco Corporation, as amended by that certain Lease Novation Agreement among Harsco Corporation, Brier Hill Steel Company, Inc. and United Defense, L.P. and by that certain Lease Modification dated June 17, 1996 among United Defense, L.P. and Brier Hill Steel Company, Inc. *10.7 Lease Agreements dated June 1, 1989 among The Equitable Life Assurance Society of the United States and FMC Corporation. *10.8 Lease Agreement dated May 23, 1979 among Devcon Investment Co. and FMC Corporation, as amended by Amendment No. 1 to Lease dated November 25, 1985 among Santa Clara Property Associates, as successor to the original lessor and FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among Santa Clara Property Associates and FMC Corporation, as amended by Third Amendment to Lease dated September 6, 1996 among California State Teachers' Retirement System, as Successor-In-Interest to the lessor and FMC Corporation. *10.9 Lease Agreement dated November 15, 1984 among John Arrillaga, Trustee, Richard T. Peery, Trustee and FMC Corporation as amended by an Amendment to Lease dated February 9, 1987 among Santa Clara Property Associates, as successor Landlord and FMC Corporation. *10.10 Lease Agreement dated February 16, 1984 among John Arrillaga, Trustee, Richard T. Peery, Trustee and FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among Santa Clara Property Associates, as successor landlord and FMC Corporation, as amended by the Second Amendment to Lease dated September 6, 1996 among California Teachers' Retirement System as successor landlord and FMC Corporation. 10.11 Transition Services Agreement dated as of October 6, 1997 among FMC Corporation, United Defense, L.P. and United Defense Industries, Inc. 10.12 Technology and Environmental Services Agreement dated as of October 6, 1997 among FMC Corporation and United Defense Industries, Inc. 10.13 Amended and Restated Lease Agreement dated as of October 6, 1997 among FMC Corporation and United Defense, L.P. 10.14 Amended and Restated Harsco Intellectual Property Agreement dated as of October 6, 1997 among Harsco Corporation and United Defense, L.P. 10.15 Amended and Restated FMC Intellectual Property Agreement dated as of October 6, 1997 among FMC Corporation and United Defense, L.P. 10.16 Management Agreement dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P. and TC Group Management, L.L.C.
II-3
EXHIBIT NUMBER DESCRIPTION - --------- ------------------------------------------------------------------------------------------------------- *10.17 Supplemental Retirement and Savings Plan 12.1 Statement Regarding Computation of Earnings to Fixed Charges 12.2 Statement Regarding Computation of Pro Forma Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of United Defense Industries, Inc. 23.1 Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1) 23.2 Consent of Ernst & Young LLP, Independent Auditors 24.1 Power of Attorney of Registrants (included on signature page to this Registration Statement on Form S-4) *25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of Norwest Bank Minnesota, National Association 27.1 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
- ------------------------ * To be filed by amendment. (b) Financial Statement Schedules: Schedules are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto. ITEM 22. UNDERTAKINGS (a) (1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities hereunder through use of a prospectus which is part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof. (b) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. II-4 (c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, there unto duly authorized, in Arlington, Virginia on December 31, 1997. UNITED DEFENSE INDUSTRIES, INC. ("UDI") and the Guarantors listed on Annex A (the "Guarantors") By /s/ FRANCIS RABORN ------------------------------------------ Francis Raborn CHIEF FINANCIAL OFFICER AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER OF UDI AND EACH OF THE GUARANTORS
S-1 POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Francis Raborn and David V. Kolovat, and each of them, such person's true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this Registration Statement, and any and all amendments thereto (including pre- and post-effective amendments) or any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. NAME TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ WILLIAM E. CONWAY, JR.* - ------------------------------ Chairman of the Board of William E. Conway, Jr. UDI /s/ FRANK C. CARLUCCI* - ------------------------------ Director of UDI Frank C. Carlucci /s/ J. H. BINFORD PEAY, III* - ------------------------------ Director of UDI J. H. Binford Peay, III Director of UDI and sole director of UDLP Holdings Corp. (for UDLP /s/ ALLAN M. HOLT* Holdings Corp. itself - ------------------------------ and as the corporate December 31, 1997 Allan M. Holt general partner of United Defense, L.P.) and Iron Horse Investors L.L.C. /s/ PETER J. CLARE* - ------------------------------ Director of UDI Peter J. Clare /s/ THOMAS W. RABAUT* President, Chief Executive - ------------------------------ Officer and Director of Thomas W. Rabaut UDI /s/ FRANCIS RABORN - ------------------------------ Director of UDI Francis Raborn S-2 NAME DATE ------------------------- ------------------- *By: /s/ FRANCIS RABORN December 31, 1997 ------------------------- Francis Raborn ATTORNEY-IN-FACT S-3 ANNEX A IRON HORSE INVESTORS, L.L.C. UDLP HOLDINGS CORP. UNITED DEFENSE, L.P. S-4 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - --------- ------------------------------------------------------------------------------------------------------- 2.1 Purchase Agreement dated as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp. (a copy of the schedules to this agreement will be furnished supplementally upon the request of the Commission) *2.2 Supplemental Agreement No. 1 to Purchase Agreement dated as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp. 3.1 a Certificate of Incorporation of Iron Horse Acquisition Corp. (n/k/a) United Defense Industries, Inc. 3.1 b Certificate of Amendment of Certificate of Incorporation Before Payment of Any Part of the Capital of Iron Horse Acquisition Corp. (n/k/a United Defense Industries, Inc.) 3.1 c Certificate of Amendment of the Certificate of Incorporation of United Defense Industries, Inc. 3.2 By-laws of United Defense Industries, Inc. 3.3 Certificate of Incorporation of UDLP Holdings Corp. 3.4 By-laws of UDLP Holdings Corp. 3.5 Amended and Restated Agreement of Limited Partnership of United Defense, L.P. 3.6 Certificate of Amendment to Certificate of Limited Partnership of United Defense, L.P. 3.7 Certificate of Formation of Iron Horse Investors, L.L.C. 3.8 Limited Liability Company Agreement of Iron Horse Investors, L.L.C. 4.1 Indenture dated as of October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP Holdings Corp. and Norwest Bank Minnesota, National Association 4.2 Specimen Certificate of 8 3/4% Senior Subordinated Notes due 2007 (included in Exhibit 4.1 hereto) 4.3 Purchase Agreement dated October 1, 1997 among United Defense Industries, Inc., UDLP Holdings Corp., Iron Horse Investors, L.L.C., United Defense, L.P., Lehman Brothers Inc., BT Alex. Brown Incorporated and Chase Securities Inc. 4.4 Registration Rights Agreement dated as of October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP Holdings Corp., Iron Horse Investors, L.L.C., Lehman Brothers Inc., BT Alex. Brown Incorporated and Chase Securities Inc. 4.5 Credit Agreement dated as of October 6, 1997 among Iron Horse Investors, L.L.C., United Defense Industries, Inc., various lending institutions party thereto, Citicorp USA, Inc. and Lehman Commercial Paper Inc. as Documentation Agents, and Bankers Trust Company as Administrative Agent and as Syndication Agent *4.6 Seller Note dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P., UDLP Holdings Corp., FMC Corporation, Harsco Corporation and Harsco UDLP 5.1 Form of Opinion of Latham & Watkins regarding the validity of the Exchange Notes *10.1 Lease Agreement dated as of June 1, 1994 among Calhoun Economic Development Council and United Defense, L.P.
EXHIBIT NUMBER DESCRIPTION - --------- ------------------------------------------------------------------------------------------------------- *10.2 Facilities contract number DAAC67-93-C-0021 dated April 21, 1993 among FMC Corporation and LetterKenney Army Depot for the use of the government owned facility located at Building 56 and 4 acres of land on LetterKenney Army Depot, Chambersburg, PA 17201. Assignment of rights from FMC Corporation to United Defense, L.P. accomplished by modification P00001. *10.3 Sub-Lease Agreement among the Louisville/Jefferson County Development Authority, Inc. and United Defense, L.P., as amended by that certain First Amendment to Sublease of Real and Personal Property Agreement among the Louisville/Jefferson County Development Authority, Inc. and United Defense, L.P. *10.4 Facilities contract number N00024-93-E-8521, dated November 16, 1992 among United Defense, L.P., Armament Systems Divisions and the U.S. Government Naval Sea Systems Command for the use of the government owned facility located at 4800 East River Road, Minneapolis, MN 55459. *10.5 Lease Agreement dated January 23, 1996 among Lewis F. Holmes III and United Defense, L.P. *10.6 Lease Agreement dated November 1, 1993 among Brier Hill Steel Company, Inc. and Harsco Corporation, as amended by that certain Lease Novation Agreement among Harsco Corporation, Brier Hill Steel Company, Inc. and United Defense, L.P. and by that certain Lease Modification dated June 17, 1996 among United Defense, L.P. and Brier Hill Steel Company, Inc. *10.7 Lease Agreements dated June 1, 1989 among The Equitable Life Assurance Society of the United States and FMC Corporation. *10.8 Lease Agreement dated May 23, 1979 among Devcon Investment Co. and FMC Corporation, as amended by Amendment No. 1 to Lease dated November 25, 1985 among Santa Clara Property Associates, as successor to the original lessor and FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among Santa Clara Property Associates and FMC Corporation, as amended by Third Amendment to Lease dated September 6, 1996 among California State Teachers' Retirement System, as Successor-In-Interest to the lessor and FMC Corporation. *10.9 Lease Agreement dated November 15, 1984 among John Arrillaga, Trustee, Richard T. Peery, Trustee and FMC Corporation as amended by an Amendment to Lease dated February 9, 1987 among Santa Clara Property Associates, as successor Landlord and FMC Corporation. *10.10 Lease Agreement dated February 16, 1984 among John Arrillaga, Trustee, Richard T. Peery, Trustee and FMC Corporation, as amended by Amendment to Lease dated February 9, 1987 among Santa Clara Property Associates, as successor landlord and FMC Corporation, as amended by the Second Amendment to Lease dated September 6, 1996 among California Teachers' Retirement System as successor landlord and FMC Corporation. 10.11 Transition Services Agreement dated as of October 6, 1997 among FMC Corporation, United Defense, L.P. and United Defense Industries, Inc. 10.12 Technology and Environmental Services Agreement dated as of October 6, 1997 among FMC Corporation and United Defense Industries, Inc. 10.13 Amended and Restated Lease Agreement dated as of October 6, 1997 among FMC Corporation and United Defense, L.P. 10.14 Amended and Restated Harsco Intellectual Property Agreement dated as of October 6, 1997 among Harsco Corporation and United Defense, L.P. 10.15 Amended and Restated FMC Intellectual Property Agreement dated as of October 6, 1997 among FMC Corporation and United Defense, L.P.
EXHIBIT NUMBER DESCRIPTION - --------- ------------------------------------------------------------------------------------------------------- 10.16 Management Agreement dated October 6, 1997 among United Defense Industries, Inc., United Defense, L.P. and TC Group Management, L.L.C. *10.17 Supplemental Retirement and Savings Plan 12.1 Statement Regarding Computation of Earnings to Fixed Charges 12.2 Statement Regarding Computation of Pro Forma Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of United Defense Industries, Inc. 23.1 Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1) 23.2 Consent of Ernst & Young LLP, Independent Auditors 24.1 Power of Attorney of Registrants (included on signature page to this Registration Statement on Form S-4) *25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of Norwest Bank Minnesota, National Association 27.1 Financial Data Schedule 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
- ------------------------ *To be filed by amendment. EX-2.1 2 EXHIBIT 2.1 PURCHASE AGMT [PROJECT PHLOX] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASE AGREEMENT among FMC CORPORATION, HARSCO CORPORATION, HARSCO UDLP CORPORATION and IRON HORSE ACQUISITION CORP. ___________________________________ Dated as of August 25, 1997 ___________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- 1. Certain Definitions; Purchase and Sale of Interests . . . . . . . . . . . 1 (a) Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1 (b) Purchase and Sale of Interests; Final Purchase Price . . . . . . . . 3 (c) Estimated Final Purchase Price . . . . . . . . . . . . . . . . . . . 4 2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (a) Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (b) Net Worth Adjustment . . . . . . . . . . . . . . . . . . . . . . . . 5 (c) Limited Partnership Form of UDLP . . . . . . . . . . . . . . . . . . 7 (d) Transfer to FMC Affiliate. . . . . . . . . . . . . . . . . . . . . . 8 3. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (a) Buyer's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . 8 (b) Each Seller's Obligation . . . . . . . . . . . . . . . . . . . . . . 9 4. Representations and Warranties of Sellers . . . . . . . . . . . . . . . .10 4A. Representations and Warranties of FMC . . . . . . . . . . . . . . . . . .10 (a) Authority; No Conflicts. . . . . . . . . . . . . . . . . . . . . . .10 (b) Ownership of the Interests . . . . . . . . . . . . . . . . . . . . .11 4B. Representations and Warranties of Harsco. . . . . . . . . . . . . . . . .11 (a) Authority; No Conflicts. . . . . . . . . . . . . . . . . . . . . . .11 (b) Ownership of the Interests . . . . . . . . . . . . . . . . . . . . .12 4C. Representations and Warranties of Sellers . . . . . . . . . . . . . . . .12 (a) Authority; No Conflicts. . . . . . . . . . . . . . . . . . . . . . .12 (b) Ownership of the Interests . . . . . . . . . . . . . . . . . . . . .12 (c) Subsidiaries and Foreign Affiliates. . . . . . . . . . . . . . . . .13 (d) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .13 (e) Title to Tangible Assets Other than Real Property Interests. . . . .14 (f) Title to Real Property . . . . . . . . . . . . . . . . . . . . . . .14 (g) Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . .15 (h) Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . .15 (i) Litigation; Decrees. . . . . . . . . . . . . . . . . . . . . . . . .17 (j) Compliance with Applicable Laws. . . . . . . . . . . . . . . . . . .18 (k) Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . .18 (l) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 -i- Page ---- (m) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 (n) Environmental Compliance . . . . . . . . . . . . . . . . . . . . . .23 (o) Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . .24 (p) Absence of Certain Changes or Events . . . . . . . . . . . . . . . .24 (q) Government Contracts . . . . . . . . . . . . . . . . . . . . . . . .24 (r) Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . .25 (s) Licenses, Permits and Authorizations . . . . . . . . . . . . . . . .26 (t) Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 (u) Loss Contracts; Backlog. . . . . . . . . . . . . . . . . . . . . . .26 (v) Customers, Distributors and Suppliers. . . . . . . . . . . . . . . .26 (w) Dividends by Foreign Affiliates. . . . . . . . . . . . . . . . . . .27 5. Covenants of Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . .27 (a) Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 (b) Ordinary Conduct . . . . . . . . . . . . . . . . . . . . . . . . . .27 (c) Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .29 (d) Preservation of Business . . . . . . . . . . . . . . . . . . . . . .30 (e) Covenant Not to Compete. . . . . . . . . . . . . . . . . . . . . . .30 (f) Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 (g) FMC Resource Transfer. . . . . . . . . . . . . . . . . . . . . . . .31 (h) Intercompany Obligations . . . . . . . . . . . . . . . . . . . . . .31 (i) Financing Obligations. . . . . . . . . . . . . . . . . . . . . . . .31 (j) Notification of Certain Matters. . . . . . . . . . . . . . . . . . .31 (k) FMC Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 6. Representations and Warranties of Buyer . . . . . . . . . . . . . . . . .32 (a) Authority; No Conflicts. . . . . . . . . . . . . . . . . . . . . . .32 (b) Actions and Proceedings, etc.. . . . . . . . . . . . . . . . . . . .32 (c) Availability of Funds. . . . . . . . . . . . . . . . . . . . . . . .33 (d) Acquisition of Interests for Investment. . . . . . . . . . . . . . .33 (e) Fulfillment of Condition . . . . . . . . . . . . . . . . . . . . . .33 7. Covenants of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . .33 (a) Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .33 (b) Performance of Obligations by Buyer After Closing Date . . . . . . .34 (c) No Additional Representations; Disclaimer Regarding Estimates and Projections. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 (d) Intentionally omitted. . . . . . . . . . . . . . . . . . . . . . . .35 (e) Certain Guaranties . . . . . . . . . . . . . . . . . . . . . . . . .35 (f) Retained Assets and Liabilities. . . . . . . . . . . . . . . . . . .35 (g) 1997 Audited Financial Statements. . . . . . . . . . . . . . . . . .36 -ii- Page ---- 8. Mutual Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 (a) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 (b) Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 (c) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 (d) HSR Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . .38 (e) Cooperation with Financings. . . . . . . . . . . . . . . . . . . . .38 (f) Environmental Indemnification. . . . . . . . . . . . . . . . . . . .39 (g) Written Materials and Records. . . . . . . . . . . . . . . . . . . .43 (h) Transferred Employees and Employee Benefits. . . . . . . . . . . . .44 (i) Mutual Release . . . . . . . . . . . . . . . . . . . . . . . . . . .50 (j) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 (k) Transition Services Agreement. . . . . . . . . . . . . . . . . . . .51 (l) Technology and Environmental Services Agreement. . . . . . . . . . .51 (m) Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 (n) Intellectual Property Agreements . . . . . . . . . . . . . . . . . .52 (o) Intellectual Property Recordations . . . . . . . . . . . . . . . . .52 (p) Cash Balance as of the Closing . . . . . . . . . . . . . . . . . . .52 (q) FNSS Royalty Dispute. . . . . . . . . . . . . . . . . . . . . . . .52 9. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . .52 10. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 11. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 (a) Indemnification by Sellers . . . . . . . . . . . . . . . . . . . . .58 (b) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . .58 (c) Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . .59 (d) Losses Net of Insurance and Tax Benefits . . . . . . . . . . . . . .59 (e) Termination of Indemnification . . . . . . . . . . . . . . . . . . .60 (f) Procedures Relating to Indemnification . . . . . . . . . . . . . . .60 12. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 13. No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . .62 14. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62 -iii- Page ---- 15. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . .63 16. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 17. Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . .63 18. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 19. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 20. No Strict Construction. . . . . . . . . . . . . . . . . . . . . . . . . .65 21. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 22. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 23. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 24. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 25. Representation by Counsel; Interpretation . . . . . . . . . . . . . . . .66 26. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 27. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 28. Exhibits and Schedules. . . . . . . . . . . . . . . . . . . . . . . . . .67 29. Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . .67 (a) Negotiation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 (b) Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 LIST OF SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 -iv- INDEX OF DEFINED TERMS Page ---- Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 Adjusted Net Worth Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Adjustment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Adjustment Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Applicable Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . 1 Backlog. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 BPI Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Buyer Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . .58 Buyer Released Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 CAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 Cause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Closing Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 Continuing Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Continuing LC Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . .31 Defense Segment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 Diligence Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . .33 E&Y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Environmental Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Environmental Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Environmental Requirements . . . . . . . . . . . . . . . . . . . . . . . . . .23 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Estimated Final Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 4 Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 File Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Final Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Financing Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 FMC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 -v- Page ---- FMC Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 FMC Arabia Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 FMC Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . .18 FMC Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 FMC Intellectual Property Agreement. . . . . . . . . . . . . . . . . . . . . .52 FMC Master Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 FMC Salaried Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 FMC Thrift Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Foreign Affiliate Closing Balance Sheet. . . . . . . . . . . . . . . . . . . .56 Foreign Affiliate Tax Basket . . . . . . . . . . . . . . . . . . . . . . . . .53 Foreign Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 FRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Government Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 Harsco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Harsco Intellectual Property Agreement . . . . . . . . . . . . . . . . . . . .52 Harsco Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 HUC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Inactive Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Income Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 indemnified party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Initial Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 June 30 Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Latest Financials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Leased Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 MIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Non-Allowable Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Notice of Disagreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 -vi- Page ---- Other Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Owned Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Owned Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Post-Closing Environmental Losses. . . . . . . . . . . . . . . . . . . . . . .41 Post-Closing Partial Period. . . . . . . . . . . . . . . . . . . . . . . . . .53 Pre-Closing Partial Period . . . . . . . . . . . . . . . . . . . . . . . . . .53 Principal Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 Pro Rata Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Public Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Remediation Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Remediation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Representatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 Required Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 Retained Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 San Jose Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Scope of Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Seller Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Seller Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . .59 Seller Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 Seller Released Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . .50 Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Settlement and Advance Agreement . . . . . . . . . . . . . . . . . . . . . . .39 Sites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Substitute Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . .35 Target Adjusted Net Worth Amount . . . . . . . . . . . . . . . . . . . . . . . 3 Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Technology and Environmental Services Agreement. . . . . . . . . . . . . . . .51 -vii- Page ---- Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60 Timely Non-Allowable Costs . . . . . . . . . . . . . . . . . . . . . . . . . .40 Transfer Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Transferred Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Transition Services Agreement. . . . . . . . . . . . . . . . . . . . . . . . .51 UDLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 UDLP Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . .18 UDLP Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 UDLP Thrift Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 UDLP's Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 -viii- PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August 25, 1997, is entered into by and among FMC Corporation, a Delaware corporation ("FMC"), Harsco Corporation, a Delaware corporation, Harsco UDLP Corporation, a Pennsylvania business corporation ("HUC" and, together with Harsco Corporation, "HARSCO"), and Iron Horse Acquisition Corp., a Delaware corporation ("BUYER"). FMC and Harsco are collectively referred to herein as "SELLERS." W I T N E S S E T H: WHEREAS, FMC is the sole owner and holder of 100% of the outstanding general partnership interests of United Defense, L.P., a Delaware limited partnership ("UDLP"), and HUC is the sole owner and holder of 100% of the outstanding limited partnership interests of UDLP; and WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer, 100% of the outstanding general partnership and limited partnership interests of UDLP (the "INTERESTS") (the sale and purchase of the Interests being referred to herein as the "PURCHASE"). NOW, THEREFORE, the parties hereto hereby agree as follows: 1. CERTAIN DEFINITIONS; PURCHASE AND SALE OF INTERESTS. (a) CERTAIN DEFINITIONS. As used in this Agreement (including the Schedules and Exhibits hereto), the following definitions shall apply: (i) "AFFILIATE" shall mean any natural person, and any corporation, partnership or other entity, that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the party specified. (ii) "ANCILLARY AGREEMENTS" shall mean the Transition Services Agreement, the Technology and Environmental Services Agreement, the Lease, the FMC Intellectual Property Agreement and the Harsco Intellectual Property Agreement. (iii) "APPLICABLE ACCOUNTING PRINCIPLES" shall mean United States generally accepted accounting principles as consistently applied in the preparation of the Financial Statements, subject to any exceptions therefrom disclosed in the notes to the Financial Statements. (iv) "BUSINESS" shall mean the entire business and operations of UDLP and its Subsidiaries and Foreign Affiliates as conducted on the date hereof, including the business to be transferred to UDLP pursuant to Section 5(g). (v) "FINANCING OBLIGATIONS" shall mean (i) indebtedness of UDLP or its Subsidiaries for borrowed money, (ii) obligations of UDLP or any of its Subsidiaries evidenced by bonds, notes, debentures, letters of credit or similar instruments, (iii) obligations of UDLP or any of its Subsidiaries under conditional sale, title retention or similar agreements or arrangements creating an obligation of UDLP or any of its Subsidiaries with respect to the deferred purchase price of property (other than customary trade credit), (iv) breakage and other costs relating to interest rate and currency obligation swaps, hedges or similar arrangements to which UDLP or any of its Subsidiaries is a party and (v) all obligations of UDLP or any of its Subsidiaries to guarantee any of the foregoing types of obligations on behalf of others. (vi) "INACTIVE CONTRACTS" shall mean all contracts or other legally binding arrangements, whether oral or written, which have been entered into or assumed by UDLP which provide for the delivery of products or the rendering of contract-defined deliverable services by a Seller or UDLP and with respect to which the final product has been delivered and the final service has been rendered. (vii) "INTELLECTUAL PROPERTY" shall mean all (i) domestic and foreign registrations of trademarks, service marks, logos, corporate names, protected models, designs, created works, trade names or other trade rights, (ii) pending applications for any such registrations, (iii) patents and registered copyrights and pending applications therefor, (iv) rights to other trademarks, service marks, copyrights, logos, corporate names, protected models, designs, created works, trade names and other trade rights and all other trade secrets, designs, plans, specifications, technology, know-how, methods, designs, concepts and other proprietary rights, whether or not registered and (v) rights under any licenses to use any copyrights, marks, trade names, trade rights, patents, registered models and designs, created works or other proprietary rights. (viii) The term "KNOWLEDGE," when used in the phrase "TO THE KNOWLEDGE OF SELLERS," shall mean, and shall be limited to, the actual knowledge after reasonable inquiry of the following individuals: Larry D. Brady, Robert N. Burt, Michael J. Callahan, Randall S. Ellis, Ronald D. Mambu, J. Paul McGrath, Thomas W. Rabaut, Francis Raborn, David A. Kolovat, Peter C. Woglom (as to the operations of the Ground Systems Division of the Business), Frederick M. Strader (as to the operations of the Armament Systems Division of the Business), David Keller, Andy Eross and each current member of the Advisory Committee (as defined in that certain Partnership Agreement by and among Sellers and UDLP dated January 1, 1994). (ix) "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect upon the Business or the assets, liabilities or financial condition of UDLP, its Subsidiaries and Foreign Affiliates taken as a whole. -2- (x) "PRO RATA BASIS" shall mean 60% with respect to FMC and 40% with respect to Harsco. (xi) "RETAINED LIABILITIES" shall mean any and all liabilities of Sellers, UDLP or any of its Subsidiaries arising out of, relating to, or in respect of the matters described on SCHEDULE 7(f) hereto. (xii) "SCHEDULES" shall mean the disclosure schedules attached hereto and incorporated by reference herein. (xiii) "SUBSIDIARIES" shall mean, with respect to any person, any corporation or other entity of which 50% or more of the voting power of the equity securities or equity interests is owned, directly or indirectly, by such person, and shall include (without limitation) in the case of UDLP, UDLP International, Inc., a Delaware corporation, UD United Defense International Sales Corporation, a Barbados corporation and UDLP Components, Limited, a Bermuda corporation, but shall specifically exclude the Foreign Affiliates. Notwithstanding anything herein or on Schedule 4C(c)-1, G&F Company, a California general partnership, shall not be deemed a "Subsidiary" for purposes of this Agreement. All other capitalized terms used herein (or in the Schedules or Exhibits hereto) and not defined above are defined elsewhere in this Agreement. See "Index of Defined Terms" above for references to the page numbers on which such terms are defined. (b) PURCHASE AND SALE OF INTERESTS; FINAL PURCHASE PRICE. On the terms and subject to the conditions of this Agreement, at the Closing Sellers shall sell, transfer and deliver to Buyer, and Buyer shall purchase from Sellers, the Interests, free and clear of all Liens, and the covenants contained in Section 5(e) for an aggregate cash purchase price of $510,000,000.00 in respect of the general partnership interests held by FMC and the covenants made by FMC in Section 5(e) and $340,000,000.00 in respect of the limited partnership interests held by HUC and the covenants made by HUC in Section 5(e) (collectively, the "INITIAL PURCHASE PRICE"). The final purchase price for the Interests and the covenants contained in Section 5(e) (the "FINAL PURCHASE PRICE") shall be equal to: (i) the Initial Purchase Price; PLUS (ii) the amount, if any, by which the Adjusted Net Worth Amount reflected on the Closing Statement in its final and binding form exceeds $160,889,000 (the "TARGET ADJUSTED NET WORTH AMOUNT"); MINUS (iii) the amount, if any, by which the Target Adjusted Net Worth Amount exceeds the Adjusted Net Worth Amount reflected on the Closing Statement in its final and binding form. -3- (c) ESTIMATED FINAL PURCHASE PRICE. At the Closing, pursuant to the provisions of Section 2(a)(i) below, Buyer shall pay Sellers an amount (the "ESTIMATED FINAL PURCHASE PRICE") equal to the Final Purchase Price as estimated in good faith by FMC based on information provided by UDLP management and set forth in a statement delivered to Buyer not less than two business days prior to the Closing Date. Such notice shall set forth FMC's and UDLP's good faith estimate of the Adjusted Net Worth Amount. For purposes of this Agreement, the difference, positive or negative, between the Estimated Final Purchase Price and the Initial Purchase Price is referred to herein as the "ADJUSTMENT AMOUNT." 2. CLOSING. (a) CLOSING. The closing (the "CLOSING") of the transactions contemplated hereby shall be held at the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois at 10:00 a.m., local time, on October 31, 1997 or, if the conditions to Closing set forth in Sections 3(a)(iii) and 3(b)(iii) shall not have been satisfied or waived by such date, on the third business day following satisfaction of such conditions. Notwithstanding the scheduled Closing Date of October 31, 1997, as set forth above, the parties agree to use their commercially reasonable efforts to cause the Closing to occur earlier on September 30, 1997, or other mutually agreeable date as soon after September 30, 1997 as practicable. The date on which the Closing shall occur is hereinafter referred to as the "CLOSING DATE," and the Closing shall be deemed effective as of 12:01 a.m. on the Closing Date. On the business day immediately preceding the Closing Date, Buyer and Sellers shall conduct a pre-Closing at the same location as the Closing, commencing at 10:00 a.m., local time, at which each party shall present for review by the other party copies in execution form of all documents required to be delivered by such party at the Closing. (i) At the Closing, subject to and on the terms and conditions set forth in this Agreement, Buyer shall deliver to Sellers (A) the Estimated Final Purchase Price as follows: (1) by wire transfer to a bank account designated in writing by FMC, immediately available funds in an amount equal to $510,000,000.00 plus 60% of the Adjustment Amount (whether positive or negative), and (2) by wire transfer to a bank account designated in writing by Harsco, immediately available funds in an amount equal to $340,000,000.00 plus 40% of the Adjustment Amount (whether positive or negative), (b) an instrument of assumption reasonably satisfactory to each Seller and Buyer assuming, subject to the other terms and conditions of this Agreement, all of the obligations and liabilities of whatever kind of such Seller in its capacity as a partner or predecessor of UDLP to be assumed pursuant to the terms of this Agreement, (C) such other documents as are specifically required by this Agreement, (D) certified copies of resolutions duly adopted by Buyer's board of directors authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements to which Buyer is a party, (E) a certificate of the Secretary or an Assistant Secretary of Buyer as to the incumbency of the officer(s) of Buyer (who shall not be such Secretary or Assistant Secretary) executing this Agreement or any Ancillary Agreement, (F) a legal opinion of Buyer's special counsel, addressed to each Seller and dated the Closing Date, substantially in the form attached hereto as EXHIBIT 2(a)(i) and (G) appropriate releases -4- by UDLP of each Seller as a partner or predecessor of UDLP, in form and substance reasonably satisfactory to such Seller and Buyer, and consistent with the provisions of Section 8(i) below. (ii) At the Closing, subject to and on the terms and conditions set forth in this Agreement, Sellers shall deliver or cause to be delivered to Buyer (A) such appropriately executed instruments of sale, assignment, transfer and conveyance in form and substance reasonably satisfactory to Buyer and Seller and its counsel evidencing and effecting the sale and transfer to Buyer of the Interests (it being understood that such instruments shall not require Sellers or their Affiliates to make any additional representations, warranties or covenants, expressed or implied, not contained in this Agreement), (b) such other documents as are specifically required by this Agreement, (C) certified copies of resolutions duly adopted by the board of directors of each Seller authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements, to the extent each is a party hereto or thereto, (D) a certificate of the Secretary or an Assistant Secretary of each Seller, and of UDLP, as to the incumbency of the officer(s) of each (who shall not be such Secretary or Assistant Secretary) executing this Agreement or any Ancillary Agreement and (E) legal opinions of each Seller's special counsel, addressed to Buyer and dated the Closing Date, substantially in the form attached hereto as EXHIBIT 2(a)(ii). (b) NET WORTH ADJUSTMENT. (i) Within 60 days after the Closing Date, UDLP shall, with the assistance of FMC consistent with past practice, prepare and deliver to Buyer a balance sheet of UDLP as of the Closing Date (the "CLOSING BALANCE SHEET"). The Closing Balance Sheet shall be prepared in a manner consistent with the June 30 Balance Sheet and in accordance with the Applicable Accounting Principles (without regard to any purchase accounting adjustments arising out of the consummation of the transactions contemplated hereby). The Closing Balance Sheet shall be audited by Ernst & Young L.L.P. ("E&Y"). E&Y shall also provide audited financial statements through the Closing Date to Sellers so that each may comply with its respective reporting obligations. In connection with the foregoing, UDLP shall provide the Closing Date financial reporting system ("FRS") package to FMC five days prior to the commencement of the E&Y audit, and UDLP shall provide Buyer and Sellers a complete list of all adjustments to accruals in excess of $250,000 made subsequent to June 30, 1997. E&Y may begin field work for procedural tests prior to delivery of the Closing Date FRS package. Within 60 days after the Closing Date, UDLP shall, with the assistance of FMC, prepare and deliver to Buyer a statement of the Adjusted Net Worth Amount as of the Closing Date (the "CLOSING STATEMENT"). The Closing Statement shall be prepared based solely upon the Closing Balance Sheet, adjusted in accordance with the principles set forth on SCHEDULE 2(b) hereto (the "ADJUSTMENT PRINCIPLES") which, in the event of a conflict with the Applicable Accounting Principles, shall control. The parties agree that the determination -5- contemplated by this Section 2(b) is solely intended to show changes between the Adjusted Net Worth Amount on the Closing Date and the Target Adjusted Net Worth Amount as calculated in accordance with Schedule 2(b). Subject to the Adjustment Principles, the Target Adjusted Net Worth Amount is based upon methodologies, practices and principles used in connection with the preparation of the June 30 Balance Sheet and the adjustment contemplated by this Section 2(b) can only be properly measured if the Closing Statement is prepared using such methodologies, practices and principles. During the preparation of the Closing Statement and the period of any dispute with respect thereto, Buyer shall and shall cause UDLP to (A) provide FMC and FMC's representatives with full access during normal business hours to the books, records (including work papers, schedules, memoranda and other documents), facilities and employees of UDLP, (b) provide FMC as promptly as practicable following the Closing Date (but in no event later than 30 days after the Closing Date) with normal year-end closing financial information for UDLP for the period ending as of the opening of business on the Closing Date and (C) cooperate fully with FMC and FMC's representatives, including the provision on a timely basis of full access to employees and all other information necessary or useful in connection with the preparation of the Closing Statement. The Closing Statement shall be reviewed by E&Y and accompanied by an appropriate report confirming that the Closing Statement has been prepared in accordance with this Section 2(b). During the 30 days immediately following receipt by Buyer and FMC of the Closing Statement, Buyer and FMC shall be permitted to review E&Y's working papers relating to the audit of the Closing Balance Sheet and review of the Closing Statement and Buyer shall be permitted to review the financial and accounting papers provided by FMC for use in preparing the Closing Statement. The Closing Statement shall become final and binding upon the parties hereto on the thirtieth day following receipt thereof by Buyer and FMC unless Buyer or FMC gives written notice of its disagreement (a "NOTICE OF DISAGREEMENT") to UDLP and the other parties hereto prior to such date. Any Notice of Disagreement shall (A) specify in reasonable detail the nature and amount of any disagreement so asserted and (b) only include disagreements based on mathematical errors or based on the Closing Statement not being prepared in accordance with this Section 2(b). If a timely Notice of Disagreement is delivered, then the Closing Statement (as revised in accordance with clause (x) or (y) below) shall become final and binding upon the parties on the earlier of (x) the date the parties hereto resolve in writing any differences they have with respect to any matter specified in the Notice of Disagreement or (y) the date any matters properly in dispute are finally resolved in writing by the Accounting Firm. During the 30 days immediately following the delivery of a Notice of Disagreement, FMC and Buyer shall seek in good faith to resolve in writing any differences which they may have with respect to any matter specified in the Notice of Disagreement. During such period, Buyer or FMC, as applicable, shall have full access to the working papers of the other prepared in connection with Buyer's review of the Closing Statement and preparation of such other party's Notice of Disagreement. At the end of such 30-day period, FMC and Buyer shall submit to a "Big-Six" accounting firm (the "ACCOUNTING FIRM") for review and resolution of any and all matters which remain in dispute and which were properly included -6- in the Notice of Disagreement, and the Accounting Firm shall make a final determination of the Closing Statement which shall be binding on the parties (it being understood, however, that the Accounting Firm shall act as an arbitrator to determine, based solely on presentations by Buyer and FMC (and not by independent review), only those matters which remain in dispute and which were properly included in the Notice of Disagreement). The Closing Statement shall become final and binding on Buyer and Sellers on the date the Accounting Firm delivers its final resolution to the parties (which final resolution shall be delivered as soon as practicable following the selection of the Accounting Firm and in any event within 30 days thereafter). The Accounting Firm shall be selected by FMC and Buyer or, if such parties are unable to agree, by FMC's and Buyer's independent accountants. The fees and expenses of E&Y and the Accounting Firm pursuant to this Section 2(b) shall be borne 50% by Buyer and 50% by Sellers on a Pro Rata Basis. (ii) If the Estimated Final Purchase Price is less than the Final Purchase Price, Buyer shall, and if the Estimated Final Price is greater than the Final Purchase Price, Sellers shall, within five business days after the Closing Statement becomes final and binding on the parties, make payment to the other party or parties by wire transfer in immediately available funds of the amount of such difference, together with interest thereon at the average one-month London Interbank Offered Rate as quoted by the Bloomberg Financial Markets Commodities and News Service calculated on the basis of the number of days elapsed from the Closing Date to the date of payment. Any payments to or by Sellers pursuant to this clause (ii) shall be made on a Pro Rata Basis to or by, as the case may be, FMC and Harsco. (iii) For purposes of this Agreement, the term "ADJUSTED NET WORTH AMOUNT" means the total assets of UDLP and its consolidated Subsidiaries as of the Closing Date, LESS the total liabilities of UDLP and its consolidated Subsidiaries as of the Closing Date, as reflected on the Closing Balance Sheet, after giving effect to the Adjustment Principles described on SCHEDULE 2(b). (iv) Each party agrees that it will not take any actions with respect to the accounting books, records, policies and procedures of UDLP that would obstruct or hinder the preparation of the Closing Statement as provided in this Section 2(b). Buyer will cooperate in the preparation of the Closing Statement, including providing customary certifications to Sellers or, if requested, to Sellers' auditors, Ernst & Young L.L.P. or the Accounting Firm. Harsco acknowledges and agrees that FMC has sole authority to act on behalf of Sellers with respect to all matters relating to this Section 2(b). (c) LIMITED PARTNERSHIP FORM OF UDLP. Buyer hereby agrees that it will take all necessary action, including assigning portions of its rights to purchase the Interests to one or more of its Affiliates, in order to maintain UDLP as a validly existing Delaware limited partnership for a period of at least thirty (30) days following the Closing Date, and for at least such 30-day period Buyer shall take no actions which would have the effect of dissolving, winding up or liquidating UDLP under the Code or the Delaware Revised Uniform Limited Partnership Act, each as in effect -7- at such time. Notwithstanding any provision of this Agreement to the contrary, no representation, warranty or covenant shall be deemed to be breached and no condition to Closing shall be deemed to be unsatisfied as a result of any actual or prospective impediment to any dissolution, liquidation or winding up of UDLP, it being understood that Sellers have made and are making no representations or warranties concerning Buyer's ability to liquidate or otherwise restructure UDLP. (d) TRANSFER TO FMC AFFILIATE. Notwithstanding anything to the contrary in this Agreement, the parties hereto agree that, prior to the Closing, FMC may transfer all of the Interests owned by it to an Affiliate of FMC that is (i) incorporated in a domestic jurisdiction and (ii) 100% directly or indirectly owned by FMC, provided that such transfer does not adversely affect UDLP or Buyer and provided that such Affiliate agrees to be bound by the terms hereof. Upon such a transfer, the defined term "FMC" as used herein or in the Ancillary Agreements shall be deemed to include such Affiliate. In no event shall FMC be relieved of any obligation for which it would otherwise be liable hereunder in the absence of such a transfer. 3. CONDITIONS TO CLOSING. (a) BUYER'S OBLIGATION. The obligation of Buyer to purchase and pay for the Interests is subject to the satisfaction (or waiver by Buyer) as of the Closing of the following conditions: (i) The representations and warranties of Sellers made in this Agreement shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date, as though made on and as of the Closing Date, except to the extent of changes or developments contemplated by the terms of this Agreement and except for representations and warranties that speak as of a specific date or time (which need only be true and correct as of such date or time), and each Seller shall have performed or complied with all obligations and covenants required by this Agreement to be performed or complied with by such Seller by the time of the Closing, except for breaches of such representations and warranties and covenants that, in the aggregate, together with all information disclosed in any supplements, modifications and updates to the Schedules by Sellers prior to the Closing as permitted by this Agreement, would not have a Material Adverse Effect; and each Seller shall have delivered to Buyer a certificate dated the Closing Date and signed by a Vice President of it confirming the foregoing; (ii) No injunction or order of any court or administrative agency of competent jurisdiction shall be in effect as of the Closing which restrains or prohibits the consummation of the Purchase; (iii) Any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), shall have expired or been terminated; -8- (iv) Each of FMC, Harsco and UDLP (as appropriate) shall have executed and delivered each of the Ancillary Agreements to which it is a party; (v) Since the date of the Latest Financials, and except as set forth on SCHEDULE 3(a)(v) hereto or the other Schedules hereto, there shall have been no change in the Business, or the assets, liabilities or financial condition of UDLP, its Subsidiaries and Foreign Affiliates, taken as a whole, which would result in a Material Adverse Effect (it being understood that the failure to be awarded, or the failure to receive government funding for, any contract currently under proposal before or after the date hereof does not and shall not constitute a failure of the condition set forth in this Section 3(a)(v)); (vi) All Financing Obligations (other than the Continuing LC Obligations) shall have been finally repaid in full, terminated or reflected in the computation of the Adjusted Net Worth Amount on the Closing Statement and Buyer shall have been provided evidence reasonably acceptable to Buyer that any and all Liens securing such Financing Obligations as have been repaid or terminated shall have been released and terminated; (vii) Each Seller shall have delivered to Buyer an affidavit, dated not more than thirty (30) days prior to the Closing Date, in accordance with Code Section 1445(b)(2) and Treasury Regulation section 1.1445-2(b)(2), which affidavit certifies that such Seller is not a foreign person; and (viii) The form and substance of all instruments and documents required to consummate the transactions contemplated by this Agreement shall have been reasonably satisfactory to Buyer and its counsel. (b) EACH SELLER'S OBLIGATION. The obligation of each Seller to sell and deliver or cause to be sold and delivered the Interests to Buyer is subject to the satisfaction (or waiver by such Seller) as of the Closing of the following conditions: (i) The representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects as of the date hereof and on and as of the Closing Date, as though made on and as of the Closing Date, except to the extent of changes or developments contemplated by the terms of this Agreement and except for representations and warranties that speak as of a specific date or time (which need only be true and correct as of such date or time), and Buyer shall have performed or complied with all obligations and covenants required by this Agreement to be performed or complied with by Buyer by the time of the Closing, except for breaches of such representations and warranties and covenants that, in the aggregate, would not have a material adverse effect on the ability of Buyer to perform its obligations under this Agreement, the Ancillary Agreements and the other agreements contemplated hereby and thereby at and after the Closing; and Buyer shall have delivered to each Seller a certificate dated the Closing Date and signed by a Vice President of it confirming the foregoing; -9- (ii) No injunction or order of any court or administrative agency of competent jurisdiction shall be in effect as of the Closing which restrains or prohibits the consummation of the Purchase; (iii) Any waiting period under the HSR Act shall have expired or been terminated; (iv) Buyer shall have executed and delivered each of the Ancillary Agreements to which it is a party; and (v) Buyer shall have obtained the Substitute Letters of Credit in accordance with the provisions of Section 7(e) below. 4. REPRESENTATIONS AND WARRANTIES OF SELLERS. 4A. REPRESENTATIONS AND WARRANTIES OF FMC. FMC represents and warrants to Buyer as follows: (a) AUTHORITY; NO CONFLICTS. FMC is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. FMC has all requisite corporate power and authority to enter into this Agreement and such Ancillary Agreements, to the extent it is a party thereto, as are contemplated hereby to be executed and delivered by it and to consummate the transactions contemplated hereby and thereby. All corporate acts and other proceedings required to be taken by FMC to authorize the execution, delivery and performance of this Agreement and such Ancillary Agreements, to the extent it is a party thereto, and the consummation of the transactions contemplated hereby and thereby, have been or will have been at or prior to the Closing duly and properly taken. This Agreement has been duly executed and delivered by FMC, and such Ancillary Agreements as are contemplated hereby to be executed and delivered by FMC will, to the extent it is a party thereto, be duly and validly executed and delivered by FMC, as applicable. This Agreement and such Ancillary Agreements constitute, or will constitute, as the case may be, valid and binding obligations of FMC, to the extent it is a party thereto, enforceable against FMC in accordance with their respective terms. Except as set forth on SCHEDULE 4C(a)(ii) and except for any consents, authorizations or approvals that are required under the HSR Act or that may be required solely by reason of Buyer's status, the execution and delivery of this Agreement and such Ancillary Agreements as are contemplated hereby to be executed and delivered by FMC do not or will not, as the case may be, and the consummation by FMC of the transactions contemplated hereby and thereby and compliance by it with the terms thereof will not, conflict with, or result in any violation of or default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or result in the creation of any lien, claim, encumbrance, security interest, option, charge or restriction of any kind upon any of the assets of UDLP or any of its Subsidiaries under, or require any consent, authorization or approval under any provision of (A) the certificate of limited partnership or other organizational documents of UDLP or any of its Subsidiaries or Foreign Affiliates, (B) any Material Contract to which UDLP or any Subsidiary or Foreign Affiliate is a party or (C) any material judgment, order -10- or decree or any material statute, law, ordinance, rule or regulation applicable to UDLP or any of its Subsidiaries or their respective assets. (b) OWNERSHIP OF THE INTERESTS. FMC is the sole general partner of UDLP and holds 100% of the outstanding general partnership interests of UDLP. The sale and transfer of the Interests owned by FMC to Buyer pursuant to this Agreement will vest in Buyer all right, title and interest in such Interests, free and clear of all adverse claims or other Lien, other than adverse claims created by or through or suffered by Buyer. 4B. REPRESENTATIONS AND WARRANTIES OF HARSCO. Harsco represents and warrants to Buyer as follows: (a) AUTHORITY; NO CONFLICTS. Each of HUC and Harsco Corporation (each, a "HARSCO PARTY") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each Harsco Party has all requisite corporate power and authority to enter into this Agreement and such Ancillary Agreements, to the extent it is a party thereto, as are contemplated hereby to be executed and delivered by it and to consummate the transactions contemplated hereby and thereby. All corporate acts and other proceedings required to be taken by each Harsco Party to authorize the execution, delivery and performance of this Agreement and such Ancillary Agreements, to the extent it is a party thereto, and the consummation of the transactions contemplated hereby and thereby, have been or will have been at or prior to the Closing duly and properly taken. This Agreement has been duly executed and delivered by each Harsco Party, and such Ancillary Agreements as are contemplated hereby to be executed and delivered by each Harsco Party will, to the extent it is a party thereto, be duly and validly executed and delivered by such Harsco Party, as applicable. This Agreement and such Ancillary Agreements constitute, or will constitute, as the case may be, valid and binding obligations of each Harsco Party, to the extent it is a party thereto, enforceable against each Harsco Party, as applicable, in accordance with their respective terms. Except as set forth on SCHEDULE 4C(a)(ii) and except for any consents, authorizations or approvals that are required under the HSR Act or that may be required solely by reason of Buyer's status, the execution and delivery of this Agreement and such Ancillary Agreements as are contemplated hereby to be executed and delivered by each Harsco Party do not or will not, as the case may be, and the consummation by each Harsco Party of the transactions contemplated hereby and thereby and compliance by it with the terms thereof will not, conflict with, or result in any violation of or default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or result in the creation of any lien, claim, encumbrance, security interest, option, charge or restriction of any kind upon any of the assets of UDLP or any of its Subsidiaries under, or require any consent, authorization or approval under any provision of (A) the certificate of limited partnership or other organizational documents of UDLP or any of its Subsidiaries or Foreign Affiliates, (B) any Material Contract to which UDLP or any Subsidiary or Foreign Affiliate is a party or (C) any material judgment, order or decree or any material statute, law, ordinance, rule or regulation applicable to UDLP or any of its Subsidiaries or their respective assets. -11- (b) OWNERSHIP OF THE INTERESTS. HUC is the sole limited partner of UDLP and holds 100% of the outstanding limited partnership interests of UDLP. The sale and transfer of the Interests owned by HUC to Buyer pursuant to this Agreement will vest in Buyer all right, title and interest in such Interests, free and clear of all adverse claims or other Lien, other than adverse claims created by or through or suffered by Buyer. 4C. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby jointly and severally represent and warrant to Buyer as follows: (a) AUTHORITY; NO CONFLICTS. (i) UDLP is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. UDLP has all requisite partnership power and authority to enter into the Ancillary Agreements, to the extent it is a party thereto, as are contemplated hereby to be executed and delivered by it and to consummate the transactions contemplated thereby. All partnership acts and other proceedings required to be taken by UDLP to authorize the execution, delivery and performance of such Ancillary Agreements, and the consummation of the transactions contemplated thereby, have been or will have been at or prior to the Closing duly and properly taken. Such Ancillary Agreements as are contemplated hereby to be executed and delivered by UDLP will, to the extent it is a party thereto, be duly and validly executed and delivered by UDLP. Such Ancillary Agreements will constitute valid and binding obligations of UDLP, to the extent it is a party thereto, enforceable against UDLP in accordance with their respective terms. (ii) Except as set forth on SCHEDULE 4C(a)(ii) and except for any consents, authorizations or approvals that are required under the HSR Act or that may be required solely by reason of Buyer's status, the execution and delivery of such Ancillary Agreements as are contemplated hereby to be executed and delivered by UDLP do not or will not, as the case may be, and the consummation by UDLP of the transactions contemplated thereby and compliance by it with the terms thereof will not, conflict with, or result in any violation of or default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or result in the creation of any lien, claim, encumbrance, security interest, option, charge or restriction of any kind upon any of the assets of UDLP or any of its Subsidiaries or Foreign Affiliates under, or require any consent, authorization or approval under any provision of (A) the certificate of limited partnership or other organizational documents of UDLP or any of its Subsidiaries or Foreign Affiliates, (B) any Material Contract relating to the Business to which UDLP or any Subsidiary or Foreign Affiliate is a party or (C) any material judgment, order or decree or any material statute, law, ordinance, rule or regulation applicable to UDLP or any of its Subsidiaries or Foreign Affiliates or their assets. (b) OWNERSHIP OF THE INTERESTS. Except for the Interests owned by FMC and HUC to be purchased by Buyer pursuant to the terms hereof, UDLP has no outstanding partnership -12- interests or other equity securities or any outstanding options, warrants or other rights exercisable for, or any securities convertible into or exchangeable for, any such partnership interest or equity securities. Except as set forth on SCHEDULE 4C(b), there are no outstanding agreements, securities or other commitments (other than this Agreement) pursuant to which any of Sellers and UDLP is or may become obligated to issue, sell, purchase, return or redeem any Interests or other securities of UDLP. (c) SUBSIDIARIES AND FOREIGN AFFILIATES. SCHEDULE 4C(c)-1 attached hereto sets forth the name and jurisdiction of incorporation of each Subsidiary of UDLP and the persons owning its outstanding capital stock. Each Subsidiary and each Foreign Affiliate is duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its incorporation. All of the outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and non-assessable. SCHEDULE 4C(c)-2 sets forth the name and nature of certain foreign entities in which UDLP has a direct or indirect ownership interest (the "FOREIGN AFFILIATES") and the ownership of the equity interests in such entities. Except as set forth on SCHEDULE 4C(c)-1, SCHEDULE 4C(c)-2 or the other Schedules hereto, neither UDLP nor any Subsidiary owns or holds the right to acquire any shares of stock or any other investment or equity interest in any other corporation, partnership, joint venture or other entity and all such shares and other interests reflected on such Schedules are owned by UDLP or another Subsidiary free and clear of any Lien or other material encumbrance and are not subject to any option or right to purchase any such shares and each Foreign Affiliate has no Subsidiaries. SCHEDULE 4C(c)-1 or SCHEDULE 4C(c)-2 sets forth the number, type and class of the outstanding shares of capital stock or other ownership interests or securities of each Subsidiary and Foreign Affiliate of UDLP and the name of the record and beneficial owner of each share of capital stock or other equity interests or securities of each Subsidiary and Foreign Affiliate of UDLP. Except as set forth on SCHEDULE 4C(c)-1, SCHEDULE 4C(c)-2 or the other Schedules hereto, there are no outstanding options, warrants or other rights exercisable for, or securities convertible into or exchangeable for, any capital stock or other ownership interests or securities of any Subsidiary or Foreign Affiliate of UDLP, any other commitments or agreements providing for the issuance of additional shares, the sale of treasury shares, or for the repurchase or redemption of shares of any Subsidiary's or Foreign Affiliate's capital stock, or any agreements of any kind which may obligate any Subsidiary or Foreign Affiliate to issue, purchase, register for sale, redeem or otherwise acquire any of its securities or interests. (d) FINANCIAL STATEMENTS. SCHEDULE 4C(d) sets forth (i) the audited consolidated balance sheets of UDLP as of December 31, 1995 and December 31, 1996, and the related consolidated statements of operations and cash flows for UDLP for the fiscal years ended December 31, 1994, December 31, 1995 and December 31, 1996, together with the auditors' report thereon and (ii) the unaudited consolidated balance sheet of UDLP as of June 30, 1997 and related consolidated statements of operations and cash flows for UDLP for the six-month period then ended (the "LATEST FINANCIALS"), in each case together with the notes thereto (collectively, the "FINANCIAL STATEMENTS"). The consolidated balance sheet of UDLP as of the fiscal period ended June 30, 1997 is referred to herein as the "JUNE 30 BALANCE SHEET." The Financial Statements have been derived from the accounting books and records of UDLP, were prepared in the ordinary course of business -13- and present fairly in all material respects the financial condition of UDLP as of the dates of such Financial Statements and the results of operations and cash flows of UDLP and its consolidated Subsidiaries for the periods indicated in accordance with the Applicable Accounting Principles. (e) TITLE TO TANGIBLE ASSETS OTHER THAN REAL PROPERTY INTERESTS. UDLP and its Subsidiaries have good and valid title to all material tangible assets reflected in the Latest Financials, except those sold or otherwise disposed of since the date of the Latest Financials in the ordinary course of business, free and clear of all mortgages, liens, security interests or encumbrances of any nature whatsoever (collectively, "LIENS"), except (i) such as are disclosed on SCHEDULE 4C(e) or the other Schedules hereto, (ii) mechanics', carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of business for which reserves have been established in accordance with generally accepted accounting principles, equipment leases with third parties entered into in the ordinary course of business, liens for taxes, and other governmental charges which are not due and payable or which may thereafter be paid without penalty for which reserves have been established in accordance with generally accepted accounting principles and (iii) other imperfections of title, restrictions or encumbrances, if any, which would not, individually or in the aggregate, materially impair the use or value of any such asset (the items in clauses (i)-(iii) being referred to herein collectively as "PERMITTED LIENS"). The material tangible assets used in the operation of the Business, taken as a whole, are in normal operating condition and repair (subject to normal wear and tear). This Section 4C(e) does not relate to real property or interests in real property, it being the intent of the parties that such items are the subject of Section 4C(f). (f) TITLE TO REAL PROPERTY. The term "OWNED PROPERTIES" as used herein means all real property and interests in real property owned in fee by UDLP or a Subsidiary as set forth on SCHEDULE 4C(f)-1 (each of such properties being referred to individually as an "OWNED PROPERTY"). SCHEDULE 4C(f)-2 sets forth a list of real properties leased by UDLP or a Subsidiary pursuant to leases under which UDLP or a Subsidiary has an annual base rental obligation in excess of $250,000 (individually, a "LEASED PROPERTY"). An Owned Property or Leased Property shall be sometimes referred to herein individually as a "PROPERTY" and collectively as the "PROPERTIES". UDLP or a Subsidiary has fee simple title to the Owned Properties, and has a valid leasehold interest in each of the Leased Properties, in each case free and clear of all mortgages, liens, security interests, easements, covenants, rights-of-way and other similar restrictions of any nature whatsoever, except (i) Permitted Liens (as defined in Section 4C(e) above), (ii) easements, covenants, conditions, rights-of-way and other restrictions of record that are disclosed in any commitment for title insurance or other title report previously delivered or made available to Buyer, (iii) any conditions that may be shown by a current, accurate survey or physical inspection of the relevant Property made prior to the Closing which do not materially and adversely affect the use as currently conducted of the Owned Properties, (iv) existing leases, licenses and possession or occupancy agreements, if any, (v) (A) zoning, building, fire, health, entitlement and other land use laws, ordinances, rules and safety regulations and other similar restrictions, (B) mortgages, liens, security interests or encumbrances that have been placed by any developer, landlord or other third party on property over which UDLP or a Subsidiary has easement rights or on any Leased Property and subordination or similar agreements relating thereto and (C) unrecorded easements, covenants, rights-of-way, liens or other -14- restrictions which do not materially and adversely affect the use as currently conducted of the Owned Properties, (vi) acts done or suffered to be done by, and judgments against, Buyer and those claiming by, through or under Buyer, (vii) any and all orders, decrees, awards or judgments related to any eminent domain or condemnation proceedings which do not materially and adversely affect the use as currently conducted of the Owned Properties, (viii) other liens, security interests, easements, covenants and restrictions of any nature whatsoever which individually or in the aggregate do not materially and adversely affect the value or use as currently conducted of the Owned Properties and (ix) with respect to the lease for the property in Aiken, South Carolina listed on SCHEDULE 4C(f)-2, an "industrial revenue bond", a copy of which has been made available to Buyer. Except as set forth on Schedule 4C(f)-1, (i) all improvements located on the Property are, in the aggregate, in normal operating condition and repair (normal wear and tear excepted) and, to the knowledge of Sellers, are free from material structural defect and (ii) there is not now pending any condemnation or eminent domain proceeding affecting the Property or any portion thereof, nor, to the knowledge of Sellers, is any such proceeding threatened by any governmental authority. (g) INTELLECTUAL PROPERTY. The Intellectual Property of UDLP that is described in clauses (i), (ii) and (iii) of Section 1(a)(vii) is listed on SCHEDULE 4C(g). Except as disclosed on SCHEDULE 4C(g) or the other Schedules hereto, UDLP or a Subsidiary or Foreign Affiliate owns or has the right to use, without payment to any other party, all material Intellectual Property used in its business. Except as set forth on SCHEDULE 4C(g) or the other Schedules hereto, no material claims are pending in writing or, to the knowledge of Sellers, threatened in writing against UDLP or a Subsidiary or Foreign Affiliate as of the date of this Agreement by any person with respect to the ownership or use of any of the Intellectual Property owned by UDLP and used in the Business. Except as set forth on SCHEDULE 4C(g) or the other Schedules hereto, no material licenses, sublicenses or agreements pertaining to any of the Intellectual Property owned by UDLP and used in the Business have been granted or entered into by UDLP or a Subsidiary or Foreign Affiliate. None of Sellers and UDLP has received any notices of any infringement by any third party with respect to any of the Intellectual Property owned by UDLP and used in the Business. Except as set forth on SCHEDULE 4C(g) or the other Schedules hereto, to the knowledge of Sellers, the operation of the Business does not infringe upon any proprietary right or other Intellectual Property right of any person in any material respect. All rights pertaining to Intellectual Property licensed to UDLP by FMC pursuant to the FMC Intellectual Property Agreement are duly and validly held by FMC, free and clear of all material Liens. All rights pertaining to Intellectual Property to be licensed to UDLP by Harsco pursuant to the Harsco Intellectual Property Agreement are duly and validly held by Harsco, free and clear of all material Liens. (h) MATERIAL CONTRACTS. SCHEDULE 4C(h) and the other Schedules hereto set forth as of the date of this Agreement each of the following types of written contracts to which UDLP or any Subsidiary or Foreign Affiliate is a party: (i) any employment agreement or employment contract with any officer or director of UDLP (excluding any independent contractor) that has future liability for cash -15- compensation in excess of $200,000 per annum and is not terminable by notice of not more than 60 calendar days for a cost of less than $200,000; (ii) any employee collective bargaining agreement; (iii) any covenant not to compete that materially impairs the Business; (iv) any lease or similar agreement under which UDLP or any Subsidiary or Foreign Affiliate is a lessor or sublessor of, or makes available for use by any third party, any real property owned or leased by UDLP or any Subsidiary or Foreign Affiliate or any portion of premises otherwise occupied by UDLP or any Subsidiary, in each case which has future liability in excess of $250,000 per annum and is not terminable by notice of not more than 60 calendar days for a cost of less than $250,000; (v) any lease or similar agreement under which (A) UDLP or any Subsidiary or Foreign Affiliate is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by a third party or (B) UDLP or any Subsidiary or Foreign Affiliate is a lessor or sublessor of, or makes available for use by any third party, any tangible personal property owned or leased by UDLP or any Subsidiary or Foreign Affiliate, in each case which has future liability in excess of $500,000 per annum and is not terminable by notice of not more than 60 calendar days for a cost of less than $500,000; (vi) any agreement or contract under which UDLP has borrowed or loaned any money, any note, bond, indenture or other evidence of indebtedness or any direct or indirect guarantee of such indebtedness of others (other than endorsements for the purpose of collection, loans made to employees for relocation, travel or other employment-related purposes, or purchases of equipment or materials made under conditional or instalment sales contracts, in each case in the ordinary course of business) which, individually or in the aggregate, has an outstanding principal amount in excess of $500,000; (vii) any agreement or contract under which either Seller or any other person has directly or indirectly guaranteed indebtedness, liabilities or obligations of UDLP or any Subsidiary or Foreign Affiliate (other than endorsements for the purpose of collection in the ordinary course of business and all Guaranties), in each case having an outstanding principal amount or aggregate future liability in excess of $1,000,000; (viii) any contract or agreement for the purchase of supplies, goods, products or other personal property or for the receipt of services which involves an unfulfilled obligation of UDLP or any Subsidiary or Foreign Affiliate in excess of $5,000,000; (ix) any contract or agreement (including the U.S. Department of Defense and any other U.S. military purchasing authority), other than any Inactive Contracts, for the sale -16- of supplies, goods, products or other personal property or for the furnishing of services which involves an unfulfilled obligation of UDLP or any Subsidiary in excess of $25,000,000; (x) any contract or agreement which provides for the procurement by UDLP of consulting, sales representative, marketing or lobbying services and which involves an unfulfilled obligation of UDLP in excess of $500,000; (xi) any joint venture, teaming, co-production or partnership contract or agreement involving an unfulfilled obligation of UDLP in excess of $5,000,000; (xii) any agreement committing UDLP or any of its Subsidiaries to purchase or sell any property or asset outside the ordinary course of business for consideration in excess of $1,000,000; and (xiii) any agreement between UDLP or one or more of its Subsidiaries or Foreign Affiliates and any Seller or any Affiliate of any Seller (other than UDLP or any of its Subsidiaries or Foreign Affiliates) which involves an unfulfilled obligation, individually or in the aggregate, in excess of $1,000,000. Sellers have delivered to, or made available for inspection by, Buyer a copy of each contract, lease, license, instrument or other agreement listed on SCHEDULE 4C(h) as amended to date, other than modifications or amendments to U.S. government contracts since June 30, 1997 as would not materially and adversely affect the value of such contracts. Except as disclosed on SCHEDULE 4C(h) or the other Schedules hereto, UDLP or a Subsidiary or Foreign Affiliate has performed all material obligations required to be performed by it to date under each contract, lease, license, commitment, instrument or other agreement of UDLP or such Subsidiary described on SCHEDULE 4C(h) (collectively, the "MATERIAL CONTRACTS") and is not (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder and, to the knowledge of Sellers, no other party thereto is (with or without lapse of time or the giving of notice, or both) in material default under any Material Contract. Except as set forth on SCHEDULE 4C(h), all of the Material Contracts are (i) in full force and effect and (ii) to the knowledge of Sellers, represent the legal, valid and binding obligations of the other parties thereto and are enforceable against such parties in accordance with their terms. (i) LITIGATION; DECREES. SCHEDULE 4C(i) and the other Schedules hereto set forth, all lawsuits, claims and judicial or administrative proceedings (excluding lawsuits, claims or proceedings for workers' compensation) pending or, to the knowledge of Sellers, threatened against UDLP or a Subsidiary or Foreign Affiliate or involving any of its respective properties, assets, operations or businesses and which (A) involve a claim against UDLP or a Subsidiary or Foreign Affiliate of, or which involve an unspecified amount which could reasonably be expected to result in liability of, more than $250,000 or (B) seek any material injunctive relief which would affect Buyer's acquisition or ownership of the Interests or the operation of the Business. Neither UDLP nor any Subsidiary or Foreign Affiliate is in material default under any material judgment, order or -17- decree applicable to it of any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign. Schedule 7(f) sets forth certain pending lawsuits or claims that will be retained by a particular Seller (as indicated thereon) from and after the Closing. (j) COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on SCHEDULE 4C(j) or the other Schedules hereto, (i) UDLP and its Subsidiaries and Foreign Affiliates are, and since January 1, 1994 have been, in compliance in all material respects with all applicable material statutes, laws, ordinances, rules, orders and regulations of any governmental authority or instrumentality and (ii) since December 31, 1996, neither UDLP nor any Subsidiary has received any written communication from a governmental authority that alleges that it is not in compliance in all material respects with any material federal, state, foreign or local laws, rules and regulations. This Section 4C(j) does not relate to environmental matters, Government Contracts and tax matters, it being the intent of the parties that environmental matters, Government Contract matters and tax matters are the subject of Sections 4C(n), 4C(q) and 4C(l), respectively. (k) EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4C(k): (i) SCHEDULE 4C(k)-1 lists all of the material employee benefit plans, programs and arrangements (including each severance or other arrangement or policy and each plan, arrangement, program, agreement or commitment providing for insurance coverage (including without limitation any self-insured arrangements), disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health, accident benefits (including without limitation any "voluntary employees' beneficiary association" as defined in Section 501(c)(9) of the Code providing for the same or other benefits) or for deferred compensation, profit-sharing bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post- retirement insurance, compensation or benefits) maintained or contributed to by UDLP with respect to current or former employees of UDLP or any of its Subsidiaries (including the Defense Segment Plan referred to in Section 8(h)(iii)) (the "UDLP EMPLOYEE BENEFIT PLANS") and SCHEDULE 4C(k)-2 lists all of such material employee benefits plans, programs and arrangements maintained or contributed to by FMC in which current or former employees of UDLP or any of its Subsidiaries participate (the "FMC EMPLOYEE BENEFIT PLANS"). Sellers have delivered to, or made available for inspection by, Buyer a copy of each UDLP Employee Benefit Plan and the defined benefit pension plans of FMC covering employees of UDLP and the Transferred Employees. Except as provided in clause (vi) of this Section 4C(k), Sellers make no representations or warranties in this Agreement regarding or relating to any of the FMC Employee Benefit Plans. (ii) All UDLP Employee Benefit Plans which are "employee benefit plans" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) are in compliance in all material respects with the applicable requirements of ERISA, the Code and all other applicable law. -18- (iii) Each UDLP Employee Benefit Plan or its predecessor plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter that it is so qualified and that its trust is exempt from taxation. (iv) All contributions and payments with respect to each UDLP Employee Benefit Plan have been timely made when due and there are no funding deficiencies (including accumulated funding deficiencies) (as defined in ERISA and the Code). (v) All ERISA reporting and disclosure obligations have been satisfied in all material respects with respect to each UDLP Employee Benefit Plan. (vi) UDLP and each UDLP Employee Benefit Plan and, with respect to employees and former employees of UDLP and its Subsidiaries, each FMC Employee Benefit Plan has complied in all material respects with its obligations under Section 4980B of the Code and Section 601 et seq. of ERISA ("COBRA"). (vii) To the knowledge of Sellers, with respect to each UDLP Employee Benefit Plan: (a) there have not been any prohibited transactions (as defined in Section 406 of ERISA or Section 4975 of the Code); (b) no fiduciary has any liability for breach of fiduciary duty; and (c) no investigations, suits, or material claims are pending. (viii) Sellers have delivered or made available to Buyer copies of the following documents in connection with each UDLP Employee Benefit Plan: (a) plan document and all amendments; (b) current summary plan descriptions; (c) the most recent Internal Revenue Service favorable determination letter with respect to each UDLP Employee Benefit Plan intended to be qualified under the Code; and (d) the most recent IRS Form 5500. (ix) UDLP does not contribute to any "multiemployer plan," as defined in Section 3(37) or 4001(a)(3) of ERISA, nor has UDLP at any time contributed to, or been obligated to contribute to, any such multiemployer plan. (x) The funding method used in connection with each UDLP Employee Benefit Plan that is an "employee pension benefit plan" as defined in Section 3(2) of ERISA (each, a "PENSION PLAN") which is subject to the minimum funding requirements of ERISA is acceptable under law, and the actuarial assumptions used in connection with funding each such plan are reasonable. As of the Closing Date, the "amount of unfunded benefit liabilities" as defined in Section 4001(a)(18) of ERISA of each Pension Plan (but excluding from the definition of "current value" of "assets" of such Pension Plan accrued but unpaid contributions) did not exceed zero. (xi) UDLP and its Subsidiaries have not engaged in, nor are successors or parent corporations to an entity that has engaged in, a transaction described in Section 4069 of ERISA. There has been no "reportable event" (as defined in Section 4043(b) of ERISA and -19- the PBGC regulations under such Section) with respect to any Pension Plan and no analogous event under applicable foreign law. No filing has been made by UDLP or either Seller with the PBGC, and no proceeding has been commenced by the PBGC, to terminate any Pension Plan. No condition exists and no event has occurred that could constitute grounds for the termination of any Pension Plan by the PBGC. UDLP has not at any time, (1) ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA or analogous foreign law, (2) withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA or analogous foreign law, or (3) ceased making contributions on or before the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA or analogous foreign law to which UDLP made contributions during the six years prior to the Closing Date. (xii) There is no contract, agreement, plan or arrangement covering any employee or former employee of UDLP that, individually or collectively, provides for the payment prior to or in connection with this transaction by UDLP of any amount (i) that is not deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess parachute payment" pursuant to Section 280G of the Code. (xiii) Each material trust agreement, annuity contract or other funding instrument maintained by UDLP and related to a UDLP Employee Benefit Plan has been maintained in all material respects in accordance with its terms and applicable law. (xiv) There is no material action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral action, governmental audit or investigation relating to or seeking benefits under any UDLP Employee Benefit Plan that is pending or, to the knowledge of Sellers, threatened against UDLP or any UDLP Employee Benefit Plan. (xv) Neither UDLP nor Sellers has any legally binding commitment to create any additional employee benefit plans which are intended to cover UDLP employees or to amend or modify any existing UDLP Employee Benefit Plan which would result in a material increase in the costs to UDLP of such Plan. (xvi) No UDLP Employee Benefit Plan holds as an asset any interest in any annuity contract, guaranteed investment contract or any other investment or insurance contract issued by an insurance company that, to the knowledge of Sellers, or UDLP is the subject of bankruptcy, conservatorship or rehabilitation proceedings. (xvii) Neither the execution and delivery of this Agreement by Sellers nor the consummation of the transactions contemplated hereby or the related transactions will result in the acceleration or creation of any rights of any person to benefits under any UDLP Employee Benefit Plan (including, without limitation, the acceleration of the vesting or exercisability of any stock options, the acceleration of the vesting of any restricted stock, the -20- acceleration of the accrual or vesting of any benefits under any Pension Plan or the acceleration or creation of any rights under any severance, parachute or change in control agreement). (xviii) No event has occurred in connection with which UDLP, any of its Subsidiaries or any UDLP Employee Benefit Plan, directly or indirectly, could be subject to any material liability (A) under any statute, regulation or governmental order relating to any UDLP Employee Benefit Plan or (B) pursuant to any obligation of UDLP or any of its Subsidiaries to indemnify any person against liability incurred under any such statute, regulation or order as it relates to the UDLP Employee Benefit Plans. (xix) None of the Subsidiaries employs any employees or has any obligation to contribute to any of the UDLP Employee Benefit Plans. (l) TAXES. Except as otherwise provided in SCHEDULE 4C(1) and except as would not result in a liability to UDLP or its Subsidiaries in excess of amounts accrued on the June 30 Balance Sheet or the Closing Statement: (i) UDLP and its Subsidiaries have filed, or have been included in, all material Tax Returns (as defined below) required to be filed by them on or before the Closing Date. To the knowledge of Sellers, the Foreign Affiliates have filed, or have been included in, all material Tax Returns required to be filed by them on or before the Closing Date. (ii) All material Taxes due and payable by UDLP and its Subsidiaries (whether or not shown on any Tax Return) have been timely paid in full. To the knowledge of Sellers, all material Taxes due and payable by the Foreign Affiliates (whether or not shown on any Tax Return) have been timely paid in full. (iii) No claim has ever been made in writing by a taxing authority in a jurisdiction where UDLP or any of its Subsidiaries do not file Tax Returns that any of UDLP and its Subsidiaries are or may be subject to taxation in a material amount by that jurisdiction. To the knowledge of Sellers, no claim has ever been made in writing by a taxing authority in a jurisdiction where any of the Foreign Affiliates do not file Tax Returns that any of the Foreign Affiliates are or may be subject to taxation in any material amount by that jurisdiction. (iv) None of UDLP's Subsidiaries or Foreign Affiliates which is a corporation has filed a consent under Code Section 341(f) concerning collapsible corporations. (v) None of UDLP, its Subsidiaries, and its Foreign Affiliates has been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). -21- (vi) None of UDLP, its Subsidiaries and, to the knowledge of Sellers, the Foreign Affiliates, (A) has been a member of any affiliated group filing a consolidated federal income Tax Return and (B) has any liability for material Taxes of any person as defined in Section 7701(a)(1) of the Code (other than UDLP and its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor or by contract of indemnity. (vii) As of the date hereof, UDLP, its Subsidiaries and, to the knowledge of Sellers, the Foreign Affiliates, have no material Tax deficiency or claim assessed or, to the knowledge of Sellers, proposed in writing against any of them, except to the extent that adequate liabilities or reserves with respect thereto are accrued on the Financial Statements in accordance with generally accepted accounting principles (or, with respect to the Foreign Affiliates, on their financial statements determined in accordance with United States generally accepted accounting principles) or (i) such deficiency or claim is being contested in good faith by appropriate proceedings, (ii) no such accrual is required by generally accepted accounting principles and (iii) the nature and amount of the disputed Tax is set forth on SCHEDULE 4C(1). (viii) As of the date hereof, there are no currently outstanding Tax examinations or Tax audits of any of UDLP and its Subsidiaries. To the knowledge of Sellers, as of the date hereof, there are no currently outstanding Tax examinations or Tax audits of the Foreign Affiliates. (ix) Neither UD United Defense International Sales Corporation nor UDLP Components, Limited has any investment in U.S. property within the meaning of Code Section 956. FMC-Arabia has an investment in U.S. property within the meaning of Code Section 956 represented by a loan to UDLP. To the knowledge of Sellers, the Foreign Affiliates have no other investments in U.S. property. (x) None of the property of UDLP or any of its Subsidiaries (A) is subject to a lease under (x) Section 168(f)(8) of the Internal Revenue Code of 1954, or (y) Code Section 7701(h), (B) secures any debt the interest on which is tax-exempt under Code Section 103(a), or (C) is tax-exempt use property within the meaning of Code Section 168(h). (xi) Neither UD United Defense International Sales Corporation nor UDLP Components, Limited nor, to the knowledge of Sellers, any of the Foreign Affiliates, is (i) engaged in a United States trade or business for federal Income Tax purposes; (ii) a passive foreign investment company within the meaning of the Code; or (iii) a foreign investment company within the meaning of the Code. (xii) To the knowledge of Sellers, none of UDLP, its Subsidiaries and Foreign Affiliates has participated in or cooperated with an international boycott within the meaning -22- of Code Section 999 or has been requested to do so in connection with any transaction or proposed transaction. (xiii) Buyer would not be required to include any amount in gross income with respect to UD United Defense International Sales Corporation or UDLP Components, Limited pursuant to Code Section 951 if the taxable year of any of such entities was deemed to end on the Closing Date after the Closing. (xiv) Since their respective formations through the date hereof, UDLP and Armored Vehicle Technologies Associates have been qualified to be treated as partnerships for federal Income Tax purposes and neither UDLP nor any of its partners has taken a position inconsistent with such treatment with regard to any federal Income Tax. (xv) This Section 4(C)(1) contains the sole and exclusive representations and warranties of Sellers with respect to any Taxes or Tax matters, with the exclusion of those representations and warranties relating to Taxes to the extent set forth in Section 4C(e), Section 4C(f) and Section 4C(k). (m) INSURANCE. Attached hereto as SCHEDULE 4C(m) is a summary of all material insurance policies issued in favor of UDLP and the Subsidiaries. Neither UDLP nor any of its Subsidiaries has received (i) any written notice of cancellation of any policy described on SCHEDULE 4C(m) or refusal of coverage thereunder, (ii) any written notice that any issuer of such policy has filed for protection under applicable bankruptcy laws or is otherwise in the process of liquidating or has been liquidated, or (iii) any other written notice that such policies are no longer in full force or effect or that the issuer of any such policy is no longer willing or able to perform its obligations thereunder. (n) ENVIRONMENTAL COMPLIANCE. (i) To the knowledge of Sellers, except as set forth on SCHEDULE 4C(n) hereto or the other Schedules hereto, as of the date hereof UDLP and the Subsidiaries are in compliance with all Environmental Requirements, except for such noncompliance as would not have a Material Adverse Effect. "ENVIRONMENTAL REQUIREMENTS" shall mean all federal, state and local statutes, regulations, ordinances, permits, approvals and licenses concerning pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any hazardous materials, substances or wastes, as such requirements are enacted and in effect on or prior to the date hereof. (ii) Except as set forth on SCHEDULE 4C(n) or the other Schedules hereto, UDLP has not, since January 1, 1996, received any written notice, report or other communication regarding any material violation of Environmental Requirements, or any material liabilities, -23- including any material investigatory, remedial or corrective obligations, relating to UDLP or its facilities arising under Environmental Requirements, except for any of the foregoing, the subject matter of which would not have a Material Adverse Effect. (iii) To the knowledge of Sellers, Sellers have delivered, or otherwise made available, to Buyer copies of all material written environmental reports, audits and assessments in Sellers' possession relating to any material environmental liabilities of UDLP or any of its Subsidiaries. (iv) This Section 4C(n) contains the sole and exclusive representations and warranties of Sellers with respect to any environmental matters, including without limitation any arising under any Environmental Requirements. (o) UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 4C(o), neither UDLP nor any of its consolidated Subsidiaries has any material liability or obligation (whether absolute or contingent, liquidated or unliquidated, or due or to become due) of a type required to be reflected on a balance sheet prepared in accordance with Applicable Accounting Principles, except for liabilities and obligations (i) reflected or reserved for on the balance sheet included in the Latest Financials, (ii) disclosed or referred to on any of the Schedules or (iii) that have arisen since or arise after the date of the Latest Financials in the ordinary course of the operation of the Business (including pursuant to contracts) and consistent with past practice (all of which are current liabilities similar in type to those reflected on the balance sheet included in the Latest Financials). (p) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997, UDLP and its Subsidiaries have operated the Business in the ordinary course, consistent with past practices. Without limiting the foregoing, since June 30, 1997, except as disclosed on SCHEDULE 4C(p), there has not been any (i) material adverse change in the Business or the assets, liabilities or financial condition of UDLP and its Subsidiaries, taken as a whole, (ii) except for normal periodic increases in the ordinary course of business consistent with past practice, increase in the compensation payable or to become payable by UDLP or its Subsidiaries to any of their respective officers, employees or agents (collectively, "PERSONNEL") whose total compensation for services rendered to UDLP or its Subsidiaries is currently at an annual rate of more than $100,000 or any material bonus, incentive compensation, service award or other like benefit granted, made or accrued, contingently or otherwise, for or to the credit of any of the Personnel, (iii) material addition to or modification of the employee benefit plans, arrangements or practices affecting Personnel, (iv) sale, assignment or transfer of any material assets of UDLP or its Subsidiaries, taken as a whole, other than in the ordinary course, (v) material change in accounting methods or practices by UDLP or its Subsidiaries or (vi) revaluation by UDLP or any of its Subsidiaries of any of their respective material assets. (q) GOVERNMENT CONTRACTS. Except as set forth on SCHEDULE 4(C)(q): (i) Since January 1, 1994, neither the United States government (through relevant contracting officers or the U.S. Department of Justice) nor any prime contractor has notified -24- UDLP or either Seller in writing that UDLP has breached or violated in any material respect any material statute or regulation pertaining to any Government Contract. (ii) Neither UDLP nor any of its Subsidiaries has been debarred or suspended from participation in the award of any Government Contract nor, to the knowledge of Sellers, has any debarment or suspension proceeding been initiated against UDLP or any of its Subsidiaries. (iii) No material termination for default or show cause notice is, or since January 1, 1994 has been, in effect pertaining to any Government Contract. (iv) Since January 1, 1994, there has been no known governmental investigation (other than routine investigations and audit proceedings) of UDLP or any of its Subsidiaries regarding an alleged or potential material violation of law by UDLP or any of its Subsidiaries with respect to any Government Contract. (v) Neither UDLP nor any of its Subsidiaries has since January 1, 1994 in connection with the Business, conducted any material internal investigation in connection with which UDLP has engaged outside legal counsel or independent accountants, or made any material voluntary disclosure to the U.S. government pursuant to the Voluntary Disclosure Program of the U.S. government, outside the ordinary course as a result of any material suspected irregularity with respect to any Government Contract. (vi) To the knowledge of Sellers, the cost accounting and procurement systems maintained by UDLP and its Subsidiaries in connection with the conduct of the Business with respect to Government Contracts are in compliance with all applicable material U.S. government laws and regulations (including all applicable cost accounting standards) in all material respects. (vii) With respect to each Government Contract to which UDLP or any of its Subsidiaries is a party (A) to the knowledge of Sellers, since January 1, 1997, UDLP and each of its Subsidiaries have complied with the material terms and conditions of each Government Contract which is a Material Contract except for such instances of non-compliance as will not result in a termination of the Material Contract or material liability and (B) to the knowledge of Sellers, all material representations and certifications executed, acknowledged or set forth in each Government Contract were complete and correct in all material respects as of their effective date. For the purpose hereof, "GOVERNMENT CONTRACT" means any contract between the United States government (or a department or agency thereof) or any prime contractor to the United States Government and UDLP, any of its Subsidiaries or either Seller. (r) LABOR RELATIONS. Except as set forth on SCHEDULE 4C(r), neither UDLP nor any of its Subsidiaries has engaged in any unfair labor practice that would have a Material Adverse -25- Effect and there are no material complaints against UDLP or any of its Subsidiaries pending or, to the knowledge of Sellers, threatened before the National Labor Relations Board or any similar state or local labor agency. Except as disclosed on SCHEDULE 4C(r), there are no representation questions, labor strikes, slow downs or stoppages, grievances or other labor disputes pending or, to the knowledge of Sellers, threatened with respect to the employees of UDLP or any of its Subsidiaries that would have a Material Adverse Effect, and neither UDLP nor any of its Subsidiaries (nor either Seller in connection with the conduct of the Business) has since January 1, 1994 experienced any such representation question, labor strike, slow down, stoppage or other labor dispute. (s) LICENSES, PERMITS AND AUTHORIZATIONS. To the knowledge of Sellers, UDLP or a Subsidiary has all of the licenses, approvals, consents, franchises and permits necessary to permit UDLP and its Subsidiaries to conduct the Business as currently conducted, except as would not have a Material Adverse Effect. (t) ASSETS. The assets reflected on the June 30 Balance Sheet, together with all rights of UDLP, its Subsidiaries and Foreign Affiliates under contracts and the assets of the Foreign Affiliates and such assets as are transferred to UDLP pursuant to Section 5(g) are all of the material assets used in the Business. (u) LOSS CONTRACTS; BACKLOG. Set forth on SCHEDULE 4C(u)-1 are those Material Contracts with respect to which UDLP has accrued a loss on the June 30 Balance Sheet. Set forth on Schedule 4C(u)-2 are (i) a list of the Backlog with respect to contracts for the sale of goods or services to unaffiliated third parties where there is an official award reported for UDLP, broken out by division on FMC's internal financial reporting systems as of July 31, 1997, which totals approximately $1.4 billion and (ii) a list of selected contracts and their respective approximate Backlog (subject to change based on deliveries and customer-directed contract modification and authorization changes) for GSD, ASD and DSI. For purposes of this Agreement, the term "BACKLOG" means as of any given date, (i) the total amount awarded and funded under the applicable contract as of such date less (ii) the amount of the shipments made in respect of such contract as of such date. (v) CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. SCHEDULE 4C(v) sets forth a list of the names of the (i) ten (10) largest customers of each division of the Business (or such fewer number as provide a substantial majority of the revenue of such division) for the most recent fiscal year, showing the approximate total sales in dollars by the Business to each such customer during such fiscal year; and (ii) the ten (10) largest suppliers of each division of the Business (or such fewer number as supply a substantial majority of the purchases by dollar volume of such division) for the most recent fiscal year showing the approximate total purchases in dollars by the Business from each such supplier during such fiscal year. Neither UDLP nor any of its Subsidiaries has received any communication in writing from any customer or supplier named on SCHEDULE 4(C)(v) of any intention to terminate or materially reduce purchases from or supplies to the Business, which termination or reduction would have a Material Adverse Effect. -26- (w) DIVIDENDS BY FOREIGN AFFILIATES. SCHEDULE 4C(w) sets forth the aggregate amount of dividends paid to UDLP or the Sellers by each Foreign Affiliate in each of the preceding five (5) fiscal years and the aggregate amount of dividends paid by such Foreign Affiliates to UDLP since December 31, 1996. 5. COVENANTS OF SELLERS. Sellers jointly and severally covenant and agree as follows: (a) ACCESS. Prior to the Closing, Sellers shall grant to Buyer or cause to be granted to Buyer and its representatives, employees, counsel and accountants reasonable access, during normal business hours and upon reasonable notice, to the personnel, properties, books and records of UDLP and its Subsidiaries and Foreign Affiliates, and Sellers shall not object to Buyer's communicating in a reasonable manner with key customers and suppliers on matters, relating to the Business; PROVIDED, HOWEVER, that such access does not unreasonably interfere with the normal operations of UDLP and that Sellers' approval is required with respect to access to, and communications with customers and suppliers of, the Foreign Affiliates; PROVIDED FURTHER, that all requests for access shall be directed to Randall S. Ellis, or such other person as Sellers may designate from time to time; and PROVIDED FURTHER, that Buyer shall have obtained any and all necessary governmental or administrative security clearances and approvals. Buyer shall indemnify and hold Sellers, UDLP and their respective Affiliates, officers, shareholders, directors and employees harmless against any and all losses, liabilities, expenses and damages or actions or claims with respect thereto resulting from claims suffered or incurred by any of such persons or entities arising out of or with respect to Buyer's or its representatives', agents' or employees' exercise of Buyer's rights under this Section 5(a) to the extent arising from the negligence or willful misconduct of Buyer or its representatives, employees, counsel and accountants. Notwithstanding any provision in this Agreement to the contrary, Buyer's obligations under this Section 5(a) shall survive the termination of this Agreement and the consummation of the transactions contemplated hereby. (b) ORDINARY CONDUCT. Except as permitted by the terms of this Agreement or as set forth in SCHEDULE 5(b) or the other Schedules hereto, from the date hereof to the Closing, Sellers will cause UDLP and its Subsidiaries and, subject to existing obligations under any applicable agreement with the minority partners, Foreign Affiliates to conduct the Business in the ordinary course, consistent with past practices. Except as provided in this Agreement or SCHEDULE 5(b) or the other Schedules hereto, from the date hereof until the Closing, Sellers shall not permit UDLP or any of its Subsidiaries or, subject to existing obligations under any applicable agreement with minority partners, Foreign Affiliates to do any of the following without the prior written consent of Buyer: (i) in the case of UDLP, amend its Certificate of Limited Partnership or its Agreement of Limited Partnership in any manner which would be materially adverse to Buyer and, in the case of any Subsidiary or Foreign Affiliates of UDLP, amend its corporate charter, bylaws or other organizational documents in any manner which would be materially adverse to Buyer; -27- (ii) make any material change in the conduct of the Business, except as contemplated or permitted by this Agreement; (iii) sell, lease, license or otherwise dispose of, or agree to sell, lease, license or otherwise dispose of, any interest in any material assets of UDLP or any Subsidiary or Foreign Affiliates, except for sales in the ordinary course of business; (iv) permit, allow or subject any of the material assets owned by UDLP or any Subsidiary or Foreign Affiliates to any mortgage, pledge, security interest, encumbrance or lien or suffer such to be imposed, except for Permitted Liens; (v) except in the ordinary course of business or as required by law or contractual obligations or other agreements existing on the date hereof, increase in any manner the compensation of, or enter into any new bonus or incentive agreement or arrangement with, any officers or other key personnel; (vi) assume, incur or guarantee any obligation for borrowed money (other than intercompany indebtedness) having an outstanding principal amount in excess of $1,000,000 in the aggregate; (vii) enter into a material lease of real property other than in the ordinary course of business, except that Buyer acknowledges and consents to UDLP entering into any lease the negotiation of which has commenced prior to the date of this Agreement or any renewal of a lease to which UDLP is a party; (viii) directly or indirectly, make any distribution of assets (other than cash distributions or other cash payments by UDLP or its Subsidiaries in the ordinary course) to its equity holders, or directly or indirectly, purchase, redeem, issue, sell or otherwise acquire or dispose of any equity interest of UDLP or such Subsidiary or Foreign Affiliate or cause any Foreign Affiliate to accelerate the payment of any dividends; (ix) issue any equity interests or other securities (other than debt securities permitted pursuant to the foregoing clause (vi)) or any options, warrants or other rights exercisable for such equity interests or other securities or otherwise take (or agree or plan to take) any steps affecting or changing the capitalization of UDLP or any its Subsidiaries or Foreign Affiliates, (x) change its accounting methods, principles or policies in any material respect; (xi) make any material Income Tax election that could affect Buyer, UDLP or its Subsidiaries after the Closing or apply to change any method of accounting for Tax purposes in any material respect; -28- (xii) acquire or agree to acquire by merging or consolidating with, or acquiring by purchasing a substantial portion of the assets of, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or acquire or agree to acquire any material assets or property, except in the ordinary course of business and in a manner consistent with past practice; (xiii) amend in any materially adverse respect any Material Contract; or (xiv) enter into any legally binding commitment to do any of the foregoing PROVIDED, HOWEVER, that nothing in this Section 5(b) shall be construed to prohibit, prevent or otherwise limit Sellers from settling accounts through, or otherwise making, regular, tax or other special distributions in cash or repayments of cash from UDLP to any Seller, to the extent that, unless otherwise provided in this Agreement (including in Section 2(b)), any such distribution or repayment is reflected on the Closing Statement; and PROVIDED FURTHER that, except as set forth in Section 8(p), nothing in this Agreement shall require the presence of any positive cash balance on the books or in the accounts of UDLP at the Closing. (c) CONFIDENTIALITY. Each Seller agrees that, after the Closing Date, it shall, and shall use its reasonable efforts to cause its respective directors, officers, employees, advisors and Affiliates to, keep the Information (as defined below) confidential for a period of five years from the Closing Date, except that any Information required by law or legal or administrative process to be disclosed may be disclosed without violating the provisions of this Section 5(c), and except that any Information may be used and disclosed (i) in connection with the exercise or performance by Sellers of their respective rights and obligations under or as permitted by the Ancillary Agreements and (ii) (subject to reasonable and customary confidentiality protections, and without jeopardizing the protection of trade secrets) in connection with the development, manufacture, sale or distribution of any product outside of UDLP's Scope of Activity, in each case without violating the provisions of this Section 5(c); PROVIDED, HOWEVER, that, with respect to Information that consists of technical information, trade secrets or know-how, the covenants and obligations of the Sellers in this Section 5(c) shall not terminate so long as such technical information, trade secrets or know-how is or remains Information subject to this Section 5(c). At Buyer's request, each Seller shall use legal action, including the commencement of litigation, if required, to enforce such confidentiality obligations, and Buyer shall reimburse each such Seller for reasonable out-of-pocket expenses (including the fees and expenses of counsel) incurred in connection with such legal action as is requested by Buyer. For purposes hereof, the term "INFORMATION" means all information that relates to UDLP, the Subsidiaries or the Foreign Affiliates or the Business, other than any such information that is available to the public on the Closing Date, or thereafter becomes available to the public other than as a result of a breach of this Section 5(c), or is developed independently by Sellers or their respective Affiliates after the Closing or is obtained from third parties who have no duty of confidentiality to Buyer, UDLP or any of its Subsidiaries or Foreign Affiliates. -29- (d) PRESERVATION OF BUSINESS. Prior to the Closing, subject to the terms and conditions of this Agreement, Sellers shall, and shall cause UDLP and its Subsidiaries and, subject to applicable agreements with the minority partners, Foreign Affiliates to, use reasonable best efforts consistent with past practices to preserve the Business intact, to preserve the goodwill of customers and suppliers of UDLP and to retain its key employees. (e) COVENANT NOT TO COMPETE. Each Seller agrees that, for a period of six years following the Closing Date, it will not, and will cause each of its Affiliates not to, engage, directly or indirectly, anywhere in the world in any line of business within the Scope of Activity; PROVIDED, HOWEVER, that (i) Harsco shall be entitled to continue to engage in the development, manufacture, retrofit, installation, repair, overhaul, engineer, design, service, sale and marketing of armor and armor kits for sale to the military and other customers, (ii) Harsco shall be entitled to engage in activities reasonably necessary to completing the termination and winding up of its former truck and bus business and (iii) either Seller shall be entitled to engage in the development, manufacture, retrofit, installation, repair, overhaul, engineer, design, service, sale and marketing of any component part or subsystem of military vehicle systems which are substantially the same as classes of products or services that primarily are commercially sold by such Seller for non-military uses. If any court of competent jurisdiction shall finally hold that the time, territory or any other provision set forth in this Section 5(e) constitutes an unreasonable restriction, such provision shall not be rendered void, but shall apply as to such time, territory or to such other extent as such court may determine constitutes a reasonable restriction under the circumstances involved. Each Seller acknowledges that the restrictions contained in this Section 5(e) are reasonable and necessary to protect the legitimate interests of Sellers, UDLP and Buyer and that any breach by either Seller of any provision hereof will result in irreparable injury to UDLP and Buyer. Each Seller acknowledges that, in addition to all remedies available at law, UDLP and Buyer shall be entitled to equitable relief, including injunctive relief, and an equitable accounting of all losses and damages. For purposes of this Agreement, the "SCOPE OF ACTIVITY" of UDLP shall be to engage in the development, manufacture, retrofit, installation, overhaul, repair, engineering, design, service, sale and marketing of any military vehicle system or weapon system or station or component thereof. It shall not be a violation of this provision for either Seller to purchase or combine with an entity conducting a business that has products and services that fall within the Scope of Activity but are incidental to the business of such entity as a whole. Each Seller further agrees that it will not, for a period commencing on the date hereof and ending two years following the Closing Date, knowingly solicit the employment of or hire the employees of UDLP listed on SCHEDULE 5(e). (f) COOPERATION. For a period of 90 days after the Closing, Sellers shall cooperate with Buyer and shall cause its respective officers, employees, agents and representatives to cooperate with Buyer to the extent reasonably requested by Buyer to provide for an orderly transition of the Business to Buyer. Buyer shall reimburse each Seller for the out-of-pocket costs and expenses incurred by such Seller in assisting Buyer pursuant to this Section 5(f). Notwithstanding the foregoing, neither Seller shall be required by this Section 5(f) to take any action that would unreasonably interfere with the conduct of its business or the Business. -30- (g) FMC RESOURCE TRANSFER. On the Closing Date, FMC shall transfer to UDLP all of FMC's right, title and interest in and to certain enumerated assets of FMC's Corporate Technology Center in the manner, and subject to the terms and conditions, set forth on SCHEDULE 5(g) attached hereto. (h) INTERCOMPANY OBLIGATIONS. All outstanding intercompany obligations between each Seller and UDLP or any of the Subsidiaries shall be settled and terminated at or prior to Closing, other than obligations that reflect amounts owed for actual services performed or goods delivered in the ordinary course. (i) FINANCING OBLIGATIONS. At or prior to the Closing, Sellers shall cause all outstanding Financing Obligations (other than Financing Obligations relating to letters of credit and related reimbursement agreements listed on SCHEDULE 7(e) which are not replaced as provided in Section 7(e) (the "CONTINUING LC OBLIGATIONS")) to be finally repaid in full, terminated or reflected in the computation of the Adjusted Net Worth Amount on the Closing Statement. (j) NOTIFICATION OF CERTAIN MATTERS. From the date hereof through the Closing, Sellers shall give prompt written notice to Buyer, and Buyer shall give prompt written notice to Sellers, of (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any of Sellers' or Buyer's respective representations or warranties contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any material failure of Sellers or Buyer to comply with or satisfy any of its respective covenants, conditions or agreements to be complied with or satisfied by it under this Agreement; PROVIDED, HOWEVER, that such disclosure shall not be deemed to cure any breach of a representation, warranty, covenant or agreement or to satisfy any condition. (k) FMC ARABIA. The parties acknowledge that UDLP is the beneficial owner of limited liability company interests in FMC Arabia Limited, a limited liability company organized under the laws of the Kingdom of Saudi Arabia ("FMC ARABIA"), entitling UDLP to 51% of the capital and profits of FMC Arabia (the "FMC ARABIA INTERESTS") but that FMC is the record owner of the FMC Arabia Interests. For administrative convenience, the parties desire that FMC retain record ownership of the FMC Arabia Interests until such time as Buyer provides FMC with written notice (a "TRANSFER NOTICE") instructing FMC to transfer record ownership of the FMC Arabia Interests to UDLP, but that UDLP continue to be provided all benefits of ownership of the FMC Arabia Interests. Following receipt of a Transfer Notice, FMC shall take any and all commercially reasonable actions necessary to cause record ownership of the FMC Arabia Interests to be transferred to UDLP, free and clear of all Liens (including, without limitation, obtaining all requisite governmental and third party consents and/or approvals), as soon as practical following receipt of the Transfer Notice and in any event within sixty (60) days after receipt of such Transfer Notice, at the cost and expense of FMC. From and after the Closing, (i) FMC shall promptly remit and pay over to UDLP any and all dividends, distributions and other payments received by FMC in respect of the FMC Arabia Interests and (ii) FMC shall take all actions reasonably requested by UDLP in respect of the FMC Arabia Interests, including, without limitation, granting to UDLP proxies or -31- powers of attorney in respect of the FMC Arabia Interests or voting the FMC Arabia Interests as directed by UDLP. FMC acknowledges and agrees that Buyer and UDLP shall be entitled to specific performance of FMC's obligations under this Section 5(k). Buyer shall indemnify FMC against any liability or expense it reasonably incurs as a result of taking any actions requested by UDLP under this Section other than the cost and expense of causing such ownership to be transferred to UDLP. 6. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and warrants to Sellers as follows: (a) AUTHORITY; NO CONFLICTS. (i) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has all requisite corporate power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. All corporate acts and other proceedings required to be taken by Buyer to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and properly taken. This Agreement has been duly executed and delivered by Buyer, and the Ancillary Agreements to be executed and delivered by Buyer will be duly and validly executed and delivered by Buyer. This Agreement and the Ancillary Agreements to which Buyer is a party constitute, or will constitute, as the case may be, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms. (ii) The execution and delivery by Buyer of this Agreement and the Ancillary Agreements to which it is a party do not, and the consummation by Buyer of the transactions contemplated hereby and thereby and compliance by Buyer with the terms hereof and thereof will not, conflict with, or result in any violation of or default under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or result in the creation of any lien, claim, encumbrance, security interest, option, charge or restriction of any kind upon any of the properties or assets of Buyer under, or require any consent, authorization or approval under any provision of (A) the certificate of incorporation or by-laws of Buyer, (B) any material contract to which Buyer is a party, or (C) any material judgment, order or decree, or any material statute, law, ordinance, rule or regulation applicable to Buyer or its property or assets, other than any such conflicts, violations, defaults, rights or liens, claims, encumbrances, security interests, options, charges or restrictions that, individually or in the aggregate, would not prevent Buyer from consummating the transactions contemplated hereby, except for any such consents, authorizations or approvals required under the HSR Act or that may be required solely by reason of a Seller's status or a Seller's participation in the transactions contemplated hereby. (b) ACTIONS AND PROCEEDINGS, ETC. There are no (i) outstanding judgments, orders, writs, injunctions or decrees of any court, governmental agency or arbitration tribunal against Buyer -32- which have or could have a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby or (ii) actions, suits, claims or legal, administrative or arbitration proceedings or investigations pending or, to the knowledge of Buyer, threatened against Buyer, which have or could have a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby. (c) AVAILABILITY OF FUNDS. Buyer has irrevocable commitments, as described in the Equity Letter issued on the date hereof by The Carlyle Group and requiring the contribution of capital to Buyer in the amount of $175,000,000, the Commitment Letter issued on the date hereof to TC Group, L.L.C. by Bankers Trust Corporation and the Commitment and Engagement Letter issued on the date hereof to TC Group, L.L.C. by Lehman Brothers, Inc., each of which is attached hereto as SCHEDULE 6(c), to enable it to consummate the transactions contemplated by this Agreement. Buyer has no reason to believe that it will not have cash available at the Closing pursuant to such commitments necessary to consummate the transactions contemplated by this Agreement. Buyer has deposited $10,000,000 of the Initial Purchase Price with the escrow agent pursuant to the terms of the Escrow Agreement attached hereto as EXHIBIT 6(c). (d) ACQUISITION OF INTERESTS FOR INVESTMENT. All securities purchased, directly or indirectly, by Buyer pursuant to this Agreement are being acquired for investment only and not with a view to any public distribution thereof, and Buyer will not offer to sell or otherwise dispose of such securities so acquired by it in violation of any of the registration requirements of the Securities Act of 1933, as amended, or any comparable state law. (e) FULFILLMENT OF CONDITION. Buyer has no knowledge of any state of facts or conditions which would prevent or otherwise hinder, in any material respect, fulfillment of the condition to Closing specified in Section 3(b)(iii). 7. COVENANTS OF BUYER. Buyer covenants as follows: (a) CONFIDENTIALITY OF BUYER. (i) Buyer acknowledges that all information provided to any of it and its Affiliates, agents and representatives by any of FMC, UDLP and their respective Affiliates, agents and representatives is subject to the terms of a confidentiality agreement between or on behalf of FMC, UDLP and Buyer or one or more of their respective Affiliates or other beneficial owners (the "DILIGENCE CONFIDENTIALITY AGREEMENT"), the terms of which are hereby incorporated herein by reference. Effective upon, and only upon, the Closing, the Diligence Confidentiality Agreement shall terminate. (ii) Buyer agrees that, after the Closing Date, Buyer and UDLP shall use their respective reasonable efforts to, and shall use their respective reasonable efforts to cause their respective directors, officers, employees, former employees, advisors and Affiliates to, keep Seller Information (as defined below) confidential for a period of five years from the Closing -33- Date; PROVIDED, HOWEVER, that with respect to Seller Information that consists of technical information, trade secrets or know-how, the covenants and obligations of Buyer and UDLP in this Section 7(a)(ii) shall not terminate so long as such technical information, trade secrets or know-how is or remains Information subject to this Section 7(a); and PROVIDED FURTHER that any Seller Information required by law or legal or administrative process to be disclosed may be disclosed without violating the provisions of this Section 7(a)(ii). At any Seller's request, Buyer shall, or shall cause UDLP to, use legal action, including the commencement of litigation, if required, to enforce such confidentiality obligations, and such Seller shall reimburse Buyer for reasonable out-of-pocket expenses (including the fees and expenses of counsel) incurred in connection with such legal action as is requested by such Seller. For purposes of this Agreement, the term "SELLER INFORMATION" shall mean all information concerning Sellers or their Affiliates, including any financial information, trade secrets, know-how and other confidential technical and business information, other than information that relates to the Business, UDLP, the Subsidiaries or the Foreign Affiliates and other than any such information that is available to the public on the Closing Date, or thereafter becomes available to the public other than as a result of a breach of this Section 7(a)(ii). (b) PERFORMANCE OF OBLIGATIONS BY BUYER AFTER CLOSING DATE. Subject to Section 8(f), Section 8(h)(xiii), Section 10 and Section 11(a), following the Closing Date, Buyer shall or shall cause UDLP to duly, promptly and faithfully pay, perform and discharge when due, (i) all obligations and liabilities of whatever kind and nature, primary or secondary, direct or indirect, absolute or contingent, known or unknown, whether or not accrued, whether arising before, on or after the Closing Date, of UDLP, other than the Retained Liabilities, without limitation, any such obligations or liabilities contained in any contract or other agreement and (ii) any liability or obligation of any Seller and its respective Affiliates with respect to any of the liabilities described in clause (i), including, without limitation, any guarantee or obligation to assure performance given or made by one or more of Sellers and their respective Affiliates with respect to any such obligation of any of UDLP, the Subsidiaries and the Foreign Affiliates. (c) NO ADDITIONAL REPRESENTATIONS; DISCLAIMER REGARDING ESTIMATES AND PROJECTIONS. Buyer acknowledges that neither Seller, nor any other person or entity acting on behalf of a Seller or any Affiliate of a Seller, (i) has made any representation or warranty express or implied, including any implied representation or warranty as to the condition, merchantability, suitability or fitness for a particular purpose of any of the assets used in the Business or held by UDLP or (ii) has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding the Business, UDLP or any Affiliate of UDLP, in each case except as expressly set forth in this Agreement and the Ancillary Agreements or as and to the extent required by this Agreement to be set forth in the Schedules hereto. Buyer further agrees that neither Seller nor any other person or entity will have or be subject to any liability, except as specifically set forth in this Agreement, to Buyer or any other person resulting from the distribution to Buyer, or Buyer's use of, any such information, including the Confidential Offering Memorandum distributed by Morgan Stanley & Co. Incorporated and any information, document, or material made -34- available to Buyer in certain "data rooms," management presentations or any other form in expectation of the transactions contemplated by this Agreement. In connection with Buyer's investigation of UDLP, Buyer has received certain projections, including projected statements of operating revenues and income from operations of the Business and UDLP for the fiscal year ending on December 31, 1997 and for subsequent fiscal years and certain business plan information for such fiscal year and succeeding fiscal years. Buyer acknowledges that there are uncertainties inherent in attempting to make such estimates, projections and other forecasts and plans, that Buyer is familiar with such uncertainties and that Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts and plans so furnished to it (including the reasonableness of the assumptions underlying such estimates, projections and forecasts). Accordingly, neither Seller makes any representation or warranty with respect to such estimates, projections and other forecasts and plans (including the reasonableness of the assumptions underlying such estimates, projections and forecasts). (d) Intentionally omitted. (e) CERTAIN GUARANTIES. Sellers and Buyers shall cooperate and use their respective reasonable best efforts to cause each of the performance bonds, letters of credit and/or guaranties or other obligations set forth on SCHEDULE 7(e) (each a "SELLER GUARANTY") to be replaced with performance bonds and/or letters of credit issued for the account of Buyer. Copies of each of the Seller Guaranties have been provided to Buyer. If any Seller Guaranty has not been so replaced as of the Closing (any such Seller Guaranty which is not so replaced being referred to as "CONTINUING GUARANTY"), Buyer will obtain a letter of credit in favor of the applicable Seller with a face of amount and expiration date identical to that set forth in the applicable Continuing Guaranty (the letters of credit obtained by Buyer in respect of such Continuing Guaranties being referred to herein as the "SUBSTITUTE LETTERS OF CREDIT"). Each Substitute Letter of Credit shall permit the beneficiary to draw on such Substitute Letter of Credit only to the extent of any drawing on the Continuing Guaranty to which such Substitute Letter of Credit relates and shall otherwise be on substantially the same terms as the Continuing Guaranties set forth on SCHEDULE 7(e) and in form and substance reasonably satisfactory to Buyer and Sellers. Following the Closing, Buyer shall also indemnify each Seller for any amounts actually paid by such Seller in respect of the guarantee obligations set forth on SCHEDULE 7(e), together with interest thereon at a rate of 8% per annum from the date on which such Seller makes such payment to the date of reimbursement by Buyer to the extent that drawings under a Substitute Letter of Credit are not available to reimburse Sellers for the amounts so paid. (f) RETAINED ASSETS AND LIABILITIES. (i) LITIGATION. With respect to all litigation matters that are designated as retained assets or retained liabilities on SCHEDULE 7(f) hereto or which may arise after the execution of this Agreement or the Closing, upon the reasonable request of either Seller, Buyer shall promptly assist such Seller in the prosecution or defense of any claim, threatened claim, -35- audit, investigation or proceeding by or against any governmental entity or any other third party (each an "ACTIVITY"). Buyer shall cooperate promptly with the applicable Seller in such Seller's efforts to investigate in a privileged manner, conduct or resolve any such Activity as may be deemed necessary or useful in such Seller's sole but reasonable discretion; PROVIDED, HOWEVER, that (A) such assistance does not unreasonably disrupt the conduct of Buyer's operations and (B) such Seller shall reimburse Buyer for all out-of-pocket expenses reasonably incurred by Buyer in connection therewith. Such assistance shall be provided by the employee or employees of Buyer or UDLP best qualified to provide the requested assistance expeditiously, as determined by Buyer in its reasonable discretion. Such assistance shall include, without limitation, to the extent reasonably practicable, extracting from the files and records of Buyer or UDLP all information relevant to the Activity, consultation concerning such Activity, testimony, if necessary, in any proceeding relating to such Activity, and assistance with the preparation of any pleadings or other submissions with respect to such Activity. Such assistance shall also require Buyer to grant Harsco sole possession, custody, control and access to all documents currently under Harsco's custody and control which are contained within the secure areas in the west warehouse and the farmhouse of UDLP's York, Pennsylvania plant as of the Closing Date. Harsco shall provide copies to Buyer, at Buyer's reasonable request, of documents in Harsco's custody and control relating to the Business. Buyer also shall provide Harsco access to the above secure areas currently used by Seller to store and review said documents and conduct interviews. Upon the conclusion of any Activity pertaining to the documents contained in the secured areas described above, possession, custody and control over said documents shall be relinquished by Harsco to Buyer. The parties hereto agree that notwithstanding the foregoing, nothing in this Section 7(f)(i) will in any way limit or otherwise affect any obligation of Buyer arising under this Agreement or the transactions contemplated hereby. (ii) CONTRACT CLOSE-OUTS. With respect to all contracts that are designated as retained assets or retained liabilities on SCHEDULE 7(f) hereto, as to which the applicable Seller will retain all financial liability, if any, Buyer and UDLP will be responsible, from and after the Closing, for the administration of the close-out or settlement of such contracts. Without limiting the generality of the foregoing, Buyer will cooperate as reasonably requested with the applicable Seller in the effort to close-out or settle each such contract, including by consulting with such Seller on a regular and frequent basis and providing such Seller with such information as is requested in such Seller's sole but reasonable discretion; PROVIDED, HOWEVER, that such cooperation and consultation does not unreasonably disrupt or interfere with the business of UDLP or Buyer. Such Seller shall reimburse Buyer for all out-of-pocket expenses reasonably incurred by Buyer in connection therewith. In addition, the parties hereto agree that neither Buyer nor any Affiliate of Buyer may close-out or settle any such contract (or resolve any open issues with respect thereto) without the prior written consent of the applicable Seller, which will not be unreasonably withheld or delayed. (g) 1997 AUDITED FINANCIAL STATEMENTS. Buyer shall prepare and deliver to each Seller at Buyer's sole cost and expense, as promptly as practicable but in no event later than 90 days -36- after the end of UDLP's 1997 fiscal year, a balance sheet of UDLP as of the end of such fiscal year and the related statements of operations, changes in partners' equity and cash flow of UDLP for such fiscal year, together with appropriate notes to such financial statements, and a balance sheet as of the end of such prior fiscal years and related statements for such number of additional fiscal years as may be reasonably requested by either Seller in order for such Seller to comply with Regulation S-X, 17 C.F.R. Section 210.3-09 ET SEQ. These statements shall reflect all of UDLP's expenses and contingent liabilities as if UDLP were a stand-alone entity consistent with U.S. generally accepted accounting principles. These financial statements shall also comply with the other relevant provisions of Regulation S-X, 17 C.F.R. Section 210, and shall be audited and reported on by a "big six" accounting firm selected by Buyer. 8. MUTUAL COVENANTS. Sellers and Buyer covenant and agree as follows: (a) CONSENTS. Buyer acknowledges that certain consents to the transactions contemplated by this Agreement or the Ancillary Agreements may be required from parties to contracts, leases, licenses or other agreements (written or otherwise) to which any of Sellers and UDLP or any of their respective Affiliates is a party (a "REQUIRED CONSENT") and such consents may not be obtained prior to the Closing. Sellers shall cooperate with Buyer in any reasonable manner and take such reasonable actions as Buyer may request in connection with Buyer's obtaining any such consents; PROVIDED, HOWEVER, that such cooperation shall not include any requirement of Sellers to expend money, commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party. In the event that such consents are not obtained, Sellers shall take such additional actions as reasonably requested by Buyer to provide to Buyer the economic benefits of such contracts, leases, licenses or other agreements, including without limitation by subcontracting, sublicensing or other similar arrangements, provided that Buyer performs and discharges its obligations under such contracts, leases, licenses or agreements. (b) PUBLICITY. Each Seller and Buyer agree that, from the date hereof through the Closing Date, no public release or announcement concerning the transactions contemplated hereby shall be issued or made by Buyer without the prior consent of Sellers (which consent shall not be unreasonably withheld) and no public release or announcement concerning the transactions contemplated hereby shall be issued or made by any Seller without the prior consent of Buyer (which consent shall not be unreasonably withheld), except (i) as such release or announcement may be advisable or required by law or the rules or regulations of any United States or foreign securities exchange on which such party's securities are listed, in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance and (ii) that each of Sellers and UDLP may make such an announcement to their respective employees. Notwithstanding the foregoing, Buyer and each Seller shall cooperate to prepare press releases to be issued at the time of the signing of this Agreement and on the Closing Date. Each Seller and Buyer agree to keep the terms of this Agreement confidential, except to the extent required by applicable law or for financial reporting purposes and except that the parties may disclose such terms to their respective accountants and -37- other representatives as necessary in connection with the ordinary conduct of their respective businesses (so long as such persons agree to keep the terms of this Agreement confidential). (c) BEST EFFORTS. Subject to the terms of this Agreement (including the limitations set forth in Section 8(a)), each party will use its reasonable best efforts to cause the Closing to occur. (d) HSR ACT COMPLIANCE. Buyer and Sellers shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act with respect to the transactions contemplated hereby and each of Buyer and Sellers shall bear the costs and expenses of their respective filings; PROVIDED, HOWEVER, that Buyer shall pay the filing fee in connection therewith. Each of Buyer and Sellers shall use their respective best efforts to make such filings promptly (and in any event within five business days) following the date hereof, to respond to any requests for additional information made by either of such agencies and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date and to resist in good faith, at each of their respective cost and expense (including the institution or defense of legal proceedings), any assertion that the transactions contemplated hereby constitute a violation of the antitrust laws, all to the end of expediting consummation of the transactions contemplated hereby. Each of Buyer, FMC and Harsco shall consult with the other prior to any material submission to and any meetings, by telephone or in person, with the staff of the Federal Trade Commission and the United States Department of Justice, and each of Buyer, FMC and Harsco shall have the right to review any such submission and have a representative present at any such meeting. (e) COOPERATION WITH FINANCINGS. Sellers acknowledge that Buyer may use the Financial Statements and other information regarding the Business, UDLP, its Subsidiaries and the Foreign Affiliates in connection with financings necessary to consummate the Closing, including in a Rule 144A offering memorandum and a registration statement filed under the Securities Act of 1933, as amended (the "PUBLIC FILINGS") to be issued or filed by Buyer. Sellers shall (and shall cause UDLP and its Subsidiaries to) cooperate in a commercially reasonable manner with Buyer prior to the Closing so that Buyer can obtain information sufficient for Buyer to prepare a Rule 144A offering memorandum and the Public Filings, in each case at Buyer's sole expense. The foregoing cooperation of Seller shall include (i) compiling the requisite financial information, including supplying financial information for purposes of comfort letters to be issued in connection with Public Filings, (ii) granting Buyer or UDLP's accountants, E&Y, full and complete access to the books and records of UDLP and to any personnel knowledgeable about such books and records (including UDLP's independent accountants), in each case, to the extent reasonably requested by Buyer, (iii) signing customary management representation letters related to the Financial Statements and any comfort letters and (iv) using commercially reasonable efforts to furnish necessary financial information for additional periods subsequent to June 30, 1997 and prior to the Closing in connection with such financings. -38- (f) ENVIRONMENTAL INDEMNIFICATION. (i) NON-SAN JOSE/SANTA CLARA PROPERTIES. From and after the Closing, subject to clause (ii) below, Buyer shall be responsible for the costs of all environmental matters relating to the Business that are allowable costs under applicable government contracting statutes and regulations. (ii) SAN JOSE/SANTA CLARA PROPERTIES. Subject to the remaining provisions of this Section 8(f), FMC will retain and will be responsible for 100% of all Remediation Costs after the Closing Date on the Sites covered by the Settlement and Advance Agreement, whether or not leased pursuant to the Lease. For a period of ten years following the Closing Date, FMC agrees that with respect to the Sites, it shall provide to Buyer no later than December 31 of each year commencing with the year 1997 a written report (a "REMEDIATION REPORT") containing the following information prepared in good faith by or on behalf of FMC: (A) projected Remediation Costs for all of the Sites for each of the four years following such year (e.g., by December 31, 1997 FMC will provide projected Remediation Costs for the years 1998, 1999, 2000 and 2001) and (B) projected recoveries for the four years following such year (calculated with reference to the Settlement and Advance Agreement) from FMC Insurers attributable and allocable to the Sites. Attached hereto as SCHEDULE 8(f)(ii) are the Remediation Reports containing Remediation Costs and FMC Insurers recovery projections for years 1997, 1998 and 1999. Buyer agrees that it shall pay to FMC periodically, but in no event more frequently than quarterly, commencing September 30, 1997 and ending December 31, 2008 a portion of any such Remediation Costs incurred for any year during such period equal to (X) the amount of Remediation Costs incurred by FMC during such year LESS (Y) the amount of the recoveries from FMC Insurers for such year projected in the applicable Remediation Report MULTIPLIED BY (Z) 0.78; PROVIDED, HOWEVER, that (X) in no event shall the aggregate amount of such payments by Buyer exceed $16,700,000, (Y) the applicable Remediation Costs are incurred in accordance with the Advance Agreement and (Z) the total amount of Remediation Costs incurred during such year shall not exceed the projected Remediation Costs for such year set forth in the Remediation Report delivered twelve months prior to the commencement of such year. Buyer further agrees that it shall be responsible for performing, and shall perform, all of FMC's reporting obligations under the Settlement and Advance Agreement and that neither Buyer nor UDLP shall amend, modify or otherwise alter the Settlement in any manner materially disadvantageous to FMC and HUC without FMC's prior written consent, which consent shall not be unreasonably withheld. FMC agrees that it shall provide to Buyer as reasonably requested all information with respect to the Sites (whether relating to insurance, recoveries, Remediation Costs or otherwise) to the extent Buyer deems such information reasonably necessary or desirable in respect of Buyer's obligations under the Settlement and Advance Agreement. For purposes of this Agreement, the term "SETTLEMENT AND ADVANCE AGREEMENT" shall mean the Settlement and Advance Agreement, dated as of December 15, 1995, by and among UDLP, FMC Corporation and the United States Department of Defense, represented by the Corporate Administrative Contracting Officer assigned to UDLP, and the -39- terms "FMC INSURERS", "REMEDIATION COSTS" and "SITES" shall have the meaning ascribed to such terms in the Settlement and Advance Agreement. Notwithstanding anything to the contrary contained in this Agreement or the Lease, Buyer agrees that, from and after the Closing Date, FMC shall have the sole right to initiate, control, direct and manage any investigative, corrective or remedial action on or with respect to any of the Sites. In connection with any such investigative, corrective or remedial actions to be taken after the Closing by FMC, Buyer and UDLP will cooperate with FMC as reasonably requested in providing access at reasonable times and under reasonable conditions to the Sites covered by the Lease (the "LEASED SITES") for the employees, agents and equipment of FMC or its contractors and in permitting FMC to construct, maintain and operate on the Leased Sites, at no charge to FMC by Buyer or UDLP, such equipment and facilities (including without limitation pump and treat facilities) as are deemed necessary or desirable by FMC in order to effect such investigative, corrective or remedial actions. FMC shall cooperate with Buyer and UDLP as reasonably requested in taking all such actions in a manner designed to minimize to the extent reasonably practicable any disruption to the operations of the Business on the Leased Sites. (iii) Except for Remediation Costs which are the subject of Section 8(f)(ii), Sellers and Buyer agree to the following allocation of responsibility for Environmental Losses which are not allowable costs under applicable government contracting statutes and regulations (the "NON-ALLOWABLE COSTS"): (A) Buyer shall pay or cause UDLP to pay (or, if applicable, reimburse Sellers for the payment of) 25% of Non-Allowable Costs with respect to matters that are discovered by UDLP or Buyer and of which Sellers are notified in writing prior to the third anniversary of the Closing Date (the "TIMELY NON-ALLOWABLE COSTS"); (B) Sellers shall, subject to the provisions of Section 8(f)(vi), pay (or, if applicable, reimburse Buyer or UDLP for the payment of) 75% of Timely Non-Allowable Costs; PROVIDED, HOWEVER, that any obligation of Sellers to pay Timely Non-Allowable Costs that have not been previously incurred and for which Sellers have not received written notice by the tenth anniversary of the Closing Date shall terminate on such tenth anniversary; and (C) Buyer shall pay or cause UDLP to pay (or, if applicable, reimburse Sellers for the payment of) 100% of Non-Allowable Costs that are not Timely Non-Allowable Costs. For purposes of this Agreement, (1) the term "ENVIRONMENTAL LOSSES" means all Losses (as defined in Section 11(a) hereto) incurred by Buyer or UDLP consistent with commercially reasonable environmental practices to the extent, and in the amount, arising from or relating to (i) the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, -40- disposal (on-site or off-site), dumping, or threatened release of Hazardous Materials on or prior to the Closing Date by UDLP or its Subsidiaries or their predecessors in interest, or by their agents, representatives, employees, or independent contractors when acting in such capacity on behalf of UDLP or its Subsidiaries; (ii) the exposure on or prior to the Closing of persons to Hazardous Materials in the work place at any current or former facility of the Business (a "FACILITY"); (iii) the exposure of persons or property as a result of Hazardous Materials released at or from any Facility on or prior to the Closing Date migrating from or otherwise emanating from any Facility; (iv) the off-site disposal of any Hazardous Materials that were generated at any Facility on or prior to the Closing Date; or (v) any pre-Closing violation of, or noncompliance with, any Environmental Requirement occurring with respect to the Business or any Facility on or prior to the Closing Date; PROVIDED, HOWEVER, that Environmental Losses shall not include costs expended by Buyer or UDLP for remedial actions that are not reasonably necessary to comply with Environmental Requirements; and (2) the term "HAZARDOUS MATERIAL" means any substance with respect to which liability or standards of conduct are imposed pursuant to an Environmental Requirement. (iv) Sellers, UDLP and Buyer acknowledge and agree that, from and after the Closing, their sole and exclusive remedy with respect to any and all claims relating to environmental matters relating to UDLP and the Business, including Non-Allowable Costs, shall be pursuant to the provisions of this Section 8(f). In furtherance of the foregoing, and except for matters which are the responsibility of Sellers pursuant to this Section 8(f), Sellers, UDLP and Buyer hereby waive, from and after the Closing, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action each of them may have against one another with respect to environmental matters. Buyer and UDLP agree to assume on the Closing Date all Post-Closing Environmental Losses and further agree to indemnify and hold Sellers harmless from and against all Post-Closing Environmental Losses with respect to UDLP, its Affiliates and successors or the Business. The term "POST-CLOSING ENVIRONMENTAL LOSSES" means all Losses (as defined in Section 11(a) hereto) incurred by Seller to the extent and in the amount arising from: (i) the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal (on-site or off-site), dumping, or threatened release of Hazardous Material after the Closing Date by Buyer, UDLP or its Subsidiaries or their successors in interest, or by their agents, representatives, employees, or independent contractors when acting in such capacity on behalf of Buyer, UDLP or its Subsidiaries or their successors in interest, or by their agents, representatives, employees, or independent contractors when acting in such capacity on behalf of Buyer, UDLP or its Subsidiaries; (ii) the exposure of persons to Hazardous Materials released after the Closing in the work place at any Facility owned or operated by Buyer, UDLP or its Subsidiaries; (iii) the exposures of persons or property as a result of Hazardous Materials released at or from any Facility owned or operated by Buyer, UDLP or its Subsidiaries after the Closing Date migrating from or otherwise emanating from any Facility owned or operated by Buyer, UDLP or its Subsidiaries; (iv) the off-site disposal of any Hazardous Materials that were generated at any Facility owned or operated by Buyer, UDLP or its Subsidiaries after the -41- Closing Date; or (v) any violation of, or noncompliance with, any Environmental Requirement occurring with respect to the Business or any Facility owned or operated by Buyer, UDLP or its Subsidiaries after the Closing Date. (v) Except as otherwise specified in clause (ii) of this Section 8(f), Sellers shall pay 25% of any insurance recovery with respect to any Environmental Losses (net of costs of recovery) to Buyer within 30 days of receipt of the recovery amount. In the event Sellers receive any recovery from third party insurers relating to Post-Closing Environmental Losses, Sellers shall pay 100% of any such insurance recovery to Buyer within 30 days of receipt of the recovery amount. (vi) (A) Notwithstanding anything in this Agreement to the contrary, but subject to the provisions of Section 8(f)(ii), the indemnification procedures in this Section 8(f)(vi) shall apply to any claim for payment or reimbursement under Section 8(f)(iii)(B) with respect to Timely Non-Allowable Costs (collectively "ENVIRONMENTAL CLAIMS"). (B) Any Environmental Claim which is of the nature of a third party claim shall also be governed by the procedures set forth in Section 11(f) hereof, it being understood that any inconsistencies between Section 11(f) and this Section 8(f)(vi) shall be resolved in favor of the provisions set forth in this Section. (C) (1) Buyer shall notify FMC in writing promptly after learning of the existence of an Environmental Claim, which notice shall describe in reasonable detail the claim, the amount thereof (if known and quantifiable), and a reasonably detailed description of the facts giving rise to such claim, except that a failure to provide prompt notice shall only serve to limit Buyer's indemnification rights hereunder to the extent that FMC is prejudiced by such failure. (2) Upon assertion by Buyer of a claim covered hereunder, FMC shall be entitled (but not obligated) to assume Principal Management of the subject matter of such claim. To assume Principal Management, FMC must notify Buyer within 30 days of its receipt of said notice that it intends to assume Principal Management. In the event FMC does not elect to undertake Principal Management, Buyer shall assume Principal Management of the subject matter of the Environmental Claim. (3) The party not exercising Principal Management with respect to a particular matter shall be entitled, at its sole cost and expense, to reasonably participate in the management of the Environmental Claim. Such participation shall include, without limitation: (i) the right to receive copies of all material reports, workplans and analytical data submitted to governmental agencies, all material notices or other letters or documents received from governmental agencies, any other documentation and correspondence materially bearing on the Environmental Claim; -42- (ii) the right of reasonable consultation with the party exercising Principal Management; and (iii) as to proposed plans of remediation to be submitted to governmental agencies, the right of reasonable advance review and approval of such plans, which approval shall not be unreasonably withheld or delayed. (4) In the event it undertakes Principal Management of any matter, FMC shall, upon reasonable notice to Buyer, have reasonable access to the relevant subject facility of Buyer and/or UDLP. (5) The party undertaking Principal Management hereunder for any matter shall manage the matter in good faith and in a responsible manner, and any activities conducted in connection therewith shall be undertaken promptly and completed reasonably expeditiously and in a cost effective manner using commercially reasonable efforts. The parties agree to reasonably cooperate with one another in connection with addressing any matter hereunder. (6) Any remedial or corrective action covered hereunder shall be deemed to have been adequately completed to the extent that it attains compliance in a cost effective manner with applicable Environmental Requirements or is completed to the satisfaction of an appropriate governmental body. (7) For purposes of this Agreement, the term "PRINCIPAL MANAGEMENT" means the authority to principally direct the handling of the subject matter of an environmental matter, including, without limitation, (1) selection of consultants, contractors, experts or advisors, (2) evaluation, selection and implementation of remedial measures and (3) negotiations with or challenges to any governmental body and third parties. (g) WRITTEN MATERIALS AND RECORDS. (i) After the Closing, Buyer may use and distribute products, shipping materials, purchase orders, invoices, sales, promotional or other forms and literature which bear the name "FMC" or "Harsco" or the "FMC" or "Harsco" design trademark if Buyer attaches a sticker or name plate previously approved by FMC or Harsco, as applicable, which discloses the acquisition of UDLP by Buyer. The right granted in the immediately preceding sentence shall terminate, in the case of inventory of UDLP existing as of the Closing Date, on the earlier of date when Buyer has sold all of such inventory and the one year anniversary of the Closing Date. In addition, such right shall terminate, in the case of shipping materials, purchase orders, invoices, sales, promotional or other forms and literature, 180 days following the Closing Date. Once such right has terminated, Buyer shall deliver or cause to be delivered to each Seller, as applicable, or destroy or cause to be destroyed (with a certification of such destruction), all of such items bearing the name "FMC" or "Harsco" or the "FMC" or "Harsco" design trademark and Buyer further agrees that it shall, and shall -43- cause UDLP to, cease to use or display names or materials bearing the name "FMC" or "Harsco" or the "FMC" or "Harsco" design trademark or any variant thereof or name confusingly similar thereto or to any name or trademark retained by FMC Corporation or Harsco. Notwithstanding the foregoing, Buyer will (i) remove all signs bearing the name "FMC" or "Harsco" or the "FMC" or "Harsco" design trademark from the Properties within six months following the Closing Date and (ii) use commercially reasonable efforts to cause the Foreign Affiliates to cease, as soon after the Closing as possible, using the name "FMC" or the "FMC" design trademark in connection with their respective business operations and as part of their respective corporate names (it being understood that the Foreign Affiliates may continue to use such names and design trademarks in accordance with the foregoing, but in any event for no longer than three years after the Closing Date; provided that, if required to continue to use the name under existing contracts, such three year period shall not apply). (ii) Buyer and Sellers agree that Sellers may maintain copies of any books and records of and other financial, tax, personnel and operations data relating to the Business (collectively, the "RECORDS") and, within six months following the Closing Date, FMC may prepare a comprehensive index and file plan of such Records reasonably acceptable to Buyer (the "FILE PLAN"). Buyer agrees to maintain such Records in a manner consistent with the File Plan for a period of not less than ten years from the Closing Date (plus any additional time during which a party has been advised that there is an ongoing legal proceeding or investigation or tax audit with respect to periods prior to the Closing Date, or such period is otherwise open to assessment). During such period, Buyer agrees to give Sellers and their representatives reasonable cooperation, access (including copies) and staff assistance, as needed, during normal business hours and upon reasonable notice, with respect to the Records, and Sellers agree to give Buyer and its representatives reasonable cooperation, access and staff assistance, as needed, during normal business hours and upon reasonable notice, with respect to the books and records and other financial data relating to the Business as may be necessary for general business purposes, including the preparation of tax returns and financial statements, the management and handling of tax audits and any closing out of outstanding contracts; PROVIDED, HOWEVER, that such cooperation, access and assistance does not unreasonably disrupt the normal operations of Buyer or Sellers. Buyer shall not destroy or otherwise dispose of the Records for the period set forth in the second sentence of this clause (ii) without the written consent of Sellers. Each party shall be entitled to reimbursement for its reasonable out-of-pocket costs in connection with the provision of such access. (h) TRANSFERRED EMPLOYEES AND EMPLOYEE BENEFITS. (i) Effective on the Closing Date, Buyer shall cause UDLP to offer employment to each person designated on SCHEDULE 8(h)(I) attached hereto with salary and wages and with employee benefits that are substantially comparable in the aggregate to those provided to such persons by FMC immediately prior to the date of such offer, and Buyer shall cause -44- UDLP to, and UDLP shall, employ on such terms each such person who accepts such offer (such employees being referred to herein collectively as the "TRANSFERRED EMPLOYEES"). The Transferred Employees shall include, in addition to those actively at work who accept such offer, all employees on leaves of absence, including those on long-term or short-term disability or on lay-off which accept such offer. Upon the hiring of the Transferred Employees by UDLP, Buyer shall cause UDLP to, and UDLP shall, (i) for benefit accrual purposes, recognize all service of such employees recognized by FMC (including predecessor employer service) under all employee benefit plans, programs and policies of UDLP at its value under such plans, programs and policies as of the Closing Date and (ii) recognize all service of such employees recognized by FMC (including predecessor employer service) for all other purposes (excluding benefit accrual) under all employee benefit plans, programs and policies of UDLP. The employees listed on SCHEDULE 8(h)(i) as retained employees (the "RETAINED EMPLOYEES") currently perform substantial services for FMC and, accordingly, will be employed after the Closing by FMC and will not be deemed to be Transferred Employees or UDLP Employees for purposes of this Agreement. From and after the Closing Date and until such time as agreed upon by Buyer and FMC, Buyer will permit such Retained Employees to continue to have access to UDLP's facilities, including without limitation office space, telecommunications and computer equipment, and FMC will reimburse Buyer or UDLP (in an amount to be agreed upon by FMC and Buyer) for costs incurred by UDLP in providing such access. (ii) (A) With respect to the Transferred Employees, effective as of the Closing Date, Buyer shall cause UDLP to waive pre-existing condition exclusions, evidence of insurability provisions, waiting period requirements or similar provisions under the UDLP health, dental, disability, accidental death and dismemberment and life insurance plans to the extent such exclusions, requirements and provisions had been waived or satisfied under the FMC Employee Benefit Plans as of the Closing Date. In addition, Buyer shall cause the UDLP health and dental plans to credit the Transferred Employees with amounts credited under the FMC health and dental plans toward the satisfaction of annual deductible and out-of-pocket maximums under the UDLP plans during the calendar year which includes the Closing Date. FMC agrees to provide to Buyer within 30 days after the Closing Date such participation, coverage and benefits information requested by Buyer in connection with the foregoing. (B) FMC and its benefit plans shall assume, pay, perform and discharge when due all obligations of UDLP with respect to the Retained Employees (other than obligations with respect to benefits accrued on or prior to the Closing Date, if any, under UDLP Employee Benefit Plans) and shall retain all liability and be responsible for all obligations of FMC and the FMC Employee Benefit Plans with respect to the Retained Employees and any FMC employee who refuses an offer of employment from Buyer as specified in Section 8(h)(i). -45- (iii) Prior to the Closing Date (if practicable), but in any event not later than December 30, 1997, FMC shall cause to be transferred from the FMC Corporation Salaried Employees' Retirement Plan (the "FMC SALARIED PLAN") to a new pension plan adopted by FMC that will be intended to be qualified under Code Section 401(a) and that will mirror the terms of the FMC Salaried Plan applicable to UDLP employees and former employees as of the date of transfer (the "DEFENSE SEGMENT PLAN") assets equal to the benefits accrued under the FMC Salaried Plan as of the Closing Date (determined in accordance with the actuarial assumptions and methods set forth in Schedule 8(h)(iii) but in no event greater than the amount permitted to be transferred under Section 414(l) of the Code and the regulations thereunder) by all participants in the FMC Salaried Plan who were associated with the FMC defense business prior to January 1, 1994, and/or who are or were employed by UDLP. In addition, on or before December 31, 1997, FMC shall contribute to the Defense Segment Plan any amounts required by the Department of Defense to satisfy the applicable provisions of Cost Accounting Standard ("CAS") 413 and any other CAS or Federal Acquisition Regulation provisions which are applicable. The assets of the Defense Segment Plan shall continue to be held by and invested under the FMC Master Trust and may be invested as permitted pursuant to the terms of such plan and the FMC Master Trust. Effective on the Closing Date, Buyer shall become the sponsor of the Defense Segment Plan and assume all liabilities associated therewith, and, as soon as possible following the Closing Date, FMC shall cause all of the assets associated with the Defense Segment Plan to be transferred from the FMC Master Trust to a pension trust designated by Buyer. Notwithstanding the above, if it is not possible by the Closing Date to finalize the amount of assets to be transferred from the FMC Salaried Plan to the Defense Segment Plan or to finalize such other amount to be contributed by FMC, then, no later than the Closing Date, FMC shall cause to be transferred from the FMC Salaried Plan and contributed by FMC to the Defense Segment Plan a substantial portion of such assets and contributions and, as soon as possible after the Closing Date, but in no event later than September 15, 1998, FMC shall cause to be transferred from the FMC Salaried Plan and/or contribute to the Defense Segment Plan the amounts necessary to complete the transfer (which, in the case of the transfer of assets from the FMC Salaried Plan, shall include earnings attributable to such additional amount from the first transfer date to the date of final transfer, and in the case of contributions from FMC shall include earnings attributable to such amount from the first transfer date to the date of final transfer). In addition, as soon as possible following the Closing Date, FMC shall cause to be transferred from the FMC Salaried Plan to the Defense Segment Plan (or such other pension plan for UDLP Employees so designated by Buyer) assets equal to the benefits accrued under the FMC Salaried Plan as of the Closing Date (determined in accordance with the actuarial assumptions and methods set forth on Schedule 8(h)(iii) but in no event greater than the amount permitted to be transferred under Section 414(l) of the Code and the regulations thereunder) by the Transferred Employees plus earnings attributable to such assets from the Closing Date to the date of transfer and minus benefit payments made with respect to any Transferred Employee. The calculation of the benefit and asset transfer amounts contemplated by this Section 8(h)(iii) shall be first made by FMC's actuary. Buyer's actuary shall be provided with sufficient data to replicate such calculation prior to the actual date of -46- transfer. Any disputes regarding the correctness of these calculations or FMC's compliance with this Section 8(h)(iii) shall be resolved in accordance with Section 29 of this Agreement. No later than 60 days following the Closing Date, FMC and Buyer shall cooperate to file any necessary governmental forms with respect to the above-described transfer of assets and liabilities. Following the completion of each such transfer of assets and liabilities, the appropriate UDLP plan other than the San Jose Plan shall assume all liability for such liabilities as of the Closing Date. Notwithstanding the above, FMC shall retain all liabilities under the FMC Salaried Plan which are funded pursuant to group annuity contracts issued by Aetna and The Prudential Insurance Company of America and will retain such insurance contracts. Prior to the Closing Date, FMC shall cause UDLP to spin off from the FMC Corporation Retirement Plan for Hourly Employees -- San Jose (the "SAN JOSE PLAN") into an appropriate FMC pension plan, the assets and liabilities of the "commercial segment" thereof. The participants covered by the "commercial segment" are those participants who are not currently and were not previously employed by UDLP or FMC in the defense business (other than employees of FMC's Corporate Technology Center). Prior to the Closing Date and prior to the date FMC causes UDLP to transfer such assets and liabilities, FMC's actuary and Buyer's actuary shall agree on such amount to be transferred by UDLP using reasonable, agreed actuarial and accounting methods and assumptions. Also, if the U.S. Department of Defense concludes, either before or after the Closing Date, that any portion of the assets so transferred by UDLP should not have been transferred, FMC shall return such amount to the San Jose Plan with appropriate interest thereon. (iv) Effective on the Closing Date, the Transferred Employees shall be eligible to participate in the United Defense Limited Partnership Salaried Employees' Plan (the "UDLP THRIFT PLAN") in accordance with the terms of such plan and shall no longer be eligible to make contributions under the FMC Employees' Thrift and Stock Purchase Plan (the "FMC THRIFT PLAN"). As soon as possible following the Closing Date, the UDLP Thrift Plan shall accept a direct trust-to-trust transfer from the FMC Thrift Plan of cash and other property (including FMC common stock) equal to the total account balances with respect to the Transferred Employees. Prior to such transfer of assets, UDLP shall provide to FMC an opinion letter of outside counsel to Buyer that such counsel knows of no reason why the current favorable determination letter issued by the Internal Revenue Service with respect to the UDLP Thrift Plan should be revoked solely as a result of changes made or actions taken by UDLP or Buyer on or after the Closing Date. Following such transfer of account balances, the UDLP Thrift Plan shall assume all liability for benefits with respect to the amounts transferred from the FMC Thrift Plan. (v) For a period of one year following the Closing Date, Buyer agrees, and agrees to cause UDLP or its successor to the Business, (I) to provide to employees of UDLP employed as of the Closing Date (including the Transferred Employees) (the "UDLP EMPLOYEES") salaries, wages and employee and retirement benefits that are substantially comparable in the aggregate as those provided to such employees immediately prior to the Closing Date and (II) to provide to or on behalf of former employees of UDLP or of any -47- predecessor employer retiree medical insurance, retiree life insurance and any other retiree benefits that are substantially the same as those provided by UDLP or FMC to or on behalf of such former employees as of the Closing Date. Buyer shall cause UDLP to retain and discharge all liabilities with respect to current or former UDLP Employees (including current or former FMC and Harsco employees whose liabilities were assumed by UDLP) assumed by UDLP upon its formation. Notwithstanding the foregoing, nothing in this clause (v) or elsewhere in this Agreement shall be deemed to restrict or otherwise prevent or prohibit Buyer or UDLP from terminating after the Closing Date any UDLP Employees, to the extent permitted by applicable law and applicable collective bargaining or other employment-related agreements. If within one year following the Closing Date Buyer or UDLP either terminates (other than for Cause) any such UDLP Employee or subjects any such UDLP Employee to an indefinite lay-off, Buyer shall pay to such UDLP Employee severance pay in an amount equal to the greater of (A) the amount that would have been due such UDLP Employee under the UDLP severance pay plan attached hereto as SCHEDULE 8(H)(v) if such UDLP Employee was terminated by UDLP and (B) the amount due such UDLP Employee under the Buyer severance pay plan applicable to such UDLP Employee. Buyer shall recognize, for all purposes of any such severance plan and any other employee benefit plan applicable to any such UDLP Employee, the service of such UDLP Employee with any of the Sellers, UDLP or other Affiliates of either Seller prior to the Closing Date to the extent recognized by similar plans of UDLP or FMC, as applicable, prior to the Closing Date, provided that for benefit accrual purposes Buyer shall recognize such service only at its value under such plans as of the Closing Date. For purposes of calculating the pension payable with respect to a UDLP Employee entitled to the severance described above, the early commencement reduction factor shall be applied assuming the termination of employment was "in connection with a permanent reduction in force" within the meaning of the UDLP pension plan. For purposes of this Section 8(h), the term "CAUSE" shall mean (A) any material failure by a UDLP Employee to perform his or her duties or any material failure by a UDLP Employee to obey policy directives from his or her supervisor, (B) the commission by a UDLP Employee of an act of fraud, misappropriation, embezzlement or any other act involving moral turpitude or constituting a felony or (C) the commission by a UDLP Employee of any act of dishonesty which injures Buyer or UDLP. (vi) As soon as practicable following the Closing Date, FMC shall cause to be transferred from the FMC master pension and thrift plan trusts (the "FMC MASTER TRUSTS") to new or existing pension and thrift plan trusts maintained by Buyer or UDLP assets held in the FMC Master Trusts which relate to the UDLP pension and thrift plans. (vii) As soon as practicable following the Closing Date, FMC shall cause to be transferred to UDLP, and Buyer shall cause UDLP to assume, the FMC Section 501(c)(9) benefit trusts for hourly employees, and FMC shall cause to be transferred to a new or existing Section 501(c)(9) benefit trust maintained by UDLP or Buyer assets from the FMC Section 501(c)(9) benefit trust for salaried employees equal to the portion of the assets in such trust which relate to UDLP retiree medical and life insurance benefits. -48- (viii) Except as provided in this subparagraph (viii), it is agreed that, following the Closing Date, each Seller will be responsible for, and will reimburse UDLP with respect to, all payments made by UDLP after the Closing Date to any of such Seller's former employees for workers' compensation benefits relating to occurrences prior to January 1, 1994. The obligations on the part of each Seller to make such payments shall continue for so long as any such payments become due to any former employee of such Seller. With respect to any workers' compensation claim based upon conditions arising out of facts or circumstances occurring both before and after January 1, 1994, the obligations of each Seller shall be determined in accordance with applicable governmental regulations governing the apportionment of responsibility for workers' compensation between predecessor and successor employers. Buyer hereby agrees that Buyer and UDLP shall be solely responsible for any workers' compensation claim based upon conditions arising out of facts or circumstances occurring solely on or after January 1, 1994 and acknowledge and agree that in no event shall any Seller be responsible for any such workers' compensation claim. (ix) Notwithstanding anything to the contrary contained in any applicable FMC stock option plan or any applicable stock option agreement, FMC and Buyer agree that each Transferred Employee shall have the right to exercise any outstanding stock option granted to him under any such plan that is vested as of the Closing Date within the earlier of (A) two years from the Closing Date and (B) the scheduled expiration date of any such option. (x) Effective as of the Closing Date, no participant in the UDLP Thrift Plan shall be eligible to purchase any additional shares of FMC or Harsco common stock under the UDLP Thrift Plan. Effective on the Closing Date and for a period of two years following the Closing Date, Buyer shall cause the UDLP Thrift Plan to be amended to cause UDLP to allow each employee of UDLP to sell all or any portion of the FMC or Harsco common stock allocated to such employee's account under the UDLP Thrift Plan. In addition, no less than ten business days prior to the expiration of such two-year period, Buyer agrees to discuss in good faith with FMC and Harsco the repurchase by FMC of any FMC common stock and the repurchase by Harsco of any Harsco common stock remaining in the UDLP Thrift Plan. (xi) Each UDLP Employee who participated immediately prior to the Closing in the FMC 1995 Management Incentive Plan (the "MIP") shall receive a BPI Award (as defined below) with respect to the Three-Year Period (as defined in the MIP) ending December 31, 1997 and with respect to the Three-Year Period (as defined in the MIP) ending December 31, 1998. Buyer or UDLP shall pay each such BPI Award that is accrued for on the Closing Statement to the applicable UDLP Employee at the time when FMC makes payment of the BPI Awards to other participants in the MIP, unless such BPI Award has previously been paid to such UDLP Employee. For purposes of this Agreement, the term "BPI AWARD" shall mean a Three-Year Incentive Award within the meaning of the MIP. In addition, each UDLP Employee who participated immediately prior to the Closing in the MIP shall receive an annual performance incentive award with respect to the calendar year ending December 31, 1997. Buyer or UDLP shall pay each such annual performance -49- incentive award that is accrued for on the Closing Statement to the applicable UDLP Employee at the time when FMC makes payment of the annual performance incentive awards to other participants in the MIP, unless such award has previously been paid to such UDLP Employee. (xii) As of the Closing, FMC shall pay to each UDLP Employee the amounts due and payable to such UDLP Employee as incentive payments under any UDLP letter agreement applicable to such UDLP Employee as described on SCHEDULE 8(h)(xii) hereto. At the Closing, UDLP shall pay to FMC an amount in cash equal to the aggregate amount of all such incentive payments so made by FMC and such payment shall reduce the cash of UDLP or be reflected as a liability of UDLP on the Closing Statement for the purposes of determining the Adjusted Net Worth Amount as of the Closing Date. In addition, after the Closing, Buyer shall pay to each UDLP Employee the amounts due and payable to such UDLP Employee as severance payments under any UDLP letter agreement applicable to such UDLP Employee as described on SCHEDULE 8(h)(xii) hereto with respect to any such UDLP Employee terminated after Closing. (xiii) Without limitation to the provisions of Section 11 and in addition thereto, each Seller shall indemnify Buyer, its Affiliates and each of its officers, directors and employees and hold them harmless from any Losses suffered or incurred by any such indemnified party to the extent arising from (i) any failure of the benefit formula in effect as of the date hereof under the United Defense CSD Salaried Employees Pension Plan to comply with the requirements of ERISA or the Code, (ii) the matters relating to the exceptions to the representations and warranties of Sellers set forth on SCHEDULE 4C(k) (other than those exceptions identified on SCHEDULE 4C(k) as not subject to this subparagraph) and (iii) Federal labor law or any collective bargaining agreement by reason of the transfer of assets and liabilities of the "commercial segment" of the San Jose Plan described in Section 8(h)(iii). The indemnification obligations of Sellers pursuant to this Section 8(h)(xiii) shall not be subject to any limitations imposed on the indemnification obligations of Sellers set forth in Section 11 hereof. (i) MUTUAL RELEASE. Except as otherwise specifically set forth herein or on SCHEDULE 7(f) hereto, effective as of the Closing: (i) Buyer and UDLP hereby unconditionally and irrevocably release and discharge each Seller and its respective Affiliates, successors, assigns, directors, officers, partners, members, employees and representatives (collectively, the "SELLER RELEASED PARTIES") from and against any and all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, liabilities, covenants, contracts, controversies, agreements, promises, damages, judgments, claims and demands of whatever nature that Buyer or UDLP or their respective Affiliates, successors, assigns, directors, officers, partners, members, employees and representatives (collectively, the "BUYER RELEASED PARTIES") ever had, now have or hereafter may or shall have that arise from, are related to, connected with or that -50- concern the Participation Agreement among FMC Corporation, Harsco and UDLP dated as of January 1, 1994, the Partnership Agreement among such parties of even date therewith and the other agreements contemplated thereby. (ii) Sellers hereby unconditionally and irrevocably release and discharge the Buyer Released Parties from and against any and all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, liabilities, covenants, contracts, controversies, agreements, promises, damages, judgments, claims and demands of whatever nature that the Seller Released Parties ever had, now have or hereafter may or shall have that arise from, are related to, connected with or that concern the Participation Agreement among FMC Corporation, Harsco and UDLP dated as of January 1, 1994, the Partnership Agreement among such parties of even date therewith and the other agreements contemplated thereby. (j) INSURANCE. Buyer acknowledges that Sellers and their respective Affiliates shall have no responsibility for obtaining any insurance or bearing any loss, liability, claim, damage or expense relating to the assets, business, operations, conduct, products and employees (including former employees) of UDLP, the Subsidiaries or the Foreign Affiliates that relates to or arises out of occurrences subsequent to the Closing other than as provided herein. Nothing in this Section 8(j) shall modify the rights or obligations of the parties with respect to indemnification obligations or the responsibility for losses, liabilities, damages or expenses that relates to or arises out of occurrences prior to the Closing which is provided for elsewhere in this Agreement. (k) TRANSITION SERVICES AGREEMENT. At the Closing, FMC and Buyer shall execute and deliver the form of Transition Services Agreement attached hereto as EXHIBIT 8(k) (the "TRANSITION SERVICES AGREEMENT"). The parties shall cooperate in good faith to negotiate and provide prior to Closing each annex to such agreement. Promptly following the execution of this Agreement, representatives of FMC and Buyer shall meet to develop a transition plan which will identify services, service periods and service charges to be provided pursuant to the Transition Service Agreement and which will, to the extent practicable, be completed prior to the Closing. (l) TECHNOLOGY AND ENVIRONMENTAL SERVICES AGREEMENT. At the Closing, FMC and Buyer shall execute and deliver the form of Technology and Environmental Services Agreement attached hereto as EXHIBIT 8(l) (the "TECHNOLOGY AND ENVIRONMENTAL SERVICES AGREEMENT"). The parties shall cooperate in good faith to negotiate and provide prior to Closing each annex to such agreement. (m) LEASE. At the Closing, FMC and UDLP shall execute and deliver the form of Amended and Restated Lease attached hereto as EXHIBIT 8(m) (the "LEASE"), pursuant to which UDLP shall lease certain buildings and real property in Santa Clara County, California owned by FMC, including certain properties currently leased by UDLP and certain properties used by FMC's Corporate Technology Center. -51- (n) INTELLECTUAL PROPERTY AGREEMENTS. At the Closing, FMC and UDLP shall execute and deliver the form of Amended and Restated FMC Intellectual Property Agreement attached hereto as EXHIBIT 8(n)-1 (the "FMC INTELLECTUAL PROPERTY AGREEMENT") and Harsco and UDLP shall execute and deliver the form of Amended and Restated Harsco Intellectual Property Agreement attached hereto as EXHIBIT 8(n)-2 (the "HARSCO INTELLECTUAL PROPERTY AGREEMENT"). (o) INTELLECTUAL PROPERTY RECORDATIONS. From and after the Closing, at the written request of Buyer, FMC or Harsco, as applicable, will cooperate with Buyer to cause any FMC Transferred IP Rights (as defined in the FMC Intellectual Property Agreement, dated as of January 1, 1994, by and between FMC and UDLP) or Harsco Transferred IP Rights (as defined in the Harsco Intellectual Property Agreement, dated as of January 1, 1994, by and between Harsco and UDLP), the transfer of ownership to UDLP of which shall not have been, prior to the Closing Date, officially recorded with appropriate authorities in any applicable jurisdiction, to be so officially recorded in the name of UDLP, Buyer or one of Buyer's Affiliates (as instructed in writing by Buyer), the cost of which will be shared equally by Sellers and Buyer. (p) CASH BALANCE AS OF THE CLOSING. As of the Closing Date, FMC shall make a good faith estimate of the aggregate liability of UDLP for all outstanding checks to be included in accounts payable on the Closing Statement. Sellers agree that, as of the Closing, UDLP shall have cash or cash equivalents having an aggregate value equal or greater than such estimated liability for outstanding checks. (q) FNSS ROYALTY DISPUTE. To the extent that Sellers have any liability in respect of the Retained Liability set forth as Item III.4. on SCHEDULE 7(f), Buyer agrees that the amount of any such liability shall be reduced by the aggregate amount of royalty payments withheld by FNSS in respect of periods prior to the Closing Date. Sellers agree that they shall not settle the FNSS litigation described on SCHEDULE 4C(i) in any manner adverse to UDLP or Buyer without the consent of Buyer (which consent shall not be unreasonably withheld). 9. FURTHER ASSURANCES. From time to time, as and when requested by any party hereto, any other party hereto shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions (subject to any limitations set forth in this Agreement), as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement. 10. TAX MATTERS. (a) Prior to Closing, Buyer and Sellers will agree to allocate an amount of the Final Purchase Price to the covenants contained in Section 5(e) hereof. Buyer and Sellers will allocate the balance of the Final Purchase Price among the assets of UDLP based on the appraisal obtained by Buyer at Buyer's expense, subject to Sellers' approval (which approval shall not be unreasonably withheld). Buyer and Sellers will determine the Income Tax consequences of the purchase and sale of the Interests and covenants contained in section 5(e) in a manner consistent with -52- such allocation. Each of Buyer, UDLP, the Subsidiaries, the Foreign Affiliates and Sellers will file all Income Tax Returns (including amended returns and claims for refund) in a manner consistent with such allocation and this Section 10(a). (b) Sellers shall indemnify and hold harmless any Buyer Indemnified Party from and against all Income Taxes (i) with respect to all periods of UDLP or the Subsidiaries ending on or prior to the Closing Date and (ii) with respect to any period of any of UDLP or the Subsidiaries beginning before the Closing Date and ending after the Closing Date, but only with respect to Income Taxes attributable to that portion of such period up to and including the Closing Date (such portion, a "PRE-CLOSING PARTIAL PERIOD"). Sellers shall indemnify and hold harmless any Buyer Indemnified Party from and against UDLP's Share of any Taxes of the Foreign Affiliates (x) with respect to all periods of the Foreign Affiliates ending on or prior to the Closing Date, (y) with respect to any Pre-Closing Partial Period of the Foreign Affiliates and (z) attributable to any breach of the representations contained in Section 4C(l), but only to the extent that UDLP's Share of such Taxes described in (x), (y) and (z) exceeds the sum of $4 million (the "FOREIGN AFFILIATE TAX BASKET") and UDLP's Share of the reserves or accruals for Income Taxes and Other Taxes, accrued but not payable, reflected in the Foreign Affiliate Closing Date Balance Sheets. Notwithstanding anything in this Agreement to the contrary, (i) Sellers shall not be required to indemnify any Buyer Indemnified Party for Taxes to the extent of the aggregate reserves therefor taken into account in the preparation of the Closing Balance Sheet (and in the case of Taxes of any Foreign Affiliate accrued but not payable that are reflected in the Foreign Affiliate Closing Date Balance Sheets) and (ii) Sellers shall not be required to indemnify any Buyer Indemnified Party for any Taxes attributable to a Tax period (or partial Tax period) beginning on or after the Closing Date. Sellers shall be entitled to any net refunds of Taxes (including interest thereon) with respect to any Tax period (or partial Tax period) of any of UDLP and its Subsidiaries ending on or before the Closing Date, except to the extent such refund arises as the result of a carryback of a loss or other Tax benefit from a period beginning after the Closing Date, and any refunds of Taxes attributable to an amount paid by Sellers under this Section. UDLP's share of any net refunds of Taxes (including interest thereon) with respect to any Tax period (or partial Tax period) of any Foreign Affiliate ending on or before the Closing Date (except to the extent such refund arises as the result of a carryback of a loss or other Tax benefit from a period beginning after the Closing Date) shall be added to the Foreign Affiliate Tax Basket. (c) Buyer shall indemnify and hold harmless each Seller Indemnified Party from and against all Taxes (i) with respect to all periods of any of UDLP, its Subsidiaries, and the Foreign Affiliates beginning after the Closing Date, (ii) with respect to any period of UDLP, its Subsidiaries, and the Foreign Affiliates beginning before the Closing Date and ending after the Closing Date, but only with respect to the portion of such period beginning the day after the Closing Date (such portion, a "POST-CLOSING PARTIAL PERIOD"), or (iii) payable as a result of any events occurring on the Closing Date, but after the Closing, which are outside of the ordinary course of business. Buyer shall be entitled to all refunds of Taxes with respect to the periods described in clauses (i) and (ii) above. -53- (d) Any Income Taxes of UDLP or its Subsidiaries or any Taxes of the Foreign Affiliates for a period including a Pre-Closing Partial Period and a Post-Closing Partial Period shall be apportioned between such Pre-Closing Partial Period and such Post-Closing Partial Period, based, in the case of real and personal property Taxes, on a per diem basis and, in the case of other Taxes, on the actual activities, taxable income or taxable loss of UDLP or its Subsidiaries or the Foreign Affiliates, as the case may be, during such Pre-Closing Partial Period and such Post-Closing Partial Period. (e) Sellers and Buyer agree to give prompt notice to each other of any proposed adjustment to Taxes for periods of UDLP, its Subsidiaries and the Foreign Affiliates ending on or prior to the Closing Date or any Pre-Closing Partial Period. Sellers and Buyer shall cooperate with each other in the conduct of any audit or other proceedings involving UDLP for such periods and each may participate at its own expense; PROVIDED, HOWEVER, that Sellers shall have the right to control the conduct of any such audit or proceeding for which Sellers and Buyer agree that any resulting Tax is or may be covered by the indemnity provided in this Section 10 or Section 11; PROVIDED FURTHER that Buyer may elect to have counsel of its choosing participate on behalf of UDLP in any such proceeding. Notwithstanding the foregoing, Sellers may not settle or otherwise resolve any such claim, suit or proceeding which would have a material adverse effect on Buyer's liability for Taxes after Closing without the consent of Buyer, which consent shall not be unreasonably withheld. (f) Sellers, Buyer and UDLP agree to treat all payments made under this Section 10, under any other indemnity provision contained in this Agreement, and in respect of any misrepresentations or breaches of warranties or covenants as adjustments to the Final Purchase Price for Tax purposes. (g) For purposes of this Section 10, all references to Buyer, Sellers, UDLP, its Subsidiaries and Foreign Affiliates shall include their respective successors. (h) Buyer and Sellers shall each pay one-half of all state, county, or local sales, excise, value added, use, registration, stamp, or other transfer Taxes and similar Taxes, levies, charges or fees required to be paid on or as the result of the transfer of the Interests. (i) FILING RESPONSIBILITY. (i) FMC shall prepare and file (or shall cause UDLP to prepare and file) all Income Tax Returns for UDLP for any taxable period ending on or before the Closing Date and UDLP will pay any Income Taxes owed by UDLP with respect to such Income Tax Returns subject to its rights to indemnification under Section 10(b). (ii) Buyer and UDLP shall, subject to the provisions of Section 10(h)(iii) and (iv), file all other Tax Returns with respect to the Business and the business and operations of the Foreign Affiliates. -54- (iii) With respect to any Income Tax Return of UDLP for taxable periods beginning before the Closing Date and ending after the Closing Date, Buyer shall cause UDLP to consult with Sellers concerning such Tax Return. Buyer shall cause UDLP to provide Sellers a copy of any such proposed Tax Return governed by this Section 10(h)(iii) at least 30 days prior to the filing of such Tax Return, and Sellers may provide comments to UDLP, which comments shall be delivered within 15 days of receiving such proposed return from UDLP. Comments shall be subject to the consent of UDLP which consent shall not be unreasonably withheld. Any comments for which consent has been given or for which consent has been unreasonably withheld shall be incorporated into the Tax Returns to which they relate. (iv) With respect to any Income Tax Return of UDLP's Subsidiaries or any Tax Return of the Foreign Affiliates not described in (i) or (iii) that relates to a tax period ending on or before the Closing Date or a tax period which includes a Pre-Closing Partial Period, Buyer shall cause UDLP, its Subsidiaries or Foreign Affiliates to prepare such Tax Return in accordance with past practice and in consultation with Sellers. Buyer shall cause UDLP, its Subsidiaries or its Foreign Affiliates to provide Sellers with a copy of any such proposed Tax Return governed by this Section 10(h)(iv) at least 30 days prior to the filing of such Tax Return, and Sellers may provide comments to UDLP, the Subsidiaries or the Foreign Affiliates which comments shall be delivered within 15 days of receiving such proposed Tax Return. Comments shall be subject to the consent of UDLP which consent shall not unreasonably be withheld. Any comments for which consent has been given or for which consent has been unreasonably withheld shall be incorporated into the Tax Returns to which they relate. (j) COOPERATION AND EXCHANGE OF INFORMATION AND CONDUCT OF TAX AUDITS. (i) FMC shall prepare and submit to Buyer no later than three months after the Closing Date, 1997 blank tax return workpaper packages. Buyer shall, and shall cause UDLP to, prepare completely and accurately and submit to Sellers within three months of receipt, all information as FMC shall reasonably request in such tax return workpaper packages. (ii) As soon as practicable, but in any event within 30 days after FMC's request, from and after the Closing Date, Buyer shall provide Sellers with such cooperation and shall deliver to Sellers such information and data concerning the pre-Closing operations of UDLP, the Subsidiaries and the Foreign Affiliates and make available such knowledgeable employees of UDLP, the Subsidiaries and the Foreign Affiliates as FMC may request, including providing the information and data required by Sellers' customary tax and accounting questionnaires, in order to enable Sellers to complete and file all Tax Returns which they may be required to file with respect to the income of UDLP through the Closing Date or to respond to audits by any taxing authorities with respect to the income of UDLP and to otherwise enable Sellers to satisfy their internal accounting, tax and other legitimate -55- requirements. Such cooperation and information shall include without limitation provision of powers of attorney for the purpose of signing Tax Returns and defending audits and promptly forwarding copies of appropriate notices and forms of other communications received from or sent to any Taxing Authority which relate to UDLP, the Subsidiaries or the Foreign Affiliates, and providing copies of all relevant Tax Returns, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by any Taxing Authority and records concerning the ownership and tax basis of property, which Buyer, UDLP, the Subsidiaries or the Foreign Affiliates may possess. Buyer and UDLP shall make their respective employees and facilities (and the employees and facilities of the Subsidiaries and the Foreign Affiliates) available on a mutually convenient basis to provide explanation of any documents or information provided hereunder. Sellers shall provide similar cooperation to Buyer or UDLP on Buyer's or UDLP's request with respect to post-Closing Tax matters. (iii) For a period of ten (10) years after the Closing Date, Buyer shall, and shall cause UDLP, the Subsidiaries and the Foreign Affiliates to, retain all Tax Returns, books and records (including computer files) of, or with respect to the activities of, UDLP, the Subsidiaries, the Foreign Affiliates or the Business for all taxable periods ending on or prior to the Closing Date. Thereafter, Buyer shall not dispose of any such Tax Returns, books or records unless it first offers in writing such Tax Returns, books and records to FMC and FMC fails to accept such offer within sixty (60) days of its being made. (iv) FMC shall continue to be the tax matters partner of UDLP as set forth in Section 10.8 of the Partnership Agreement between FMC and Harsco, dated as of January 1, 1994, for any taxable periods with respect to Income Taxes ending on or before the Closing Date. (k) SECTION 754 ELECTION. Sellers shall make a valid election under Section 754 of the Code, and under any other similar state or local Tax Law, in the applicable Tax Returns of UDLP to be filed by Sellers. Buyer shall reasonably cooperate with Sellers in making such elections. (l) Notwithstanding anything in this agreement to the contrary, all claims for indemnity with respect to Taxes of any Foreign Affiliate shall be made solely under Section 10(b). (m) DEFINITIONS. For purposes of this Section 10, the following terms shall have the meanings ascribed to them below: (i) "CODE" means the Internal Revenue Code of 1986, as amended. (ii) "FOREIGN AFFILIATE CLOSING BALANCE SHEET" shall mean each Foreign Affiliate's balance sheet as of the Closing Date, stated in United States dollars and prepared in accordance with United States generally accepted accounting principles in a manner -56- consistent with such Foreign Affiliate's June 30, 1997 balance sheet. Copies of both Foreign Affiliates' June 30, 1997 balance sheets are attached as Exhibit 10(m). (iii) "INCOME TAXES" means federal, state, local, or foreign income or franchise Taxes or other Taxes imposed on or measured by income, together with interest or penalties imposed with respect thereto. (iv) "INCOME TAX RETURNS" means federal, state, local, or foreign Tax Returns required to be filed with any Taxing Authority with respect to Income Taxes. (v) "IRS" means the U.S. Internal Revenue Service. (vi) "OTHER TAXES" means all Taxes which are not Income Taxes. (vii) "TAX" or "TAXES" means all federal, state, local, or foreign income, gross receipts, estimated, alternative minimum, add-on minimum, profits, sales, use, occupation, value added, ad valorem, transfer, registration, franchise, employee or other withholding, payroll, unemployment, excise, license, property, or other tax, of any kind whatsoever, together with any interest, penalties, or additions to tax imposed with respect thereto. (viii) "TAX LAWS" means the Code and any federal, state, local, or foreign laws relating to Taxes and any regulations or official administrative pronouncements released thereunder. (ix) "TAX RETURNS" means returns, amended returns, declarations, reports, claims for refund, information returns, or other documents (including any related or supporting schedules, statements, or information) filed or required to be filed in connection with the determination, assessment or collection of Taxes of any party or the administration of any laws, regulations, or administrative requirements relating to any Taxes. (x) "TAXING AUTHORITY" means any governmental authority, domestic or foreign, having jurisdiction over the assessment, determination, collection, or other imposition of Tax. (xi) "UDLP'S SHARE" with respect to Taxes, Tax accruals and reserves, or Tax refunds of a Foreign Affiliate shall mean the product of (a) the amount of such Taxes, Tax accruals and reserves, or Tax refunds as the case may be and (b) the percentage of common equity interests in such Foreign Affiliate owned directly or indirectly by UDLP as of the Closing Date. -57- 11. INDEMNIFICATION. (a) INDEMNIFICATION BY SELLERS. Each Seller shall indemnify Buyer, UDLP and their respective Affiliates and each of their respective officers, directors and employees (collectively, "BUYER INDEMNIFIED PARTIES") and defend and hold them harmless from any loss, liability, cost, damage or expense (including reasonable legal fees and expenses) BUT EXCLUDING punitive damages (except to the extent awarded to third parties as a result of a third party claim) ("LOSSES") suffered or incurred by any such indemnified party to the extent directly attributable to (i) any breach or inaccuracy of any representation or warranty of Sellers contained in this Agreement or the Ancillary Agreements as of the date hereof or as of the Closing Date (after giving effect to the supplement to the Schedules permitted under Section 24 hereof), to the extent such Seller is a party thereto, (other than any representation or warranty contained in Section 4C(n)), (ii) any breach of any covenant of Sellers contained in this Agreement or the Ancillary Agreements, to the extent such Seller is a party thereto, (iii) any Retained Liability and (iv) except as provided in Section 8(h), any liability with respect to any employee benefit plan (other than the Defense Segment Plan) sponsored, maintained or contributed to by FMC or any ERISA Affiliate thereof (defined as any member of the FMC controlled group of companies as defined in Section 414(b), (c), (m) or (o) of the Code) other than UDLP and its Subsidiaries; PROVIDED HOWEVER, that with respect to (A) any breach by FMC of any representation or warranty of FMC contained in Section 4A and (B) any breach of FMC of any covenant contained in Sections 5(c), 5(e) and 8(b), FMC only (and not Harsco) shall so indemnify Buyer, its Affiliates and each of its officers, directors and employees, and, with respect to (X) any breach by Harsco of any representation or warranty of Harsco contained in Section 4B and (Y) any breach by Harsco of any covenant contained in Section 5(c), 5(e) and 8(b), Harsco only (and not FMC), shall so indemnify Buyer, its Affiliates and each of its officers, directors and employees; PROVIDED, FURTHER, that Sellers shall not have any liability under clause (i) above unless the aggregate of all Losses relating thereto for which Sellers would, but for this proviso, be liable exceeds on a cumulative basis an amount equal to $10,000,000, and then only to the extent of any such excess; PROVIDED FURTHER, that Sellers shall not have any liability under clause (i) above for any individual item where the Loss relating to such item is less than $25,000 and such items shall not be aggregated for purposes of the first proviso to this Section 11(a); and PROVIDED FURTHER, that Sellers' aggregate liability under clause (i) above shall in no event exceed 10% of the Final Purchase Price. In no event shall Sellers be liable for any Loss relating to environmental matters pursuant to this Section 11. (b) EXCLUSIVE REMEDY. Except as otherwise expressly provided in Sections 5(k), 8(f), 8(h), 10 and 23 and except as provided in any supplemental agreement executed in connection herewith, each party acknowledges and agrees that, from and after the Closing, its sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement, the Purchase and the Ancillary Agreements shall be pursuant to the indemnification provisions set forth in this Section 11. In furtherance of the foregoing, each party hereby waives, from and after the Closing, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action it may have against the other parties hereto relating to the subject matter of this Agreement, the Purchase and the Ancillary Agreements arising under or based upon any federal, state, local or foreign statute, law, ordinance, rule or regulation or otherwise, PROVIDED, HOWEVER, that no party -58- waives any tort claims it may have against any other party hereto for intentional fraudulent misrepresentation; and PROVIDED FURTHER that nothing in this Section 11(b) shall affect any rights or remedies that the Sellers may have with respect to each other. (c) INDEMNIFICATION BY BUYER. Buyer shall indemnify Sellers, their Affiliates and their respective officers, directors and employees (collectively, "SELLER INDEMNIFIED PARTIES") against and hold them harmless from any Losses suffered or incurred by any such indemnified party to the extent directly attributable to (i) any breach or inaccuracy of any representation or warranty of Buyer contained in this Agreement or the Ancillary Agreements as of the date hereof or as of the Closing Date,(ii) any breach of any covenant of Buyer contained in this Agreement or the Ancillary Agreements contemplated hereby, (iii) any failure by Buyer or its Affiliates to comply with the provisions of the Worker Adjustment Retraining and Notification Act of 1988, as amended, or any similar state or local law or regulation, (iv) any discontinuance, suspension or modification of any employee benefit plan maintained by Buyer or UDLP as contemplated by Section 8(h) hereof, (v) subject to Buyer's rights under Section 11(a), any liability, action, suit, claim or other proceeding which arises directly or indirectly in connection with Buyer's financing or refinancing of the Initial Purchase Price or Final Purchase Price, including as a result of the use of the Financial Statements or other information provided pursuant to Section 8(e) or otherwise in connection with any such financing or refinancing or otherwise or (vi) except as otherwise expressly provided in this Agreement and other than with respect to any Retained Liabilities, all obligations and liabilities of whatever kind and nature, primary or secondary, direct or indirect, absolute or contingent, known or unknown, whether or not accrued, whether arising before, on or after the Closing Date (whether or not asserted against either Seller in its capacity as a partner of UDLP or otherwise), of any of UDLP, its Subsidiaries or the Foreign Affiliates, including, without limitation, any such obligations or liabilities contained in the Material Contracts or any agreement, lease, license, permit, plan or commitment that, because it fails to meet the relevant threshold amount or term, is not included within the definition of Material Contracts; PROVIDED HOWEVER, that Buyer shall not have any liability under clause (i) above unless the aggregate of all Losses relating thereto for which Buyer would, but for this proviso, be liable exceeds on a cumulative basis an amount equal to $10,000,000 and then only to the extent of any such excess; and PROVIDED, FURTHER, that Buyer shall not have any liability under clause (i) above for any individual item where the Loss relating to such item is less than $25,000, and such items shall not be aggregated for purposes of the first proviso to this Section 11(c). (d) LOSSES NET OF INSURANCE AND TAX BENEFITS. The amount of any and all Losses indemnified under this Agreement shall be determined net of any amounts recovered or recoverable by the indemnified party under insurance policies, indemnities or other reimbursement arrangements with respect to such Losses. Each party hereby waives, to the extent permitted under its applicable insurance policies, any subrogation rights that its insurer may have with respect to any indemnifiable Losses. The amount of any and all Losses indemnified under this agreement shall be reduced by the present value (computed using the mid-term applicable federal rate under Code Section 1274, as in effect on the date hereof) of any Tax benefits realized and to be realized by the indemnified party with respect to the Loss, and the amount of all Losses shall be increased by the amount of all additional -59- Taxes (if any) payable by an indemnified party in respect of any indemnification payment made pursuant to this Agreement. Any indemnity payment under this Agreement shall be treated as an adjustment to the Final Purchase Price for tax purposes. (e) TERMINATION OF INDEMNIFICATION. The obligations to indemnify and hold harmless a party hereto with respect to any breach of a representation or warranty of any party hereto contained in Section 4 or 6, shall terminate when the applicable representation or warranty terminates pursuant to Section 15; PROVIDED, HOWEVER, that such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the person to be indemnified or the related party thereto shall have, prior to the expiration of the applicable period, previously made a claim by delivering a written notice (stating in reasonable detail the nature of, and factual and legal basis for, any such claim for indemnification, and the provisions of this Agreement upon which such claim for indemnification is made) to the indemnifying party. The obligation to indemnify and hold harmless a party hereto pursuant to the other provisions of Sections 11(a) and 11(c) shall not terminate. (f) PROCEDURES RELATING TO INDEMNIFICATION. (i) In the event that a party (the "INDEMNIFIED PARTY") is entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by any person, firm, governmental authority or corporation against the indemnified party (a "THIRD PARTY CLAIM"), such indemnified party must notify the indemnifying party in writing, and in reasonable detail, of the Third Party Claim as promptly as reasonably possible after receipt by such indemnified party of notice of the Third Party Claim; PROVIDED, HOWEVER, that failure to give such notification on a timely basis shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure; PROVIDED, FURTHER, that any notices to be delivered to Sellers collectively as the "indemnifying party" shall be delivered to FMC. Thereafter, the indemnified party shall deliver to the indemnifying party, within five business days after the indemnified party's receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim. (ii) If a Third Party Claim is made against an indemnified party, the indemnifying party (FMC if on behalf of Sellers collectively or FMC solely, or Harsco on behalf of Harsco solely) shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges its obligation to indemnify the indemnified party therefor, to assume the defense thereof with counsel selected by the indemnifying party (FMC if on behalf of Sellers collectively or FMC solely, or Harsco on behalf of Harsco solely) and reasonably satisfactory to the indemnified party. Notwithstanding any acknowledgment made pursuant to the immediately preceding sentence, the indemnifying party shall continue to be entitled to assert any limitation on its indemnification responsibility contained in the provisos to Section 11(a) or Section 11(c), as the case may be. Should the indemnifying party so elect to assume the -60- defense of a Third Party Claim, the indemnifying party shall not be liable to the indemnified party for legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the indemnifying party, it being understood, however, that the indemnifying party (FMC if on behalf of Sellers collectively or FMC solely, or Harsco on behalf of Harsco solely) shall control such defense; PROVIDED, HOWEVER, that the indemnifying party shall not be permitted to settle or compromise such Third Party Claim without the written consent of each indemnified party subject to such Third Party Claim (which consent shall not be unreasonably withheld) unless (i) the indemnifying party shall pay or cause to be paid all amounts arising out of such settlement concurrently with the effectiveness thereof, (ii) such settlement is conditioned upon the full and complete release of each indemnified party with respect to such Third Party Claim and (iii) such settlement shall not restrict the business or operations of any indemnified party in any material respect. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the defense thereof. If the indemnifying party chooses to defend any Third Party Claim, all parties hereto shall cooperate in the defense or prosecution of such Third Party Claim. Such cooperation shall include the retention and (upon the indemnifying party's request (FMC if on behalf of Sellers collectively or FMC solely, or Harsco on behalf of Harsco solely)) the provision to the indemnifying party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. In the event that the indemnifying party shall have assumed the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the indemnifying party's (FMC's if on behalf of Sellers collectively or FMC solely, Harsco's if on behalf of Harsco solely) prior written consent (which consent shall not be unreasonably withheld). If the applicable indemnifying party does not assume the defense of a Third Party Claim, the applicable indemnified parties may defend against such claim in any reasonable manner as such indemnified parties may deem appropriate, including settling such Third Party Claim on such terms as such indemnified parties may deem appropriate without the consent of any indemnifying party. 12. ASSIGNMENT. Except as set forth below, this Agreement and any rights and obligations hereunder shall not be assignable or transferable by Buyer or any Seller without the prior written consent of the other parties and any purported assignment without such consent shall be void and without effect; PROVIDED, HOWEVER, that, without the consent of Sellers, (i) Buyer may assign its right to purchase the Interests hereunder to one or more wholly-owned subsidiaries of Buyer upon written notice of such assignment to FMC (it being understood, however, that no such assignment shall limit or otherwise affect Buyer's obligations hereunder), (ii) Buyer may collaterally assign its rights under this agreement as security for its obligations to any third party providing financing in connection with the transactions contemplated hereby and (iii) after Closing, Buyer may assign its rights under this Agreement to any person who, directly or indirectly, acquires 50% or more of the -61- capital stock of Buyer (by merger, sale of stock or otherwise) or the Interests or acquires all or any substantial portion of the assets of UDLP (it being understood that if more than 10% of such person's annual revenues for the latest fiscal year ended prior to such acquisition were derived from the defense business, then all of the representations and warranties contained in this Agreement and the Ancillary Agreements (other than any representation and warranty contained in Sections 4C(k), 4C(l), 4C(n) and 8(f) of this Agreement) shall immediately terminate as of the date of such acquisition). 13. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein express or implied (including Sections 8(f), 8(h) and 11) shall give or be construed to give to any person or entity, other than the parties hereto and such permitted assigns, any legal or equitable rights hereunder. 14. TERMINATION. (a) Anything contained herein to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing Date: (i) by the mutual written consent of Sellers and Buyer; (ii) by either Seller if any of the conditions set forth in Section 3(b) shall have become incapable of fulfillment, and shall not have been waived by Seller; (iii) by Buyer if any of the conditions set forth in Section 3(a) shall have become incapable of fulfillment, and shall not have been waived by Buyer; or (iv) by either Seller if the Closing does not occur on or prior to November 25, 1997; or (v) by Buyer if the Closing does not occur on or prior to November 25, 1997; PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii), (iii), (iv) or (v) above is not in breach of any of its representations, warranties, covenants or agreements contained in this Agreement. (b) In the event of termination by Sellers or Buyer pursuant to this Section 14, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated, without further action by any party. If the transactions contemplated by this Agreement are terminated as provided herein: (i) Buyer shall return all documents and copies and other materials received from or on behalf of each Seller relating to the transactions contemplated hereby, whether so -62- obtained before or after the execution hereof, to such Seller or shall destroy all such documents, copies and materials and provide written certification of such destruction to such Seller; and (ii) all confidential information received by Buyer with respect to UDLP, the Subsidiaries, the Foreign Affiliates and the Business shall be treated in accordance with the Diligence Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement. (c) If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Section 14, this Agreement shall become void and of no further force and effect, except for the provisions of (i) Section 5(a) relating to indemnification in connection with access to the Property, (ii) Section 7(a) relating to the obligation of Buyer to keep confidential certain information and data obtained by it, (iii) Section 8(b) relating to publicity, (iv) Section 16 relating to certain expenses, (v) Section 23 relating to finder's fees and broker's fees, and (vi) this Section 14. Nothing in this Section 14 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by another party of its obligations under this Agreement. 15. SURVIVAL OF REPRESENTATIONS. The representations and warranties in this Agreement and in any other document delivered in connection herewith shall survive the Closing solely for purposes of Sections 11(a) and 11(c) and shall terminate at the close of business on April 30, 1999; PROVIDED, HOWEVER, that (i) the representations and warranties set forth in Section 4C(l) and Section 4C(k) (to the extent relating to the applicable statutes) shall survive the Closing until 90 days after the expiration of the applicable statute of limitations and (ii) the representations and warranties set forth in Sections 4A, 4B, 4C(a)(i) and 4C(b) shall survive the Closing without limitation. 16. EXPENSES. Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses. 17. AMENDMENT AND WAIVER. This Agreement may be amended, or any provision of this Agreement may be waived; PROVIDED, HOWEVER, that any such amendment or waiver shall be binding upon a Seller only if set forth in a writing executed by such Seller and referring specifically to the provision alleged to have been amended or waived, and any such amendment or waiver shall be binding upon Buyer only if set forth in a writing executed by Buyer and referring specifically to the provision alleged to have been amended or waived. No course of dealing between or among any persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. -63- 18. NOTICES. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by prepaid telex, cable or telecopy, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows: (i) IF TO BUYER, Iron Horse Acquisition Corp. c/o TC Group, L.L.C. 1001 Pennsylvania Avenue, N.W. Suite 220 South Washington, D.C. 20004 Telecopy No.: 202-347-9250 Attention: Allan M. Holt WITH A COPY TO: Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Telecopy No.: 202-637-2201 Attention: Bruce E. Rosenblum (ii) IF TO FMC, FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 Telecopy No.: (312) 861-6012 Attention: J. Paul McGrath WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Telecopy No.: (312) 861-2200 Attention: Glen E. Hess, P.C. -64- (iii) IF TO HARSCO, Harsco Corporation 350 Poplar Church Road Camp Hill, PA 17011 Telecopy No.: (717) 763-6402 Attention: Paul C. Coppock WITH A COPY TO: Morgan, Lewis & Bockius 1800 M Street, N.W. Washington, D.C. 20036 Telecopy No.: (202) 467-7176 Attention: Lloyd H. Feller 19. INTERPRETATION. The headings and captions contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized terms used in any Schedule or Exhibit and not otherwise defined therein shall have the meanings set forth in this Agreement. The use of the word "including" herein shall mean "including without limitation." 20. NO STRICT CONSTRUCTION. Notwithstanding the fact that this Agreement has been drafted or prepared by one of the parties, each of Buyer and Sellers confirms that each of them and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the parties, and the language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person. 21. COUNTERPARTS. This Agreement may be executed in one or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party. 22. ENTIRE AGREEMENT. This Agreement and the other agreements referred to herein (including the Diligence Confidentiality Agreement) or executed among all of the parties in connection herewith contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter. 23. BROKERAGE. Buyer has not used a broker or finder in connection with the transactions contemplated by this Agreement, and there are no claims for brokerage commissions, -65- finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement by or on behalf of Buyer, except pursuant to an arrangement with Lehman Brothers, Inc. for which Buyer is solely responsible. No Seller has retained any broker or finder or incurred any liability or obligation for any brokerage fees, commissions or finder's fees with respect to this Agreement or the transactions contemplated hereby, except pursuant to arrangements with Morgan Stanley & Co. Incorporated (for which FMC is responsible) and Salomon Brothers Inc (for which Harsco is responsible). Notwithstanding anything to the contrary in Section 11, Buyer shall indemnify and hold Sellers harmless for any breach of its representation in this Section 23, and Sellers shall indemnify and hold Buyer harmless for any breach of their representation in this Section 23. 24. SCHEDULES. The Schedules hereto are qualified in their entirety by reference to the specific provisions of the Agreement and are not intended to constitute, and shall not be construed as constituting, representations or warranties of Sellers, except as and to the extent provided in the Agreement. Inclusion of information in the Schedules hereto shall not be construed as an admission that such information is material to any of Sellers, the Interests, the Business and/or UDLP or its Subsidiaries or Foreign Affiliates. Matters reflected in the following Schedules are not necessarily limited to matters required by the Agreement to be reflected in the Schedules. Such additional matters are set forth for informational purposes only and do not necessarily include other matters of a similar nature. Prior to the Closing, Sellers shall have the right to supplement, modify or update the Schedules hereto to reflect changes occurring between the date of this Agreement and the Closing; PROVIDED, HOWEVER, that any such supplements, modifications or updates shall be subject to Buyer's rights under Section 3(a)(i). Matters disclosed in any Schedule shall be deemed to be disclosed in all Schedules in which such matters are appropriate to be disclosed. Headings have been inserted on Sections of the Schedules for convenience of reference only and shall to no extent have the effect of amending or changing the express description of the Sections as set forth in the Agreement. 25. REPRESENTATION BY COUNSEL; INTERPRETATION. Sellers and Buyer acknowledge that each of them has been represented by counsel in connection with this Agreement and the transactions contemplated hereby. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. 26. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and effective under applicable law, but if any provision of this Agreement or the application of any such provision to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 27. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois applicable to agreements made and to be -66- performed entirely within such State, without regard to the conflicts of law principles of such State, except to the extent otherwise provided on SCHEDULE 29(b) hereto. 28. EXHIBITS AND SCHEDULES. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. 29. DISPUTE RESOLUTION. (a) NEGOTIATION. In the event of any dispute or disagreement between Sellers and Buyer as to the interpretation of any provision of this Agreement or any Ancillary Agreement (or the performance of obligations hereunder or thereunder), the matter, upon written request of any Seller or Buyer, shall be referred to representatives of the parties for decision, each party being represented by a senior executive officer (the "REPRESENTATIVES"). The Representatives shall promptly meet in a good faith effort to resolve the dispute. If the Representatives do not agree upon a decision within thirty (30) calendar days after reference of the matter to them, each of Buyer and Sellers shall be free to exercise the remedies available to them under Section 29(b). (b) ARBITRATION. Any controversy, dispute or claim arising out of or relating in any way to this Agreement or the Ancillary Agreements or the transactions arising hereunder or thereunder that cannot be resolved by negotiation pursuant to Section 29(a), including any controversy, dispute or claim relating to any alleged breach or violation hereof or thereof by a party hereto, or the scope, interpretation, validity or termination hereof or thereof, shall, except as otherwise provided in Section 2(b), be settled exclusively by arbitration in accordance with and subject to the principles and provisions set forth on SCHEDULE 29(b) attached hereto. * * * * * -67- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. FMC CORPORATION By: /s/ J. Paul McGrath ------------------------------ Name: J. Paul McGrath Title: Senior Vice President HARSCO CORPORATION By: /s/ Leonard A. Campanaro ------------------------------ Name: Leonard A. Campanaro Title: Sr. Vice President & CFO HARSCO UDLP CORPORATION By: /s/ Leonard A. Campanaro ------------------------------ Name: Leonard A. Campanaro Title: Treasurer IRON HORSE ACQUISITION CORP. By: /s/ Allan M. Holt ------------------------------ Name: Allan M. Holt Title: President -68- LIST OF EXHIBITS Exhibit 2(a)(i) - Form of Opinion of Buyer's Counsel Exhibit 2(a)(ii) - Form of Opinion of Each Seller's Counsel Exhibit 6(c) - Escrow Agreement Exhibit 8(k) - Transition Services Agreement Exhibit 8(l) - Technology and Environmental Services Agreement Exhibit 8(m) - Lease Exhibit 8(n)-1 - FMC Intellectual Property Agreement Exhibit 8(n)-2 - Harsco Intellectual Property Agreement Exhibit 10m - Foreign Affiliates' June 30, 1997 Balance Sheets -69- LIST OF SCHEDULES Schedule 2(b) - Adjustment Principles Schedule 3(a)(v) - Material Adverse Changes Schedule 4C(a)(ii) - Certain Conflicts Schedule 4C(b) - Purchase Rights Schedule 4C(c)-1 - Subsidiaries Schedule 4C(c)-2 - Foreign Affiliates Schedule 4C(d) - Financial Statements Schedule 4C(e) - Permitted Liens Schedule 4C(f)-1 - Owned Real Property Schedule 4C(f)-2 - Leased Real Property Schedule 4C(g) - Intellectual Property and Intellectual Property Exceptions Schedule 4C(h) - Material Contracts Schedule 4C(i) - Litigation Schedule 4C(j) - Compliance with Laws Schedule 4C(k) - ERISA Exceptions Schedule 4C(k)-1 - UDLP Employee Benefit Plans Schedule 4C(k)-2 - FMC Employee Benefit Plans Schedule 4C(l) - Taxes Schedule 4C(m) - Insurance Policies Schedule 4C(n) - Environmental Compliance Schedule 4C(o) - Undisclosed Liabilities Schedule 4C(p) - Subsequent Events Schedule 4C(q) - Government Contracts Schedule 4C(r) - Labor Relations Schedule 4C(u)-1 - Loss Contracts Schedule 4C(u)-2 - Backlog Schedule 4C(v) - Customers, Distributors and Suppliers Schedule 4C(w) - Dividends by Foreign Affiliates Schedule 5(b) - Permitted Conduct Schedule 5(e) - Employees Not To Be Solicited Schedule 5(g) - FMC Resource Transfer Schedule 6(c) - Commitment Letters Schedule 7(e) - Guaranties Schedule 7(f) - Retained Assets and Liabilities Schedule 8(f)(ii) - Remediation Reports Schedule 8(h)(i) - Transferred Employees Schedule 8(h)(iii) - Actuarial Assumptions and Methods Schedule 8(h)(v) - UDLP Severance Plan Schedule 8(h)(xii) - Incentive Payments and Severance Payments Schedule 29(b) - Arbitration Principles -70- EX-3.1A 3 CERT. OF INCORPORATION OF IRON HORSE ACQUISITION CERTIFICATE OF INCORPORATION OF IRON HORSE ACQUISITION CORP. FIRST: The name of the corporation (hereinafter sometimes referred to as the "Corporation") is: IRON HORSE ACQUISITION CORP. SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, New Castle County, Wilmington, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The aggregate number of all classes of shares which the Corporation shall have authority to issue is one thousand (1,000) shares of common stock, par value of $.01 per share. No holder of shares of the Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive right to subscribe for, purchase or receive any share of the Corporation of any class, now or hereafter authorized, or any options or warrants for such shares, or any rights to subscribe for or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time or from time to time be issued, sold or offered for sale by the Corporation; PROVIDED, HOWEVER, that in connection with the issuance or sale of any such shares or securities, the Board of Directors of the Corporation may, in its sole discretion, offer such shares or securities, or any part thereof, for purchase or subscription by the holders of shares of the Corporation, except as may otherwise be provided by this Certificate of Incorporation, as amended from time to time. At all times, each holder of common stock of the Corporation shall be entitled to one vote for each share of common stock held by such stockholder standing in the name of such stockholder on the books of the Corporation. FIFTH: The name and address of the Incorporator is as follows: Eleanor R. Horsley Latham & Watkins 1001 Pennsylvania Avenue, NW Suite 1300 Washington, D.C. 20004 SIXTH: In furtherance and not in limitation of the power conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the Bylaws of the Corporation. SEVENTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for the breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transactions from which the director derived an improper personal benefit. EIGHTH: Election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. NINTH: The Corporation reserves the right to amend, alter, change or repeal any provisions contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the General Corporation Law of the State of Delaware. All rights conferred upon stockholders herein are granted subject to this reservation. I, THE UNDERSIGNED, being the sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, herein declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 15th day of August, 1997. /s/ Eleanor R. Horsley Eleanor R. Horsley Incorporator EX-3.1B 4 CERT. OF AMENDMENT OF CERT. OF INC. OF IRON HORSE CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION BEFORE PAYMENT OF ANY PART OF THE CAPITAL OF IRON HORSE ACQUISITION CORP. It is hereby certified that: 1. The name of the corporation (hereinafter called the "Corporation") is Iron Horse Acquisition Corp. 2. The Corporation has not received any payment for any of its stock. 3. The Certificate of Incorporation of the Corporation is hereby amended by striking out the FIRST article and by substituting in lieu thereof a new FIRST article as follows: FIRST: The name of the corporation (hereinafter sometimes referred to as the "Corporation") is: UNITED DEFENSE INDUSTRIES, INC. 4. The amendment to the Certificate of Incorporation herein certified was duly adopted, pursuant to the provisions of Section 241 of the General Corporation Law of the State of Delaware, by at least a majority of the directors who have been elected and qualified. Signed on September 8, 1997. Attest: /s/ Peter J. Clare /s/ Allan M. Holt Peter J. Clare, Secretary Allan M. Holt, President EX-3.1C 5 CERT. OF AMEND. OF CERT. OF INC. OF UNITED DEFENSE CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF UNITED DEFENSE INDUSTRIES, INC. Pursuant to Section 242 of the General Corporation Law of the State of Delaware, United Defense Industries, Inc. (the "Corporation"), a Delaware corporation, hereby certifies that: 1. The Certificate of Incorporation of the Corporation is hereby amended by deleting the present first paragraph of Article FOURTH and inserting in lieu thereof a new first paragraph of Article FOURTH, as follows: FOURTH: The aggregate number of all classes of shares which the Corporation shall have authority to issue is four hundred thousand (400,000 shares of common stock, par value of $.01 per share. The remaining paragraphs of Article FOURTH shall remain unamended. 2. The sole director of the Corporation, by written consent, declared the foregoing Amendment advisable and referred it to the sole shareholder of the Corporation for a vote and approval; and 3. The sole shareholder of the Corporation, by written consent, has adopted and approved the foregoing amendment. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed and executed in its corporate name by Allen M. Holt, its President, and attested by Peter J. Clare, its Secretary on this 1st day of October, 1997. Attest: United Defense Industries, Inc., a Delaware corporation /s/ Peter J. Clare /s/ Allan M. Holt - ------------------------------ ------------------------------ Peter J. Clare Allan M. Holt, Secretary President EX-3.2 6 EXHIBIT 3.2 BY-LAWS OF UNITED DEFENSE INDUSTRIES BY-LAWS OF UNITED DEFENSE INDUSTRIES, INC. (FORMERLY KNOWN AS IRON HORSE ACQUISITION CORP.) ARTICLE I OFFICES Section 1. The registered office of Iron Horse Acquisition Corp. (the "Corporation") shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the Corporation. Section 2. The annual meeting of stockholders shall be held each year on a date and a time designated by the Board of Directors. At each annual meeting directors shall be elected and any other proper business may be transacted. Section 3. A majority of the stock issued and outstanding and entitled to vote at any meeting of stockholders, the holders of which are present in person or represented by proxy, shall constitute a quorum for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until 1 adjournment. If, however, such quorum shall not be present or represented at any meeting of the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat. Section 4. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes, or the Certificate of Incorporation, or these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 5. At each meeting of the stockholders, each stockholder having the right to vote may vote in person or may authorize another person or persons to act for him by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. All proxies must be filed with the Secretary of the Corporation at the beginning of each meeting in order to be counted in any vote at the meeting. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the Corporation on the record date set by 2 the Board of Directors as provided in Article V, Section 6 hereof. All elections shall be had and all questions decided by a plurality vote. Section 6. Special meetings of the stockholders, for any purpose, or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the President and shall be called by the President or the Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation, issued and outstanding, and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 7. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Section 8. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the 3 examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 9. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole Board shall be not less than one (1) and not more than twelve (12). The exact number of directors shall be determined by resolution of the Board, and the initial number of directors shall be one (1). The directors need not be stockholders. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this 4 Article, and each director elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, either with or without cause, from the Board of Directors at any meeting of stockholders by a majority of the stock represented and entitled to vote thereat. Section 2. Vacancies on the Board of Directors by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next annual election of directors and until their successors are duly elected and shall qualify, unless sooner replaced by a vote of the shareholders. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. The property and business of the Corporation shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board may exercise all 5 such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. Section 4. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation outside of the State of Delaware. Section 5. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board. Section 6. Special meetings of the Board of Directors may be called by the President on forty-eight hours' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or the Secretary in like manner and on like notice on the written request of two directors. Section 7. At all meetings of the Board of Directors a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at any meeting at which there is a quorum, shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. If only one director is authorized, such sole director shall constitute a quorum. At any meeting, a director shall have the right to be accompanied by counsel provided that such counsel shall agree to any confidentiality restrictions reasonably imposed by the Corporation. 6 Section 8. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 9. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. Section 10. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each such committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and 7 affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-Laws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 11. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Section 12. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 13. The Corporation shall indemnify every person who is or was a party or is or was threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation or, while a director or officer or employee of 8 the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the full extent permitted by applicable law. ARTICLE IV OFFICERS Section 1. The officers of this corporation shall be chosen by the Board of Directors and shall include a President, a Secretary, and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, such other officers as are desired, including a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 hereof. In the event there are two or more Vice Presidents, then one or more may be designated as Executive Vice President, Senior Vice President, or other similar or dissimilar title. At the time of the election of officers, the directors may by resolution determine the order of their rank. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-Laws otherwise provide. Section 2. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose the officers of the Corporation. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall 9 exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board of Directors. Section 6. Chairman of the Board. The Chairman of the Board, if such an officer be elected, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these By-Laws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 7 of this Article IV. Section 7. President. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. He shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be an ex-officio member of all 10 committees and shall have the general powers and duties of management usually vested in the office of President and Chief Executive Officer of corporations, and shall have such other powers and duties as may be prescribed by the Board of Directors or these By-Laws. Section 8. Vice Presidents. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall have such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors. Section 9. Secretary. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required by the Board of Directors. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or these By-Laws. He shall keep in safe custody the seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. Section 10. Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of 11 Directors, or if there be no such determination, the Assistant Secretary designated by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 11. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond, in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 12. Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, or if there be no such determination, the Assistant Treasurer designated by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties 12 and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE V CERTIFICATES OF STOCK Section 1. Every holder of stock of the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman or Vice Chairman of the Board of Directors, or the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer of the Corporation, certifying the number of shares represented by the certificate owned by such stockholder in the Corporation. Section 2. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Section 3. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu 13 of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 4. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 5. Upon surrender to the Corporation, or the transfer agent of the Corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its book. 14 Section 6. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders, or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 7. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE VI GENERAL PROVISIONS Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. 15 Section 2. Before payment of any dividend there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation, and the directors may abolish any such reserve. Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. Section 4. The fiscal year of the Corporation shall be the calendar year. Section 5. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 6. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 7. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof 16 in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Section 8. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation. ARTICLE VII AMENDMENTS Section 1. These By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal By-Laws. 17 CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: (1) That I am the duly elected and acting Secretary of Iron Horse Acquisition Corp., a Delaware corporation (the "Corporation"); and (2) That the foregoing By-Laws, comprising seventeen (17) pages, constitute the By-Laws of the Corporation as duly adopted by the written consent of the sole Incorporator, and approved by the Board of Directors of the Corporation as of August 18, 1997. IN WITNESS WHEREOF, I have hereunto subscribed my name this 18th day of August, 1997. /s/ Peter J. Clare ------------------ Peter J. Clare, Secretary i TABLE OF CONTENTS PAGE ARTICLE I - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Registered Office. . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . 1 Section 1. Place of Meetings. . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Annual Meeting of Stockholders . . . . . . . . . . . . . . . . . 1 Section 3. Quorum; Adjourned Meetings and Notice Thereof. . . . . . . . . . 1 Section 4. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 5. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 7. Notice of Stockholder's Meetings . . . . . . . . . . . . . . . . 3 Section 8. Maintenance and Inspection of Stockholder List . . . . . . . . . 3 Section 9. Stockholder Action by Written Consent Without a Meeting. . . . . 4 ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1. The Number of Directors. . . . . . . . . . . . . . . . . . . . . 4 Section 2. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4. Place of Directors' Meetings . . . . . . . . . . . . . . . . . . 6 Section 5. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 7. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 8. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . 7 Section 9. Telephonic Meetings. . . . . . . . . . . . . . . . . . . . . . . 7 Section 10. Committees of Directors. . . . . . . . . . . . . . . . . . . . . 7 Section 11. Minutes of Committee Meetings. . . . . . . . . . . . . . . . . . 8 Section 12. Compensation of Directors. . . . . . . . . . . . . . . . . . . . 8 Section 13. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE IV - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 1. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 2. Election of Officers . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. Subordinate Officers . . . . . . . . . . . . . . . . . . . . . . 9 Section 4. Compensation of Officers . . . . . . . . . . . . . . . . . . . .10 Section 5. Term of Office; Removal and Vacancies. . . . . . . . . . . . . .10 Section 6. Chairman of the Board. . . . . . . . . . . . . . . . . . . . . .10 Section 7. President. . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Section 8. Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . . .11 Section 9. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Section 10. Assistant Secretaries. . . . . . . . . . . . . . . . . . . . . .11 Section 11. Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 12. Assistant Treasurer. . . . . . . . . . . . . . . . . . . . . . .12 ARTICLE V - CERTIFICATES OF STOCK. . . . . . . . . . . . . . . . . . . . . . .13 Section 1. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .13 Section 2. Signatures on Certificates . . . . . . . . . . . . . . . . . . .13 Section 3. Statement of Stock Rights, Preferences, Privileges . . . . . . .13 Section 4. Lost Certificates. . . . . . . . . . . . . . . . . . . . . . . .14 Section 5. Transfers of Stock . . . . . . . . . . . . . . . . . . . . . . .14 Section 6. Fixing Record Date . . . . . . . . . . . . . . . . . . . . . . .15 Section 7. Registered Stockholders. . . . . . . . . . . . . . . . . . . . .15 ARTICLE VI - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .15 Section 1. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Section 2. Payment of Dividends' Directors' Duties. . . . . . . . . . . . .16 Section 3. Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Section 4. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . .16 Section 5. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . .16 Section 6. Manner of Giving Notice. . . . . . . . . . . . . . . . . . . . .16 Section 7. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . .16 Section 8. Annual Statement . . . . . . . . . . . . . . . . . . . . . . . .17 ARTICLE VII - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Section 1. Amendment by Directors or Stockholders . . . . . . . . . . . . .17 EX-3.3 7 EXH. 3.3 CERT. OF INC. OF UDLP HOLDINGS CORP. CERTIFICATE OF INCORPORATION OF UDLP HOLDINGS CORP. FIRST: The name of the corporation (hereinafter sometimes referred to as the "Corporation") is: UDLP HOLDINGS CORP. SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, New Castle County, Wilmington, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The aggregate number of all classes of shares which the Corporation shall have authority to issue is one thousand (1,000) shares of common stock, par value of $.01 per share. No holder of shares of the Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive right to subscribe for, purchase or receive any share of the Corporation of any class, now or hereafter authorized, or any options or warrants for such shares, or any rights to subscribe for or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time or from time to time be issued, sold or offered for sale by the Corporation; PROVIDED, HOWEVER, that in connection with the issuance or sale of any such shares or securities, the Board of Directors of the Corporation may, in its sole discretion, offer such shares or securities, or any part thereof, for purchase or subscription by the holders of shares of the Corporation, except as may otherwise be provided by this Certificate of Incorporation, as amended from time to time. At all times, each holder of common stock of the Corporation shall be entitled to one vote for each share of common stock held by such stockholder standing in the name of such stockholder on the books of the Corporation. FIFTH: The name and address of the Incorporator is as follows: Eleanor R. Horsley Latham & Watkins 1001 Pennsylvania Avenue, NW Suite 1300 Washington, D.C. 20004 SIXTH: In furtherance and not in limitation of the power conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the Bylaws of the Corporation. SEVENTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for the breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transactions from which the director derived an improper personal benefit. EIGHTH: Election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. NINTH: The Corporation reserves the right to amend, alter, change or repeal any provisions contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the General Corporation Law of the State of Delaware. All rights conferred upon stockholders herein are granted subject to this reservation. I, THE UNDERSIGNED, being the sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, herein declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 8th day of September, 1997. /s/ Eleanor R. Horsley Eleanor R. Horsley Incorporator EX-3.4 8 EXHIBIT 3.4 BY-LAWS OF UDLP HOLDINGS CORP. BY-LAWS OF UDLP HOLDINGS CORP. ARTICLE I OFFICES Section 1. The registered office of UDLP Holdings Corp. (the "Corporation") shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the Corporation. Section 2. The annual meeting of stockholders shall be held each year on a date and a time designated by the Board of Directors. At each annual meeting directors shall be elected and any other proper business may be transacted. Section 3. A majority of the stock issued and outstanding and entitled to vote at any meeting of stockholders, the holders of which are present in person or represented by proxy, shall constitute a quorum for the transaction of business except as otherwise provided by law, by the Certificate of Incorporation, or by these By-Laws. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until 1 adjournment. If, however, such quorum shall not be present or represented at any meeting of the stockholders, a majority of the voting stock represented in person or by proxy may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote thereat. Section 4. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes, or the Certificate of Incorporation, or these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 5. At each meeting of the stockholders, each stockholder having the right to vote may vote in person or may authorize another person or persons to act for him by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. All proxies must be filed with the Secretary of the Corporation at the beginning of each meeting in order to be counted in any vote at the meeting. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the Corporation on the record date set by 2 the Board of Directors as provided in Article V, Section 6 hereof. All elections shall be had and all questions decided by a plurality vote. Section 6. Special meetings of the stockholders, for any purpose, or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the President and shall be called by the President or the Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation, issued and outstanding, and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 7. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Section 8. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the 3 examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 9. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole Board shall be not less than one (1) and not more than twelve (12). The exact number of directors shall be determined by resolution of the Board, and the initial number of directors shall be one (1). The directors need not be stockholders. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this 4 Article, and each director elected shall hold office until his successor is elected and qualified; provided, however, that unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, either with or without cause, from the Board of Directors at any meeting of stockholders by a majority of the stock represented and entitled to vote thereat. Section 2. Vacancies on the Board of Directors by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next annual election of directors and until their successors are duly elected and shall qualify, unless sooner replaced by a vote of the shareholders. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. The property and business of the Corporation shall be managed by or under the direction of its Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board may exercise all 5 such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. Section 4. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation outside of the State of Delaware. Section 5. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board. Section 6. Special meetings of the Board of Directors may be called by the President on forty-eight hours' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or the Secretary in like manner and on like notice on the written request of two directors. Section 7. At all meetings of the Board of Directors a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at any meeting at which there is a quorum, shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or by these By-Laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. If only one director is authorized, such sole director shall constitute a quorum. At any meeting, a director shall have the right to be accompanied by counsel provided that such counsel shall agree to any confidentiality restrictions reasonably imposed by the Corporation. 6 Section 8. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 9. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. Section 10. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each such committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and 7 affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-Laws of the Corporation; and, unless the resolution or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 11. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Section 12. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 13. The Corporation shall indemnify every person who is or was a party or is or was threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation or, while a director or officer or employee of 8 the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the full extent permitted by applicable law. ARTICLE IV OFFICERS Section 1. The officers of this corporation shall be chosen by the Board of Directors and shall include a President, a Secretary, and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, such other officers as are desired, including a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 hereof. In the event there are two or more Vice Presidents, then one or more may be designated as Executive Vice President, Senior Vice President, or other similar or dissimilar title. At the time of the election of officers, the directors may by resolution determine the order of their rank. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-Laws otherwise provide. Section 2. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose the officers of the Corporation. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall 9 exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the Board of Directors. Section 6. Chairman of the Board. The Chairman of the Board, if such an officer be elected, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these By-Laws. If there is no President, the Chairman of the Board shall in addition be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 7 of this Article IV. Section 7. President. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. He shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be an ex-officio member of all 10 committees and shall have the general powers and duties of management usually vested in the office of President and Chief Executive Officer of corporations, and shall have such other powers and duties as may be prescribed by the Board of Directors or these By-Laws. Section 8. Vice Presidents. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall have such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors. Section 9. Secretary. The Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required by the Board of Directors. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or these By-Laws. He shall keep in safe custody the seal of the Corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. Section 10. Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of 11 Directors, or if there be no such determination, the Assistant Secretary designated by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 11. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond, in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 12. Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, or if there be no such determination, the Assistant Treasurer designated by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties 12 and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE V CERTIFICATES OF STOCK Section 1. Every holder of stock of the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman or Vice Chairman of the Board of Directors, or the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer of the Corporation, certifying the number of shares represented by the certificate owned by such stockholder in the Corporation. Section 2. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Section 3. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu 13 of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 4. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 5. Upon surrender to the Corporation, or the transfer agent of the Corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its book. 14 Section 6. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders, or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 7. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE VI GENERAL PROVISIONS Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. 15 Section 2. Before payment of any dividend there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation, and the directors may abolish any such reserve. Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. Section 4. The fiscal year of the Corporation shall be the calendar year. Section 5. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 6. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 7. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof 16 in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Section 8. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation. ARTICLE VII AMENDMENTS Section 1. These By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the Certificate of Incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal By-Laws. 17 CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: (1) That I am the duly elected and acting Secretary of UDLP Holdings Corp., a Delaware corporation (the "Corporation"); and (2) That the foregoing By-Laws, comprising seventeen (17) pages, constitute the By-Laws of the Corporation as duly adopted by the written consent of the sole Incorporator, and approved by the Board of Directors of the Corporation as of September 8, 1997. IN WITNESS WHEREOF, I have hereunto subscribed my name this 8th day of September 8, 1997. /s/ Peter J. Clare -------------------------- Peter J. Clare, Secretary 18 TABLE OF CONTENTS PAGE ARTICLE I - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . 1 Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Annual Meeting of Stockholders. . . . . . . . . . . . . . . . . 1 Section 3. Quorum; Adjourned Meetings and Notice Thereof . . . . . . . . . 1 Section 4. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 5. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 6. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . 3 Section 7. Notice of Stockholder's Meetings. . . . . . . . . . . . . . . . 3 Section 8. Maintenance and Inspection of Stockholder List. . . . . . . . . 3 Section 9. Stockholder Action by Written Consent Without a Meeting . . . . 4 ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1. The Number of Directors . . . . . . . . . . . . . . . . . . . . 4 Section 2. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4. Place of Directors' Meetings. . . . . . . . . . . . . . . . . . 6 Section 5. Regular Meetings. . . . . . . . . . . . . . . . . . . . . . . . 6 Section 6. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . 6 Section 7. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 8. Action Without Meeting. . . . . . . . . . . . . . . . . . . . . 7 Section 9. Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . 7 Section 10. Committees of Directors . . . . . . . . . . . . . . . . . . . . 7 Section 11. Minutes of Committee Meetings . . . . . . . . . . . . . . . . . 8 Section 12. Compensation of Directors . . . . . . . . . . . . . . . . . . . 8 Section 13. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE IV - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 1. Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 2. Election of Officers. . . . . . . . . . . . . . . . . . . . . . 9 Section 3. Subordinate Officers. . . . . . . . . . . . . . . . . . . . . . 9 Section 4. Compensation of Officers. . . . . . . . . . . . . . . . . . . .10 Section 5. Term of Office; Removal and Vacancies . . . . . . . . . . . . .10 Section 6. Chairman of the Board . . . . . . . . . . . . . . . . . . . . .10 Section 7. President . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . .11 Section 9. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Section 10. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . .11 Section 11. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 12. Assistant Treasurer . . . . . . . . . . . . . . . . . . . . . .12 ARTICLE V - CERTIFICATES OF STOCK. . . . . . . . . . . . . . . . . . . . . . .13 Section 1. Certificates. . . . . . . . . . . . . . . . . . . . . . . . . .13 Section 2. Signatures on Certificates. . . . . . . . . . . . . . . . . . .13 Section 3. Statement of Stock Rights, Preferences, Privileges. . . . . . .13 Section 4. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . .14 Section 5. Transfers of Stock. . . . . . . . . . . . . . . . . . . . . . .14 Section 6. Fixing Record Date. . . . . . . . . . . . . . . . . . . . . . .15 Section 7. Registered Stockholders . . . . . . . . . . . . . . . . . . . .15 ARTICLE VI - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .15 Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Section 2. Payment of Dividends' Directors' Duties . . . . . . . . . . . .16 Section 3. Checks. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Section 4. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . .16 Section 5. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . .16 Section 6. Manner of Giving Notice . . . . . . . . . . . . . . . . . . . .16 Section 7. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . .16 Section 8. Annual Statement. . . . . . . . . . . . . . . . . . . . . . . .17 ARTICLE VII - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Section 1. Amendment by Directors or Stockholders. . . . . . . . . . . . .17 EX-3.5 9 EXHIBIT 3.5 AGMT OF LTD PARTNERSHIP OF UNITED DEF AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF UNITED DEFENSE, L.P. This Amended and Restated Agreement of Limited Partnership (this "Agreement") of United Defense, L.P. is entered into by and between UDLP Holdings Corp., a Delaware corporation, as general partner ("Holdings" or the "General Partner"), and United Defense Industries, Inc., a Delaware corporation, as limited partner ("UDI" or the "Limited Partner" and, together with the General Partner, the "Partners"). RECITALS: WHEREAS, United Defense, L.P., a Delaware limited partnership (the "Partnership"), was formed on January 20, 1994 in accordance with the Delaware Revised Uniform Limited Partnership Act (the "Act"), pursuant to that certain Partnership Agreement dated as of January 1, 1994 by and among FMC Corporation, a Delaware corporation ("FMC"), Harsco Defense Holding, Inc., a Delaware corporation, and the Partnership (the "Original Partnership Agreement"); WHEREAS, pursuant to that certain Purchase Agreement (the "Purchase Agreement"), dated August 25, 1997, among FMC, Harsco Corporation, Harsco UDLP Corporation (together with Harsco Corporation, "Harsco") and UDI, FMC and Harsco agreed to sell to UDI and its assigns, and UDI agreed to purchase or cause to be purchased from FMC and Harsco, all of the outstanding interests in the Partnership; WHEREAS, UDI has assigned its right under the Purchase Agreement to purchase a 1% interest in the Partnership to the General Partner pursuant to an Assignment Agreement dated as of the date hereof; WHEREAS, FMC, Harsco, UDI, Holdings and the Partnership have entered into that certain Amendment No. 1 to the Partnership Agreement, dated as of the date hereof, whereby UDI was admitted to the Partnership as a limited partner and Holdings was admitted to the Partnership as a general partner, effective immediately prior to the consummation of the transactions contemplated by the Purchase Agreement (the "Closing"); WHEREAS, effective upon the Closing, FMC and Harsco assigned all of their right, title and interest in and to the Partnership to the Partners in accordance with the terms and conditions set forth in the Purchase Agreement; and WHEREAS, effective upon the Closing, FMC withdrew as a general partner of the Partnership and Harsco UDLP withdrew as a limited partner of the Partnership. AGREEMENT: NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the General Partner and the Limited Partner, pursuant to and in accordance with the Act, hereby agree to amend and restate the Partnership Agreement as follows: 1. NAME. The name of the Partnership is United Defense, L.P. 2. PURPOSE. The purpose of the Partnership is to engage in any and all business activities that may be lawfully conducted by a limited partnership formed under the Act. 3. REGISTERED OFFICE; PRINCIPAL PLACE OF BUSINESS; OTHER OFFICES. The registered office of the Partnership in the State of Delaware shall be at 1013 Centre Road, Wilmington, Delaware 19805 or such other place as the General Partner may designate from time to time. The principal place of business of the Partnership shall be at 1525 Wilson Boulevard, Suite 700, Arlington, Virginia 22209 or such other place as the General Partner may designate from time to time, which need not be in the State of Delaware. The Partnership may have such other offices as the General Partner may designate from time to time. 4. REGISTERED AGENT. The registered agent for service of process on the Partnership in the State of Delaware or any other jurisdiction shall be such Person or Persons as the General Partner may designate from time to time. 5. PARTNERS. The names and the business, residence or mailing addresses of the General Partner and the Limited Partner as of the date hereof are as follows: GENERAL PARTNER: UDLP Holdings Corp. c/o The Carlyle Group 1001 Pennsylvania Avenue, N.W. Suite 200 Washington, D.C. 20004 Attn: Allan M. Holt LIMITED PARTNER: United Defense Industries, Inc. c/o The Carlyle Group 1001 Pennsylvania Avenue, N.W. Suite 200 Washington, D.C. 20004 Attn: Allan M. Holt 6. TERM. The Partnership shall dissolve, and its affairs shall be wound up, on the twenty-fifth anniversary of the date hereof, or at such earlier time as (a) the Partners approve in writing, (b) an event of withdrawal of the General Partner has occurred under the Act and a majority in interest of the remaining partners do not agree in writing to continue the Partnership and designate at least one general partner of the Partnership within ninety (90) days of the date of 2 withdrawal of the General Partner, or (c) an entry of a decree of judicial dissolution has occurred under Section 17-802 of the Act. 7. CAPITAL CONTRIBUTIONS. The aggregate capital contribution made to the Partnership by each Partner at any given time during the term of the Partnership shall be as set forth in the Partnership's books and records. 8. ADDITIONAL CONTRIBUTIONS. Except as otherwise set forth herein, no Partner shall be required to make any further capital contribution to the Partnership. 9. CAPITAL ACCOUNTS. (a) There shall be established for each Partner on the books of the Partnership a capital account (the "Capital Account") reflecting the difference between (i) the sum of (w) such Partner's capital contributions, (x) such Partner's share of Profits (as hereafter defined), and (y) such Partner's share of tax-exempt income of the Partnership minus (ii) the sum of (w) such Partner's share of Losses (as hereafter defined), (x) such Partner's share of other Partnership expenditures that are not deductible for federal income tax purposes (not including principal payments on indebtedness or expenditures to the extent included in the basis of any asset of the Partnership), and (y) any distributions to such Partners. (b) Notwithstanding any other provision in this Section 9 or elsewhere in this Agreement, each Partner's Capital Account shall be maintained and adjusted in accordance with the Internal Revenue Code of 1986, as amended (the "CODE"), and the Treasury Regulations thereunder ("REGULATIONS"), including Regulations Sections 1.704-1(b) and 1.704-2. It is intended that appropriate adjustments shall thereby be made to Capital Accounts to give effect to any income, gain, loss or deduction (or items thereof) that is allocated pursuant to this Agreement. Each Partner's Capital Account shall include that of any predecessor holders of the Partnership interest of such Partner. The General Partner shall make (1) any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership's balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (2) any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2. (c) The General Partner may in its discretion increase or decrease the Capital Accounts of the Partners to reflect a revaluation of Partnership property on the Partnership's books and records, but only in accordance with the rules set forth in Regulations Section 1.704-1(b)(2)(iv)(f). Following any such revaluation, the Partners' Capital Accounts shall be adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization, and gain or loss as computed for book purposes with respect to such property. 10. TIMING AND AMOUNT OF ALLOCATIONS OF PROFITS AND LOSSES. Profits and Losses of the Partnership shall be determined and allocated with respect to each fiscal year of the 3 Partnership as of the end of each such year. Subject to the other provisions of this Agreement, an allocation to a Partner of a share of Profits or Losses shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Profits or Losses. "PROFITS" or "LOSSES" for each fiscal year of the Partnership shall mean the net income or net loss of the Partnership, determined by the method of accounting for the Partnership as selected by the General Partner for federal income tax purposes, including, without limitation, each item of Partnership income, gain, loss and deduction; provided, however, in the event of a revaluation of Partnership property as described in Section 9(c), "Profits" and "Losses" of the Partnership shall be adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(g). 11. ALLOCATIONS. (a) Except as otherwise provided in this Section 11, all Profits and Losses of the Partnership shall be allocated to the Partners in proportion to their respective Percentage Interests. The "PERCENTAGE INTEREST" of each Partner shall be as set forth on Exhibit A hereto. (b) Notwithstanding Section 11(a): (i) If there is a net decrease in Partnership Minimum Gain (as hereafter defined) or Partner Minimum Gain (as hereafter defined) during any fiscal year, the Partners shall be allocated items of Partnership income and gain for such year (and, if necessary, for subsequent years) in accordance with Regulations Section 1.704-2(f) or Section 1.704-2(i)(4), as applicable. (ii) Any Partner Nonrecourse Deductions (as hereafter defined) for any fiscal year shall be specially allocated to the Partner(s) who bears the economic risk of loss with respect to the Partner Nonrecourse Debt (as hereafter defined) to which such Partner Nonrecourse Deductions are attributable, in accordance with Regulations Section 1.704-2(i). (iii) Items of Partnership income and gain shall be allocated to the Partners in accordance with the "qualified income offset" requirements of Regulations Section 1.704-1(b)(2)(ii)(d). (iv) To the extent any allocation of losses would cause or increase an Adjusted Capital Account Deficit (as hereafter defined) as to any Partner, such allocation of losses shall be reallocated among the other Partners in proportion to their respective Percentage Interests, but in a manner that will not produce an Adjusted Capital Account Deficit as to any other Partner. 4 (v) The allocations set forth in Sections 9(b)(1) through (4) (the "REGULATORY ALLOCATIONS") are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Section 11(a), the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Partners so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Partner shall be equal to the net amount that would have been allocated to each such Partner if the Regulatory Allocations had not occurred. (c) Definitions. (i) "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner, the deficit balance, if any, in such Partner's capital account as of the end of the relevant fiscal year, after giving effect to the following adjustments: (A) Decrease such deficit by any amounts which such Partner is obligated to restore pursuant to this Agreement or is deemed to be obligated to restore to the Partnership pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (B) Increase such deficit by such Partner's share of the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). (ii) "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations Section 1.704-2(b)(1). (iii) "PARTNER MINIMUM GAIN" means gain attributable to Partner Nonrecourse Debt determined in accordance with Regulations Section 1.704-2(i). (iv) "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations Section 1.704-2(b)(4). (v) "PARTNER NONRECOURSE DEDUCTION" has the meaning set forth in Regulations Section 1.704-2(i)(2). (vi) "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations Section 1.704-2(b)(2). (d) For any fiscal year during which a Partner's Partnership interest is assigned by such Partner (or by an assignee or successor in interest to a Partner), the portion of 5 the Profits or Losses of the Partnership that is allocable in respect of such Partner's interest shall be apportioned between the assignor and the assignee on any basis selected by the General Partner, provided such basis is permitted by Section 706(d)(2) of the Code. (e) Tax Allocations (i) Except as otherwise provided in this Section 11(e), each item of income, gain, loss and deduction shall be allocated for income tax purposes among the Partners in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Section 11. (ii) Notwithstanding the foregoing provisions of this Section 11, income, gain, loss and deduction with respect to property contributed to the Partnership by a Partner shall be allocated among the Partners, pursuant to Regulations promulgated under Section 704(c) of the Code, so as to take account of the variation, if any, between the adjusted basis of such property to the Partnership and its initial value. The Partnership shall account for such variation under any method approved under Section 704(c) of the Code and the applicable Regulations as chosen by the General Partner. In the event the value of any Partnership asset is adjusted pursuant to Section 3.2(c), subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of the variation, if any, between the adjusted basis of such asset for federal income tax purposes and its value in the same manner as under Section 704(c) of the Code and the applicable Regulations, consistent with the requirements of Regulations Section 1.704-1(b)(2)(iv)(g), using any method approved under Section 704(c) of the Code and the applicable Regulations, as chosen by the General Partner. Allocations pursuant to this Section 11(e) are solely for purposes of federal, state and local income taxes and shall not affect, or in any way be taken into account in computing, any Partner's Capital Account or share of Profits, Losses, other tax items or distributions pursuant to any provision of this Agreement. 12. DISTRIBUTIONS. All distributions of Partnership assets to be made to the Partners prior to and otherwise not in conjunction with the final liquidation of the Partnership in accordance with Section 16 shall be made to the Partners only at such times as the General Partner, in its sole and absolute discretion, deems appropriate and shall be made in proportion to each Partner's Percentage Interest. The General Partner may withhold from any distributions to the Partners the amount(s) required to satisfy the present and future cash needs of the Partnership, as determined by the General Partner in its sole and absolute discretion. No right is given to any Partner to demand and receive property other than cash. The General Partner may 6 determine, in its sole and absolute discretion, to make a distribution in kind to the Partners of Partnership assets other than cash. 13. MANAGEMENT OF PARTNERSHIP. (a) The General Partner shall have exclusive control over the business of the Partnership and shall have all rights, powers and authority generally conferred by law or necessary, advisable or consistent in connection therewith. The General Partner may, in its discretion, appoint officers of the Partnership (such as President, Vice President, Treasurer, Secretary and Assistant Secretary) to act as agents of the Partnership. If the General Partner so resolves in writing, any such officer may bind the Partnership by executing and delivering contracts, agreements or instruments in the name and on behalf of the Partnership. The Limited Partner shall have no right to participate in or vote upon any Partnership matters except as specifically provided by this Agreement or required by any mandatory provision of the Act. (b) Without limiting the foregoing, the General Partnership shall have full power on behalf and in the name of the Partnership to carry out any and all of the objects and purposes of the Partnership and to perform all acts and to execute and deliver all agreements, instruments and other documents which it, in its sole discretion, may deem necessary or desirable, including without limitation, the power to: (c) enter into, deliver, perform, construe and take any action under, any contract, agreement or other instrument as the General Partner shall determine to be necessary or desirable to further the purpose of the Partnership; (d) open, maintain and close bank accounts, make deposits thereunder and investment decisions with respect thereto and draw checks or other orders for the payment of moneys; (e) collect all sums due the Partnership, including the assertion by all advisable means of the Partnership's right to payment; (f) to the extent that funds of the Partnership are available therefor, pay as they become due all debts, obligations and operating expenses of the Partnership including, without limitation, the salaries, bonuses, benefits and expenses of the employees and agents of the Partnership and equipment and office acquisitions and operating costs; (g) employ and dismiss from employment, and pay the fees and expenses of, any and all employees, attorneys, accountants, consultants, advisors or other agents, on such terms and for such compensation as the General Partner may determine, whether or not such person may also be otherwise employed by any affiliate of the General Partner; (h) obtain insurance for the Partnership; (i) admit addition partners; 7 (j) determine distributions of Partnership cash and other property as provided in Section 12; (k) bring and defend actions, investigations and proceedings at law or equity or arbitrations or other forms of alternative dispute resolution and before any governmental, administrative or other regulatory agency, body or commission or arbitrator, mediator or other forum for dispute resolution; (l) make all elections, investigations, evaluations and decisions, binding the Partnership thereby, that may in the sole judgment of the General Partner be necessary or desirable for the acquisition, management or disposition of assets by the Partnership, including without limitation the exercise of rights to elect to adjust the tax basis of Partnership assets; (m) incur expenses and other obligations on behalf of the Partnership and, to the extent that funds of the Partnership are available for such purpose, pay all such expenses and obligations; (n) cause the Partnership to incur or guarantee indebtedness for borrowed money; (o) possess and exercise all rights and powers of general partners under the Act, in furtherance of the purposes of the Partnership; and (p) consult with and seek the advice of one or more of the Limited Partners as contemplated by Section 17-303 of the Act. 14. TRANSFER OR PLEDGE. A partner's interest in the Partnership shall not be assigned, pledged, sold or otherwise transferred, in whole or in part, without the prior written consent of the other partner, which consent may be given or withheld in such partner's sole and absolute discretion. No assignee of a partner's interest in the Partnership shall be admitted into the Partnership as a substituted partner without the prior written consent of the General Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. 15. WITHDRAWAL. No right is given to any partner of the Partnership to withdraw from the Partnership. 16. DISSOLUTION AND WINDING UP. Upon the expiration of the Partnership's term, the Partnership shall be dissolved and the business wound up. Upon the dissolution of the Partnership the General Partner shall act as liquidator (unless there is no General Partner at such time, in which case the Limited Partner shall select a person (which may include the Limited Partner) to act as liquidator) of the Partnership's assets. After paying the Partnership's outstanding liabilities to creditors in the order of priority as provided by law (or the provision of adequate reserves therefor), the liquidator(s) shall distribute the remaining assets to the Partners 8 pro rata in accordance with their relative positive Capital Account balances, determined after taking into account all Capital Account adjustments for the Partnership fiscal year during which such liquidation occurs through the date of such liquidation. No Partner shall be obligated to contribute to the Partnership the amount of any deficit balance in its Capital Account. All liquidating distributions shall be made in assets of the Partnership and/or in cash, as the liquidator(s) shall determine in its sole and absolute discretion. 17. LIMITED LIABILITY. The Limited Partner shall not be liable for the losses, debts, liabilities, contracts or other obligations of the Partnership except as otherwise required by law. 18. GOVERNING LAW. This Agreement, and all rights and remedies in connection therewith, shall be governed by, and construed under, the laws of the State of Delaware, without regard to otherwise governing principles of conflicts of law. 9 IN WITNESS WHEREOF, the undersigned, intending to be bound hereby, have duly executed this Agreement of Limited Partnership as of the date first above written. GENERAL PARTNER: UDLP Holdings Corp., a Delaware corporation By: /s/ Allan M. Holt Name: Allan M. Holt Title: President LIMITED PARTNER: United Defense Industries, Inc., a Delaware corporation By: /s/ Allan M. Holt Name: Allan M. Holt Title: President 10 SCHEDULE A PERCENTAGE INTEREST ------------------- General Partner: UDLP Holdings Corp. ....................... 1.0% Limited Partner: United Defense Industries, Inc. ........... 99.0% TOTAL: ................................. 100.0% EX-3.6 10 CERTIFICATE OF LIMITED PARTNERSHIP OF UDLP CERTIFICATE OF AMENDMENT TO CERTIFICATE OF LIMITED PARTNERSHIP OF UNITED DEFENSE, L.P. It is hereby certified that: FIRST: The name of the limited partnership is United Defense, L.P. (the "Partnership"). SECOND: Pursuant to provisions of Section 17-202, Title 6, Delaware Code, the THIRD article of the Certificate of Limited Partnership of the Partnership is amended effective 12:02 a.m. EST, October 6, 1997 to read as follows: THIRD: The name and the mailing address of the sole general partner of the Partnership is: UDLP Holdings Corp. c/o The Carlyle Group 1001 Pennsylvania Avenue, NW Suite 220 South Washington, D.C. 20004 Attn: Allan M. Holt The undersigned, being the sole general partner of the Partnership, executed this Certificate of Amendment on October 6, 1997. UDLP HOLDINGS CORP. By: /s/ Allan M. Holt Allan M. Holt President EX-3.7 11 CERT. OF FORMATION OF IRON HORSE INVESTORS - LLC CERTIFICATE OF FORMATION OF IRON HORSE INVESTORS, L.L.C. The undersigned, an authorized natural person, for the purpose of forming a limited liability company, under the provision and subject to the requirements of the State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified, and referred to as the "Delaware Limited Liability Company Act"), hereby certifies that: FIRST: The name of the limited liability company (hereinafter called the "limited liability company") is: Iron Horse Investors, L.L.C. SECOND: The address of the registered office and the name and the address of the registered agent of the limited liability company required to be maintained by Section 18-104 of the Delaware Limited Liability Company Act are: The Corporation Trust Company Corporation Trust Center 1209 Orange Street Wilmington, New Castle County, Delaware 19801 Executed on September 8, 1997. /s/ Eleanor R. Horsley ------------------------------------------------ Eleanor R. Horsley, Authorized Person EX-3.8 12 LIMITED LIABILITY CO. AGMT. OF IRON HORSE - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- LIMITED LIABILITY COMPANY AGREEMENT OF IRON HORSE INVESTORS, L.L.C. a Delaware Limited Liability Company Dated as of October 6, 1997 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- LIMITED LIABILITY COMPANY AGREEMENT OF IRON HORSE INVESTORS, L.L.C. THIS LIMITED LIABILITY COMPANY AGREEMENT (the "AGREEMENT") is made and entered into as of the 6th day of October, 1997, by and among DBD Investors IV, L.L.C., a Delaware limited liability company ("DBD INVESTORS"), Carlyle Partners II, L.P., a Delaware limited partnership, Carlyle Partners III, L.P., a Delaware limited partnership, Carlyle International Partners II, L.P., a Cayman Islands exempted limited partnership, Carlyle International Partners III, L.P., a Cayman Islands exempted limited partnership, C/S International Partners, a Cayman Islands general partnership, Carlyle Investment Group, L.P., a Delaware limited partnership, the State Board of Administration of Florida, Carlyle-UDLP Partners, L.P., a Delaware limited partnership, Carlyle-UDLP International Partners, L.P., a Cayman Islands exempted limited partnership, Carlyle-UDLP Partners II, L.P., a Delaware limited partnership, and Carlyle-UDLP International Partners II, L.P., a Cayman Islands exempted limited partnership (collectively, the "MEMBERS", and each, individually, a "MEMBER"), for the purpose of forming Iron Horse Investors, L.L.C. (the "COMPANY"), a member-managed limited liability company organized under the Delaware Limited Liability Company Act, as amended (the "ACT"). ARTICLE 1 ORGANIZATIONAL MATTERS 1.1 FORMATION. The Members hereby form the Company under the Act for the purposes and upon the terms and conditions hereinafter set forth. The rights and liabilities of the Members of the Company shall be as provided in the Act, except as otherwise expressly provided herein. In the event of any inconsistency between any terms and conditions contained in this Agreement and any non-mandatory provisions of the Act, the terms and conditions contained in this Agreement shall govern. 1.2 NAME. The name of the Company shall be Iron Horse Investors, L.L.C. The Company may also conduct business at the same time under one or more fictitious names if the Members determine that such is in the best interests of the Company. The Members may change the name of the Company, from time to time, in accordance with applicable law. 1.3 PRINCIPAL PLACE OF BUSINESS; OTHER PLACES OF BUSINESS. The principal place of business of the Company shall be located at 1209 Orange Street, Wilmington, Delaware 19801, or such other place as the Members may from time to time designate in writing. The Company may maintain offices and places of business at such other place or places, within or outside the State of Delaware, as the Members deem advisable. 1.4 BUSINESS PURPOSE. The purpose of the Company is to acquire, own and dispose of the capital stock and other securities of United Defense Industries, Inc., a Delaware corporation, and to engage in any and all actions incidental thereto. 1.5 CERTIFICATE OF FORMATION; FILINGS. The Members have caused an authorized representative to execute and file the Certificate in the Office of the Delaware Secretary of State as required by the Act. The Members 1 shall cause any duly authorized amendments to the Certificate to be filed in the Office of the Delaware Secretary of State in a form prescribed by the Act. The Members shall cause to be made such additional filings and recordings as the Members deem necessary or advisable. 1.6 FICTITIOUS BUSINESS NAME STATEMENTS. Following the execution of this Agreement, fictitious business name statements shall be filed and published when and if the Members determine it necessary. Any such statement shall be renewed as required by applicable law. 1.7 DESIGNATED AGENT FOR SERVICE OF PROCESS. The Company shall continuously maintain a registered office and a designated and duly qualified agent for service of process on the Company in the State of Delaware. 1.8 TERM. The Company commenced on the date that the Certificate was filed with the Office of the Delaware Secretary of State, and shall continue until terminated pursuant to this Agreement. ARTICLE 2 DEFINITIONS Capitalized words and phrases used and not otherwise defined elsewhere in this Agreement shall have the following meanings: 2.1 "ACT" is defined in the Preamble. 2.2 "ADDITIONAL MEMBERS" means those Persons admitted to the Company pursuant to PARAGRAPH 3.4 of the Agreement. 2.3 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments: 2.3.1 Add to such Capital Account the following items: (a) The amount, if any, that such Member is obligated to contribute to the Company upon liquidation of such Member's Interest; and (b) The amount that such Member is obligated to restore or is deemed to be obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(C) or the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and 2.3.2 Subtract from such Capital Account such Member's share of the items described in Regulations Sections 1.704-1(b)(2)(ii)(D)(4), (5) and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(D) and shall be interpreted consistently therewith. 2.4 "AFFILIATE" means, with reference to a specified Person: (a) a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the specified Person, (b) any Person that is an officer, partner or trustee of, or serves in a similar 2 capacity with respect to, the specified Person, or for which the specified Person is an officer, partner or trustee, or serves in a similar capacity, or (c) with respect to any natural Person, any member of the Immediate Family of the specified Person. 2.5 "AGREEMENT" is defined in the Preamble. 2.6 "ASSIGNEE" means any Person (a) to whom a Member (or assignee thereof) Transfers all or any part of its interest in the Company, and (b) which has not been admitted to the Company as a Substitute Member pursuant to PARAGRAPH 7.6 of this Agreement. 2.7 "CAPITAL ACCOUNT" means the Capital Account maintained for each Member on the Company's books and records in accordance with the following provisions: 2.7.1 To each Member's Capital Account there shall be added (a) such Member's Capital Contributions, (b) such Member's allocable share of Net Profits and any items in the nature of income or gain that are specially allocated to such Member pursuant to ARTICLE 5 hereof or other provisions of this Agreement, and (c) the amount of any Company liabilities assumed by such Member or which are secured by any property distributed to such Member. 2.7.2 From each Member's Capital Account there shall be subtracted (a) the amount of (i) cash and (ii) the Gross Asset Value of any Company Assets (other than cash) distributed to such Member (other than any payment of principal and/or interest to such Member pursuant to the terms of a loan made by the Member to the Company) pursuant to any provision of this Agreement, (b) such Member's allocable share of Net Losses and any other items in the nature of expenses or losses that are specially allocated to such Member pursuant to ARTICLE 5 or other provisions of this Agreement, and (c) liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company. 2.7.3 In the event any interest in the Company is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. 2.7.4 In determining the amount of any liability for purposes of PARAGRAPHS 2.7.1 and 2.7.2 hereof, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. 2.7.5 The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied in a manner consistent with such Regulations. In the event that the Members shall determine that it is prudent to modify the manner in which the Capital Accounts, or any additions or subtractions thereto, are computed in order to comply with such Regulations, the Members may make such modification, PROVIDED THAT it is not likely to have a material effect on the amounts distributable to any Member pursuant to ARTICLE 8 hereof upon the dissolution of the Company. The Members shall also make (a) any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company's balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(Q), and (b) any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Sections 1.704-1(b) and 1.704-2. 3 2.8 "CAPITAL CONTRIBUTIONS" means, with respect to any Member, the total amount of money and the initial Gross Asset Value of property (other than money) contributed to the capital of the Company by such Member, whether as an initial Capital Contribution or as an additional Capital Contribution. 2.9 "CASH AVAILABLE FOR DISTRIBUTION" means, with respect to any fiscal year, all Company cash receipts (excluding the proceeds from any Terminating Cash Transaction), after deducting payments for Operating Cash Expenses, payments required to be made in connection with any loan to the Company or any other loan secured by a lien on any Company Assets, capital expenditures and any other amounts set aside for the restoration, increase or creation of reasonable Reserves. 2.10 "CERTIFICATE" means the Certificate of Formation of the Company filed under the Act in the Office of the Delaware Secretary of State for the purpose of forming the Company as a Delaware limited liability company, and any duly authorized, executed and filed amendments or restatements thereof. 2.11 "CODE" means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). 2.12 "COMPANY" is defined in the Preamble. 2.13 "COMPANY MINIMUM GAIN" has the meaning set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d)(1) for the phrase "partnership minimum gain." 2.14 "COMPANY ASSETS" means all direct and indirect interests in real and personal property owned by the Company from time to time, and shall include both tangible and intangible property (including cash). 2.15 "DEPRECIATION" means, for each fiscal year or other period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; PROVIDED, HOWEVER, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Members. 2.16 "ECONOMIC INTEREST" means a Person's right to share in the Net Profits, Net Losses, or similar items of, and to receive distributions from, the Company, but does not include any other rights of a Member including, without limitation, the right to vote or to participate in the management of the Company, or, except as specifically provided in this Agreement or required under the Act, any right to information concerning the business and affairs of the Company. 2.17 "GROSS ASSET VALUE" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: 4 2.17.1 The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Members. 2.17.2 The Gross Asset Values of all Company Assets immediately prior to the occurrence of any event described in subsection (a), subsection (b), subsection (c) or subsection (d) hereof shall be adjusted to equal their respective gross fair market values, as determined by the Members using such reasonable method of valuation as they may adopt, as of the following times: (a) the acquisition of an additional interest in the Company (other than in connection with the execution of this Agreement) by a new or existing Member in exchange for more than a DE MINIMIS Capital Contribution, if the Members reasonably determine that such adjustment is necessary or appropriate to reflect the relative Economic Interests of the Members in the Company; (b) the distribution by the Company to a Member of more than a DE MINIMIS amount of Company Assets as consideration for an interest in the Company, if the Members reasonably determine that such adjustment is necessary or appropriate to reflect the relative Economic Interests of the Members in the Company; (c) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(G); and (d) at such other times as the Members shall reasonably determine necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and 1.704-2. 2.17.3 The Gross Asset Value of any Company Asset distributed to a Member shall be the gross fair market value of such asset on the date of distribution as determined by the Members. 2.17.4 The Gross Asset Values of Company Assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(M); PROVIDED, HOWEVER, that Gross Asset Values shall not be adjusted pursuant to this PARAGRAPH 2.17.4 to the extent that the Members reasonably determine that an adjustment pursuant to PARAGRAPH 2.17.2 above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this PARAGRAPH 2.17.4. 2.17.5 If the Gross Asset Value of a Company Asset has been determined or adjusted pursuant to PARAGRAPH 2.17.1, PARAGRAPH 2.17.2 or PARAGRAPH 2.17.4 hereof, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such Company Asset for purposes of computing Net Profits and Net Losses. 2.18 "IMMEDIATE FAMILY" means, and is limited to, an individual Member's current spouse, parents, parents-in-law, grandparents, children, siblings, and grandchildren, or a trust or estate, all of the beneficiaries of which consist of such Member or members of such Member's Immediate Family. 5 2.19 "INCAPACITY" means the entry of an order of incompetence or of insanity, or the death, dissolution, bankruptcy (as defined in the Act) or termination (other than by merger or consolidation) of any Person. 2.20 "INDEMNIFYING MEMBER" and "INDEMNIFIED MEMBER" are defined in PARAGRAPH 6.8.1. 2.21 "INDEMNITEE" is defined in PARAGRAPH 6.8.1. 2.22 "LIQUIDATOR" is defined in PARAGRAPH 8.5.1. 2.23 "MAJORITY IN INTEREST" means Members holding, in the aggregate, a majority of the Percentage Interests held by all Members of the Company. 2.24 "MAJORITY OF REMAINING MEMBERS" means Members owning (a) a majority of the profits interests in the Company held by all Members determined and allocated based on any reasonable estimate of profits from the relevant date to the projected termination of the Company and taking into account present and future allocations of profits under the Agreement as it is in effect on the relevant date, and (b) a majority of the capital interests in the Company, determined as of the relevant date under the Agreement, owned by all the Members. 2.25 "MEMBER MINIMUM GAIN" means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i) with respect to "partner minimum gain." 2.26 "MEMBER NONRECOURSE DEBT" has the meaning set forth in Regulations Section 1.704-2(b)(4) for the phrase "partner nonrecourse debt." 2.27 "MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations Section 1.704-2(i) for the phrase "partner nonrecourse deductions." 2.28 "MEMBERS" means the Persons owning Membership Interests, including any Substitute Members, with each Member being referred to, individually, as a "MEMBER." 2.29 "MEMBERSHIP INTEREST" or "INTEREST" means the entire ownership interest of a Member in the Company at any particular time, including without limitation, the Member's Economic Interest, any and all rights to vote and otherwise participate in the Company's affairs, and the rights to any and all benefits to which a Member may be entitled as provided in this Agreement, together with the obligations of such Member to comply with all of the terms and provisions of this Agreement. 2.30 [INTENTIONALLY OMITTED] 2.31 "NET PROFITS" or "NET LOSSES" means, for each fiscal year or other period, an amount equal to the Company's taxable income or loss for such year or period determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: 6 2.31.1 Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this PARAGRAPH 2.31 shall be added to such taxable income or loss; 2.31.2 Any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(I), and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this PARAGRAPH 2.31, shall be subtracted from such taxable income or loss; 2.31.3 Gain or loss resulting from any disposition of Company Assets where such gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the Company Assets disposed of, notwithstanding that the adjusted tax basis of such Company Assets differs from its Gross Asset Value; 2.31.4 In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year; 2.31.5 To the extent an adjustment to the adjusted tax basis of any asset included in Company Assets pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(M)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member's Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for the purposes of computing Net Profits and Net Losses; 2.31.6 If the Gross Asset Value of any Company Asset is adjusted in accordance with PARAGRAPH 2.17.2 or PARAGRAPH 2.17.3 of this Agreement, the amount of such adjustment shall be taken into account in the taxable year of such adjustment as gain or loss from the disposition of such asset for purposes of computing Net Profits or Net Losses; and 2.31.7 Notwithstanding any other provision of this PARAGRAPH 2.31, any items that are specially allocated pursuant to PARAGRAPH 5.2 or PARAGRAPH 5.4.2 hereof shall not be taken into account in computing Net Profits or Net Losses. 2.32 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations Sections 1.704-2(b)(1) and 1.704-2(c). 2.33 "NONRECOURSE LIABILITY" has the meaning set forth in Regulations Sections 1.704-2(b)(3) and 1.752-1(a)(2). 2.34 "OPERATING CASH EXPENSES" means, with respect to any fiscal period, the amount of cash disbursed in the ordinary course of business during the period, including without limitation, all cash expenses, such as advertising, promotion, property management, insurance premiums, taxes, utilities, repair, maintenance, legal, accounting, bookkeeping, computing, equipment use, travel on Company business, telephone expenses and salaries, and direct expenses of Company employees (if any) and agents while engaged in Company business. Operating Cash Expenses shall include fees paid by the Company to any Member or any Affiliate thereof permitted by this Agreement, and the actual cost of goods, materials and administrative services used for or by the Company, whether incurred by any Member, any 7 Affiliate thereof or any non-Affiliate in performing functions set forth in this Agreement reasonably requiring the use of such goods, materials or administrative services. Operating Cash Expenses shall not include expenditures paid from Reserves. 2.35 "PERCENTAGE INTEREST" shall be determined as follows: PI = P ---- PC where: PI = Percentage Interest P = Balance in particular Member's Capital Account; and PC = Sum of all balances in the Capital Accounts of all Members; provided, however, that solely for the purposes of determining a Member's Percentage Interest, a Member's Capital Account balance shall be determined as if all Profits and Losses were allocated pursuant to PARAGRAPH 5.1 (I.E. without regard to the allocations described in PARAGRAPH 5.2). EXHIBIT A shall set forth the initial Percentage Interests of each of the Members and shall be revised from time to time as necessary to properly reflect the Percentage Interests of the members as determined in accordance with this PARAGRAPH 2.35. 2.36 "PERSON" means and includes an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated organization, a government or any department or agency thereof, or any entity similar to any of the foregoing. 2.37 "RECOURSE LIABILITY" has the meaning set forth in Regulations Section 1.752-1(a)(1). 2.38 "REGULATIONS" means proposed, temporary and final Treasury Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding Treasury Regulations). 2.39 "REGULATORY ALLOCATIONS" is defined in PARAGRAPH 5.2.8. 2.40 "RESERVES" means funds set aside or amounts allocated to reserves that shall be maintained in amounts deemed sufficient by the Members for working capital, to pay taxes, insurance, debt service, and other costs or expenses incident to the conduct of business by the Company as contemplated hereunder. 2.41 "RESPONSIBLE PARTY" is defined in PARAGRAPH 6.8.7. 2.42 "SAFE HARBORS" is defined in PARAGRAPH 7.9. 8 2.43 "SUBSTITUTE MEMBER" means any Person (a) to whom a Member (or assignee thereof) Transfers all or any part of its interest in the Company, and (b) which has been admitted to the Company as a Substitute Member pursuant to PARAGRAPH 7.6 of this Agreement. 2.44 "TERMINATING CAPITAL TRANSACTION" means any sale or other disposition of all or substantially all of the assets of the Company or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of the Company. 2.45 "TERMINATION PAYMENT" is defined in PARAGRAPH 7.5. 2.46 "TRANSFER" means, with respect to any interest in the Company, a sale, conveyance, exchange, assignment, pledge, encumbrance, gift, bequest, hypothecation or other transfer or disposition by any other means, whether for value or no value and whether voluntary or involuntary (including, without limitation, by operation of law), or an agreement to do any of the foregoing. ARTICLE 3 CAPITAL; CAPITAL ACCOUNTS AND MEMBERS 3.1 INITIAL CAPITAL CONTRIBUTIONS OF MEMBERS. The names, addresses, initial Capital Contributions and Percentage Interests of the Members are set forth on EXHIBIT "A" attached hereto and incorporated herein. All Members acknowledge and agree that the initial Capital Contributions set forth in EXHIBIT "A" represent the amount of money and the Gross Asset Value of all property (other than money) initially contributed by the Members. 3.2 ADDITIONAL CAPITAL CONTRIBUTIONS BY MEMBERS. No Member shall be permitted or required to make any additional Capital Contributions to the Company. 3.3 CAPITAL ACCOUNTS. A Capital Account shall be established and maintained for each Member in accordance with the terms of this Agreement. 3.4 ADDITIONAL MEMBERS. Following formation of the Company, the Members may issue additional Interests in the Company directly from the Company, and admit one or more recipients of such Interests as Additional Members from time to time, on such terms and conditions and for such Capital Contributions, if any, as the Members may determine. As a condition to being admitted to the Company, each Additional Member shall execute an agreement to be bound by the terms and conditions of this Agreement. 3.5 MEMBER CAPITAL. Except as otherwise provided in this Agreement, (a) no Member shall demand or be entitled to receive a return of or interest on its Capital Contributions or Capital Account, (b) no Member shall withdraw any portion of its Capital Contributions or receive any distributions from the Company as a return of capital on account of such Capital Contributions, and (c) the Company shall not be required to redeem or repurchase the Interest of any Member. 3.6 MEMBER LOANS. No Member shall be required to make any loans or otherwise lend any funds to the Company. No loans made by any Member to the Company shall have any effect on such Member's Percentage Interest, such loans representing a debt of the Company payable or collectible solely from the assets of the Company in accordance with the terms and conditions upon which such loans were made. 9 3.7 LIABILITY OF MEMBERS. Except as otherwise required by any non-waivable provision of the Act or other applicable law: (a) no Member shall be personally liable in any manner whatsoever for any debt, liability or other obligation of the Company, whether such debt, liability or other obligation arises in contract, tort, or otherwise; and (b) no Member shall in any event have any liability whatsoever in excess of (i) the amount of its Capital Contributions, (ii) its share of any assets and undistributed profits of the Company, (iii) the amount of any unconditional obligation of such Member to make additional Capital Contributions to the Company pursuant to this Agreement, and (iv) the amount of any wrongful distribution to such Member, if, and only to the extent, such Member has actual knowledge (at the time of the distribution) that such distribution is made in violation of Section 18-607 of the Act. ARTICLE 4 DISTRIBUTIONS 4.1 DISTRIBUTIONS OF CASH AVAILABLE FOR DISTRIBUTION. 4.1.1 Except as otherwise provided in ARTICLE 8, Cash Available for Distribution shall be distributed to the Members only at such times as may be determined by a Majority in Interest of the Members. 4.1.2 Subject to ARTICLE 8 hereof, all distributions of Cash Available for Distribution shall be distributed to the Members pro rata in accordance with their respective Percentage Interests. 4.2 DISTRIBUTIONS UPON LIQUIDATION. Distributions made in conjunction with the final liquidation of the Company, including, without limitation, the net proceeds of a Terminating Capital Transaction, shall be applied or distributed as provided in ARTICLE 8 hereof. 4.3 WITHHOLDING. The Company may withhold distributions or portions thereof if it is required to do so by any applicable rule, regulation, or law, and each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local or foreign taxes that the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement. Any amount paid on behalf of or with respect to a Member pursuant to this PARAGRAPH 4.3 shall constitute a loan by the Company to such Member, which loan shall be repaid by such Member within fifteen (15) days after notice from the Company that such payment must be made unless the Company withholds such payment from a distribution which would otherwise be made to the Member. Any amounts withheld pursuant to this PARAGRAPH 4.3 shall be treated as having been distributed to such Member. Each Member hereby unconditionally and irrevocably grants to the Company a security interest in such Member's Interest in the Company to secure such Member's obligation to pay to the Company any amounts required to be paid pursuant to this PARAGRAPH 4.3. In the event that a Member fails to pay any amounts owed to the Company pursuant to this PARAGRAPH 4.3 when due, the remaining Members may, in their respective sole and absolute discretion, elect to make the payment to the Company on behalf of such defaulting Member, and in such event shall be deemed to have loaned such amount to such defaulting Member and shall succeed to all rights and remedies of the Company as against such defaulting Member (including, without limitation, the right to receive distributions). Any amounts payable by a Member hereunder shall bear interest at the Prime Rate from the date such amount is due (I.E., 15 days after demand) until such amount is paid in full. Each Member shall take such actions as the Company shall request in order to perfect or enforce the security interest created hereunder. A Member's obligations hereunder shall survive the dissolution, liquidation, or winding up of the Company. The "PRIME RATE" as used herein 10 shall mean the publicly quoted rate of interest announced from time to time by Citibank, N.A., as its commercial prime or reference rate of interest, in effect as of the time of any determination. 4.4 DISTRIBUTIONS IN KIND. No right is given to any Member to demand or receive property other than cash as provided in this Agreement. A Majority in Interest of the Members may determine, in their sole and absolute discretion, to make a distribution in kind of Company Assets to the Members, and such Company Assets shall be distributed in such a fashion as to ensure that the fair market value thereof is distributed in accordance with this ARTICLE 4 and ARTICLE 8 hereof. 4.5 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding any provision to the contrary contained in this Agreement, no distribution shall be made to any Member or the holder of any Economic Interest on account of its Membership Interest or Economic Interest in the Company (as applicable) in violation of Section 18-607 of the Act. ARTICLE 5 ALLOCATIONS OF NET PROFITS AND NET LOSSES 5.1 GENERAL ALLOCATION OF NET PROFITS AND LOSSES. 5.1.1 Net Profits and Net Losses shall be determined and allocated with respect to each fiscal year of the Company as of the end of such fiscal year. Subject to the other provisions of this Agreement, an allocation to a Member of a share of Net Profits or Net Losses shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Profits or Net Losses. 5.1.2 Subject to the other provisions of this ARTICLE 5, Net Profits shall be allocated to the Members: (a) First, to each of the Members pro rata in accordance with their Percentage Interests, until the cumulative amount of Net Profits allocated pursuant to this PARAGRAPH 5.1.2.(a) is equal to the cumulative amount of Net Losses allocated pursuant to PARAGRAPH 5.1.3 for all prior periods; (b) Second, to DBD Investors until the cumulative amount of Net Profit allocated purusant to this PARAGRAPH 5.1.2(b) is equal to $2 million; and (c) Thereafter, to the Members pro rata in accordance with their respective Percentage Interests. 5.1.3 Subject to the other provisions of this ARTICLE 5, Net Losses shall be allocated to each of the Members pro rata in accordance with their Percentage Interests. 5.2 REGULATORY ALLOCATIONS. Notwithstanding the foregoing provisions of this ARTICLE 5, the following special allocations shall be made in the following order of priority: 5.2.1 If there is a net decrease in Company Minimum Gain during a Company taxable year, then each Member shall be allocated items of Company income and gain for such taxable year (and, if necessary, for subsequent years) in an amount equal to such 11 Member's share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.704-2(g)(2). This PARAGRAPH 5.2.1 is intended to comply with the minimum gain chargeback requirement of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. 5.2.2 If there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Company taxable year, each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such taxable year (and, if necessary, subsequent years) in an amount equal to such Member's share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in a manner consistent with the provisions of Regulations Section 1.704-2(g)(2). This PARAGRAPH 5.2.2 is intended to comply with the partner nonrecourse debt minimum gain chargeback requirement of Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. 5.2.3 If any Member unexpectedly receives an adjustment, allocation, or distribution of the type contemplated by Regulations Section 1.704-1(b)(2)(ii)(D)(4), (5) or (6), items of income and gain shall be allocated to all such Members (in proportion to the amounts of their respective Adjusted Capital Account Deficits) in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit of such Member as quickly as possible. It is intended that this PARAGRAPH 5.2.3 qualify and be construed as a "qualified income offset" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(D). 5.2.4 If the allocation of Net Loss to a Member as provided in PARAGRAPH 5.1 hereof would create or increase an Adjusted Capital Account Deficit, there shall be allocated to such Member only that amount of Net Loss as will not create or increase an Adjusted Capital Account Deficit. The Net Loss that would, absent the application of the preceding sentence, otherwise be allocated to such Member shall be allocated to the other Members in accordance with their relative Percentage Interests, subject to the limitations of this PARAGRAPH 5.2.4. 5.2.5 To the extent that an adjustment to the adjusted tax basis of any Company Asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(M)(2) or Regulations Section 1.704-1(b)(2)(iv)(M)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its Interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event that Regulations Section 1.704-1(b)(2)(iv)(M)(2) applies, or to the Members to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(M)(4) applies. 5.2.6 The Nonrecourse Deductions for each taxable year of the Company shall be allocated to the Members in proportion to their Percentage Interests. 5.2.7 The Member Nonrecourse Deductions shall be allocated each year to the Member that bears the economic risk of loss (within the meaning of Regulations Section 1.752-2) for the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable. 12 5.2.8 The allocations set forth in PARAGRAPHS 5.2.1, 5.2.2, 5.2.3, 5.2.4, 5.2.5, 5.2.6 and 5.2.7 hereof (the "REGULATORY ALLOCATIONS") are intended to comply with certain requirements of Regulations Sections 1.704-1(b) and 1.704-2(i). Notwithstanding the provisions of PARAGRAPH 5.1.2, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Members so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred. 5.3 TAX ALLOCATIONS. 5.3.1 Except as provided in PARAGRAPH 5.3.2 hereof, for income tax purposes under the Code and the Regulations each Company item of income, gain, loss and deduction shall be allocated between the Members as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to this ARTICLE 5. 5.3.2 Tax items with respect to Company Assets that are contributed to the Company with a Gross Asset Value that varies from its basis in the hands of the contributing Member immediately preceding the date of contribution shall be allocated between the Members for income tax purposes pursuant to Regulations promulgated under Code Section 704(c) so as to take into account such variation. The Company shall account for such variation under any method approved under Code Section 704(c) and the applicable Regulations as chosen by the Member designated as the Tax Matters Partner pursuant to PARAGRAPH 9.7.1, including, without limitation, the "traditional method" as described in Regulations Section 1.704-3(b). If the Gross Asset Value of any Company Asset is adjusted pursuant to PARAGRAPH 2.17, subsequent allocations of income, gain, loss and deduction with respect to such Company Asset shall take account of any variation between the adjusted basis of such Company Asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations promulgated thereunder under any method approved under Code Section 704(c) and the applicable Regulations as chosen by the Tax Matters Member. Allocations pursuant to this PARAGRAPH 5.3.2 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Net Profits, Net Losses and any other items or distributions pursuant to any provision of this Agreement. 5.4 OTHER PROVISIONS. 5.4.1 For any fiscal year during which any part of a Membership Interest or Economic Interest is transferred between the Members or to another Person, the portion of the Net Profits, Net Losses and other items of income, gain, loss, deduction and credit that are allocable with respect to such part of a Membership Interest or Economic Interest shall be apportioned between the transferor and the transferee under any method allowed pursuant to Section 706 of the Code and the applicable Regulations as determined by the Members. 5.4.2 In the event that the Code or any Regulations require allocations of items of income, gain, loss, deduction or credit different from those set forth in this ARTICLE 5, such allocations shall be made in accordance with the Code and such Regulations, and no such new allocation shall give rise to any claim or cause of action by any Member. 13 5.4.3 For purposes of determining a Member's proportional share of the Company's "excess nonrecourse liabilities" within the meaning of Regulations Section 1.752-3(a)(3), each Member's interest in Net Profits shall be such Member's Percentage Interest. 5.4.4 The Members acknowledge and are aware of the income tax consequences of the allocations made by this ARTICLE 5 and hereby agree to be bound by the provisions of this ARTICLE 5 in reporting their shares of Net Profits, Net Losses and other items of income, gain, loss, deduction and credit for federal, state and local income tax purposes. ARTICLE 6 OPERATIONS MANAGEMENT 6.1 MANAGEMENT. Notwithstanding any provision of this Agreement to the contrary, and in addition to the powers given to the Members by law, each of the Members shall have all of the rights and powers to act on behalf of and with respect to the Company that a general partner would have under the law of the State of Delaware if the Company was a general partnership. Collectively, the Members shall have the exclusive and complete power and authority to direct, manage, control and operate the Company, including (without limitation) the authority and power, on behalf of the Company and at the Company's expense: 6.1.1 to conduct any business, and exercise any rights and powers, permitted of a limited liability company organized under the laws of the state of Delaware, in any state, territory, district, or foreign country; 6.1.2 to acquire by purchase, lease, contribution, or otherwise, and/or to otherwise own, hold, operate, maintain, finance, improve, lease, sell, convey, mortgage, transfer, or dispose of any property or other assets (real or personal, tangible or intangible); 6.1.3 to lend money, to invest and reinvest its funds, and to take and hold real and/or personal property for the payment of funds so loaned or invested; 6.1.4 to sue and be sued, complain and defend, and participate in administrative, judicial and other proceedings, in the name of, and behalf of, the Company; 6.1.5 to pay, collect, compromise, arbitrate, or otherwise adjust or settle any and all claims or demands of or against the Company, in such amounts and upon such terms and conditions as the Members shall reasonably determine; 6.1.6 to employ, engage, hire, or otherwise secure the services of such Persons, including any Member or any Persons related thereto or affiliated therewith; 6.1.7 to appoint such officers and agents of the Company and to define and modify, from time to time, such officers' and agents' duties, and fix and adjust, as appropriate, such officers' and agents' compensation; 6.1.8 to cause the Company to indemnify any Person in accordance with, and to the fullest extent permitted by, applicable law, and to obtain, for or on behalf of the Company, any and all types of insurance deemed necessary or advisable by the Members or the Chairman; 14 6.1.9 to borrow money and issue evidences of indebtedness necessary, convenient, or incidental to the business of the Company, and secure the same by mortgage, pledge, or other lien on any Company Property or other assets of the Company; 6.1.10 to prepare, execute, file, record, publish, and deliver any and all instruments, documents, or statements necessary or convenient to effectuate any and all actions that the Members or the Chairman are authorized to take on behalf of the Company; 6.1.11 to deal with, or otherwise engage in business with, or provide services to, any Person who has provided or may in the future provide services to, lend money to, sell property to, or purchase property from the Company, any Member or any Affiliate thereof; 6.1.12 to establish and maintain Reserves for such purposes and in such amounts Members or the Chairman deems appropriate from time to time; and 6.1.13 to negotiate, enter into, perform, modify, extend, terminate, amend, waive, renegotiate, and/or carry out any contracts and agreements of any kind and nature, including, without limitation, contracts and agreements with any Member or Affiliate thereof, or any other agent of the Company. 6.2 VOTING BY MEMBERS. Except as otherwise provided herein, all actions to be taken, decisions or determinations to be made, authorizations to be granted, and power and authority to be exercised, by the Members shall be so taken, made, granted and exercised only by the affirmative vote of the Members holding a majority of the Percentage Interests in the Company. 6.2.1 ACTIONS REQUIRING UNANIMOUS CONSENT. Notwithstanding the forgoing or any other provision of this Agreement, without the unanimous written consent of all Members, none of the Members, the Company, nor any agent, officer, employee or representative of the Company shall have the authority to: (a) Do any act in contravention of the Agreement; or (b) Knowingly perform any act that would subject any Member to liability for the debts, liabilities or obligations of the Company. 6.2.2 FILING FOR BANKRUPTCY. No member may commence a voluntary case on behalf of, or any involuntary case against, the Company under a chapter of Title 11 U.S.C. by the filing of a "petition" (as defined in 11 U.S.C. 101(42)) with the United States Bankruptcy Court unless such action has been authorized by a Majority in Interest of the Members. Any such petition filed by any Member without such authorization shall be deemed an unauthorized and bad faith filing and all parties to this Agreement shall use their best efforts to cause such petition to be dismissed. 6.3 CHAIRMAN. 6.3.1 The Members hereby establish the office of "Chairman" to be governed by this PARAGRAPH 6.3. 6.3.2 Subject to the supervening power and authority of the Members pursuant to PARAGRAPHS 6.1 and 6.2, the Chairman shall have the power and authority to oversee the operation 15 of the Company, direct all of the Company's day-to-day business and specific operational decisions, and assume such other responsibilities as the Members shall, from time to time, delegate to the Chairman. In no event shall the Members delegate the authority to dissolve the Company or approve any Terminating Capital Transaction. 6.3.3 The Chairman may delegate all or any portion of its power and authority, as permitted by the Members, to officers of the Company appointed by the Members to serve under the direction of the Chairman. Each officer so appointed shall (i) be employed for such reasonable compensation and upon such reasonable terms and conditions as the Members shall determine and (ii) hold office for such term as is designated by, or otherwise at the pleasure of, the Members. 6.3.4 The Chairman shall initially be Allan M. Holt. Upon the resignation (pursuant to PARAGRAPH 6.3.5) or removal (pursuant to PARAGRAPH 6.3.6) of the Chairman, and from time to time thereafter as determined by the Members, the Members shall designate one or more successor Chairmen. 6.3.5 The Chairman may resign from the Company at any time by providing to the Members not less than thirty (30) days prior written notice (or such shorter time as the Members may agree). 6.3.6 The Members may remove the Chairman from the Company at any time for any reason by a vote of the Members having a Majority in Interest. 6.3.7 The Chairman shall devote such amount of his time to the Company as the Members may reasonably consider necessary to fulfill the obligations of the position of Chairman. 6.4 POWER TO ACT FOR THE COMPANY. Notwithstanding any provision hereof to the contrary, each of Carlyle-Partners II, L.P., Carlyle-Partners III, L.P., Carlyle-UDLP Partners, L.P. and Carlyle-UDLP Partners II, L.P. shall have all of the rights and powers to act on behalf of and with respect to the Company that a general partner would have under the law of the State of Delaware if the Company was a limited partnership. Except as otherwise expressly provided in this Section 6.4 or otherwise in this Agreement, or as required by any non-waivable provision of the Act or other applicable law, no Person other than the Chairman and such other Persons designated by the Members shall be an agent for the Company or have any right, power, or authority to transact any business in the name of the Company or to act for or on behalf of or to bind the Company. 6.5 REIMBURSEMENT AND REMUNERATIONS. The Members and the Chairman shall be entitled to reimbursement from the Company for all reasonable out-of-pocket costs and expenses incurred by them in furtherance of the business or management of the Company. Except as set forth in this PARAGRAPH 6.5, or pursuant to their retention pursuant to PARAGRAPH 6.1.6, neither the Members nor the Chairman shall be entitled to receive any additional remuneration for undertaking their respective obligations under this ARTICLE 6. Distributions received by the Members pursuant to ARTICLES 4 and 8 are not, and shall not be deemed to be, remuneration within the meaning of this PARAGRAPH 6.5. 6.6 RELIANCE BY THIRD PARTIES. Any Person dealing with the Company or an Officer appointed by the Members or the Chairman may rely upon a certificate signed by the Chairman of the Company as to: 6.6.1 the identity of any Member hereof; 16 6.6.2 the existence or non-existence of any fact or facts which constitute a condition precedent to acts by the Members or delegate thereof or in any other manner germane to the affairs of the Company; 6.6.3 the Persons who are authorized to execute and deliver any instrument or document for or on behalf of the Company; or 6.6.4 any act or failure to act by the Company or as to any other matter whatsoever involving the Company or any Member. 6.7 RECORDS AND REPORTS. 6.7.1 RECORDS. The Chairman shall cause to be kept, at the principal place of business of the Company, or at such other location as the Members shall reasonably deem appropriate, full and proper ledgers, other books of account, and records of all receipts and disbursements, other financial activities, and the internal affairs of the Company. 6.7.2 FISCAL YEAR. Subject to Code Section 448, the books of the Company shall be kept on such method of accounting for tax and financial reporting purposes as may be determined by the Members. The fiscal year of the Company shall end on December 31 of each year, or on such other date permitted under the Code as the Members shall determine. 6.7.3 ACCOUNTING AND RECORDS. The Company shall keep true and accurate accounting records of all operations and such records shall be open to inspection by any Member, or by such Member's duly authorized representatives during business hours. The Company's financial records shall be audited annually pursuant to generally accepted accounting principles and applicable laws, rules, and regulations at the expense of the Company by the Company's outside auditing firm. 6.7.4 REPORTS. The Company shall file or otherwise submit to any government body all financial and other statements and reports required to be so filed or submitted under applicable law. 6.7.5 TAX REPORTS TO MEMBERS. The Chairman shall also cause to be sent to each Member of the Company, the following: (a) within ninety (90) days following the end of each fiscal year of the Company, a report that shall include all necessary information required by the Members for preparation of their federal, state and local income or franchise tax or information returns, including each Member's PRO RATA share of Net Profits, Net Losses and any other items of income, gain, loss and deduction for such fiscal year; and (b) a copy of the Company's federal, state and local income tax or information returns for each fiscal year, concurrent with the filing of such returns. 6.7.6 REVIEW OF RECORDS BY MEMBERS. Members (personally or through an authorized representative) may, for purposes reasonably related to their Interests, examine and copy 17 (at their own cost and expense) the books and records of the Company at all reasonable business hours. 6.8 INDEMNIFICATION AND LIABILITY OF MEMBERS AND RELATED PARTIES. 6.8.1 The Company shall indemnify and hold harmless each Member, and any officer, employee and agent of any Member or the Company, including the Chairman, (each individually, an "INDEMNITEE") to the full extent permitted by law from and against any and all losses, claims, demands, costs, damages, liabilities, joint and several, expenses of any nature (including attorneys' fees and disbursements), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits, or proceedings, civil, criminal, administrative, or investigative, in which the Indemnitee may be involved, or threatened to be involved as a party or otherwise, relating to the performance or nonperformance of any act on behalf of the Company concerning the activities of the Company, if (i) the Indemnitee acted in good faith and in a manner it believed to be in, or not contrary to, the best interests of the Company, and (ii) the Indemnitee's conduct did not constitute gross negligence or willful misconduct. The termination of an action, suit, or proceeding by judgment, order, settlement, or upon a plea of nolo contendere or its equivalent, shall not, in and of itself, create a presumption or otherwise constitute evidence that the Indemnitee acted in a manner contrary to that specified in clauses (i) or (ii) above. 6.8.2 Expenses incurred by an Indemnitee in defending any claim, demand, action, suit, or proceeding subject to PARAGRAPH 6.8.1 may, by action of the Members, be advanced by the Company prior to the final disposition of such claim, demand, action, suit, or proceeding upon receipt by the Company of a written commitment by or on behalf of the Indemnitee to repay such amount if it shall be determined that such Indemnitee is not entitled to be indemnified as authorized in this PARAGRAPH 6.8. 6.8.3 Any indemnification provided in this PARAGRAPH 6.8 shall be satisfied solely out of the assets of the Company, as an expense of the Company, and no Member shall be subject to personal liability by reason of such indemnification provision. 6.8.4 In the event that a Member, or any officer, employee or agent of any such Member breaches or causes a breach of this Agreement, such Member (the "INDEMNIFYING MEMBER") shall indemnify and hold harmless any nonbreaching Members (the "INDEMNIFIED MEMBER") against any and all losses, claims, demands, costs, damages, liabilities, joint and several, expenses of any nature (including attorneys' fees and disbursements), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits, or proceedings, civil, criminal, administrative, or investigative, in which the Indemnified Member may be involved, or threatened to be involved as a party or otherwise, arising out of or relating to such breach or the performance or nonperformance of any act by or on behalf of the Indemnifying Member with respect thereto. 6.8.5 The provisions of this PARAGRAPH 6.8 are for the benefit of the Indemnitees and Indemnified Members and shall not be deemed to create any rights for the benefit of any other person or entity. 6.8.6 Except as set forth in PARAGRAPH 6.8.4, neither the Members nor any officer, employee, or agent of the Company shall be liable to the Company or to a Member for any losses sustained or liabilities incurred as a result of any act or omission such Member or any officer, 18 employee, or agent of any Member or of the Company if (i) the act or failure to act of such Member, officer, employee, or agent of any Member or of the Company was in good faith and in a manner it believed to be in, or not contrary to, the best interests of any Member or of the Company, and (ii) the conduct of such Member, officer, employee, or agent of any Member or of the Company did not constitute gross negligence or willful misconduct. 6.8.7 To the extent that any Member or any officer, employee, or agent of the Company (each, a "RESPONSIBLE PARTY") has, at law or in equity, duties (including, without limitation, fiduciary duties) to the Company, any other Member or any other Person bound by the terms of this Agreement, such Responsible Parties acting in accordance with this Agreement shall not be liable to the Company, any other Member, or any such other Person for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties of a Responsible Party otherwise existing at law or in equity, are agreed by all parties hereto to replace such other duties to the greatest extent permitted under applicable law. 6.8.8 Whenever a Responsible Party is required or permitted to make a decision, take or approve an action, or omit to do any of the foregoing: (a) in its discretion, under a similar grant of authority or latitude, or without an express standard of behavior (including, without limitation, standards such as "reasonable" or "good faith"), then such Responsible Party shall be entitled to consider only such interests and factors, including its own, as it desires, and shall have no duty or obligation to consider any other interests or factors whatsoever, or (b) with an express standard of behavior (including, without limitation, standards such as "reasonable" or "good faith"), then such Responsible Party shall comply with such express standard but shall not be subject to any other, different, or additional standard imposed by this Agreement or otherwise applicable law. 6.9 OTHER ACTIVITIES. The Members and the Chairman may engage or invest in, and devote their time to, any other business venture or activity of any nature so long as such activity does not violate this Agreement. Neither the Company nor any Member shall have any right or interest, by virtue of this Agreement or the relationship created hereby, in any other venture or activity of any other Member or the Chairman (or to the income or proceeds derived therefrom). ARTICLE 7 INTERESTS AND TRANSFERS OF INTERESTS 7.1 TRANSFERS. No Member or Assignee may Transfer all or any portion of its Membership or Economic Interest (or beneficial interest therein) without the prior written consent of a Majority in Interest of the remaining Members, which consent may be given or withheld in each Member's sole and absolute discretion. Any purported Transfer which is not in accordance with this Agreement shall be null and void. 7.2 FURTHER RESTRICTIONS. Notwithstanding any contrary provision in this Agreement, any otherwise permitted Transfer shall be null and void if: (a) such Transfer would cause a termination of the Company for federal or state, if applicable, income tax purposes; 19 (b) such Transfer would, in the opinion of counsel to the Company, cause the Company to cease to be classified as a partnership for federal or state income tax purposes; (c) such Transfer requires the registration of such Transferred Interest pursuant to any applicable federal or state securities laws; (d) such Transfer causes the Company to become a "Publicly Traded Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of the Code; (e) such Transfer subjects the Company to regulation under the Investment Company Act of 1940, the Investment Advisers Act of 1940 or the Employee Retirement Income Security Act of 1974, each as amended; (f) such Transfer results in a violation of applicable laws; (g) such Transfer causes the revaluation or reassessment of the value of any Company Asset resulting in any federal, state or local tax liability; (h) such Transfer is made to any Person who lacks the legal right, power or capacity to own such Interest; or (i) the Company does not receive written instruments of Transfer including, without limitation, such Assignee's consent to be bound by this Agreement as an Assignee. 7.3 RIGHTS OF ASSIGNEES. Until such time, if any, as a transferee of any permitted Transfer pursuant to this ARTICLE 7 is admitted to the Company as a Substitute Member pursuant to PARAGRAPH 7.6: (i) such transferee shall be an Assignee only, and only shall receive, to the extent Transferred, the distributions and allocations of income, gain, loss, deduction, credit, or similar item to which the Member which Transferred its Interest would be entitled, and (ii) such Assignee shall not be entitled or enabled to exercise any other rights or powers of a Member, such other rights remaining with the transferring Member. In such a case, the transferring Member shall remain a Member even if he has transferred his entire Economic Interest in the Company to one or more Assignees. In the event any Assignee desires to make a further assignment of any Economic Interest in the Company, such Assignee shall be subject to all of the provisions of this Agreement to the same extent, and in the same manner, as any Member desiring to make such an assignment. 7.4 ADMISSIONS, WITHDRAWALS AND REMOVALS. No Person shall be admitted to the Company as a Member except in accordance with PARAGRAPH 3.4 (in the case of Persons obtaining an interest in the Company directly from the Company) or PARAGRAPH 7.6 (in the case of transferees of a permitted Transfer of an Interest in the Company from another Person). Except as otherwise specifically set forth in PARAGRAPH 7.7, no Member shall be entitled to retire or withdraw from being a Member of the Company without the written consent of a Majority in Interest of the remaining Members, which consents may be given or withheld in each Member's sole and absolute discretion. No Member shall be subject to removal except for good cause as determined by the unanimous vote of the other Members. No admission, withdrawal or removal of a Member shall cause the dissolution of the Company. Any purported admission, withdrawal or removal which is not in accordance with this Agreement shall be null and void. 20 7.5 PAYMENT UPON WITHDRAWAL OR REMOVAL OF MEMBER. If any Member withdraws from the Company with the consent of a Majority in Interest of the remaining Members (other than pursuant to PARAGRAPH 7.7), or if any Member is removed pursuant to PARAGRAPH 7.4, then such Member automatically shall receive from the Company a payment equal to the Member's Capital Account balance as adjusted as of the effective date of the written election of withdrawal (the "TERMINATION PAYMENT"). The Termination Payment shall be paid on the effective date of the removal or written election of withdrawal. Notwithstanding the foregoing, the Company shall have the right to withhold from, and set off against, the Termination Payment of any removed Member such damages as the remaining Members may reasonably determine was suffered by the Company and/or its Members in connection with the matter(s) or event(s) resulting in such removal. 7.6 ADMISSION OF ASSIGNEES AS SUBSTITUTE MEMBERS. 7.6.1 An Assignee shall become a Substitute Member only if and when each of the following conditions are satisfied: (a) the assignor of the Interest transferred sends written notice to the Company requesting the admission of the Assignee as a Substitute Member and setting forth the name and address of the Assignee, the Percentage Interest transferred, and the effective date of the Transfer; (b) a Majority in Interest of the remaining Members consents in writing to such admission, which consent may be given or withheld in each Member's sole and absolute discretion; and (c) the Chairman receives from the Assignee (i) such information concerning the Assignee's financial capacities and investment experience as may reasonably be requested by the Chairman, and (ii) written instruments of Transfer including, without limitation such Assignee's consent to be bound by this Agreement as a Substitute Member. 7.6.2 Upon the admission of any Substitute Member, EXHIBIT A shall be amended to reflect the name, address and Percentage Interest of such Substitute Member and to eliminate or adjust, if necessary, the name, address and Percentage Interest of the predecessor of such Substitute Member. 7.7 WITHDRAWAL OF MEMBERS. If a Member has transferred all of its Membership Interest to one or more Assignees, then such Member shall withdraw from the Company if and when all such Assignees have been admitted as Substitute Members in accordance with this Agreement. 7.8 CONVERSION OF MEMBERSHIP INTEREST. Upon the Incapacity of a Member and the subsequent continuation of the business of the Company pursuant to PARAGRAPH 8.2(c), such Incapacitated Member's Membership Interest shall convert to an Economic Interest only, and such Incapacitated Member (or its executor, administrator, trustee or receiver, as applicable) shall thereafter be deemed an Assignee for all purposes hereunder, with the same Economic Interest as was held by such Incapacitated Member prior to its Incapacity, but without any other rights of a Member unless the holder of such Economic Interest is admitted as a Substitute Member pursuant to PARAGRAPH 7.6. 21 7.9 COMPLIANCE WITH IRS SAFE HARBOR. The Chairman shall monitor the transfers of interests in the Company to determine (i) if such interests are being traded on an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of section 7704 of the Code, and (ii) whether additional transfers of interests would result in the Company being unable to qualify for at least one of the "safe harbors" set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the Internal Revenue Service setting forth safe harbors under which interests will not be treated as "readily tradable on a secondary market (or the substantial equivalent thereof)" within the meaning of section 7704 of the Code) (the "SAFE HARBORS"). The Members shall take all steps reasonably necessary or appropriate to prevent any trading of interests or any recognition by the Company of transfers made on such markets and, except as otherwise provided herein, to ensure that at least one of the Safe Harbors is met. ARTICLE 8 DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY 8.1 LIMITATIONS. The Company may be dissolved, liquidated, and terminated only pursuant to the provisions of this ARTICLE 8, and the Members do hereby irrevocably waive any and all other rights they may have to cause a dissolution of the Company or a sale or partition of any or all of the Company Assets. 8.2 EXCLUSIVE CAUSES. Notwithstanding the Act, the following, and only the following, events shall cause the Company to be dissolved, liquidated, and terminated: (a) The occurrence of a Terminating Capital Transaction; (b) The Incapacity of any Member, unless a Majority of Remaining Members votes to continue the Company within ninety (90) days following the occurrence of any such Incapacity, PROVIDED THAT, the provisions of this PARAGRAPH 8.2(b) shall cease to apply upon the written determination of the Tax Matters Partner to the effect that such provisions are no longer necessary to cause the Company to be treated as a partnership for federal and applicable state income tax purposes; (c) By the election of a Majority in Interest of the Members; or (d) Judicial dissolution. Any dissolution of the Company other than as provided in this PARAGRAPH 8.2 shall be a dissolution in contravention of this Agreement. 8.3 EFFECT OF DISSOLUTION. The dissolution of the Company shall be effective on the day on which the event occurs giving rise to the dissolution. However, the Company shall not terminate until it has been wound up and its assets have been distributed as provided in PARAGRAPH 8.5 of this Agreement. Notwithstanding the dissolution of the Company, prior to the termination of the Company, the business of the Company and the affairs of the Members, as such, shall continue to be governed by this Agreement. 8.4 NO CAPITAL CONTRIBUTION UPON DISSOLUTION. Each Member shall look solely to the Company Assets for all distributions with respect to the Company, its Capital Contribution thereto, its 22 Capital Account and its share of Net Profits or Net Losses, and shall have no recourse therefor (upon dissolution or otherwise) against any other Member. Accordingly, if any Member has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which the liquidation occurs), then such Member shall have no obligation to make any Capital Contribution with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other person for any purpose whatsoever. 8.5 LIQUIDATION. 8.5.1 Upon dissolution of the Company, the Members shall designate a "LIQUIDATOR" of the Company. The Liquidator shall liquidate the assets of the Company, and after allocating (pursuant to ARTICLE 5 of this Agreement) all income, gain, loss and deductions resulting therefrom, shall apply and distribute the proceeds thereof as follows: (a) First, to the payment of the obligations of the Company, to the expenses of liquidation, and to the setting up of any Reserves for contingencies. (b) Thereafter, to the Members in proportion to the positive balances in the Members' respective Capital Accounts, determined after taking into account all Capital Account adjustments for the Company taxable year during which such liquidation occurs (other than those made as a result of the distributions set forth in this PARAGRAPH 8.5.1(b) of this Agreement), by the end of the taxable year in which such liquidation occurs or, if later, within 90 days after the date of the liquidation. 8.5.2 Notwithstanding PARAGRAPH 8.5.1 of this Agreement, in the event that the Members determine that an immediate sale of all or any portion of the Company Assets would cause undue loss to the Members, the Members, in order to avoid such loss to the extent not then prohibited by the Act, may either defer liquidation of and withhold from distribution for a reasonable time any Company Assets except those necessary to satisfy the Company's debts and obligations, or distribute the Company Assets to the Members in kind. ARTICLE 9 MISCELLANEOUS 9.1 AMENDMENTS. 9.1.1 Each Additional Member and Substitute Member shall become a signatory hereto by signing such number of counterpart signature pages to this Agreement, and such other instruments, in such manner, as the Members shall determine. By so signing, each Additional Member and Substitute Member, as the case may be, shall be deemed to have adopted and to have agreed to be bound by all of the provisions of this Agreement. 9.1.2 This Agreement may only be amended by a written instrument executed by a Majority in Interest of the Members. Notwithstanding the foregoing in no event shall this Agreement be amended without the consent of the Members to be adversely affected, so as to (a) modify the limited liability of a Member or (b) adversely affect the interest of a Member in Net Profits, Net Losses or Cash Available for Distribution (other than to reflect the admission of an Additional Member). 23 9.1.3 In making any amendments, there shall be prepared and filed by the Chairman, such documents and certificates as may be required under the Act and under the laws of any other jurisdiction applicable to the Company. 9.2 ACCOUNTING AND FISCAL YEAR. Subject to Code Section 448, the books of the Company shall be kept on such method of accounting for tax and financial reporting purposes as may be determined by the Members. The fiscal year of the Company shall end on December 31 of each year, or on such other date permitted under the Code as the Members shall determine. 9.3 MEETINGS. At any time, and from time to time, the Chairman or a Majority in Interest of the Members (by written notice to the Chairman) may, but shall not be required to, call meetings of the Members. Written notice of any such meeting shall be given to all Members not less than two (2) nor more than forty-five (45) days prior to the date of such meeting. Each meeting of the Members shall be conducted by the Chairman. Each Member may authorize any other Person (whether or not such other Person is a Member) to act for it or on its behalf on all matters in which the Member is entitled to participate. Each proxy must be signed by the Member or such Member's attorney-in-fact. 9.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersedes any and all prior or contemporaneous agreements or understandings between the parties hereto pertaining to the subject matter hereof. 9.5 FURTHER ASSURANCES. Each of the parties hereto does hereby covenant and agree on behalf of itself, its successors, and its assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish, and deliver such other instruments, documents and statements, and to take such other action as may be required by law or reasonably necessary to effectively carry out the purposes of this Agreement. 9.6 NOTICES. Any notice, consent, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be (a) delivered personally to the Person or to an officer of the Person to whom the same is directed, or (b) sent by facsimile or registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to the Company, if to the Company or any of the Members c/o The Carlyle Group, 1001 Pennsylvania Avenue, N.W., Washington, D.C. 20004, or to such other address as the Company may from time to time specify by notice to the Company and the other Members. Any such notice shall be deemed to be delivered, given and received for all purposes as of: (i) the date so delivered, if delivered personally, (ii) upon receipt, if sent by facsimile, or (iii) on the date of receipt or refusal indicated on the return receipt, if sent by registered or certified mail, return receipt requested, postage and charges prepaid and properly addressed. 9.7 TAX MATTERS. 9.7.1 Carlyle Partners II shall be designated and shall operate as "Tax Matters Partner" (as defined in Code Section 6231), to oversee or handle matters relating to the taxation of the Company. 9.7.2 The Member designated as "Tax Matters Partner" may make all elections for federal income and all other tax purposes (including, without limitation, pursuant to Section 754 of the Code). 24 9.7.3 Income tax returns of the Company shall be prepared by such certified public accountant(s) as the Chairman shall retain at the expense of the Company. 9.8 GOVERNING LAW. This Agreement, including its existence, validity, construction, and operating effect, and the rights of each of the parties hereto, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to otherwise governing principles of conflicts of law. 9.9 CHOICE OF FORUM. Any questions, dispute, or other difference relating to this Agreement shall be resolved in the state courts of the State of Delaware, provided that such court or courts have subject matter jurisdiction, and if for any reason such court or courts do not have subject matter jurisdiction, in a federal court in the State of Delaware. The parties shall and hereby do consent to the jurisdiction of the state and federal courts of the State of Delaware and acknowledge that such a forum shall be a convenient forum for resolution of these questions, disputes, and other differences. 9.10 CONSTRUCTION. This Agreement shall be construed as if all parties prepared this Agreement. 9.11 CAPTIONS - PRONOUNS. Any titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the text of this Agreement. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as appropriate. 9.12 BINDING EFFECT. Except as otherwise expressly provided herein, this Agreement shall be binding on and inure to the benefit of the Members, their heirs, executors, administrators, successors and all other Persons hereafter holding, having or receiving an interest in the Company, whether as Assignees, Substitute Members or otherwise. 9.13 SEVERABILITY. In the event that any provision of this Agreement as applied to any party or to any circumstance, shall be adjudged by a court to be void, unenforceable or inoperative as a matter of law, then the same shall in no way affect any other provision in this Agreement, the application of such provision in any other circumstance or with respect to any other party, or the validity or enforceability of the Agreement as a whole. 9.14 CONFIDENTIALITY. Each Party hereto agrees that the provisions of this Agreement, all understandings, agreements and other arrangements between and among the parties, and all other non-public information received from or otherwise relating to, the Company shall be confidential, and shall not be disclosed or otherwise released to any other Person (other than another party hereto), without the written consent of a Majority in Interest of the Members. The obligations of the parties hereunder shall not apply to the extent that the disclosure of information otherwise determined to be confidential is required by applicable law, PROVIDED THAT, prior to disclosing such confidential information, a party shall notify the Company thereof, which notice shall include the basis upon which such party believes the information is required to be disclosed. 9.15 COUNTERPARTS. This Agreement may be executed in any number of multiple counterparts, each of which shall be deemed to be an original copy and all of which shall constitute one agreement, binding on all parties hereto. 25 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. CARLYLE PARTNERS II, L.P., By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /S/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director CARLYLE PARTNERS III, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director CARLYLE INTERNATIONAL PARTNERS II, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director CARLYLE INTERNATIONAL PARTNERS III, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director 26 C/S INTERNATIONAL PARTNERS By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director STATE BOARD OF ADMINISTRATION OF FLORIDA, separate account maintained pursuant to an Investment Management Agreement dated as of September 6, 1996 between the State Board of Administration of Florida, Carlyle Investment Group, L.P. and Carlyle Investment Management, L.L.C. By: Carlyle Investment Management, L.L.C., as Investment Manager By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director CARLYLE-UDLP INTERNATIONAL PARTNERS, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director CARLYLE INVESTMENT GROUP, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director CARLYLE-UDLP PARTNERS, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director 27 CARLYLE-UDLP PARTNERS II, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director CARLYLE-UDLP INTERNATIONAL PARTNERS II, L.P. By: TC GROUP, L.L.C., its General Partner By: TCG Holdings, L.L.C., its Managing Member By: /s/ Allan M. Holt ------------------------- Allan M. Holt, Managing Director DBD INVESTORS IV, L.L.C. By: /s/ Allan M. Holt ------------------------- Allan M. Holt 28 EXHIBIT "A" MEMBERS, CAPITAL CONTRIBUTIONS, AND PERCENTAGE INTERESTS
Name and Address of Members Capital Contribution Percentage Interest - --------------------------- -------------------- ------------------- Carlyle Investment Group, L.P. $ 54,899 0.03% Florida SBA $ 21,957,690 12.69% Carlyle Partners II, L.P. $ 52,274,197 30.22% Carlyle Partners III, L.P. $ 2,385,992 1.38% Carlyle International Partners II, L.P. $ 44,124,848 25.51% Carlyle International Partners III, L.P. $ 2,377,443 1.37% C/S International Partners $ 9,934,931 5.74% Carlyle-UDLP Partners, L.P. $ 14,713,377 8.50% Carlyle-UDLP Partners II, L.P. $ 14,525,441 8.40% Carlyle-UDLP International Partners, L.P. $ 7,225,471 4.18% Carlyle-UDLP International Partners II, L.P. $ 3,425,711 1.98% DBD Investors IV, L.L.C. $ 0 0%
29 TABLE OF CONTENTS PAGE ARTICLE 1. ORGANIZATIONAL MATTERS...........................................1 1.1 Formation.................................................1 1.2 Name......................................................1 1.3 Principal Place of Business; Other Places of Business.....1 1.4 Business Purpose..........................................1 1.5 Certificate of Formation; Filings.........................1 1.6 Fictitious Business Name Statements.......................2 1.7 Designated Agent for Service of Process...................2 1.8 Term......................................................2 ARTICLE 2. DEFINITIONS....................................................2 2.1 "Act".....................................................2 2.2 "Additional Members"......................................2 2.3 "Adjusted Capital Account Deficit"........................2 2.4 "Affiliate"...............................................2 2.5 "Agreement"...............................................3 2.6 "Assignee.................................................3 2.7 "Capital Account".........................................3 2.8 "Capital Contributions"...................................4 2.9 "Cash Available for Distribution".........................4 2.10 "Certificate".............................................4 2.11 "Code"....................................................4 2.12 "Company".................................................4 2.13 "Company Minimum Gain"....................................4 2.14 "Company Assets...........................................4 2.15 "Depreciation"............................................4 2.16 "Economic Interest".......................................4 2.17 "Gross Asset Value".......................................4 2.18 "Immediate Family"........................................5 2.19 "Incapacity"..............................................6 2.20 "Indemnitee"..............................................6 2.21 "Liquidator"..............................................6 2.22 "Majority in Interest"....................................6 2.23 "Majority of Remaining Members"...........................6 2.24 [INTENTIONALLY OMITTED]...................................6 2.25 "Member Minimum Gain".....................................6 2.26 "Member Nonrecourse Debt".................................6 2.27 "Member Nonrecourse Deductions"...........................6 2.28 "Members".................................................6 2.29 "Membership Interest" or "Interest".......................6 2.30 [INTENTIONALLY OMITTED]...................................6 2.31 "Net Profits" or "Net Losses".............................6 2.32 "Nonrecourse Deductions"..................................7 2.33 "Nonrecourse Liability"...................................7 i 2.34 "Operating Cash Expenses".................................7 2.35 "Percentage Interest".....................................8 2.36 "Person"..................................................8 2.37 "Recourse Liability"......................................8 2.38 "Regulations".............................................8 2.39 "Regulatory Allocations"..................................8 2.40 "Reserves"................................................8 2.41 "Substitute Member".......................................8 2.42 "Terminating Capital Transaction".........................8 2.43 "Termination Payment".....................................9 2.44 "Transfer"................................................9 2.45 "Termination Payment".....................................9 2.46 "Transfer"................................................9 ARTICLE 3. CAPITAL; CAPITAL ACCOUNTS AND MEMBERS..........................9 3.1 Initial Capital Contributions of Members..................9 3.2 Additional Capital Contributions by Member................9 3.3 Capital Accounts..........................................9 3.4 Additional Members........................................9 3.5 Member Capital............................................9 3.6 Member Loans..............................................9 3.7 Liability of Members.....................................10 ARTICLE 4. DISTRIBUTIONS.................................................10 4.1 Distributions of Cash Available for Distribution.........10 4.2 Distributions Upon Liquidation...........................10 4.3 Withholding..............................................10 4.4 Distributions in Kind....................................11 4.5 Limitations on Distributions.............................11 ARTICLE 5. ALLOCATIONS OF NET PROFITS AND NET LOSSES.....................11 5.1 General Allocation of Net Profits and Losses.............11 5.2 Regulatory Allocations...................................11 5.3 Tax Allocations..........................................13 5.4 Other Provisions.........................................13 ARTICLE 6. OPERATIONS MANAGEMENT.........................................14 6.1 Management...............................................14 6.2 Voting by Members........................................15 6.3 Chairman.................................................15 6.4 Power to Act For The Company.............................16 6.5 Reimbursement and Remunerations..........................16 6.6 Reliance By Third Parties................................16 6.7 Records and Reports......................................17 6.8 Indemnification and Liability of Members and Related Parties......................................18 6.9 Other Activities.........................................19 ii ARTICLE 7. INTERESTS AND TRANSFERS OF INTERESTS..........................19 7.1 Transfers................................................19 7.2 Further Restrictions.....................................19 7.3 Rights of Assignees......................................20 7.4 Admissions, Withdrawals and Removals.....................20 7.5 Payment Upon Withdrawal or Removal of Member.............21 7.6 Admission of Assignees as Substitute Members.............21 7.7 Withdrawal of Members....................................21 7.8 Conversion of Membership Interest........................21 7.9 Compliance With IRS Safe Harbor..........................22 ARTICLE 8. DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY.......................................................22 8.1 Limitations..............................................22 8.2 Exclusive Causes.........................................22 8.3 Effect of Dissolution....................................22 8.4 No Capital Contribution Upon Dissolution.................22 8.5 Liquidation..............................................23 ARTICLE 9. MISCELLANEOUS.................................................23 9.1 Amendments...............................................24 9.2 Accounting and Fiscal Year...............................24 9.3 Meetings.................................................24 9.4 Entire Agreement.........................................24 9.5 Further Assurances.......................................24 9.6 Notices..................................................24 9.7 Tax Matters..............................................24 9.8 Governing Law............................................25 9.9 Choice of Forum..........................................25 9.10 Construction.............................................25 9.11 Captions - Pronouns......................................25 9.12 Binding Effect...........................................25 9.13 Severability.............................................25 9.14 Confidentiality..........................................25 9.15 Counterparts.............................................25 iii EX-4.1 13 EXHIBIT 4.1 INDENTURE DTD 10/6 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- United Defense Industries, Inc. 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 INDENTURE Dated as of October 6, 1997 Norwest Bank Minnesota, N.A. Trustee - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE (*) TRUST INDENTURE ACT SECTION INDENTURE SECTION 310 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 (b)(2). . . . . . . . . . . . . . . . . . . . . . . . . 7.06, 7.07 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06, 12.02 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.02 (a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05 (c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 316 (a)(last sentence). . . . . . . . . . . . . . . . . . . . . N.A. (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 317 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. N.A. means not applicable. - --------------------------- This Cross-Reference Table is not part of this Indenture. TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . 1 Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1 Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . 17 Section 1.03. Incorporation by Reference of Trust Indenture Act . . 18 Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . 18 ARTICLE 2 THE NOTES . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . 19 Section 2.02. Execution and Authentication. . . . . . . . . . . . . 19 Section 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . 20 Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . 20 Section 2.05. Holder Lists. . . . . . . . . . . . . . . . . . . . . 20 Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . 21 Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . 31 Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . 31 Section 2.09. Treasury Notes. . . . . . . . . . . . . . . . . . . . 31 Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . 31 Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . 31 Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . 32 ARTICLE 3 REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . 32 Section 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . 32 Section 3.02. Selection of Notes to be Redeemed . . . . . . . . . . 32 Section 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . 32 Section 3.04. Effect of Notice of Redemption. . . . . . . . . . . . 33 Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . 33 Section 3.06. Notes Redeemed in Part. . . . . . . . . . . . . . . . 34 Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . 34 Section 3.08. Mandatory Redemption. . . . . . . . . . . . . . . . . 34 Section 3.09. Offer to Purchase by Application of Excess Proceeds. . . . . . . . . . . . . . . . . . 35 Section 3.10. Special Redemption. . . . . . . . . . . . . . . . . . 36 ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . . 36 Section 4.01. Payment of Notes. . . . . . . . . . . . . . . . . . . 36 Section 4.02. Maintenance of Office or Agency.. . . . . . . . . . . 37 Section 4.03. Reports.. . . . . . . . . . . . . . . . . . . . . . . 37 Section 4.04. Compliance Certificate. . . . . . . . . . . . . . . . 37 Section 4.05. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . 38 Section 4.06. Waiver of Stay, Extension and Usury Laws. . . . . . . 38 Section 4.07. Restricted Payments.. . . . . . . . . . . . . . . . . 38 Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.. . . . . . . . . . 40 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.. . . . . . . . . . . 41 Section 4.10. Asset Sales. . . . . . . . . . . . . . . . . . . . . 43 Section 4.11. Transactions with Affiliates. . . . . . . . . . . . . 44 Section 4.12. Liens.. . . . . . . . . . . . . . . . . . . . . . . . 45 Section 4.13. Business Activities.. . . . . . . . . . . . . . . . . 45 Section 4.14. Corporate Existence.. . . . . . . . . . . . . . . . . 45 Section 4.15. Offer to Repurchase upon Change of Control. . . . . . 45 Section 4.16. No Senior Subordinated Debt.. . . . . . . . . . . . . 46 Section 4.17. Sale and Leaseback Transactions.. . . . . . . . . . . 46 Section 4.18. Limitation on Capital Stock of Controlled Subsidiaries. . . . . . . . . . . . . . 47 i Page ---- Section 4.19. Guarantees of Certain Indebtedness. . . . . . . . . . 47 Section 4.20. Payments for Consent. . . . . . . . . . . . . . . . . 47 Section 4.21. Deposit of Proceeds with Trustee Pending Consummation of Acquisition.. . . . . . . . . 47 ARTICLE 5 SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . 49 Section 5.01. Merger, Consolidation, or Sale of Assets. . . . . . . 49 Section 5.02. Successor Corporation Substituted.. . . . . . . . . . 49 ARTICLE 6 DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . 49 Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . 49 Section 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . 51 Section 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . 51 Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . 52 Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . 52 Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . 52 Section 6.07. Rights of Holders of Notes to Receive Payment.. . . . 52 Section 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . 52 Section 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . 53 Section 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . 53 Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . 53 ARTICLE 7 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 54 Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . 54 Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . 54 Section 7.03. Individual Rights of Trustee. . . . . . . . . . . . . 55 Section 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . 55 Section 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . . 55 Section 7.06. Reports by Trustee to Holders of the Notes. . . . . . 55 Section 7.07. Compensation and Indemnity. . . . . . . . . . . . . . 56 Section 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . 56 Section 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . 57 Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . 57 Section 7.11. Preferential Collection of Claims Against Company . . 57 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . 57 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . 57 Section 8.02. Legal Defeasance and Discharge. . . . . . . . . . . . 58 Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . . 58 Section 8.04. Conditions to Legal or Covenant Defeasance. . . . . . 58 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions . . . . 59 Section 8.06. Repayment to Company. . . . . . . . . . . . . . . . . 60 Section 8.07. Reinstatement.. . . . . . . . . . . . . . . . . . . . 60 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER. . . . . . . . . . . 60 Section 9.01. Without Consent of Holders of Notes . . . . . . . . . 60 Section 9.02. With Consent of Holders of Notes. . . . . . . . . . . 61 Section 9.03. Compliance with Trust Indenture Act . . . . . . . . . 62 Section 9.04. Revocation and Effect of Consents.. . . . . . . . . . 62 Section 9.05. Notation on or Exchange of Notes. . . . . . . . . . . 62 Section 9.06. Trustee to Sign Amendments, Etc.. . . . . . . . . . . 62 ii Page ---- ARTICLE 10 SUBORDINATION . . . . . . . . . . . . . . . . . . . . 63 Section 10.01. Agreement to Subordinate. . . . . . . . . . . . . . . 63 Section 10.02. Liquidation; Dissolution; Bankruptcy. . . . . . . . . 63 Section 10.03. Default on Designated Senior Debt . . . . . . . . . . 63 Section 10.04. Acceleration of Notes . . . . . . . . . . . . . . . . 64 Section 10.05. Notice by Company . . . . . . . . . . . . . . . . . . 64 Section 10.06. Subrogation.. . . . . . . . . . . . . . . . . . . . . 64 Section 10.07. Relative Rights . . . . . . . . . . . . . . . . . . . 64 Section 10.08. Subordination May Not Be Impaired by Company. . . . . 65 Section 10.09. Distribution or Notice to Representative. . . . . . . 65 Section 10.10. Rights of Trustee and Paying Agent. . . . . . . . . . 65 Section 10.11. Authorization to Effect Subordination . . . . . . . . 65 Section 10.12. Amendments. . . . . . . . . . . . . . . . . . . . . . 65 Section 10.13. Continued Effectiveness . . . . . . . . . . . . . . . 65 Section 10.14. No Contest; No Security . . . . . . . . . . . . . . . 66 Section 10.15. Cumulative Rights; No Waivers . . . . . . . . . . . . 66 Section 10.16. Trustee . . . . . . . . . . . . . . . . . . . . . . . 66 ARTICLE 11 GUARANTEES. . . . . . . . . . . . . . . . . . . . . . 66 Section 11.01. Guarantees. . . . . . . . . . . . . . . . . . . . . . 66 Section 11.02. Execution and Delivery of Guarantee . . . . . . . . . 67 Section 11.03. Guarantors May Consolidate, Etc., on Certain Terms. . . . . . . . . . . . . . . . 67 Section 11.04. Releases Following Release Under Senior Credit Facility or Sale of Assets. . . . . . . 68 Section 11.05. Limitation on Guarantor Liability; Contribution . . . 68 Section 11.06. Trustee to Include Paying Agent . . . . . . . . . . . 69 Section 11.07. Subordination of Guarantee. . . . . . . . . . . . . . 69 ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 69 Section 12.01. Trust Indenture Act Controls. . . . . . . . . . . . . 69 Section 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . 69 Section 12.03. Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . 70 Section 12.04. Certificate and Opinion as to Conditions Precedent. . 70 Section 12.05. Statements Required in Certificate or Opinion . . . . 71 Section 12.06. Rules by Trustee and Agents . . . . . . . . . . . . . 71 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders. . . . . . . . . 71 Section 12.08. Governing Law . . . . . . . . . . . . . . . . . . . . 71 Section 12.09. No Adverse Interpretation of Other Agreements . . . . 71 Section 12.10. Successors. . . . . . . . . . . . . . . . . . . . . . 71 Section 12.11. Severability. . . . . . . . . . . . . . . . . . . . . 72 Section 12.12. Counterpart Originals . . . . . . . . . . . . . . . . 72 Section 12.13. Table of Contents, Headings, Etc. . . . . . . . . . . 72 iii EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE iv INDENTURE dated as of October 6, 1997 between United Defense Industries, Inc., a Delaware corporation (the "COMPANY"), UDLP Holdings Corp., a Delaware corporation ("HOLDINGS"), Iron Horse Investors, L.L.C., a Delaware limited liability company ("IRON HORSE") and, upon consummation of the Acquisition (as defined below), United Defense, L.P., a Delaware limited partnership ("UDLP," and together with Iron Horse and Holdings, the "GUARANTORS"), and Norwest Bank Minnesota, N.A. as trustee (the "TRUSTEE"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 8 3/4% Senior Subordinated Notes due 2007 (the "INITIAL NOTES") and the 8 3/4% Senior Subordinated Notes due 2007 issued in the Exchange Offer (the "EXCHANGE NOTES" and, together with the Initial Notes, the "NOTES"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "ACQUIRED DEBT" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "ACQUISITION" means the acquisition by the Company and Holdings of United Defense, L.P. and certain related assets. "ADJUSTED NET ASSETS" of a Guarantor at any date means the lesser of the amount by which (i) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Guarantee, of such Guarantor at such date and (ii) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under such Guarantee), excluding debt in respect of such Guarantee, as they become absolute and matured. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED THAT beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "AGENT" means any Registrar, Paying Agent or co-registrar. "APPLICABLE PREMIUM" means, with respect to a Note at any Redemption Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess of (A) the present value at such time of (1) the redemption price of such Note at November 15, 2002 (such redemption price being set forth in Section 3.07 hereof) PLUS (2) all required interest payments due on such Note through November 15, 2002, such present value computed using a discount rate equal to the Treasury Rate plus 87.5 basis points over (B) the principal amount of such Note. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than in the ordinary course of business (PROVIDED THAT the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by Sections 4.15 and 5.01 hereof and not by the provisions of Section 4.10 hereof) and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2,000,000 or (b) for Net Proceeds in excess of $2,000,000. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Restricted Subsidiary of the Company that is a Guarantor or to a Controlled Subsidiary or by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company that is a Guarantor or to a Controlled Subsidiary, (ii) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company that is a Guarantor, and (iii) (A) a Permitted Investment (including, without limitation, a Permitted Investment in a Permitted Joint Venture) or (B) a Restricted Payment that is permitted by Section 4.07 hereof shall not be deemed to be Asset Sales. "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "BANKRUPTCY CODE" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee duly authorized to act on behalf of the Board of Directors. "BORROWING BASE" means, as of any date, an amount equal to the sum of (a) 90% of the net book value of the accounts receivable of the Company and its Restricted Subsidiaries as of such date resulting from sales in the United States of America, including sales under contracts pursuant to the U.S. Foreign Military Sales program (provided that no accounts receivable shall be included in such calculation if such receivable or any portion thereof is unpaid for more than 90 days after the date such receivable arises or is created), and (b) 60% of the net book value of the inventory, including work-in-process and raw goods (less progress payments or advanced payments from customers with respect to such inventory), owned by the Company and its Restricted Subsidiaries as of such date, all calculated on a consolidated basis and in accordance with GAAP. To the extent that information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company may utilize the most recent available quarterly or annual financial report for purposes of calculating the Borrowing Base. "BUSINESS DAY" means any day other than a Legal Holiday. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership (whether 2 general or limited) or membership interests and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CARLYLE" means TC Group, L.L.C., a Delaware limited liability company, and its Affiliates, and any successors thereof that are Permitted Holders. "CASH EQUIVALENTS" means (i) United States dollars, (ii) the local currency of any jurisdiction in which any Permitted Joint Venture conducts business, (iii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iv) certificates of deposit and eurodollar time deposits with maturities of not more than one year from the date of acquisition, bankers' acceptances with maturities of not more than one year from the date of acquisition and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $250,000,000 and a Thompson Bank Watch Rating of "B" or better, (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (iii) and (iv) above entered into with any financial institution meeting the qualifications specified in clause (iv) above, (vi) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or one of the two highest ratings from Standard & Poor's Rating Group with maturities of not more than six months from the date of acquisition, and (vii) money market funds at least 95% of the assets of which comprise assets specified in clauses (i) through (vi). "CEDEL" means Cedel Bank, societe anonyme. "CHANGE OF CONTROL" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "GROUP") together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture) unless immediately following such sale, lease, exchange or other transfer in compliance with this Indenture such assets are owned, directly or indirectly, by the Company or a Restricted Subsidiary of the Company that is a Guarantor; (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); (iii) the acquisition, in one or more transactions, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) by (x) any Person or Group (other than a Group the majority in economic interests and voting or similar rights is owned by Permitted Holders) that either (A) beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, (I) at least 30% (or, in the case of a transaction or transactions approved before the consummation of same by a majority of the directors of the Company, 35%) of the Company's then outstanding voting securities entitled to vote on a regular basis for the board of directors of the Company and (II) a greater beneficial interest than the Permitted Holders, or (B) otherwise has the ability to elect, directly or indirectly, a majority of the members of the Company's board of directors, including without limitation by the acquisition of revocable proxies for the election of directors; or (iv) the first day on which a majority of the members of the Company's board of directors are not Continuing Directors. "COLLATERAL" means (i) the Collateral Account, (ii) the Special Redemption Amount and all other cash or Cash Equivalents deposited in the Collateral Account from time to time pursuant to Section 4.21 hereof, (iii) all rights and privileges of the Company with respect to the Collateral Account and such cash and Cash Equivalents, (iv) all dividends, interest and other payments and distributions made on or with respect to such Cash Equivalents or the Collateral Account and (v) all proceeds of any of the foregoing. "CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period PLUS (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), PLUS (ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, PLUS (iii) Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that any such Fixed 3 Charges were deducted in computing such Consolidated Net Income, PLUS (iv) depreciation and amortization (including amortization of goodwill, other intangibles and other asset write-ups resulting from the application of purchase accounting but excluding amortization of prepaid cash expenses that were paid in a prior period commencing after the Issue Date) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation and amortization were deducted in computing such Consolidated Net Income, PLUS (v) LIFO charges of such Person and its Restricted Subsidiaries for such period, PLUS (vi) other non-cash items reducing Consolidated Net Income (excluding any such charge which requires an accrual of or a cash reserve for cash charges for any future period), PLUS (vii) cash received with respect to any non-cash item previously deducted from Consolidated Net Income pursuant to clause (viii) below and MINUS (viii) non-cash items increasing such Consolidated Net Income for such period (including without limitation under any LIFO credit and excluding any reversal of any non-cash item to the extent such reversed non-cash item previously reduced an addition to Consolidated Cash Flow pursuant to the parenthetical to clause (vi) above). Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary, and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries (for such period, on a consolidated basis, determined in accordance with GAAP); PROVIDED THAT (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary that is a Guarantor, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, and (iv) the cumulative effect of a change in accounting principles shall be excluded. For purposes of the calculation in Section 4.07(c) hereof only, the calculation of Consolidated Net Income shall exclude the effects of any amortization of goodwill, research and development, inventory and other asset write-ups, in each case as reflected on the Company's opening consolidated balance sheet after giving effect to the Acquisition as a result of the application of purchase accounting, with the amount of such exclusion (the "EXCLUDED AMOUNT") being reduced by an amount equal to the product of (A) the Excluded Amount and (B) the average effective consolidated federal, state and local income tax rate of the Company applied by the Company in its consolidated financial statements in accordance with GAAP over the period of determination expressed as a decimal. "CONSOLIDATED TANGIBLE ASSETS" means, with respect to any Person as of any date, the amount which, in accordance with GAAP, would be set forth under the caption "Total Assets" (or any like caption) on a consolidated balance sheet of such Person and its Restricted Subsidiaries, less all intangible assets, including, without limitation, goodwill, organization costs, patents, trademarks, copyrights, franchises and research and development costs. "CONTINUING DIRECTOR" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "CONTROLLED SUBSIDIARY" of the Company means a Restricted Subsidiary of the Company (i) (x) 90% or more of the total Equity Interests or other ownership interests of which (other than Capital Stock constituting 4 directors' qualifying shares or interests held by directors or shares or interest required to be held by foreign nationals, in each case to the extent mandated by applicable law) is at the time owned by the Company (directly or through one or more Controlled Subsidiaries of the Company), and (y) the remaining Equity Interests or other ownership interest of which (other than Capital Stock constituting directors' qualifying shares or interests held by directors or shares or interests required to be held by foreign nationals, in each case to the extent mandated by applicable law) is at the time owned by members of management of the Company or any of its Restricted Subsidiaries, directors of the Company or any of its Restricted Subsidiaries or consultants or suppliers to or customers of the Company or any of its Restricted Subsidiaries and (ii) of which the Company possesses, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting securities, by agreement or otherwise. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "CREDIT FACILITIES" means, with respect to the Company or any Restricted Subsidiary, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, other borrowings (including term loans), receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "CUSTODIAN" means any receiver, trustee, assignee, liquidator, sequestor or similar official under the Bankruptcy Code. "DEFAULT" means any event that is or with the passage of time or the giving of notice (or both) would be an Event of Default. "DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DESIGNATED PREFERRED STOCK" means Preferred Stock of the Company that is issued for cash (other than to a Restricted Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate executed by the principal executive officer and the principal financial officer of the Company, on the issuance date thereof. "DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the Senior Credit Facility and (ii) any other Senior Debt permitted hereunder the principal amount of which is $25,000,000 or more and that has been designated by the Company as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature, except to the extent that such Capital Stock is solely redeemable with, or solely exchangeable for, any Capital Stock of such Person that is not Disqualified Stock. 5 "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXCLUDED CONTRIBUTIONS" means net cash proceeds received by the Company after the Issue Date from (a) capital contributions and (b) the private sale of common stock of the Company to Carlyle or its Affiliates, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed by the principal executive officer and the principal financial officer of the Company on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, the cash proceeds of which are excluded from the calculation set forth in Section 4.07(c) hereof. "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facility and the Notes) in existence on the Issue Date and the date of the consummation of the Acquisition, and the Indebtedness of FNSS-Turkey in existence on the date of the consummation of the Acquisition, until such amounts are repaid. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings under any Credit Facility) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "FIXED CHARGES" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense (net of interest income) of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with 6 Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations but excluding amortization of debt issuance costs), (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, (iii) any interest expense on Indebtedness of another Person (excluding the Company or any Restricted Subsidiary) that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of Preferred Stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) and other than dividends paid or accrued for the benefit of the Company or a Restricted Subsidiary; PROVIDED that with respect to any series of Preferred Stock that is Disqualified Capital Stock or Designated Preferred Stock that has not paid cash dividends during such period but accrues dividends according to its terms during any period prior to the maturity date of the Notes, cash dividends will be deemed to have been paid with respect to such series of Disqualified Capital Stock or Designated Preferred Stock during such period, TIMES (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FNSS-TURKEY" means FMC-Nurol Savunma Sanayii A.S., UDLP's 51%-owned Turkish joint venture. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the statements and pronouncements of the Financial Accounting Standards Board and such other statements by such other entities as have been approved by a significant segment of the accounting profession, which are applicable on the Issue Date. "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.06(g)(ii) hereof, which is required to be placed on all Global Notes issued under this Indenture. "GLOBAL NOTES" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(iv) or 2.06(f) hereof. "GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantees or obligations the full faith and credit of the United States is pledged. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTEE" means the guarantee of the Notes by each of the Guarantors pursuant to Article 11 hereof and in the form of guarantee endorsed on the form of Note attached as Exhibit A hereto and any additional guarantee of the Notes to be executed by any Restricted Subsidiary of the Company pursuant to Section 4.19 hereof. "GUARANTORS" means (i) each of (a) United Defense, L.P. (upon the consummation of the Acquisition and entry into a supplement to this Indenture pursuant to Section 4.19 hereof if the date of the consummation of the Acquisition is not the Issue Date), (b) UDLP Holdings Corp. and (c) Iron Horse Investors, L.L.C., (ii) each of the Company's Subsidiaries which becomes a guarantor of the Notes pursuant to Section 4.19 hereof and (iii) each of the Company's Subsidiaries executing a supplemental indenture in which such Subsidiary agrees to be bound by the terms of this Indenture; PROVIDED that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms thereof. 7 "HEDGING OBLIGATIONS" means, with respect to any Person, the net payment Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements in the ordinary course of business designed to protect such Person against fluctuations in commodity prices, interest rates or currency exchange rates. "HOLDER" means a Person in whose name a Note is registered. "IAI GLOBAL NOTE" means the Global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense, customer advance, progress payment or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person), and, to the extent not otherwise included, the guarantee by such Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDEPENDENT FINANCIAL ADVISOR" means a reputable accounting, appraisal or investment banking firm that is, in the reasonable judgment of the Board of Directors, qualified to perform the task for which such firm has been engaged hereunder and disinterested and independent with respect to the Company and its Affiliates. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "INTELLECTUAL PROPERTY" means patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other Obligations), advances of assets or capital contributions, purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary or Permitted Joint Venture of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a direct or indirect Restricted Subsidiary or Permitted Joint Venture of the Company, the Company, or such Restricted Subsidiary, as the case may be, shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary or Permitted Joint 8 Venture not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. "INVESTMENTS" shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in the ordinary course of business. "ISSUE DATE" means the date on which the Initial Notes are first issued and delivered. "LEGAL HOLIDAY" a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in any asset and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "NET INCOME" means, with respect to any person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions), or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries, and (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds or Cash Equivalents received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of all costs relating to such Asset Sale (including, without limitation, legal, accounting, investment banking and brokers fees, and sales and underwriting commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. Net proceeds shall not include Asset Sale proceeds payable to a holder of Capital Stock of any Permitted Joint Venture other than the Company or any of its Restricted Subsidiaries in accordance with the terms of the joint venture agreement or similar agreements governing such Permitted Joint Venture. "NON-RECOURSE INDEBTEDNESS" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (other than Permitted Joint Ventures), (a) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor or otherwise), and (ii) the incurrence of which will not result in any recourse against any of the assets of the Company or its Restricted Subsidiaries (other than Permitted Joint Ventures). "NON-U.S. PERSON" means a person who is not a U.S. Person. 9 "NOTE CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "NOTES" has the meaning assigned to it in the preamble to this Indenture. "OBLIGATIONS" means any principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or its Restricted Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including Liquidated Damages), guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof. "OFFERING" means the offering of the Initial Notes by the Company. "OFFERING MEMORANDUM" means the Offering Memorandum of the Company dated October 1, 1997 with respect to the Offering. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary of the Company. "PARTICIPANT" means, with respect to DTC, Euroclear or Cedel, a Person who has an account with DTC, Euroclear or Cedel, respectively (and, with respect to DTC, shall include Euroclear and Cedel). "PARTICIPATING BROKER-DEALER" has the meaning set forth in the Registration Rights Agreement. "PERMITTED BUSINESS" means the lines of business conducted by the Company and its Subsidiaries on the date of the Acquisition and businesses reasonably related thereto and reasonable extensions thereof, serving governmental, commercial or other customers. "PERMITTED HOLDERS" means TC Group, L.L.C., a Delaware limited liability company, and its Affiliates, and any successors thereof that are Permitted Holders. "PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a Controlled Subsidiary or in a Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person engaged in a Permitted Business, if as a result of such Investment (i) such Person becomes a Controlled Subsidiary or a Restricted Subsidiary that is a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Controlled Subsidiary or a Restricted Subsidiary that is a Guarantor; (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) Investments arising in connection with Hedging Obligations that are incurred in the ordinary course of business, for the purpose of fixing or hedging currency, commodity or interest rate risk (including with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding) in connection with the conduct of the business of 10 the Company and its Subsidiaries; (g) loans or advances to employees in an aggregate principal amount not to exceed $500,000 at any time outstanding; (h) any Investment acquired by the Company or any of its Restricted Subsidiaries (x) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (y) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any Investment or other transfer of title with respect to any Investment in default; (i) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business; (j) Investments the payment for which consists of Equity Interests of the Company (exclusive of Disqualified Stock); PROVIDED, HOWEVER, that such Equity Interests will not increase the amount available for Restricted Payments under Section 4.07(c) hereof; (k) any Investments by the Company or any Restricted Subsidiary of the Company in Permitted Joint Ventures made after the Issue Date having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (k) that are at the time outstanding, not exceeding in the aggregate 10% of the Consolidated Tangible Assets of the Company as of the last day of the most recent full fiscal quarter ending immediately prior to the date of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (l) any Investment existing on the Issue Date; and (m) other Investments by the Company or any of its Restricted Subsidiaries in any Person having an aggregate fair market value, when taken together with all other Investments made pursuant to this clause (m) that are at the time outstanding, not to exceed $25,000,000 at the time of such Investment (with the fair market value being measured at the time made and without giving effect to subsequent changes in value). "PERMITTED JOINT VENTURE" means any joint venture, partnership or other Person designated by the Board of Directors, and until designation by the Board of Directors to the contrary, (i) at least 50% of whose Capital Stock with voting power under ordinary circumstances to elect directors (or Persons having similar or corresponding powers and responsibilities) is at the time owned (beneficially or directly) by the Company and/or by one or more Restricted Subsidiaries of the Company and if the Company and/or such Restricted Subsidiary or Subsidiaries owns more than 50% of the Capital Stock of the Permitted Joint Venture, such Permitted Joint Venture is a Restricted Subsidiary of the Company, (ii) all of whose Indebtedness is Non-Recourse Indebtedness or otherwise permitted to be incurred by such entity pursuant to clause (ii) and/or (xiv) of the second paragraph of Section 4.09 hereof, and (iii) which is engaged in a Permitted Business; PROVIDED THAT upon consummation of the Acquisition, FMC Arabia Limited shall be a Permitted Joint Venture for purposes of this Indenture. Any such designation (other than with respect to FMC Arabia Limited) or designation to the contrary shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt pursuant to this Indenture. "PERMITTED LIENS" means (i) Liens on assets of the Company or any of its Restricted Subsidiaries to secure Senior Debt permitted by this Indenture to be incurred; (ii) Liens on the assets of the Company or any of the Guarantors to secure Hedging Obligations with respect to Indebtedness under any Credit Facility permitted by this Indenture to be incurred; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition and only extend to the property so acquired; (v) Liens existing on the Issue Date; (vi) Liens to secure any Permitted Refinancing Indebtedness incurred to refinance any Indebtedness secured by any Lien referred to in the foregoing clauses (i) through (v), as the case may be, at the time the original Lien became a Permitted Lien; (vii) Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor; (viii) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company 11 with respect to obligations that do not exceed $10,000,000 in the aggregate at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Restricted Subsidiary; (ix) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds, deposits to secure the performance of bids, trade contracts, government contracts, leases or licenses or other obligations of a like nature incurred in the ordinary course of business (including, without limitation, landlord Liens on leased properties); (x) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted, PROVIDED that any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor; (xi) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (vi) of the second paragraph of Section 4.09 hereof covering only the assets acquired with such Indebtedness; (xii) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations not overdue for a period in excess of 60 days or which are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted; PROVIDED that any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor; (xiii) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not in any case materially detract from the value of the property subject thereto or do not interfere with or adversely affect in any material respect the ordinary conduct of the business of the Company and its Restricted Subsidiaries taken as a whole; (xiv) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business and other similar Liens arising in the ordinary course of business; (xv) leases or subleases granted to third Persons not interfering with the ordinary course of business of the Company or any of its Restricted Subsidiaries; (xvi) Liens (other than any Lien imposed by the Employee Retirement Income Security Act of 1974, as amended or any rule or regulation promulgated thereunder) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance, and other types of social security; (xvii) deposits, in an aggregate not to exceed $250,000, made in the ordinary course of business to secure liability to insurance carriers; (xviii) Liens for purchase money obligations (including refinancings thereof) permitted under Section 4.09 hereof, PROVIDED that (A) the Indebtedness secured by any such Lien is permitted under Section 4.09 hereof and (B) any such Lien encumbers only the asset so purchased; (xix) any interest or title of a lessor or sublessor under any operating lease; (xx) Liens under licensing agreements for use of Intellectual Property entered into in the ordinary course of business; (xxi) Liens on the assets of a Permitted Joint Venture securing Non-Recourse Indebtedness; (xxii) Liens securing industrial revenue bonds; (xxiii) Liens in favor of the Trustee under this Indenture and any substantially equivalent Lien granted to any trustee or similar institution under any indenture for Senior Debt permitted by the terms of this Indenture; (xxiv) Liens securing reimbursement obligations with respect to letters of credit which encumber documents and other property relating to such letters of credit and the products and proceeds thereof; (xxv) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Company or any Subsidiary in the ordinary course of business in accordance with past practices; (xxvi) any interest or title of a lessor in the property subject to any lease, whether characterized as capitalized or operating other than any such interest or title resulting from or arising out of a default by the Company or any Subsidiary of its obligations under such lease; (xxvii) Liens arising from filing UCC financing statements for precautionary purposes in connection with true leases of personal property that are otherwise permitted under the applicable indenture and under which the Company or any Subsidiary is lessee; (xxviii) Liens on assets or capital stock of Unrestricted Subsidiaries; and (xxix) any attachment or judgment Lien not constituting an Event of Default under clause (g) of Section 6.01 hereof. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); PROVIDED THAT: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued and unpaid interest on, any Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable fees and expenses incurred in connection therewith); (ii) such Permitted Refinancing 12 Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or a Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PREFERRED STOCK" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of the other Capital Stock issued by such Person. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.06(g)(i) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "PROCEEDING" means any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person (including, without limitation, any such proceeding under Bankruptcy Code). "PUBLIC EQUITY OFFERING" means any underwritten primary public offering of the Voting Stock of the Company pursuant to an effective registration statement (other than a registration statement on Form S-4, Form S-8, or any successor or similar form) under the Securities Act. "PURCHASE AGREEMENT" means the Purchase Agreement dated October 1, 1997 among the Company, the Guarantors and the Initial Purchasers (as defined therein). "QIB" means a "qualified institution buyer" as defined in Rule 144A. "REDEMPTION DATE" has the meaning as stated in Section 3.07(c) hereof. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of October 6, 1997, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "REGULATION S PERMANENT GLOBAL NOTE" means a permanent global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. 13 "REGULATION S TEMPORARY GLOBAL NOTE" means a temporary global Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "REPRESENTATIVE" means the administrative agent under the Senior Credit Facility or its successor thereunder or any similar agent for any Senior Debt. "RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend. "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend. "RESTRICTED INVESTMENT" means any investment other than a Permitted Investment. "RESTRICTED PERIOD" means the 40-day restricted period as defined in Regulation S. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary; PROVIDED that, on the Issue Date, all Subsidiaries of the Company shall be Restricted Subsidiaries of the Company for purposes of this Indenture and, upon consummation of the Acquisition, UDLP and all Subsidiaries of UDLP (other than FNSS-Turkey) shall also be Restricted Subsidiaries of the Company for purposes of this Indenture. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 144A GLOBAL NOTE" means the Global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated under the Securities Act. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SELLER NOTE" means the Senior Subordinated Note outstanding upon consummation of the Acquisition that was issued by the Company to certain partners of United Defense, L.P., as in effect on the date of the consummation of the Acquisition. "SENIOR CREDIT FACILITY" means that certain Credit Agreement, to be entered into by and among United Defense Industries, Inc., Iron Horse, various lending institutions including Lehman Brothers Commercial Paper Inc. and Citibank, N.A. (as Documentation Agents), and Bankers Trust Company (as Administration Agent 14 and as Syndication Agent), including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, restated, refunded, replaced or refinanced from time to time and any agreement (and related documents) governing Indebtedness incurred to refund or refinance credit extensions and commitments then outstanding or permitted to be outstanding under such Senior Credit Facility or a successor Credit Facility, whether by the same or any other lender or group of lenders. The Company shall promptly notify the Trustee of any other lender or group of lenders. The Company shall promptly notify the Trustee of any such refunding or refinancing of the existing Senior Credit Facility. "SENIOR DEBT" means (i) indebtedness of the Company (and its Restricted Subsidiaries, as applicable) for money borrowed and all obligations, whether direct or indirect, under guarantees, letters of credit, foreign currency or interest rate swaps, foreign exchange contracts, caps, collars, options, hedges or other agreements or arrangements designed to protect against fluctuations in currency values or interest rates, other extensions of credit, expenses, fees, reimbursements, indemnities and all other amounts (including interest at the contract rate accruing on or after the filing of any petition in bankruptcy or reorganization relating to the Company (and its Restricted Subsidiaries, as applicable) whether or not a claim for post-filing interest is allowed in such proceeding) owed by the Company (and its Restricted Subsidiaries, as applicable) under, or with respect to, the Senior Credit Facility or any other Credit Facility; (ii) the principal of and premium, if any, and accrued and unpaid interest, whether existing on the date hereof or hereafter incurred, in respect of (A) indebtedness of the Company (and its Restricted Subsidiaries, as applicable) for money borrowed, (B) express written guarantees by the Company (and its Restricted Subsidiaries, as applicable) of indebtedness for money borrowed by any other Person, (C) indebtedness evidenced by notes, debentures, bonds, or other instruments of indebtedness for the payment of which the Company (and its Restricted Subsidiaries, as applicable) are responsible or liable, by guarantees or otherwise, (D) obligations of the Company (and its Restricted Subsidiaries, as applicable) for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (E) obligations of the Company (and its Restricted Subsidiaries, as applicable) under any agreement to lease, or any lease of, any real or personal property which, in accordance with GAAP, is classified on the Company's consolidated balance sheet as a liability, and (F) obligations of the Company (and its Restricted Subsidiaries, as applicable) under interest rate swaps, caps, collars, options and similar arrangements and foreign currency hedges; and (iii) modifications, renewals, extensions, replacements, refinancings and refundings of any such indebtedness, obligations or guarantees, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that such indebtedness, obligations or guarantees, or such modifications, renewals, extensions, replacements, refinancings or refundings thereof, are not superior in right of payment to the Notes; PROVIDED that Senior Debt will not be deemed to include (a) any obligation of the Company or any Restricted Subsidiary of the Company to any Subsidiary (other than obligations pledged pursuant to the Senior Credit Facility, as security for the obligations of the Company (and its Restricted Subsidiaries, as applicable thereunder), (b) any liability for federal, state, local or other taxes owed or owing by the Company or any Restricted Subsidiary of the Company, (c) advance payments and progress payments to customers and any accounts payable or other liability to trade creditors arising in the ordinary course of business, (d) any Indebtedness, guarantee or obligation of the Company or any Restricted Subsidiary of the Company which is expressly subordinate or junior by its terms in right of payment to any other Indebtedness, guarantee or obligation of the Company or any Restricted Subsidiary of the Company, (e) Indebtedness with respect to the Seller Note, (f) that portion of any Indebtedness incurred in violation of Section 4.09 hereof or (g) Indebtedness of the Company or any Restricted Subsidiary of the Company which is classified as non-recourse in accordance with GAAP or any unsecured claim arising in respect thereof by reason of the application of section 1111(b)(1) of the Bankruptcy Code. "SHELF REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "SIGNIFICANT SUBSIDIARY" means each Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act and the Exchange Act, (as such regulation is in effect on October 1, 1997). "SPECIAL REDEMPTION DATE" means November 26, 1997. 15 "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBORDINATED OBLIGATIONS" means any Indebtedness of the Company which is expressly subordinated or junior in right of payment to the Notes. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person, (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or an entity described in clause (i) and related to such Person or (b) the only general partners of which are such Person or one or more entities described in clause (i) and related to such Person (or any combination thereof) and (iii) any limited liability company, the sole managing member or the majority of the managing members of which are Persons described in clause (i) or (ii). "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "TREASURY RATE" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) which has become publicly available at least two business days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source or similar market data)) most nearly equal to the period from the Redemption Date to November 15, 2002; PROVIDED, HOWEVER, that if the period from the Redemption Date to November 15, 2002 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to November 15, 2002 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED GLOBAL NOTE" means a permanent global Note in the form of Exhibit A-1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) that is designated by the Board of Directors as an Unrestricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary; but only to the extent that the Subsidiary described in clause (i) and each of its Subsidiaries at the time of designation and thereafter (a) have no Indebtedness other than Non-Recourse Indebtedness; (b) are not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained, in light of all the circumstances, at the time from Persons who are not Affiliates of the Company; (c) are Persons with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) 16 to subscribe for additional Equity Interests or (y) to maintain or preserve such Persons' financial condition or to cause such Persons to achieve any specified levels of operating results; (d) have not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) do not own any Capital Stock of or own or hold any Lien on any property of, the Company or any Restricted Subsidiary of the Company. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness under the first paragraph of Section 4.09 hereof, (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing and (z) the Company certifies that such designation complies with Section 4.07 hereof. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date. "U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the Securities Act. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such indebtedness. "WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary of the Company, 100% of the outstanding Capital Stock and other Equity Interests of which (other than Capital Stock constituting directors' qualifying shares or interests held by directors or shares or interests required to be held by foreign nationals, in each case to the extent mandated by applicable law) is directly or indirectly owned by the Company or by one or more Wholly Owned Subsidiaries of the Company. SECTION 1.02. OTHER DEFINITIONS. Defined in Term Section "AFFILIATE TRANSACTION" . . . . . . . . . . . . . . . . . . . . . .4.11 "ACQUISITION DATE". . . . . . . . . . . . . . . . . . . . . . . . .4.21 "ASSET SALE OFFER". . . . . . . . . . . . . . . . . . . . . . . . .3.09 "CHANGE OF CONTROL OFFER" . . . . . . . . . . . . . . . . . . . . .4.15 "CHANGE OF CONTROL PAYMENT" . . . . . . . . . . . . . . . . . . . .4.15 "CHANGE OF CONTROL PAYMENT DATE". . . . . . . . . . . . . . . . . .4.15 "COLLATERAL ACCOUNT". . . . . . . . . . . . . . . . . . . . . . . .4.21 "COLLATERAL FUNDS". . . . . . . . . . . . . . . . . . . . . . . . .4.21 "COVENANT DEFEASANCE" . . . . . . . . . . . . . . . . . . . . . . .8.03 "DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.03 "EVENT OF DEFAULT". . . . . . . . . . . . . . . . . . . . . . . . .6.01 "EXCESS PROCEEDS" . . . . . . . . . . . . . . . . . . . . . . . . .4.10 "FUNDING GUARANTOR" . . . . . . . . . . . . . . . . . . . . . . . 11.05 "INCUR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.09 "LEGAL DEFEASANCE". . . . . . . . . . . . . . . . . . . . . . . . .8.02 "NET OFFERING PROCEEDS" . . . . . . . . . . . . . . . . . . . . . .4.21 17 "OFFER AMOUNT". . . . . . . . . . . . . . . . . . . . . . . . . . .3.09 "OFFER PERIOD". . . . . . . . . . . . . . . . . . . . . . . . . . .3.09 "PAYING AGENT". . . . . . . . . . . . . . . . . . . . . . . . . . .2.03 "PAYMENT DEFAULT" . . . . . . . . . . . . . . . . . . . . . . . . .6.01 "PERMITTED DEBT". . . . . . . . . . . . . . . . . . . . . . . . . .4.09 "PURCHASE DATE" . . . . . . . . . . . . . . . . . . . . . . . . . .3.09 "REGISTRAR" . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.03 "RESTRICTED PAYMENTS" . . . . . . . . . . . . . . . . . . . . . . .4.07 "SPECIAL REDEMPTION". . . . . . . . . . . . . . . . . . . . . . . .3.01 "SPECIAL REDEMPTION AMOUNT" . . . . . . . . . . . . . . . . . . . .4.21 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" OR "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. 18 ARTICLE 2 THE NOTES SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. Notes issued in global form shall be substantially in the form of Exhibit A-1 or A-2 attached hereto (including the Global Note Legend and the "Schedule of Exchanges in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 attached hereto (but without the Global Note Legend and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the nominee of the Depositary for credit to the accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by members of, or Participants, in DTC through Euroclear or Cedel Bank. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Notes for the Company by manual or facsimile signature. 19 If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers, authenticate Notes for original issue on the Issue Date up to $200,000,000 aggregate principal amount of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed $300,000,000 except as provided in Section 2.07 hereof. Additional amounts may be issued after the Issue Date in one or more series from time to time subject to the limitations set forth under Section 4.09 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency within the City and State of New York where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall provide to the Trustee at least seven Business Days before each interest payment date 20 and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary for the Global Notes or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion notifies the Trustee in writing that it elects to cause issuance of the Notes in certificated form; PROVIDED THAT in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.11 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to Section 2.07 or 2.11 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs as applicable: (i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; PROVIDED, HOWEVER, that prior to the expiration of the Restricted Period transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred only to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL NOTES. In connection with all transfers and exchanges of beneficial interests (other than a transfer of a beneficial interest in a Global Note to a Person who takes delivery thereof in the form of a beneficial interest in the same Global Note), the transferor of such beneficial interest must deliver to the Registrar (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note 21 shall be registered to effect the transfer or exchange referred to in (1) above; PROVIDED THAT in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture, the Notes and otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of clause (ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (1) thereof; (B) if the transferee will take delivery in the form of the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (2) thereof; or (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by Item (3) thereof, if applicable. (iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of clause (ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (1)(a) thereof; 22 (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES. (i) If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by Item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(b) thereof; or 23 (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be (A) exchanged for a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(B) under the Securities Act or (B) transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to the conditions set forth in clause (A) above or unless the transfer is pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (1)(b) thereof; (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company, to the effect that such exchange or transfer 24 is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. (iv) If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend. A beneficial interest in an Unrestricted Global Note cannot be exchanged for a Definitive Note bearing the Private Placement Legend or transferred to a Person who takes delivery thereof in the form of a Definitive Note bearing the Private Placement Legend. (d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS. (i) If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (2)(b) thereof; (B) if such Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (1) thereof; (C) if such Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (2) thereof; (D) if such Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(a) thereof; (E) if such Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by Item (3) thereof, if applicable; (F) if such Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(b) thereof; or 25 (G) if such Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(c) thereof, the Trustee shall cancel the Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of subparagraph (A) above, the appropriate Restricted Global Note and, in the case of subparagraph (B) above, the 144A Global Note, and, in the case of subparagraph (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (1)(c) thereof; (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Definitive Notes are being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. 26 (iv) If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above. (e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, pursuant to the provisions of this Section 2.06(e). (i) Restricted Definitive Notes may be transferred to and registered in the name of Persons who take delivery thereof if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by Item (3) thereof, if applicable. (ii) Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (1)(b) thereof; 27 (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Note is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. (iii) A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request for such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. Unrestricted Definitive Notes cannot be exchanged for or transferred to Persons who take delivery thereof in the form of a Restricted Definitive Note. (f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of (A) an authentication order in accordance with Section 2.02 hereof and (B) an Opinion of Counsel opining as to the enforceability of the Exchange Notes and the guarantees thereof, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by persons that are not (x) broker-dealers, (y) Persons participating in the distribution of the Exchange Notes or (z) Persons who are affiliates (as defined in Rule 144) of the Company and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrent with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) LEGENDS. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) PRIVATE PLACEMENT LEGEND. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER: REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR 28 TO SUCH TRANSFER, FURNISHES TO THE NORWEST BANK MINNESOTA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO NORWEST BANK MINNESOTA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES," AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO ARTICLE 2 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) REGULATION S TEMPORARY GLOBAL NOTE LEGEND. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS 29 REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED RECEIVE PAYMENT OF INTEREST HEREON." (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or by the Depositary at the direction of the Trustee, to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note, by the Trustee or by the Depositary at the direction of the Trustee, to reflect such increase. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. 30 (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a transfer or exchange may be submitted by facsimile. SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES. Until Definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by two Officers of the Company. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. 31 The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall return such canceled Notes to the Company. Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, PROVIDED THAT no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If (x) the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date and (y) the Company redeems Notes pursuant to the redemption provisions of Section 3.10 hereof (a "SPECIAL REDEMPTION"), it shall furnish, subject to Section 3.03 hereof, to the Trustee at least two days before notice of the Special Redemption is to be mailed to the Holders (unless a shorter notice period shall be satisfactory to the Trustee, as evidenced in writing signed on behalf of the Trustee), in each such case an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a PRO RATA basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date (other than in connection with a Special Redemption), the Company shall mail or cause to be 32 mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. In the event of a Special Redemption, at least three Business Days before a Special Redemption other than on the Special Redemption Date the Company shall mail or cause to be mailed a notice of redemption by first class mail, postage prepaid, to each Holder, with a copy to the Trustee. In the event of a Special Redemption on the Special Redemption Date the Company shall provide the Trustee with notice on or prior to 9:30 a.m. New York City time on the Business Day immediately preceding the Special Redemption Date to effect such Special Redemption; PROVIDED THAT failure to provide any such notice of a Special Redemption shall not affect the Company's right to effect a Special Redemption on the Special Redemption Date, or the amount of the Company's obligation on the Notes.. The notice shall identify the Notes (including CUSIP numbers) to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. No later than 10:00 a.m. Eastern Standard Time on the redemption date (other than in connection with a Special Redemption), the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. 33 If the Company complies with the provisions of the preceding paragraph and from and after the Special Redemption Date or such earlier date of a Special Redemption in accordance with Sections 3.03 and 3.10 hereof, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in clauses (b) and (c) of this Section 3.07 and Section 3.10 hereof, the Notes shall not be redeemable at the Company's option prior to November 15, 2002. Thereafter, the Notes will be subject to redemption at any time at the option of the Company in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on November 15 of the years indicated below: YEAR PERCENTAGE 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.375% 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.917% 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.458% 2005 and thereafter . . . . . . . . . . . . . . . . . . . . . . . 100.000% (b) Notwithstanding the foregoing, at any time prior to November 15, 2000, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of any Public Equity Offering; PROVIDED THAT at least 65% of the aggregate principal amount of Notes originally issued on the Issue Date remain outstanding immediately after each occurrence of such redemption; and PROVIDED, FURTHER, that each such redemption shall occur within 90 days of the date of the closing of such Public Equity Offering. (c) Notwithstanding the foregoing, at any time on or prior to November 15, 2002, the Notes also may be redeemed, in whole but not in part, at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days prior notice (but in no event may such redemption date occur more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date (the "REDEMPTION DATE") (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). The Company shall not redeem Notes pursuant to this clause if it has made a Change of Control Offer with respect to such Change of Control. (d) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. SECTION 3.08. MANDATORY REDEMPTION. 34 Except as set forth under Sections 3.10, 4.10 and 4.15 hereof, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "ASSET SALE OFFER"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders and holders of any other Indebtedness (including the Seller Note) entitled to participate in such Asset Sale Offer, 35 if any, exceeds the Offer Amount, the Company shall select the Notes to be purchased on a PRO RATA basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a PRO RATA basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. SECTION 3.10. SPECIAL REDEMPTION. If the Acquisition has not been consummated prior to the Special Redemption Date, all outstanding Notes shall be redeemed by the Company on the Special Redemption Date at a redemption price equal to 101% of the principal thereof, plus accrued and unpaid interest to the date of redemption. The Company may redeem all outstanding Notes at any time on or prior to the Special Redemption Date if the Acquisition has not been consummated, and the Company believes in good faith that the consummation of the Acquisition prior to the Special Redemption Date is not reasonably possible on terms and conditions at least as favorable to the Company, considered as a whole, as the terms and conditions described in the Offering Memorandum, on or prior to such date at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of redemption. ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Standard Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under the 36 Bankruptcy Code) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. SECTION 4.03. REPORTS. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding and irrespective of whether the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective by the SEC, the Company shall furnish to each of the Holders of Notes within the time periods specified in the SEC's rules and regulations, beginning with annual financial information for the year ended December 31, 1997, (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such financial information, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and any consolidated Restricted Subsidiaries and, with respect to the annual information only, reports thereon by the Company's independent public accountants (which shall be firm(s) of established national reputation) and (ii) all information that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. All such information and reports shall be filed with the SEC on or prior to the dates on which such filings would have been required to be made had the Company been subject to the rules and regulations of the SEC. In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company shall at all times comply with TIA Section 314(a). (b) For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to 37 each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any future knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 4.06. WAIVER OF STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate (other than any such Equity Interests of the Company or a Restricted Subsidiary in a Restricted Subsidiary or Permitted Joint Venture) of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Obligations, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being 38 collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable fourth-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company or any of its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (vi), (vii), (viii) or (ix) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter immediately following the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), PLUS (ii) 100% of the aggregate net cash proceeds received by the Company as a contribution to its common equity capital or from the issue or sale since the Issue Date of Equity Interests of the Company (other than Disqualified Stock), or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Restricted Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), PLUS (iii) to the extent not already included in Consolidated Net Income of the Company for such period without duplication, any Restricted Investment that was made by the Company or any of its Restricted Subsidiaries after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, or any Unrestricted Subsidiary which is designated as an Unrestricted Subsidiary subsequent to the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment or Unrestricted Subsidiary (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment or amount deemed to constitute an Investment in such Unrestricted Subsidiary. The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any Subordinated Obligations or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); PROVIDED THAT the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of Subordinated Obligations with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend or distribution by a Restricted Subsidiary of the Company or by a Permitted Joint Venture, (A) in the case of a Restricted Subsidiary that is not a Permitted Joint Venture, to the holders of its common Equity Interests so long as the Company or such Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests, and (B) in the case of a Permitted Joint Venture, to the holders of its Equity Interests so long as such dividend or distribution is made in accordance with the terms of the agreement or agreements or applicable legal requirements governing such Permitted Joint Venture and the Company and/or the applicable Restricted Subsidiary or Restricted Subsidiaries holding such Equity Interests receive its or their share of such dividend or distribution as contemplated by such agreement or agreements or applicable legal requirements; (v) any payment by the Company or any Restricted Subsidiary of the Company, or any payment of a dividend or distribution by the Company to Iron Horse the proceeds of which are used, (a) in connection with repurchases of Equity Interests or Subordinated Obligations of the Company or Iron Horse following the death, disability or termination of employment of members of management of the Company or any Subsidiary of the Company or any Permitted Joint Venture, and (b) of amounts (to the extent such payments would otherwise constitute Restricted Payments) required to be paid by 39 the Company or any of its Restricted Subsidiaries or Iron Horse to participants in employee benefit plans upon termination of employment by such participants, as provided in the documents related thereto, in an aggregate amount (for both clauses (a) and (b)) not to exceed $3,000,000 in any fiscal year; PROVIDED that any unused amounts may be carried over to any subsequent fiscal year subject to a maximum amount of $6,000,000 in any fiscal year; PROVIDED, FURTHER, that such amount in any fiscal year may be increased by an amount not to exceed (A) the cash proceeds from the sale of Equity Interests of the Company (or from the sale of Equity Interests of Iron Horse to the extent such proceeds are contributed to the Company by Iron Horse) to members of management, directors or consultants of the Company and its Subsidiaries that occurs after the Issue Date (to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (c) of the preceding paragraph) PLUS (B) the cash proceeds of key man life insurance policies received by the Company and its Restricted Subsidiaries after the Issue Date LESS (C) the amount of any Restricted Payments previously made pursuant to clauses (A) and (B); and PROVIDED, FURTHER that the cancellation of Indebtedness owing to the Company or Iron Horse from members of management of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Company or Iron Horse will not be deemed to constitute a Restricted Payment for purposes of this Section 4.07 or any other provision of this Indenture; (vi) repurchases of Equity Interests of the Company or a Restricted Subsidiary deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (vii) Restricted Investments in Subsidiaries or Permitted Joint Ventures that are made with Excluded Contributions; (viii) other Restricted Payments in an aggregate amount since the Issue Date not to exceed $10,000,000; (ix) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock issued after the Issue Date; PROVIDED, HOWEVER, that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance on a pro forma basis, the Company and its Restricted Subsidiaries would have had a Fixed Charge Coverage Ratio greater than 2.0 to 1.0; and (x) payments required pursuant to any indenture or agreement governing Subordinated Obligations in respect of any Change of Control or Asset Sale, PROVIDED THAT payment has theretofore been made with respect to all Notes tendered in response to a Change of Control Offer or Asset Sale Offer, as applicable, PROVIDED THAT, with respect to clauses (ii), (iii), (v), (viii), (ix) and (x) above, no Default or Event of Default shall have occurred and be continuing immediately after such transaction. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary of the Company, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors of the Company whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an Independent Financial Advisor if such fair market value exceeds $10,000,000. Not later than five Business Days after making any Restricted Payment in excess of $2,000,000, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company or the Company to (i)(x) pay dividends or make any other distributions to the Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (y) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the Issue Date, or as amended thereafter on terms, taken as a whole, no less favorable to the Holders of the Notes than the terms of such Indebtedness as in effect on the Issue Date, (b) the Senior Credit Facility as in effect as of the Issue Date, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, 40 refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the Senior Credit Facility as in effect on the Issue Date, (c) this Indenture and the Notes, (d) applicable law (including without limitation the laws of any jurisdiction governing any Permitted Joint Venture), (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (f) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Indebtedness of Guarantors, PROVIDED that such Indebtedness was permitted to be incurred pursuant to this Indenture, (i) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (j) secured Indebtedness otherwise permitted to be incurred pursuant to Sections 4.09 and 4.12 hereof that limit the right of the debtor to dispose of the assets securing such Indebtedness, (k) customary net worth provisions contained in leases and other agreements entered into in the ordinary course of business, (l) customary restrictions with respect to a Restricted Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary, (m) provisions with respect to dividends and the disposition or distribution of assets or property, or transactions between or among the joint venture and the parties to such joint venture (including loans), in joint venture agreements and other similar agreements, (n) any other instrument governing Indebtedness incurred on or after the Issue Date or any refinancing thereof that is incurred in accordance with this Indenture, PROVIDED that the encumbrance or restriction contained in any such Indebtedness or any such refinancing thereof is no more restrictive and no more unfavorable to the Holders of the Notes than that contained in the Senior Credit Facility as in effect on the Issue Date, (o) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, (p) Non-Recourse Indebtedness of any Permitted Joint Venture or other Indebtedness of a Permitted Joint Venture permitted to be incurred under this Indenture, and (q) the Seller Note. SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "INCUR") any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary that is a Guarantor may incur Indebtedness (including Acquired Debt) or the Company may issue shares of Disqualified Stock if the Company's Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "PERMITTED DEBT"): (i) the incurrence by the Company of Indebtedness under one or more Credit Facilities and related guarantees under any such Credit Facility; PROVIDED that the sum of the aggregate principal amount of all such Indebtedness outstanding under such Credit Facilities after giving effect to such incurrence does not exceed an amount equal to $505,000,000 minus an amount (the "REDUCTION AMOUNT") equal to the difference between (a) $50,000,000 and (b) the amount of Indebtedness incurred under the Senior Credit Facility to repay the Seller Note (provided that if the computation of the Reduction Amount results in a negative amount, the Reduction Amount shall be deemed to be zero); 41 (ii) the incurrence by the Company or any of its Restricted Subsidiaries of revolving credit Indebtedness under one or more Credit Facilities, letters of credit and related guarantees under any such Credit Facility; PROVIDED that the aggregate principal amount of all revolving Indebtedness (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) outstanding under such Credit Facilities after giving effect to such incurrence, does not exceed the greater of (a) $220,000,000 and (b) the Borrowing Base, less the aggregate amount of Asset Sale proceeds applied to permanently reduce the availability of revolving credit Indebtedness under such Credit Facilities pursuant to Section 4.10 hereof; (iii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness (which Indebtedness is not contemplated to be repaid with the proceeds of the Offering) other than Indebtedness described in clause (i), (ii) or (viii) of this paragraph; (iv) the incurrence by the Company of Indebtedness represented by the Notes issued on the Issue Date and the incurrence by the Guarantors of the Guarantees; (v) the incurrence by the Company of Indebtedness represented by the Seller Note and the incurrence by the Guarantors of guarantees thereof; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace Indebtedness incurred pursuant to this clause (vi), not to exceed $15,000,000 at any time outstanding; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in respect of Indebtedness described in the first paragraph of this Section 4.09 or clause (iii), (iv) or (v) of this paragraph; (viii) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (x) any subsequent event or issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (y) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company that is a Guarantor shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (viii); (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred in the normal course of business or as required by any Credit Facility for the purpose of fixing or hedging currency, commodity or interest rate risk (including with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding) in connection with the conduct of their respective businesses and not for speculative purposes; (x) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company or a Permitted Joint Venture that was permitted to be incurred by another provision of this Section 4.09 hereof, PROVIDED that any such guarantee of Indebtedness is a Permitted Investment or otherwise permitted by Section 4.07 hereof; (xi) Indebtedness incurred by the Company or any Restricted Subsidiary under performance bonds, letter of credit obligations to provide security for worker's compensation claims, payment obligations in connection with self-insurance or similar requirements and bank overdrafts incurred in the ordinary course 42 of business; PROVIDED that any Obligations arising in connection with such bank overdraft Indebtedness is extinguished within five Business Days; (xii) Indebtedness incurred by the Company or any Restricted Subsidiary arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, from guarantees or letters of credit, surety bonds or performance bonds securing any Obligations of the Company or any Restricted Subsidiary pursuant to such agreements, in any case incurred in connection with the disposition of any business, assets, Subsidiary or Permitted Joint Venture (including, without limitation, an Asset Sale) other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets, Subsidiary or Permitted Joint Venture (including, without limitation, an Asset Sale) for the purpose of financing such acquisition, in a principal amount not to exceed the gross proceeds (with proceeds other than cash or Cash Equivalents being valued at the fair market value thereof as determined by the Board of Directors in good faith) actually received by the Company or any Restricted Subsidiary in connection with such dispositions; (xiii) the incurrence of Non-Recourse Indebtedness (A) by Permitted Joint Ventures or (B) constituting Acquired Debt of a Restricted Subsidiary not incurred in connection with such Restricted Subsidiary becoming a Restricted Subsidiary; and (xiv) the incurrence by the Company or any of its Restricted Subsidiaries or any Permitted Joint Ventures of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, which may, but need not, be incurred under a Credit Facility, not to exceed $50,000,000. For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xiv) above or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this Section 4.09, and such item of Indebtedness shall be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph of Section 4.09. Accrual of interest, the accretion of accredit value and the payment of interest in the form of additional Indebtedness shall not be deemed to be an incurrence of Indebtedness for purposes of this Section 4.09. SECTION 4.10. ASSET SALES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value, or at least equal to 95% of the fair market value in the case of a sale and leaseback transaction permitted by Section 4.17 hereof (in each case as specified in an Officers' Certificate with respect to any Asset Sale of less than $3,000,000 and as determined by the Board of Directors in good faith with respect to any Asset Sales in excess of $3,000,000), of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% (100% in the case of lease payments) of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary of the Company (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 30 days after consummation of such Asset Sale, shall be deemed to be cash for purposes of this provision. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or the Restricted Subsidiary, as applicable, may apply such Net Proceeds, at its option, (a) to repay Indebtedness under any Credit Facility (and to correspondingly permanently reduce the commitments with respect thereto in the case of 43 revolving borrowings) or (b) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other assets that are not current assets, in each case, in Permitted Businesses. Pending the final application of any such Net Proceeds, the Company or a Restricted Subsidiary, as applicable, may temporarily reduce Indebtedness under any Credit Facility or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company shall be required to make an Asset Sale Offer (after complying with any asset sale offer requirement pursuant to the terms of any Senior Debt permitted to be incurred in accordance with this Indenture, and PRO RATA in proportion to the principal amount (or accreted value, if applicable) outstanding in respect of any asset sale offer required by the terms of the Seller Note and any other PARI PASSU Indebtedness incurred in accordance with this Indenture) to all Holders of Notes to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in this Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds (after giving effect to any asset sale offer required under the terms of any Senior Debt or PARI PASSU Indebtedness as aforesaid), the Company may use any remaining Excess Proceeds for general corporate purposes including payment of Subordinated Obligations. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a PRO RATA basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. This paragraph shall apply, but the preceding paragraph shall not apply, to the sale or liquidation of an interest in a Permitted Joint Venture or FNSS-Turkey pursuant to the exercise of call or rights by any party thereto, or the sale or other disposition of property or assets of a Permitted Joint Venture or FNSS-Turkey, in accordance with the terms of the agreement or agreements (as amended) governing such Permitted Joint Venture or FNSS-Turkey. SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of any such Person (each of the foregoing, an "AFFILIATE TRANSACTION"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (x) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $3,000,000, a resolution of its Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of its Board of Directors and (y) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10,000,000, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor; PROVIDED that none of the following shall be deemed to be Affiliate Transactions: (a) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary, as the case may be; (b) transactions between or among (A) the Company and/or its Restricted Subsidiaries that are Guarantors, Controlled Subsidiaries and/or Permitted Joint Ventures, and (B) any such entity and any other Restricted Subsidiaries or between or among such other Restricted Subsidiaries, which in the case of this clause (B) are on terms that are no less favorable to the Company and/or such Subsidiary than those that would have been obtained in a comparable transaction by the Company and/or such Subsidiary with an unrelated Person; (c) Restricted Payments or other payments that are permitted by Section 4.07 or 4.21 hereof; (d) fees and compensation paid to members of the Board of Directors of the Company and any of its Restricted Subsidiaries and Permitted Joint Ventures in their capacity as such, to the extent such fees and compensation are reasonable and customary; (e) advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business and consistent with past practices; (f) provision of administrative or management services by the Company, its Subsidiaries or Permitted Joint Ventures or any of their officers to any of their respective Subsidiaries or Permitted Joint Ventures in the ordinary course of business; (g) arm's length 44 transactions entered into in the ordinary course of business between or among the Company, any Restricted Subsidiary or any Permitted Joint Venture and any Affiliate of the Company; (h) transactions contemplated by any agreement as in effect as of the Issue Date or any amendment thereto so long as any such amendment is not disadvantageous to the Holders of the Notes in any material respect and so long as the amounts paid by the Company and the Restricted Subsidiaries under any such amended agreement do not exceed the amounts payable by the Company and the Restricted Subsidiaries on the Issue Date; and (i) fees, compensation and benefits paid to, and indemnity provided on behalf of, officers, directors or employees of the Company or any of its Restricted Subsidiaries, as determined by the Board of Directors of the Company or of any such Restricted Subsidiary, to the extent such fees, compensation and benefits are reasonable and customary. SECTION 4.12. LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness or trade payables (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. SECTION 4.13. BUSINESS ACTIVITIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, engage in any line of business other than a Permitted Business, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.14. CORPORATE EXISTENCE. Subject to Articles 5 and 11 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the purchase date (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder stating: (1) the description of the transaction or transactions that constitute the Change of Control and that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the 45 third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED THAT each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with the provisions of this Section 4.15 but in any event within 60 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) If the Senior Credit Facility is in effect, or any amounts are owing thereunder, at the time of the occurrence of a Change of Control, prior to the mailing of the notice to holders described in Section 4.15(a) hereof but in any event within 30 days following any Change of Control, the Company shall (i) repay in full all Obligations under the Senior Credit Facility or offer to repay in full all Obligations under the Senior Credit Facility and repay the Obligations under the Senior Credit Facility of each lender who has accepted such offer or (ii) obtain the requisite consent under the Senior Credit Facility to permit the repurchase of the Notes as described in this Section 4.15. The Company shall first comply with the covenant described in the preceding sentence before it shall be required to purchase Notes in the event of a Change of Control; PROVIDED that the Company's failure to purchase Notes in the event of a Change of Control after complying with the covenant described in the preceding sentence constitutes an Event of Default described in clause (d) under Section 6.01 hereof if not cured within 30 days after the notice required by such clause. (d) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. SECTION 4.16. NO SENIOR SUBORDINATED DEBT. Notwithstanding any other provision hereof, (i) the Company shall not incur, create, issue, assume, guarantee or otherwise become liable directly or indirectly for any Indebtedness (including Acquired Debt) that is expressly subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes, and (ii) no Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness (including Acquired Debt) that is expressly subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to the Guarantees, it being understood that Indebtedness will not be considered senior to other Indebtedness solely by reason of being secured. SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS. 46 The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; PROVIDED THAT the Company may enter into a sale and leaseback transaction if (i) the Company could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof or pursuant to clause (vi) or (xiv) of the second paragraph of Section 4.09 hereof, (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to 95% of the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction, and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.10 hereof, if applicable. SECTION 4.18. LIMITATION ON CAPITAL STOCK OF CONTROLLED SUBSIDIARIES. The Company shall not, if such action would cause a Restricted Subsidiary not to be a Controlled Subsidiary, (i) sell, pledge, hypothecate or otherwise convey or dispose of any Capital Stock of a Controlled Subsidiary (other than Liens on such Capital Stock securing Obligations under Senior Debt) or (ii) permit any of its Controlled Subsidiaries to issue any Capital Stock, other, in any such case, than to the Company or a Controlled Subsidiary. The foregoing restrictions shall not apply to an Asset Sale made in compliance with Section 4.10 hereof or the issuance or sale of Capital Stock of or by a Controlled Subsidiary that will result in the establishment of a Permitted Joint Venture. SECTION 4.19. GUARANTEES OF CERTAIN INDEBTEDNESS. The Company will not permit any of its Restricted Subsidiaries, directly or indirectly, to guarantee the payment of any Indebtedness under any Credit Facility under which the Company is a borrower or under which a Restricted Subsidiary is a borrower and guarantees Indebtedness of the Company under any Credit Facility, unless such Restricted Subsidiary, the Company and the Trustee execute and deliver a supplemental indenture evidencing such Guarantee of the Notes in accordance with Article 11 hereof, such Guarantee to be a senior subordinated unsecured obligation of such Restricted Subsidiary. Neither the Company nor any Guarantor shall be required to make a notation on the Notes to reflect any such subsequent Guarantee. Nothing in this Section 4.19 shall be construed to permit any Restricted Subsidiary of the Company to incur Indebtedness otherwise prohibited by Section 4.09 hereof. Unless UDLP is already a party to and a Guarantor under this Indenture as a result of the consummation of the Acquisition on the Issue Date, the Company shall cause UDLP to enter into a supplement to this Indenture upon consummation of the Acquisition providing for the Guarantee by UDLP of the Notes. SECTION 4.20. PAYMENTS FOR CONSENT. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.21. DEPOSIT OF PROCEEDS WITH TRUSTEE PENDING CONSUMMATION OF ACQUISITION. (a) If the Acquisition has not been consummated by the close of business on the Issue Date, the Company shall deposit, at or prior to such time, with the Trustee as hereinafter provided the net proceeds from the issuance of the Notes (the "NET OFFERING PROCEEDS") and such other amount as, when added to the Net Offering Proceeds, equals $202,000,000 plus an amount equal to the interest that would accrue on $200,000,000 from the Issue Date to the Special Redemption Date at an interest rate of 8-3/4% per annum (the "SPECIAL REDEMPTION AMOUNT"). 47 (b) In order to secure the full and punctual payment and performance of the Company's obligation to redeem the Notes upon a Special Redemption, the Company hereby grants to the Trustee, for the benefit of the holders, a continuing security interest in and to the Collateral, whether now owned or existing or hereafter acquired or arising. The Trustee shall have no obligation to file any financing statement or otherwise take any action to maintain or perfect any such security interest. (c) If the Acquisition is not completed on the Issue Date, at all times until the earliest to occur of (i) receipt by the Trustee of (x) an Officers' Certificate stating that the Acquisition is to be consummated on a date specified therein which shall be on or before November 25, 1997 (the "ACQUISITION DATE") on terms and conditions at least as favorable to the Company considered as a whole, as the terms and conditions described in the Offering Memorandum and in the Purchase Agreement relating to the Notes in all material respects (including Section 7(l) of the Purchase Agreement) and requesting the Trustee to release the Collateral to the order of the Company for application in connection with the Acquisition and (y) an Opinion of Counsel (1) to the effect that the condition precedent described in the preceding clause (x) has been satisfied and (2) with respect to the authorization, execution, delivery and enforceability of the Guarantee and the supplement to this Indenture required to be executed by UDLP pursuant to the second paragraph of Section 4.19 hereof, (ii) receipt by the Trustee of notice from the Company pursuant to Section 3.03 hereof to effect a Special Redemption, and (iii) the Special Redemption Date, there shall be maintained with the Trustee a securities account, number 133-616-00, reference United Defense (the "COLLATERAL ACCOUNT"), which account shall be under the sole dominion and control of the Trustee. If the Acquisition will not be consummated by the close of business on the Issue Date, the Company shall cause the Special Redemption Amount to be deposited in the Collateral Account by the close of business on the Issue Date. Amounts on deposit in the Collateral Account shall be invested and reinvested in Cash Equivalents from time to time in accordance with applicable law as directed by the Company with such investment held in the Collateral Account. Any income received with respect to the balance from time to time standing to the credit of the Collateral Account, including any interest or capital gains on Cash Equivalents, shall be distributed to the Company, Lehman Brothers Inc. and TC Group, L.L.C., as and when instructed by the Company, in proportion to the amounts specified in clauses (i), (ii) and (iii) of Section 4.21(d) hereof. The Trustee shall not be liable or accountable for any losses resulting without negligence on the part of the Trustee from the sale or depreciation in the market value of any investment of amounts on deposit in the Collateral Account. Subject to Article 7 hereof, the Trustee solely in its individual capacity hereby waives any rights it may have in such individual capacity to the Collateral Account and all funds and investments therein including, without limitation, any such rights arising through any counterclaim, defense, recoupment, charge, lien or right of set-off. (d) Upon notice from the Company to the Trustee pursuant to Section 4.21(c)(i) above, the security interests in the Collateral shall terminate as of the Acquisition Date and all funds in the Collateral Account (the "COLLATERAL FUNDS") shall be released as of the Acquisition Date as follows: (i) $3,500,000 to Lehman Brothers Inc. to an account previously designated by it by wire transfer of immediately available funds; (ii) $194,000,000 to the Company to an account previously designated by it by wire transfer of immediately available funds; (iii) $6,979,167 to TC Group, L.L.C or to their respective designees to one or more accounts previously designated by them, by wire transfer of immediately available funds; and (iv) any remaining Collateral Funds (including income with respect to Collateral Funds) shall be distributed to Lehman Brothers Inc., the Company and TC Group L.L.C. (or their designees as aforesaid), as set forth in clauses (i), (ii) and (iii) above in proportion to the respective amounts distributed to each such Person pursuant to such clauses as set forth in an Officers' Certificate previously delivered to the Trustee; PROVIDED, that the amount of Collateral Funds distributed pursuant to clause (iv) shall be reduced to the extent that there are insufficient Collateral Funds to make the distributions provided for in clauses (i), (ii) and (iii) of this paragraph (d). Upon notice from the Company to the Trustee pursuant to subsection (c)(ii) above, the Trustee shall apply Collateral Funds to fund the Special Redemption and the Trustee shall pay any amount in the Collateral Account in excess of the amount needed to fund the Special Redemption to the Company. TIA Section 314(d) shall not apply to the release of Collateral pursuant to this provision if such release occurs prior to the filing of the Exchange Offer Registration Statement pursuant to the Registration Rights Agreement, after which time this sentence shall be deemed deleted from this Indenture. 48 (e) The Parties intend that the Trustee shall have "control" of the Collateral Account within the meaning of Article 8 of the Minnesota Uniform Commercial Code, and shall not release Collateral Funds except as provided in this Section 4.21. ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States of America, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately before and after such transaction no Default or Event of Default shall have occurred; and (iv) except in the case of a merger of the Company with or into a Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a period of 30 days (whether or not prohibited by Article 10 hereof); (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by Article 10 hereof); (c) the Company fails to comply with any of the provisions of Section 5.01 hereof; 49 (d) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Section 4.07, 4.09, 4.10 or 4.15 for 30 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) the Company or any of its Restricted Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (f) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (a) is caused by a failure to pay principal of such Indebtedness at final maturity prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "PAYMENT DEFAULT") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $10,000,000 or more; (g) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED THAT the aggregate of all such unpaid or undischarged judgments exceeds $10,000,000 (excluding amounts covered by insurance); (h) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of the Bankruptcy Code: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; (i) a court of competent jurisdiction enters an order or decree under the Bankruptcy Code that: (i) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case; (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of the property of the Company or any of its Significant Subsidiaries; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days; or 50 (j) except as permitted herein, any Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee (other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture). SECTION 6.02. ACCELERATION. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the Company or any Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of at least a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after November 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law. If an Event of Default occurs prior to November 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on November 15 of the years set forth below (provided that the additional premium shall begin on the Issue Date for the 1997 period referred to below), as set forth below (expressed as a percentage of the aggregate principal amount to the date of payment that would otherwise be due but for the provisions of this sentence): YEAR PERCENTAGE ---- ---------- 1997 ............................ 111.665% 1998 ............................ 110.207% 1999 ............................ 108.749% 2000 ............................ 107.291% 2001 ............................ 105.833% SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. 51 SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes including in connection with an offer to purchase; PROVIDED, HOWEVER, that the Holders of a majority in aggregate principal amount of then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration, to the extent permitted by applicable law. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and 52 interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: FIRST: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense, and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; SECOND: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and THIRD: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the cost of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. 53 ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties that are specifically set forth in this Indenture and the TIA and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee. To the extent of any conflict between the duties of the Trustee hereunder and under the TIA, the TIA shall control. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written 54 advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. 55 SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the parties shall agree from time to time. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under the Bankruptcy Code. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof, (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under the Bankruptcy Code; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. 56 If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10 hereof, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, PROVIDED all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. 57 SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of this Indenture. For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19 and 4.20 hereof, Article 5 hereof and Section 11.03 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(g) hereof and 6.01(j) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will 58 be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Section 6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 59 The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a secured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 hereof, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; 60 (c) to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger, consolidation or sale of assets of the Company pursuant to Article 5 hereof or of any Guarantor pursuant to Article 11 hereof or to add any Person as a Guarantor hereunder; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; or (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Without the consent of at least 75% in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for such Notes), no waiver or amendment to this Indenture may make any change in the provisions of Section 4.21 hereof or Article 10 hereof that adversely affects the rights of any Holder of Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): 61 (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver of any provision of this Indenture, the Notes or any Guarantee; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive in any manner that adversely affects the rights of any Holder of Notes any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof and the related definitions; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change that adversely affects the rights of any Holder of Notes in the provisions of this Indenture relating to waivers of past Defaults or make any change to the rights of Holders of Notes to receive payments of principal of or interest on the Notes; or (g) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company, in exchange for all Notes, may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In 62 executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Note agrees, that the payment of principal of, premium, if any, and interest on the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full, in cash or Cash Equivalents, of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (1) the holders of Senior Debt shall be entitled to receive payment in full, in cash or Cash Equivalents, of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt (whether or not an allowable claim)) before Holders of the Notes shall be entitled to receive any payment with respect to the Notes (except that Holders may receive and retain (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Article 8 hereof); and (2) until all Obligations with respect to Senior Debt (as provided in subsection (1) above) are paid in full, in cash or Cash Equivalents, any distribution to which Holders would be entitled but for this Article 10 shall be made to the holders of Senior Debt (except that Holders of Notes may receive and retain (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Article 8 hereof), as their interests may appear. SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT. The Company may not make any payment upon or in respect of or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Article 8 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full in cash or Cash Equivalents if: (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of the default (a "PAYMENT BLOCKAGE NOTICE") from a Person who may give it pursuant to Section 10.10 hereof, which notice states it is a Payment Blockage Notice under this Indenture. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall commence or be effective for purposes of this Section unless and until (i) 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) 63 all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 90 days. The Company may and shall resume payments on and distributions in respect of the Notes and may acquire them upon: (1) in the case of a payment default, the date on which the default is cured or waived, and (2) in the case of a default referred to in Section 10.03(ii) hereof, the earlier of (a) the date on which such nonpayment default is cured or (b) 179 days after notice is received if the maturity of such Designated Senior Debt has not been accelerated, if this Article 10 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. SECTION 10.04. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. SECTION 10.05. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. SECTION 10.06. SUBROGATION. After all Senior Debt is paid in full in cash or Cash Equivalents and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness PARI PASSU with the Notes, including the Seller Note) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. SECTION 10.07. RELATIVE RIGHTS. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure after any applicable grace period has elapsed is still a Default or Event of Default. 64 SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. SECTION 10.09. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of any Senior Debt, the distribution may be made and the notice given to the Representative of such Senior Debt. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.10. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative of the holders of any Designated Senior Debt may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.11. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representative is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 10.12. AMENDMENTS. The provisions of this Article 10 shall not be amended or modified without the written consent of the respective Representatives under the Senior Credit Facility and all other Designated Senior Debt. SECTION 10.13. CONTINUED EFFECTIVENESS. The terms of this Indenture, the subordination effected hereby, and the rights and other obligations of the Holders of the Notes of the holders of Senior Debt arising hereunder, shall not be affected, modified or impaired in any manner or to any extent by: (i) any amendment or modification of or supplement to any Credit Facility (to the extent not prohibited by this Indenture); (ii) the validity and enforceability of any of such documents; or (iii) any exercise or non-exercise of any right, power or remedy under or in respect of the Senior Debt or the 65 Obligations evidenced by the Notes or any of the instruments or documents referred to in clause (i) above. Each Holder of Notes hereby acknowledges that the provisions of this Indenture are intended to be enforceable at all times, whether before the commencement of, in connection with or premised on the occurrence of a Proceeding. SECTION 10.14. NO CONTEST; NO SECURITY. The Holders of the Notes agree that they will not at any time contest the validity, perfection, priority or enforceability of the Senior Debt, any Credit Facility or the security interest securing any Credit Facility. The Holders of the Notes shall not accept any collateral as security for the Obligations in respect of the Notes at any time. SECTION 10.15. CUMULATIVE RIGHTS; NO WAIVERS. Subject to Section 10.13 hereof, each and every right, remedy and power granted to any Representative of any Senior Debt hereunder shall be cumulative and in addition to any other right, remedy or power specifically granted herein, in the related Senior Debt or now or hereafter existing in equity, at law, by virtue of statute or otherwise, and may be exercised by any Representative of any Senior Debt or the holders of any Senior Debt, from time to time, concurrently or independently and as often and in such order as such any Representative or the holders of Senior Debt may deem expedient (subject to the limits provided in Section 10.03 hereof with respect to payment blockages). Any failure or delay on the part of any Representative of Senior Debt or the holders of Senior Debt in exercising any such right, remedy or power, or abandonment or discontinuance of steps to enforce the same, shall not operate as a waiver thereof or affect the rights of such any Representative or the holders of Senior Debt thereafter to exercise the same, and any single or partial exercise of any such right, remedy or power shall not preclude any other or further exercise thereof or the exercise of any other right, remedy or power, and no such failure, delay, abandonment or single or partial exercise of the rights of any Representative of Senior Debt or the holders of Senior Debt hereunder shall be deemed to establish a custom or course of dealing or performance among the parties hereto. SECTION 10.16. TRUSTEE. Any Representative of Senior Debt shall be entitled to send any notices required or permitted to be delivered to the Holders of the Notes to the Trustee on behalf of such holders and any such notice so delivered to the Trustee shall be deemed to have been delivered to all Holders of Notes. ARTICLE 11 GUARANTEES SECTION 11.01. GUARANTEES. Subject to Section 11.05 hereof, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes and the Obligations of the Company hereunder and thereunder, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal, premium, if any (to the extent permitted by law), interest on any interest, if any, and Liquidated Damages, if any, on the Notes, and all other payment Obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full and performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason the Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under the Guarantees, and shall entitle the Holders to accelerate the Obligations of the Guarantors hereunder in 66 the same manner and to the same extent as the Obligations of the Company. The Guarantors hereby agree that their Obligations hereunder shall be unconditional, irrespective of the validity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Note Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by the Company or any Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to, and hereby waives, any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of its Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of its Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long a the exercise of such right does not impair the rights of the Holders under the Guarantees. SECTION 11.02. EXECUTION AND DELIVERY OF GUARANTEE. To evidence its Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees that a notation of such Guarantee substantially in the form of Exhibit E hereto shall be endorsed by manual or facsimile signature by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor, by manual or facsimile signature, by an Officer of such Guarantor. Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an officer whose signature is on this Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors. SECTION 11.03. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) Except as set forth in Articles 4 and 5 hereof, nothing contained in this Indenture shall prohibit a merger between a Guarantor and another Guarantor or a merger between a Guarantor and the Company. (b) No Guarantor shall consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) or sell all or substantially all of its assets to, another corporation, Person or entity whether or not affiliated with such Guarantor unless, the Person formed by or surviving any such merger or consolidation, or to which such sale of assets shall have been made (if other than such Guarantor) assumes all the Obligations of such Guarantor, pursuant to a supplemental indenture substantially in the form of Exhibit F hereto, under this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) except in the case of the merger of a Guarantor with or into another Guarantor or the Company, the 67 Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. (c) In the case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and substantially in the form of Exhibit F hereto, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All of the Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Guarantees had been issued at the date of the execution hereof. SECTION 11.04. RELEASES FOLLOWING RELEASE UNDER SENIOR CREDIT FACILITY OR SALE OF ASSETS. In the event of (i) the release by the lenders under the Senior Credit Facility (and, to the extent applicable, under all other outstanding Credit Facilities), related documents and future refinancings thereof of all guarantees of a Guarantor and all Liens on the property and assets of such Guarantor relating to such Indebtedness, or (ii) a sale or other disposition of all of the Capital Stock of any Guarantor (or all or substantially all of its assets) to an entity which is not a Subsidiary of the Company, then such Guarantor shall be released and relieved of any obligations under this Indenture and its Guarantee; PROVIDED THAT (i) the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 hereof, (ii) the Company is in compliance with all other provisions of this Indenture applicable to such disposition and (iii) any such termination shall occur only to the extent that all obligations of such Guarantor under the Senior Credit Facility (and, to the extent applicable, under all other outstanding Credit Facilities) and all of its guarantees of, and under all of its pledges of assets or other security interests which secure, Indebtedness of the Company shall also terminate upon such release, sale or transfer. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect of the foregoing, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its Obligation under its Guarantee. Any Guarantor not released from its Obligations under its Guarantee shall remain liable for the full amount of principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes and for the other Obligations of such Guarantor under this Indenture as provided in this Article 11. SECTION 11.05. LIMITATION ON GUARANTOR LIABILITY; CONTRIBUTION. For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and this Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Guarantee of the Notes was entered into; PROVIDED THAT, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Guarantor is the amount set forth in clause (ii) above. In making any determination as to solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors as set forth below, and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, INTER SE, that in the event any payment or distribution is made by any Guarantor (a "FUNDING GUARANTOR") under its Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a PRO RATA amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all 68 payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Notes or any other Guarantor's Obligations with respect to its Guarantee. SECTION 11.06. TRUSTEE TO INCLUDE PAYING AGENT. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "TRUSTEE" as used in this Article 11 shall in each case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully and for all intents and purposes as if such Paying Agent were named in this Article 11 in place of the Trustee. SECTION 11.07. SUBORDINATION OF GUARANTEE. The obligations of each Guarantor under its Guarantee pursuant to this Article 11 shall be junior and subordinated to the prior payment in full of all Senior Debt of such Guarantor, and the amounts for which the Guarantors will be liable under the guarantees issued from time to time with respect to Senior Debt, on the same basis as the Notes are junior and subordinated to Senior Debt. For the purposes of the foregoing sentence, the Trustee and the Holders of Notes shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. Each Holder of a Note by its acceptance thereof (a) agrees to and shall be bound by the provisions of this Section 11.07, (b) authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee its attorney-in-fact for any and all such purposes. Consistent with the subordination of the Guarantees, for purposes of any applicable fraudulent transfer or similar laws, Indebtedness incurred under any Credit Facility will be deemed to have been incurred prior to the incurrence by any Guarantor of its liability under its Guarantee. ARTICLE 12 MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 12.02. NOTICES. Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company: United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209-2411 Telecopier No.: (703) 312-6144 Attention: Chief Financial Officer 69 With a copy to: Latham & Watkins Sears Tower, Suite 5800 Chicago, IL 60606 Telecopier No.: (312) 993-9767 Attention: Mark Stegemoeller If to the Trustee: Norwest Bank Minnesota, N.A. Sixth and Marquette Minneapolis, MN 55479 Telecopier No.: (612) 667-9825 Attention: Corporate Trust Board The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and 70 (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator, partner, member or stockholder of the Company or any Subsidiary of the Company or any Permitted Joint Venture or any Guarantor, or of any member, partner or stockholder of any such entity, as such, shall have any liability for any obligations of the Company under the Notes, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 12.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. 71 SECTION 12.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [SIGNATURES PAGE(S) FOLLOW] 72 SIGNATURES Dated as of October 6, 1997 Issuer: UNITED DEFENSE INDUSTRIES, INC. By: /s/ Allan M. Holt ------------------------- Name: Allan M. Holt Title: President Guarantors: UDLP HOLDINGS CORP. By: /s/ Allan M. Holt ------------------------- Name: Allan M. Holt Title: President IRON HORSE INVESTORS, L.L.C. By: /s/ Allan M. Holt ------------------------- Name: Allan M. Holt Title: Chairman UNITED DEFENSE, L.P. (only upon consummation of the Acquisition) By: UDLP Holdings Corp., as General Partner By: /s/ Allan M. Holt ------------------------- Name: Allan M. Holt Title: President Trustee: NORWEST BANK MINNESOTA, N.A. By: /s/ Curtis D. Schwegman ------------------------- Name: Curtis D. Schwegman Title: Assistant Vice President 73 EXHIBIT A-1 (Face of Note) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP/CINS ----------- 8 3/4% Senior Subordinated Notes due 2007 No $ ---- ------------ UNITED DEFENSE INDUSTRIES, INC. promises to pay to ------------------------- or registered assigns, the principal sum of ----------------------- Dollars on November 15, 2007. Interest Payment Dates: May 15 and November 15 Record Dates: May 1 and November 1 UNITED DEFENSE INDUSTRIES, INC. By: --------------------------------- Name: Title: By: --------------------------------- Name: Title: This is one of the [Global] Notes referred to in the within-mentioned Indenture: NORWEST BANK MINNESOTA, N.A. as Trustee By: Dated: , 1997 ------------------- ------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A1-1 (Back of Note) 8 3/4% Senior Subordinated Notes due 2007 [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE, PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE, PURSUANT TO THE PROVISIONS OF THE INDENTURE] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. United Defense Industries, Inc., a Delaware corporation (the "COMPANY"), promises to pay interest on the principal amount of this Note at 8 3/4% per annum from October 6, 1997 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages semi-annually in arrears on May 15 and November 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; PROVIDED THAT if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest Payment Date shall be May 15, 1998. The Company shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the May 1 or November 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, N.A., the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE; SUBORDINATION. The Company issued the Notes under an Indenture dated as of October 6, 1997 ("INDENTURE") between the Company, Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company limited to $300,000,000 in aggregate principal amount, $200,000,000 of which will be issued in the Offering. A1-2 The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Senior Debt, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. The Guarantees in respect of the Notes will be subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Senior Debt of each Guarantor, whether outstanding on the date of the Indenture or thereafter created, incurred assumed or guaranteed. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraphs (b) and (c) of this paragraph 5 and paragraph 8 below, the Notes shall not be redeemable at the Company's option prior to November 15, 2002. Thereafter, the Notes will be subject to redemption at any time at the option of the Company in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on November 15 of the years indicated below: Year Percentage 2002 . . . . . . . . . . . . . . . . . 104.375% 2003 . . . . . . . . . . . . . . . . . 102.917% 2004 . . . . . . . . . . . . . . . . . 101.458% 2005 and thereafter. . . . . . . . . . 100.000% (b) Notwithstanding the foregoing, at any time prior to November 15, 2000, the Company may on any one or more occasions redeem an aggregate of up to 35% of the original aggregate principal amount of Notes at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of any Public Equity Offering; PROVIDED THAT at least 65% of the original aggregate principal amount of Notes originally issued on the Issue Date remain outstanding immediately after each occurrence of such redemption; and PROVIDED, FURTHER, that each such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering. (c) Notwithstanding the foregoing, at any time on or prior to November 15, 2002, the Notes also may be redeemed, in whole but not in part, at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days' prior notice (but in no event may such redemption date occur more than 90 days after the occurrence of such Change of Control) at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued and unpaid interest and Liquidated Damages, if any, to, the date of redemption (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). The Company shall not redeem Notes pursuant to this clause if it has made a Change of Control Offer with respect to such Change of Control. 6. MANDATORY REDEMPTION. Except as set forth in paragraphs 7 and 8 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company A1-3 shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as by the Indenture. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales and the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company shall commence an offer to all Holders of Notes (as "ASSET SALE OFFER") pursuant to Section 3.09 of the Indenture (after complying with any applicable asset sale offer requirements of any Senior Debt and PRO RATA in proportion to outstanding Indebtedness that is PARI PASSU with the Notes that require asset sale offers) to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency for general corporate purposes including payment of Subordinated Obligations. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a PRO RATA basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. SPECIAL REDEMPTION. If the Acquisition has not been consummated prior to the Special Redemption Date, all outstanding Notes shall be redeemed by the Company on the Special Redemption Date at a redemption price equal to 101% of the principal thereof, plus accrued and unpaid interest to the date of redemption. The Company may redeem all outstanding Notes at any time on or prior to the Special Redemption Date if the Acquisition has not been consummated, and the Company believes in good faith that the consummation of the Acquisition prior to the Special Redemption Date is not reasonably possible, on terms and conditions at least as favorable to the Company, considered as a whole, as the terms and conditions described in the Offering Memorandum, on or prior to such date at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of redemption. 9. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation or to add any Person as a Guarantor, to make any change that would provide any additional rights or benefits to the Holders A1-4 of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA. 13. DEFAULTS AND REMEDIES. Events of Default include: (a) default in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a period of 30 days (whether or not prohibited by Article 10 of the Indenture); (b) default in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise (whether or not prohibited by Article 10 of the Indenture); (c) failure by the Company to comply with any of the provisions of Section 5.01 of the Indenture; (d) failure by the Company or any of its Restricted Subsidiaries to comply with any of the provisions of Section 4.07, 4.09, 4.10 or 4.15 of the Indenture for 30 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) failure by the Company or any of its Restricted Subsidiaries to observe or perform any other covenant, representation, warranty or other agreement in the Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (f) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date (a) is caused by a failure to pay principal of such Indebtedness at final maturity prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "PAYMENT DEFAULT") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $10,000,000 or more; (g) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED THAT the aggregate of all such unpaid or undischarged judgments exceeds $10,000,000 (excluding amounts covered by insurance); (h) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries; or (i) except as permitted in the Indenture, any Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator, partner, member or stockholder, of the Company or any Subsidiary of the Company or any Permitted Joint Venture or any Guarantor, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note A1-5 waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of October 6, 1997, between the Company and the parties named on the signature pages thereof (the "REGISTRATION RIGHTS AGREEMENT"). 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209-2411 Telecopier No.: (703) 312-6144 Attention: Chief Financial Officer A1-6 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint --------------------------------------------------------- to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ------------------- Your Signature: ----------------------------------- (Sign exactly as your name appears on the face of this Note) SIGNATURE GUARANTEE -------------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A1-7 Option of Holder to Elect Purchase If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: / / Section 4.10 / / Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $ ---------------- Date: ------------- Your Signature: ----------------------------------- (Sign exactly as your name appears on the face of the Note) Tax Identification No.: --------------------------- SIGNATURE GUARANTEE -------------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A1-8 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made: PRINCIPAL AMOUNT OF THIS GLOBAL AMOUNT OF AMOUNT OF NOTE SIGNATURE OF DECREASE IN INCREASE IN FOLLOWING AUTHORIZED PRINCIPAL PRINCIPAL SUCH OFFICER OF AMOUNT OF AMOUNT OF DECREASE TRUSTEE OR DATE OF THIS GLOBAL THIS GLOBAL (OR NOTE EXCHANGE NOTE NOTE INCREASE) CUSTODIAN ---------- ----------- ----------- ----------- ------------ - -------------------- THIS SHOULD BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM. A1-9 EXHIBIT A-2 (Face of Regulation S Temporary Global Note) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP/CINS --------- 8 3/4% Senior Subordinated Notes due 2007 No. $ ---- ----------- UNITED DEFENSE INDUSTRIES, INC. promises to pay to ------------------------------- or registered assigns, the principal sum of ------------------------------------ Dollars on November 15, 2007. Interest Payment Dates: May 15 and November 15 Record Dates: May 1 and November 1 UNITED DEFENSE INDUSTRIES, INC. By: ------------------------------------------ Name: Title: By: ------------------------------------------ Name: Title: This is one of the [Global] Notes referred to in the within-mentioned Indenture: NORWEST BANK MINNESOTA, N.A. as Trustee By: Dated: , 1997 --------------------------- -------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A2-1 (Back of Regulation S Temporary Global Note) 8 3/4% Senior Subordinated Notes due 2007 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1) ABOVE. A2-2 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. United Defense Industries, Inc., a Delaware corporation (the "COMPANY"), promises to pay interest on the principal amount of this Note at 8 3/4% per annum from October 6, 1997 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages semi-annually in arrears on May 15 and November 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; PROVIDED THAT if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest Payment Date shall be May 15, 1998. The Company shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Code) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the May 1 or November 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, N.A., the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE; SUBORDINATION. The Company issued the Notes under an Indenture dated as of October 6, 1997 ("INDENTURE") between the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company limited to $300,000,000 in aggregate principal amount, $200,000,000 of which will be issued in the Offering. The Notes are subordinated in right of payment, in the manner and to the extend set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Senior Debt, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. The Guarantees in respect of the Notes will be subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment A2-3 in full in cash or Cash Equivalents of all Senior Debt of each Guarantor, whether outstanding on the date of the Indenture or thereafter created, incurred assumed or guaranteed. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraphs (b) and (c) of this paragraph 5 and paragraph 8 below, the Notes shall not be redeemable at the Company's option prior to November 15, 2002. Thereafter, the Notes will be subject to redemption at any time at the option of the Company in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on November 15 of the years indicated below: Year Percentage 2002 ................................................. 104.375% 2003 ................................................. 102.917% 2004 ................................................. 101.458% 2005 and thereafter .................................. 100.000% (b) Notwithstanding the foregoing, at any time prior to November 15, 2000, the Company may on any one or more occasions redeem an aggregate of up to 35% of the original aggregate principal amount of Notes at a redemption price of 108.75% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of any Public Equity Offering; PROVIDED THAT at least 65% of the original aggregate principal amount of Notes originally issued on the Issue Date remain outstanding immediately after each occurrence of such redemption; and PROVIDED, FURTHER, that each such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering. (c) Notwithstanding the foregoing, at any time on or prior to November 15, 2002, the Notes also may be redeemed, in whole but not in part, at the option of the Company upon the occurrence of a Change of Control, upon not less than 30 nor more than 60 days prior notice (but in no event may such redemption date occur more than 90 days after the occurrence of such Change of Control), at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued and unpaid interest and Liquidated Damages, if any, to, the date of redemption (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). The Company shall not redeem Notes pursuant to this clause if it has made a Change of Control Offer with respect to such Change of Control. 6. MANDATORY REDEMPTION. Except as set forth in paragraphs 7 and 8 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as by the Indenture. A2-4 (b) If the Company or a Restricted Subsidiary consummates any Asset Sales and the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company shall commence an offer to all Holders of Notes (as "ASSET SALE OFFER") pursuant to Section 3.09 of the Indenture (after complying with any applicable asset sale offer requirements of any Senior Debt and PRO RATA in proportion to outstanding Indebtedness that is PARI PASSU with the Notes that require asset sales offers) to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use such deficiency for general corporate purposes including payment of Subordinated Obligations. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a PRO RATA basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. SPECIAL REDEMPTION. If the Acquisition has not been consummated prior to the Special Redemption Date, all outstanding Notes shall be redeemed by the Company on the Special Redemption Date at a redemption price equal to 101% of the principal thereof, plus accrued and unpaid interest to the date of redemption. The Company may redeem all outstanding Notes at any time on or prior to the Special Redemption Date if the Acquisition has not been consummated, and the Company believes in good faith that the consummation of the Acquisition prior to the Special Redemption Date is not reasonably possible on terms and conditions at least as favorable to the Company, considered as a whole, as the terms and conditions described in the Offering Memorandum, on or prior to such date at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of redemption. 9. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date (other than in connection with a Special Redemption) to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, A2-5 defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation or to add any Person as a Guarantor, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA. 13. DEFAULTS AND REMEDIES. Events of Default include: (a) default in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a period of 30 days (whether or not prohibited by Article 10 of the Indenture); (b) default in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise (whether or not prohibited by Article 10 of the Indenture); (c) failure by the Company to comply with any of the provisions of Section 5.01 of the Indenture; (d) failure by the Company or any of its Restricted Subsidiaries to comply with any of the provisions of Sections 4.07, 4.09, 4.10 or 4.15 of the Indenture for 30 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) failure by the Company or any of its Restricted Subsidiaries to observe or perform any other covenant, representation, warranty or other agreement in the Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (f) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date (a) is caused by a failure to pay principal of such Indebtedness at final maturity prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "PAYMENT DEFAULT") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates without duplication $10,000,000 or more; (g) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, PROVIDED THAT the aggregate of all such unpaid or undischarged judgments exceeds $10,000,000 (excluding amounts covered by insurance); (h) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries; or (i) except as permitted in the Indenture, any Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator, partner, member or stockholder, of the Company or any Subsidiary of the Company or any Permitted Joint Venture or any Guarantor, A2-6 as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of October 6, 1997, between the Company and the parties named on the signature pages thereof (the "REGISTRATION RIGHTS AGREEMENT"). 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209-2411 Telecopier No.: (703) 312-6144 Attention: Chief Financial Officer A2-7 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint --------------------------------------------------------- to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ------------ Your Signature: ----------------------------------- (Sign exactly as your name appears on the face of this Note) SIGNATURE GUARANTEE -------------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A2-8 Option of Holder to Elect Purchase If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: / / Section 4.10 / / Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $ -------- Date: -------------- Your Signature: ----------------------------------- (Sign exactly as your name appears on the face of the Note) Tax Identification No.: --------------------------- SIGNATURE GUARANTEE -------------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A2-9 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made: PRINCIPAL AMOUNT OF THIS GLOBAL AMOUNT OF AMOUNT OF NOTE SIGNATURE OF DECREASE IN INCREASE IN FOLLOWING AUTHORIZED PRINCIPAL PRINCIPAL SUCH OFFICER OF AMOUNT OF AMOUNT OF DECREASE TRUSTEE OR DATE OF THIS GLOBAL THIS GLOBAL (OR NOTE EXCHANGE NOTE NOTE INCREASE) CUSTODIAN - -------------- ----------- ----------- ----------- ------------ A2-10 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209-2411 Norwest Bank Minnesota, N.A. Sixth and Marquette Minneapolis, MN 55479 Attention: Corporate Trust Board Re: 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 Reference is hereby made to the Indenture, dated as of October 6, 1997 (the "INDENTURE"), between United Defense Industries, Inc., as issuer (the "COMPANY"), UDLP Holdings Corp., a Delaware corporation, Iron Horse Investors, L.L.C., a Delaware limited liability company, and United Defense, L.P., a Delaware limited partnership (upon consummation of the Acquisition referred to in the Indenture) (collectively, as the "GUARANTORS") and Norwest Bank Minnesota, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________________, (the "TRANSFEROR") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $____________________ in such Note[s] or interests (the "TRANSFER"), to _______________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of B-1 Regulation S under the Securities Act and (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) / / such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) / / such Transfer is being effected to the Company or a subsidiary thereof; or (c) / / such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) / / such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated B-2 in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ----------------------------- [Insert Name of Transferor] By: ------------------------------------------ Name: Title: Dated: --------------- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP ________), or (ii) / / Regulation S Global Note (CUSIP _____), or (iii) / / IAI Global Note (CUSIP ____); or (b) / / a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP ________), or (ii) / / Regulation S Global Note (CUSIP _____), or (iii) / / IAI Global Note (CUSIP ____); or (iv) / / Unrestricted Global Note (CUSIP ____); or (b) / / a Restricted Definitive Note. (b) / / an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209-2411 Norwest Bank Minnesota, N.A. Sixth and Marquette Minneapolis, MN 55479 Attention: Corporate Trust Board Re: 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 (CUSIP______________) Reference is hereby made to the Indenture, dated as of October 6, 1997 (the "INDENTURE"), between United Defense Industries, Inc. as issuer (the "COMPANY"), UDLP Holdings Corp., a Delaware corporation, Iron Horse Investors, L.L.C., a Delaware limited liability company, and United Defense, L.P., a Delaware limited partnership (upon consummation of the Acquisition referred to in the Indenture) (collectively, as the "GUARANTORS"), and Norwest Bank Minnesota, N.A. as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ____________ (the "OWNER") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $________ in such Note[s] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DERIVATIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DERIVATIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficiary interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account C-1 without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] / / 144A Global Note, Regulation S Global Note, IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. --------------------------------------------- [Insert Name of Owner) By: ----------------------------------------- Name: Title: Dated: , ------------- ---- C-2 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209-2411 Norwest Bank Minnesota, N.A. Sixth and Marquette Minneapolis, MN 55479 Attention: Corporate Trust Board Re: 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 Reference is hereby made to the Indenture, dated as of October 6, 1997 (the "INDENTURE"), between United Defense Industries, Inc., as issuer (the "COMPANY"), UDLP Holdings Corp., a Delaware corporation, Iron Horse Investors, L.L.C., a Delaware limited liability company, and United Defense, L.P., a Delaware limited partnership (upon consummation of the Acquisition referred to in the Indenture) (collectively, as the "GUARANTORS") and Norwest Bank Minnesota, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) / / a beneficial interest in a Global Note, or (b) / / a Definitive Note, we confirm that: 1. we are an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule (501)(a)(1), (2), (3) or (7) under the Securities Act (an "institutional accredited investor"); 2. (i)(A) any purchase of the Notes by us will be for our own account or for the account of one or more other institutional accredited investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring Notes as fiduciary for the account of one or more institutions for which we exercise sole investment discretion; 3. in the event that we purchase any Notes, we will acquire Notes having a minimum purchase price of not less than $250,000 for our own account and for each separate account for which we are acting; 4. we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing Notes; 5. we are not acquiring the Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdictions, provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; D-1 6. we have received a copy of the Offering Memorandum relating to the offering of the Notes and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase the Notes; and 7. (vii)(a) we are not an employee benefit plan or other arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended, or an entity whose underlying assets include assets of such a plan or arrangement (pursuant to 29 C.F.R. Section 2510.3-101 or otherwise), and we are not purchasing (and will not hold) the Notes on behalf of, or with the assets of, any such plan, arrangement or entity; or (b) our purchase and holding of the Notes are completely covered by the full exemptive relief provided by U.S. Department of Labor Prohibited Transaction Class Exemption 96-23, 95-60, 91-38, 90-1 or 84-14. We understand that the Notes are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Notes have not been registered under the Securities Act, and we agree, on our own behalf, and on behalf of each account for which we acquire any Notes, that if in the future we decide to resell or otherwise transfer such Notes, such Notes may be resold or otherwise transferred only (i) to the Company or any subsidiary thereof, or (ii) inside the United States to a person who is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, or (iii) inside the United States to an institutional accredited investor or a person that is not a U.S. Person that, prior to such transfer, furnishes to the trustee for such Notes a signed letter containing certain representations and agreements relating to the restrictions on transfer of such Notes (the form of which letter can be obtained from such trustee), or (iv) outside the United States in a transaction meeting the requirements of Rule 904 under the Securities Act, or (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if applicable) or in accordance with another exemption from the registration requirements of the Securities Act, or (vi) pursuant to an effective registration statement under the Securities Act and, in each case, in accordance with any applicable securities laws of any State or any other applicable jurisdiction and in accordance with the legends set forth on the Notes. We further agree to provide any person purchasing any of the Notes other than pursuant to clause (vi) above from us a notice advising such purchaser that resales of such securities are restricted as stated herein. We understand that the registrar and transfer agent for the Notes will not be required to accept for registration of transfer any Notes, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that any Notes will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of this paragraph. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. -------------------------------------------------- [Insert Name of Accredited Investor] By: ----------------------------------------------- Name: Title: Dated: , -------------- ---- D-2 EXHIBIT E FORM OF GUARANTEE Subject to Section 11.05 of the Indenture, each Guarantor hereby, jointly and severally, unconditionally guarantees on a senior subordinated basis to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The obligations of the Guarantors to the Holders and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Guarantee. The terms of Article 11 of the Indenture are incorporated herein by reference. This Guarantee is subject to release as and to the extent provided in Section 11.04 of the Indenture. The obligations of each Guarantor to the Holders and to the Trustee pursuant to the Guarantee and the Indenture are expressly subordinated in right of payment to the prior payment in full in cash or Cash Equivalents of all Senior Debt of such Guarantor, to the extent and in the manner set forth in the Indenture. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and not a guarantee of collection. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture. This Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Guarantor with unreasonably small capital at the time its Guarantee of the Notes was entered into; PROVIDED THAT, it will be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to the Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, or proves in such a lawsuit that the aggregate liability of the Guarantor is limited to the amount set forth in clause (ii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantors to contribution from other Guarantors as set forth in the Indentures and any other rights such Guarantors may have, contractual or otherwise, shall be taken into account. E-1 Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. Dated: [NEW GUARANTOR] By: ------------------------------------- Name: Title: UDLP HOLDINGS CORP. By: ------------------------------------- Name: Title: IRON HORSE INVESTORS, L.L.C. By: ------------------------------------- Name: Title: UNITED DEFENSE, L.P. (only upon consummation of the Acquisition) By: UDLP Holdings Corp., as General Partner By: ------------------------------------- Name: Title: E-2 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as of ______________, ______ among United Defense Industries, Inc., a Delaware corporation (the "COMPANY"), UDLP Holdings Corp., a Delaware corporation, Iron Horse Investors, L.L.C., a Delaware limited liability company, and United Defense, L.P., a Delaware limited partnership (upon consummation of the Acquisition referred to in the Indenture) (collectively, the "GUARANTORS"), [New Guarantor] (the "NEW GUARANTOR"), an affiliate of the Company and Norwest Bank Minnesota, N.A., as trustee under the indenture referred to below (the "TRUSTEE"). Capitalized terms used herein and not defined herein shall have the meaning ascribed to them in the Indenture (as defined below). W I T N E S S E T H WHEREAS, the Company and the Guarantors have heretofore executed and delivered to the Trustee an indenture (the "INDENTURE"), dated as of October 6, 1997, providing for the issuance of an aggregate principal amount of $200,000,000 of 8 3/4% Senior Subordinated Notes due 2007 (the "NOTES"); WHEREAS, Article 11 of the Indenture provides that under certain circumstances the Company may or must cause certain of its subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Notes pursuant to a Guarantee on the terms and conditions set forth herein; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the New Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The New Guarantor hereby agrees, jointly and severally with all other Guarantors, to guarantee the Company's Obligations under the Notes and the Indenture on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. 3. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, partner, member, shareholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. 4. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE. 5. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. F-1 7. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the correctness of the recitals of fact contained herein, all of which recitals are made solely by the New Guarantor. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: UNITED DEFENSE INDUSTRIES, INC. ---------------- By: ------------------------------------- Name: Title: [NEW GUARANTOR] By: ------------------------------------- Name: Title: IRON HORSE INVESTORS, L.L.C. By: ------------------------------------- Name: Title: UNITED DEFENSE, L.P. (only upon consummation of the Acquisition) By: UDLP Holdings Corp., as General Partner By: ------------------------------------- Name: Title: NORWEST BANK MINNESOTA, N.A. as Trustee By: ------------------------------------- Name: Title: F-2 EX-4.3 14 EXHIBIT 4.3 PURCHASE AGMT DTD 10/1/97 UNITED DEFENSE INDUSTRIES, INC. 8-3/4% SENIOR SUBORDINATED NOTES DUE 2007 PURCHASE AGREEMENT October 1, 1997 LEHMAN BROTHERS INC. BT ALEX. BROWN INCORPORATED CHASE SECURITIES INC. c/o Lehman Brothers Inc. Three World Financial Center New York, New York 10285 Ladies and Gentlemen: United Defense Industries, Inc., a Delaware corporation (the "COMPANY"), proposes to issue and sell to you (the "INITIAL PURCHASERS") $200,000,000 million in aggregate principal amount of its 8-3/4% Senior Subordinated Notes due 2007 (the "INITIAL NOTES"). The payment of principal, premium, interest and Liquidated Damages (as defined below) if any, on the Initial Notes and the Company's 8-3/4% Senior Subordinated Notes due 2007 to be issued in the Registered Exchange Offer referred to below (the "NEW NOTES" and, together with the Initial Notes, the "NOTES") will be unconditionally guaranteed pursuant to guarantees (the "GUARANTEES") issued on a senior subordinated basis by United Defense, L.P. ("UDLP") (as of the Effective Time (as defined below)), UDLP Holdings Corp. and Iron Horse Investors, L.L.C. ("IRON HORSE") (collectively, the "GUARANTORS"). The Initial Notes are to be issued pursuant to the terms of an indenture to be dated as of October 6, 1997 (the "CLOSING DATE") among the Company, Norwest Bank Minnesota, N.A., as trustee (the "TRUSTEE"), and the Guarantors (as supplemented by the Supplemental Indenture (as defined below), if any, the "INDENTURE"). The Initial Notes will be offered and sold to you pursuant to an exemption from the registration requirements under the Securities Act of 1933, as amended (the "ACT"). The Company has prepared a preliminary offering memorandum (the "PRELIMINARY OFFERING MEMORANDUM"), dated September 16, 1997 and a final offering memorandum (the "OFFERING MEMORANDUM"), dated October 1, 1997, relating to the Company, UDLP and the Initial Notes. As described in the Offering Memorandum, the Company will use all of the net proceeds from the offering of the Initial Notes, together with the Equity Contribution (as defined in the Offering Memorandum), the Seller Note (as defined in the Offering Memorandum) and borrowings under the Senior Credit Facility (as defined below), to fund the acquisition by the Company of all of the respective partnership interests of FMC Corporation ("FMC") and Harsco Corporation and Harsco UDLP Corporation (collectively, "HARSCO") in UDLP and the acquisition by UDLP of certain assets of FMC's Corporate Technology Center (collectively, the "ACQUISITION") and to pay the fees and expenses in connection therewith. The time of the consummation of the Acquisition is referred to herein as the "EFFECTIVE TIME". At the Effective Time, the Company, the Guarantors and the Trustee will enter in a first supplemental indenture to the Indenture (the "SUPPLEMENTAL INDENTURE") providing for the Guarantee by UDLP, unless UDLP is already a party to and Guarantor under the Indenture as a result of the Effective Time being on the Closing Date. Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Act, the Initial Notes (and all securities issued in exchange therefor or in substitution thereof) shall bear the following legend: "THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER: REPRESENTS THAT (I) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT) OR (B) AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT TO (A) THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144 UNDER THE ACT, (C) AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO NORWEST BANK MINNESOTA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE) OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO NORWEST BANK MINNESOTA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION, "UNITED STATES," AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT." 2 You have represented and warranted to the Company that you will make offers (the "EXEMPT RESALES") of the Initial Notes purchased by you hereunder on the terms set forth in the Offering Memorandum, as amended or supplemented, solely (i) to persons whom you reasonably believe to be "qualified institutional buyers" as defined in Rule 144A under the Act ("QIBS"), (ii) to a limited number of other institutional "accredited investors," as defined in Rule 501(a) (1), (2), (3) and (7) under the Act, who execute a letter containing certain representations and agreements in the form set forth as Annex A to the Offering Memorandum (each, an "ACCREDITED INSTITUTION") and (iii) outside the United States to persons other than U.S. Persons in offshore transactions meeting the requirements of Rule 904 of Regulation S ("REGULATION S") under the Act (such persons specified in clauses (i) through (iii) being referred to herein as the "ELIGIBLE PURCHASERS"). As used herein, the terms "offshore transaction," "United States" and "U.S. person" have the respective meanings given to them in Regulation S. You will offer the Initial Notes to Eligible Purchasers initially at a price equal to 100% of the principal amount thereof. Such price may be changed at any time without notice. Holders (including subsequent transferees) of the Initial Notes will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated as of the Closing Date, in the form of Exhibit A hereto, for so long as such Initial Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein, (i) a registration statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the New Notes to be offered in exchange for the Initial Notes (such offer to exchange being referred to collectively as the "REGISTERED EXCHANGE OFFER"), and (ii) a shelf registration statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT") relating to the resale by certain holders of the Initial Notes, and to use its best efforts to cause such Registration Statements to be declared effective. This Agreement, the Indenture and the Registration Rights Agreement are hereinafter referred to collectively as the "OPERATIVE DOCUMENTS." This is to confirm the agreements concerning the purchase of the Initial Notes from the Company by you. 1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE GUARANTORS. The Company and each Guarantor represents, warrants and agrees as follows: (a) The Preliminary Offering Memorandum and the Offering Memorandum have been prepared by the Company for use by the Initial Purchasers in connection with the Exempt Resales. No order or decree preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Act, has been issued and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company, is contemplated. (b) The Preliminary Offering Memorandum and the Offering Memorandum as of their respective dates and the Offering Memorandum as of the Closing Date, did not and will not at any time contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading, except that this representation and warranty does not apply to statements in or omissions from the Preliminary Offering Memorandum and the Offering Memorandum made in reliance upon and in conformity with information relating to the Initial Purchasers furnished to the Company in writing by or on behalf of the Initial Purchasers expressly for use therein. 3 (c) The market-related and customer-related data and estimates included in the Preliminary Offering Memorandum and the Offering Memorandum are based on or derived from sources which the Company believes to be reliable and accurate in all material respects. (d) The Company is a corporation duly incorporated and validly existing and in good standing under the laws of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or to be in good standing would not reasonably be expected to have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company, UDLP and the Subsidiaries (as defined in the Indenture) and the Foreign Affiliates (as defined in the Acquisition Agreement hereinafter referred to) of the Company and UDLP, taken as a whole (a "MATERIAL ADVERSE EFFECT"). (e) UDLP is a limited partnership duly formed and validly existing and in good standing under the laws of Delaware with full power and authority to own, lease and operate its properties and to conduct its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or to be in good standing would not have a Material Adverse Effect. (f) Iron Horse is a limited liability corporation duly formed and validly existing and in good standing under the laws of Delaware with full limited liability company power and authority to own, lease and operate its properties and to conduct its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or to be in good standing would not have a Material Adverse Effect. (g) UDLP Holdings Corp. is a corporation duly incorporated and validly existing and in good standing under the laws of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or to be in good standing would not have a Material Adverse Effect. (h) The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement, the Indenture, the Notes and the Registration Rights Agreement. (i) Each Guarantor (except UDLP) has and, at and as of the Effective Time, UDLP will have all requisite power and authority to execute, deliver and perform its obligations under this Agreement, the Indenture, the Registration Rights Agreement and the Guarantees. (j) This Agreement has been duly and validly authorized, executed and delivered by the Company and each Guarantor (except UDLP) and, at and as of the Effective Time, will be duly and validly authorized, executed and delivered by UDLP, and, assuming due authorization, execution and delivery by the Initial Purchasers, constitutes the valid and binding agreement of the Company and each 4 Guarantor, enforceable against the Company and each Guarantor in accordance with its terms, except as the enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or principles of public policy. (k) The Registration Rights Agreement has been duly and validly authorized by the Company and each Guarantor (except UDLP) and, at and as of the Effective Time, will be duly and validly authorized by UDLP and, upon its execution and delivery by the Company and each Guarantor and, assuming due authorization, execution and delivery by the Initial Purchasers, will constitute the valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (l) The Indenture has been duly and validly authorized by the Company and each Guarantor (except UDLP) and, at and as of the Effective Time, will be duly and validly authorized by UDLP, and upon its execution and delivery and, assuming due authorization, execution and delivery by the Trustee, will constitute the valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law); no qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "1939 ACT"), is required in connection with the offer and sale of the Initial Notes contemplated hereby or in connection with the Exempt Resales other than in connection with the performance of the Company's obligations under the Registration Rights Agreement. (m) The Initial Notes have been duly and validly authorized by the Company and when duly executed by the Company in accordance with the terms of the Indenture and, assuming due authentication of the Initial Notes by the Trustee, upon delivery to the Initial Purchasers against payment therefor in accordance with the terms hereof, will have been validly issued and delivered, and will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law). (n) The Guarantees to be endorsed on the Initial Notes have been duly and validly authorized by each Guarantor (except UDLP) and, at and as of the Effective Time, will be duly and validly authorized by UDLP and when duly executed by each Guarantor in accordance with the terms of the Indenture and, assuming due authentication of the Initial Notes by the Trustee, upon delivery to the Initial Purchasers against payment therefor in accordance with the terms hereof, will have been validly issued and delivered, and will constitute valid and binding obligations of each of the Guarantors, entitled to the benefits of the Indenture, enforceable against each of the Guarantors in accordance with their 5 terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law). (o) On or prior to the Closing Date, the New Notes will have been duly and validly authorized and, if and when executed and delivered by the Company, and if and when the New Notes have been issued and authenticated in accordance with the terms of the Registration Rights Agreement and the Indenture, the New Notes will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law). (p) On or prior to the Closing Date, the Guarantees to be endorsed on the New Notes will have been duly and validly authorized by each Guarantor (except UDLP) and, at and as of the Effective Time, will be duly and validly authorized by UDLP and, if and when executed and delivered by the Guarantors, and if and when the New Notes have been issued and authenticated in accordance with the terms of the Registration Rights Agreement and the Indenture, the Guarantees to be endorsed on the New Notes will be valid and binding obligations of each of the Guarantors, entitled to the benefits of the Indenture and enforceable against each of the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law). (q) The Company has all requisite corporate power and authority to enter into (i) the Seller Note, (ii) the Credit Agreement (the "SENIOR CREDIT FACILITY"), by and among the Company, Iron Horse, various lending institutions including Lehman Brothers Commercial Paper Inc. and Citibank, N.A. (as Documentation Agents), and Bankers Trust Company (as Administrative Agent and as Syndication Agent) and (iii) any and all other agreements and instruments ancillary to or entered into in connection with the transaction contemplated by such Credit Agreement (collectively, the "CREDIT DOCUMENTS"). (r) Each of the Seller Note, the Senior Credit Facility and the other Credit Documents has been duly and validly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (s) The Company has all requisite corporate power and authority to enter into (i) the Purchase Agreement, as supplemented by Supplemental Agreement No. 1 thereto (the "ACQUISITION AGREEMENT"), dated August 25, 1997, among FMC, Harsco and Iron Horse Acquisition Corp. (predecessor name to the Company), and (ii) any and all other agreements, including the Ancillary Agreements (as defined in the Acquisition Agreement), and side letters ancillary to or entered into in connection with the transaction contemplated by the Acquisition Agreement. 6 (t) (i) Each of the Acquisition Agreement and the Ancillary Agreements has been duly and validly authorized, has been or will be duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties thereto, constitutes or will constitute the valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law); and (ii) all representation and warranties made by the Company in Section 6 of the Acquisition Agreement are true and correct in all material respects as of the date hereof. (u) All the shares of capital stock of the Company outstanding prior to the issuance of the Initial Notes have been duly authorized and validly issued, are fully paid and nonassessable, and are wholly owned by Iron Horse free and clear of any lien, adverse claim, security interest, equity or other encumbrance (except pursuant to the Senior Credit Facility), and, at and as of the Effective Time, the outstanding capital stock of the Company will be as represented by Stockholder's Equity under the caption "Capitalization" in the Offering Memorandum. (v) Neither the Company nor its direct parent, Iron Horse, nor any of the Subsidiaries of the Company, and, at and as of the Effective Time, UDLP, owns Capital Stock (as defined in the Indenture) of any corporation or entity other than other Subsidiaries and Foreign Affiliates of the Company and UDLP. All the outstanding shares of Capital Stock of each of the Wholly Owned Subsidiaries (as defined in the Indenture) of the Company, and, at and as of the Effective Time, UDLP, have been or will be duly authorized and validly issued, are fully paid and nonassessable, and are or will be on the Closing Date or the Effective Time, as the case may be, wholly owned by the Company (with the exception of any director's qualifying shares) directly, or indirectly through one or more of the Subsidiaries of the Company, free and clear of any lien, adverse claim, security interest, equity or other encumbrance (except pursuant to the Senior Credit Facility). (w) Except for the Registration Rights Agreement, there are no contracts, agreements or understandings between the Company or any Guarantor (except UDLP) or, at and as of the Effective Time, UDLP, and any person granting such person the right to require the Company or such Guarantor to file a registration statement under the Act with respect to any securities of the Company or such Guarantor owned or to be owned by such person or to require the Company or such Guarantor to include such securities in the securities registered pursuant to the Exchange Offer Registration Statement, the Shelf Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company or such Guarantor under the Act. (x) Since the date as of which information is given in the Offering Memorandum through the date hereof, and except as may otherwise be disclosed in, or specifically contemplated by, the Offering Memorandum, none of the Company, UDLP or any Guarantor has (i) issued or granted any securities, (ii) entered into any transaction not in the ordinary course of business or (iii) declared or paid any dividend on its Capital Stock. (y) There are no legal or governmental proceedings pending or, to the knowledge of the Company or any of the Guarantors, threatened, against the Company, UDLP or the Subsidiaries and Foreign Affiliates of the Company and UDLP or to which any of their respective properties (or any of the properties to be acquired by the Company upon consummation of the transactions contemplated by the Acquisition Agreement), is subject, that are not disclosed in, or specifically contemplated by, the Offering 7 Memorandum and which, if adversely decided, would reasonably be expected, individually or in the aggregate, to cause a Material Adverse Effect or to materially and adversely affect the issuance of the Notes and the Guarantees or the consummation of the other transactions contemplated by the Operative Documents, the Acquisition Agreement, the Ancillary Agreements, the Seller Note, the Senior Credit Facility, the other Credit Documents and the documentation pursuant to which the Equity Contribution will be consummated (collectively, the "TRANSACTION DOCUMENTS"). None of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP are involved in any strike, job action or labor dispute with any group of employees, and, to the knowledge of the Company or any of the Guarantors, no such action or dispute is imminent which could reasonably be expected to have a Material Adverse Effect. (z) No material relationship, direct or indirect, exists between or among the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP on the other hand which is required to be described in the Offering Memorandum, which is not so described pursuant to Regulation S-K of the Act (assuming Regulation S-K is applicable to the Offering Memorandum). (aa) None of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP (i) is in violation of its certificate of incorporation, bylaws, partnership agreement or other organizational documents, (ii) is in default in any material respect in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which any of them is a party or by which any of them is bound or to which any of their respective properties or assets is subject that is material to the condition (financial or other), business, properties or results of operations of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP, taken as a whole (collectively, the "MATERIAL AGREEMENTS"), and (iii) assuming compliance of the Initial Purchasers with their representations and covenants in Section 2, is in violation in any material respect of any law, statute or ordinance, or any rule, regulation, injunction or decree of any court or governmental agency to which their respective property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, except in the case of (i), (ii) or (iii), as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect or materially and adversely affect the issuance of the Notes and the Guarantees or the consummation of the other transactions contemplated by the Transaction Documents and except in the case of clause (i) or (ii) any such violation or default determined to have occurred the allegation of which is disclosed in, or specifically contemplated by, the Offering Memorandum. (ab) Except to the extent the failure to obtain any such consent, approval, authorization or order or to make any such filing or registration would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect or materially and adversely affect the issuance of the Notes and the Guarantees or the consummation of the other transactions contemplated by the Transaction Documents and except as disclosed in, or specifically contemplated by, the Offering Memorandum and assuming compliance of the Initial Purchasers with their representations and covenants in Section 2, none of the issuance, offer or sale of the Notes and the Guarantees, the execution, delivery or performance by the Company or any Guarantor of this Agreement, the Guarantees or the other Transaction Documents to which the Company or any Guarantor is a party, compliance by the Company or any Guarantor with the provisions hereof or thereof nor consummation by the Company or any 8 Guarantor of the transactions contemplated hereby or by the other Transaction Documents to which the Company or any Guarantor is a party (i) requires any consent, approval, authorization or other order of, or registration or filing with, any federal, state, local or foreign court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required in connection with the registration under the Act of the New Notes in accordance with the Registration Rights Agreement, qualification of the Indenture under the 1939 Act and compliance with the securities or Blue Sky laws of various jurisdictions and except as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate of incorporation, partnership agreement or bylaws, or other organizational documents, of the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under any Material Agreement or materially and adversely affect the issuance of the Notes and the Guarantees or the consummation of the other transactions contemplated by the Transaction Documents or will violate any federal, state, local, or foreign law, statute, ordinance or any rule, regulation, injunction or decree of any federal, state, local or foreign court or governmental agency to which the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP or the property or assets of the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP may be subject or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP (except for liens arising under the Senior Credit Facility) pursuant to the terms of any agreement or instrument to which the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP is a party or by which the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP may be bound or to which any of the property or assets of the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP is subject. (ac) The accountants, Ernst & Young LLP, who have certified certain of the financial statements included as part of the Offering Memorandum, are independent public accountants under Rule 101 of the AICPA's Code of Professional Conduct, and its interpretation and rulings during the periods covered by the financial statements on which they reported contained in the Offering Memorandum. (ad) The consolidated historical and PRO FORMA financial statements, together with related notes, set forth in the Offering Memorandum comply as to form in all material respects with the requirements of Regulation S-X under the Act applicable to registration statements on Form S-1 under the Act. Such historical financial statements fairly present the financial position of the Company and UDLP at the respective dates indicated and the results of operations and cash flows for the respective periods indicated, in accordance with GAAP consistently applied throughout such periods. Such PRO FORMA financial statements have been prepared on a basis consistent with such historical statements, except for the PRO FORMA adjustments specified therein, and give effect to assumptions made on a reasonable basis and in good faith and present fairly the historical and proposed transactions contemplated by the Offering Memorandum and this Agreement. The other financial and statistical information and data included in the Offering Memorandum, historical and PRO FORMA, are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company and UDLP. (ae) Except as disclosed in, or specifically contemplated by, the Offering Memorandum, subsequent to the date of the latest audited financial statements included in the Offering Memorandum, neither the Company nor any Guarantor has incurred any liability or obligation, direct or 9 contingent, or entered into any transaction, in each case not in the ordinary course of business, that is material to the Company or such Guarantor, as the case may be, and there has not been any material change in the capital stock, or material increase in the short-term or long-term debt, of the Company or such Guarantor or any material adverse change, or any development involving or which would reasonably be expected to involve a prospective material adverse change, in the condition (financial or other), business, properties, results of operations of the Company or such Guarantor. (af) The Company and UDLP maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (ag) Each of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP has good and marketable title to all property (real and personal) described in the Offering Memorandum as being owned by it, free and clear of all Liens, except for Permitted Liens (as such terms are defined in the Offering Memorandum) or except such as are described in, or specifically contemplated by, the Offering Memorandum or to the extent the failure to have such title or existence of such liens, claims, security interests or other encumbrances would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP. All the material property described in the Offering Memorandum as being held under lease by the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP are, to the knowledge of the Company, held by them under valid, subsisting and enforceable leases, with only such exceptions as in the aggregate are not materially burdensome and do not interfere with the conduct of the business of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP, taken as a whole and except as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law). (ah) Each of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP owns or possesses, free and clear of all Liens (other than Permitted Liens), defects, restrictions or equities of any kind whatsoever, all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, "INTELLECTUAL PROPERTY") presently employed by it in connection with its respective business now operated by it, except as disclosed in, or specifically contemplated by, the Offering Memorandum or where the failure to own, use, possess or have the ability to acquire such Intellectual Property would not, individually or in the aggregate, result in a Material Adverse Effect. The use of such Intellectual Property in connection with the business and operations of the Company, UDLP and the Subsidiaries of the Company and UDLP does not, to the knowledge of the Company or any of the Guarantors, infringe on the rights or claimed rights of any person, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. None of the Company, UDLP and the Subsidiaries of the Company and UDLP have received any notice of infringement of or conflict with assessed rights of 10 others with respect to any Intellectual Property which, singly or in the aggregate, if the subject of any unfavorable decision, ruling or finding, might have a Material Adverse Effect. (ai) Each of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP has such permits, licenses, patents, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities ("PERMITS") as are necessary under applicable law to own its properties and to conduct its businesses in the manner described in the Offering Memorandum, except as disclosed in or specifically contemplated by the Offering Memorandum, and to the extent that the failure to have such Permits would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; each of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP has fulfilled and performed in all material respects, all of its material obligations with respect to the Permits, and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit, except as disclosed in, or specifically contemplated by, the Offering Memorandum and except to the extent that any such revocation or termination would not have a Material Adverse Effect; and, except as disclosed in, or specifically contemplated by, the Offering Memorandum, none of the Permits contains any restriction that is materially burdensome to the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP. (aj) Except as set forth in, or specifically contemplated by, the Offering Memorandum, there has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company, UDLP or any of the Subsidiaries of the Company and UDLP (or, to the knowledge of the Company or any of the Guarantors, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company, UDLP or any of the Subsidiaries of the Company and UDLP in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not reasonably be expected, individually or in the aggregate, with all such violations and remedial actions, to have a Material Adverse Effect; except as disclosed in, or specifically contemplated by, the Offering Memorandum, there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company, UDLP or any of the Subsidiaries of the Company and UDLP or with respect to which the Company or any of the Guarantors has knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not reasonably be expected to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect; and the terms "hazardous wastes," "toxic wastes," "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. (ak) Each of the Company and UDLP is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); and except as disclosed in, or specifically contemplated by, the Offering Memorandum and except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the 11 Company or UDLP would have any liability and except as disclosed in, or specifically contemplated by, the Offering Memorandum and except as would not reasonably be expected to have a Material Adverse Effect, each "pension plan" other than a multiemployer plan, as defined in ERISA, for which the Company or UDLP would have any liability that is intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "CODE") is so qualified in all material respects and to the knowledge of the Company and UDLP, nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification and except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (al) Each of the Company, UDLP and the Subsidiaries of the Company and UDLP maintain insurance covering their properties, operations, personnel and businesses. Such insurance insures against such losses and risks as are reasonably adequate in accordance with customary industry practice to protect the Company, UDLP and the Subsidiaries of the Company and UDLP and their businesses, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. None of the Company, UDLP and the Subsidiaries of the Company and UDLP have received written notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. All such insurance is outstanding and duly in force on the date hereof and will be outstanding and duly in force through the Closing Date, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (am) Except as disclosed in, or specifically contemplated by, the Offering Memorandum, each of the Company, UDLP and the Subsidiaries and Foreign Affiliates of the Company and UDLP has filed all material federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and has paid, or made adequate reserve or provision for, all taxes due thereon, that, on the date hereof, are due and payable,and no tax deficiency has been determined adversely to the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP which has had a Material Adverse Effect. (an) None of the Company, UDLP and the Subsidiaries of the Company and UDLP, nor to the knowledge of the Company or any of the Guarantors, any director, officer, agent, employee or other person associated with or acting on behalf of the Company, UDLP or any of the Subsidiaries of the Company and UDLP, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; has made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; has violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. (ao) The Company is not and, upon sale of the Initial Notes to be issued and sold thereby in accordance herewith and the application of the net proceeds to the Company of such sale as described in the Offering Memorandum under the caption "Use of Proceeds," will not be an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 12 (ap) Neither the Company nor any affiliate (as defined in Rule 501(b) of Regulation D ("REGULATION D") under the Act) of the Company has directly, or through any agent (provided that no representation is made as to the Initial Purchasers or any person acting on its behalf), (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Act) which is or could be integrated with the offering and sale of the Notes in a manner that would require the registration of the Initial Notes under the Act or (ii) engaged in any form of general solicitation or general advertising (within the meaning of Regulation D, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) in connection with the offering of the Initial Notes. No securities of the same class as the Initial Notes have been issued and sold by the Company within the six-month period immediately prior to the date hereof. (aq) When the Initial Notes are issued and delivered pursuant to this Agreement, such Initial Notes will not be of the same class (within the meaning of Rule 144A under the Act) as securities of the Company, if any, that are listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") or that are quoted in a United States automated inter-dealer quotation system. (ar) Assuming (i) that the Initial Notes are issued, sold and delivered under the circumstances contemplated by the Offering Memorandum and this Agreement, (ii) that your representations and warranties in Section 2 are true, (iii) that the representations of the Accredited Institutions set forth in the certificates of such Accredited Institutions in the form set forth in Annex A to the Offering Memorandum are true, (iv) compliance by you with your covenants set forth in Section 2 and (v) that each of the Eligible Purchasers is a QIB, an Accredited Institution or a person who is not a "U.S. person" who acquires the Initial Notes outside the United States in an "offshore transaction" (within the meaning of Rule 904 of Regulation S), the purchase of the Initial Notes by you pursuant hereto and the initial resale of the Initial Notes pursuant hereto pursuant to the Exempt Resales is exempt from the registration requirements of the Act. (as) None of the Company or any of its affiliates or any person acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Rule 902(b) of Regulation S with respect to the Notes, and the Company and its affiliates and all persons acting on its behalf have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Initial Notes outside of the United States; PROVIDED THAT no representation is made as to the Initial Purchasers or any person, acting on their behalf. (at) The sale of the Initial Notes pursuant to Regulation S are "offshore transactions" and are not part of a plan or scheme to evade the registration provision of the Act. 2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE INITIAL PURCHASERS. Each Initial Purchaser represents and warrants with respect to itself that: (a) Such Initial Purchaser is either a QIB or an Accredited Institution, in either case with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Initial Notes. 13 (b) Such Initial Purchaser (i) is not acquiring the Initial Notes with a view to any distribution thereof or with any present intention of offering or selling any of the Initial Notes in a transaction that would violate the Act or the securities laws of any State of the United States or any other applicable jurisdiction; (ii) in connection with the Exempt Resales, will solicit offers to buy the Notes only from, and will offer to sell the Notes only to, the Eligible Purchasers in accordance with this Agreement and on the terms contemplated by the Offering Memorandum; and (iii) will not offer or sell the Notes by, nor has it offered or sold the Notes by, or otherwise engaged in, any form of general solicitation or general advertising (within the meaning of Regulation D; including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) in connection with the offering of the Initial Notes. (c) The Notes have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act. The Initial Purchasers represent that they have not offered, sold or delivered the Notes, and will not offer, sell or deliver the Notes (i) as part of its distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date or such longer period as may then be applicable under Regulation S (such period, the "RESTRICTED PERIOD"), within the United States or to, or for the account or benefit of U.S. persons, except in accordance with Rule 144A under the Act, or to Accredited Institutions in transactions that are exempt from the registration requirements of the Act. Accordingly, each Initial Purchaser represents and agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Rule 902(b) of Regulation S with respect to the Notes, and it, its affiliates and all persons acting on its behalf have complied and will comply with the offering restrictions requirements of Regulation S. (d) Such Initial Purchaser agrees that, at or prior to confirmation of a sale of Notes (other than a sale pursuant to Rule 144A or to Accredited Institutions in transactions that are exempt from the registration requirements of the Act), it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the Restricted Period a confirmation or notice substantially to the following effect: "The Notes covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering or the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Act. Terms used above have the meanings assigned to them in Regulation S." Such Initial Purchaser further agrees that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Notes, except with its affiliates or with the prior written consent of the Company. (e) Such Initial Purchaser further represents and agrees that (i) it has not offered or sold and will not offer or sell any Notes to persons in the United Kingdom prior to the expiry of the period of six months from the issue date of the Notes, except to persons whose ordinary activities involve 14 them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the Notes to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the document may otherwise lawfully be issued or passed on. (f) Such Initial Purchaser agrees not to cause any advertisement of the Notes to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Notes, except such advertisements as may be permitted by Regulation S. (g) The sale of the Initial Notes pursuant to Regulation S are "offshore transactions" and are not part of a plan or scheme to evade the registration provision of the Act. (h) Such Initial Purchaser understands that the Company and, for purposes of the opinions to be delivered to you pursuant to Section 7 hereof, counsel to the Company and counsel to the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations and you hereby consent to such reliance. The terms used in this Section 2 that have meanings assigned to them in Regulation S are used herein as so defined. Each Initial Purchaser further agrees that, in connection with the Exempt Resales, it will solicit offers to buy the Initial Notes only from, and will offer to sell the Initial Notes only to, the Eligible Purchasers in Exempt Resales. 3. PURCHASE OF THE NOTES BY THE INITIAL PURCHASERS. On the basis of the representations and warranties contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell $200,000,000 million in aggregate principal amount of Initial Notes to the Initial Purchasers, and each of the Initial Purchasers, severally and not jointly, agrees to purchase the aggregate principal amount of Initial Notes set forth opposite that Initial Purchaser's name in Schedule 1 hereto. Each Initial Purchaser will purchase such aggregate principal amount of Initial Notes at an aggregate purchase price equal to 97.25% of the principal amount thereof (the "PURCHASE PRICE"). The Company shall not be obligated to deliver any of the Initial Notes to be delivered, except upon payment for all the Initial Notes to be purchased on such Closing Date as provided herein. 4. DELIVERY OF AND PAYMENT. (a) Delivery to the Initial Purchasers of and payment for the Initial Notes shall be made at 9:00 a.m., New York City time, on the Closing Date at the offices of Kirkland & Ellis, Chicago, IL, or such other time or place as you and the Company shall designate. (b) One or more Initial Notes in definitive form, registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), or such other names as the Initial Purchasers 15 may request upon at least one business days' notice to the Company, having an aggregate principal amount corresponding to the aggregate principal amount of Initial Notes sold pursuant to Eligible Resales (collectively, the "GLOBAL NOTE"), shall be delivered by the Company to the Initial Purchasers, against payment by the Initial Purchasers of the purchase price thereof by wire transfer of immediately available funds as the Company may direct by written notice delivered to you two business days prior to the Closing Date. The Global Note in definitive form shall be made available to you for inspection not later than 9:30 a.m. on the day immediately preceding the Closing Date. (c) Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Initial Purchaser hereunder. 5. FURTHER AGREEMENTS OF THE COMPANY AND THE GUARANTORS. The Company and each of the Guarantors agrees: (a) To advise you promptly and, if requested by you, to confirm such advice in writing, of (i) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Initial Notes for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by the Commission or any state securities commission or other regulatory authority, and (ii) the happening of any event that makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company and each Guarantor shall use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of the Initial Notes under any state securities or Blue Sky laws and, if at any time any state securities commission shall issue any stop order suspending the qualification or exemption of the Initial Notes under any state securities or Blue Sky laws, the Company and each Guarantor shall use every reasonable effort to obtain the withdrawal or lifting of such order at the earliest possible time. (b) To furnish to you, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments or supplements thereto, as you may reasonably request. The Company and each Guarantor consents to the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments and supplements thereto required pursuant to this Agreement, by you in connection with the Exempt Resales that are in compliance with this Agreement. (c) Not to amend or supplement the Offering Memorandum prior to the Closing Date or during the period referred to in (d) below unless you shall previously have been advised of, and shall not have reasonably objected to, such amendment or supplement within a reasonable time, but in any event not longer than five days after being furnished a copy of such amendment or supplement. The Company shall reasonably promptly prepare, upon any reasonable request by you, any amendment or supplement to the Offering Memorandum that may be necessary or advisable in connection with Exempt Resales. (d) If, in connection with any Exempt Resales or market making transactions after the date of this Agreement and prior to the consummation of the Exchange Offer, any event shall occur that, in the judgment of the Company or in the judgment of your counsel, makes any statement of a material fact in the Offering Memorandum untrue or that requires the making of any additions to or 16 changes in the Offering Memorandum in order to make the statements in the Offering Memorandum, in light of the circumstances at the time that the Offering Memorandum is delivered to prospective Eligible Purchasers, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with all applicable laws, the Company shall promptly notify you of such event and prepare an appropriate amendment or supplement to the Offering Memorandum so that (i) such statements or omissions will be corrected and (ii) the Offering Memorandum will comply with applicable law. (e) To cooperate with you and your counsel in connection with the qualification of the Initial Notes for offer and sale by you and by dealers under the state securities or Blue Sky laws of such jurisdictions as you may request (PROVIDED, HOWEVER, that the Company shall not be obligated to qualify as a foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service of process in any jurisdiction in which it is not now so subject). The Company shall continue such qualification in effect so long as required by law for distribution of the Initial Notes and shall file such consents to service of process or other documents as may be necessary in order to effect such qualification. (f) To the extent it lawfully may do so, not to voluntarily claim, and to actively resist any attempts to claim, the benefit of any usury laws against the holders of the Initial Notes. (g) Prior to the Closing Date, to furnish to you, as soon as they have been prepared, a copy of any internal consolidated financial statements of the Company for any period subsequent to the period covered by the financial statements appearing in the Offering Memorandum. (h) To use its reasonable best efforts to do and perform all things required to be done and performed under this Agreement by it prior to or after the Closing Date and to satisfy all conditions set forth in Section 7 hereof. (i) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the sale of the Initial Notes in a manner that would require the registration under the Act of the sale to you or the Eligible Purchasers of Initial Notes. (j) For so long as any of the Notes remain outstanding and are Restricted Securities within the meaning of Rule 144(a)(3) under the Act and during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, to make available to any registered holder or beneficial owner of Initial Notes in connection with any sale thereof and any prospective purchaser of such Initial Notes from such registered holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act. (k) To comply with its agreements in the Registration Rights Agreement, and all agreements set forth in the representation letters of the Company to DTC relating to the approval of the Notes by DTC for "book-entry" transfer. (l) To use its reasonable best efforts to effect the inclusion of the Notes in the National Association of Securities Dealers, Inc. Automated Quotation System - Private Offerings, Resales and Trading through Automated Linkages Market ("PORTAL"). 17 (m) To apply the net proceeds from the sale of the Initial Notes being sold by the Company as set forth in the Offering Memorandum under the caption "Use of Proceeds." (n) To take such steps as shall be necessary to ensure that the Company shall not become an "investment company" within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the Commission thereunder. (o) To cause UDLP, at and as of the Effective Time, to duly execute this Agreement, the Supplemental Indenture (if the Effective Time is other than on the Closing Date) and the Guarantee referred to therein. (p) Neither the Company nor any of its Subsidiaries, other than Foreign Affiliates, shall offer, sell, contract to dispose of, or file a registration statement for, any debt security of the Company or any such Subsidiary, or any security convertible into or exchangeable for, any such debt security (other than the Notes, the Seller Note, any commercial paper or similar short-term promissory notes issued by the Company or any Guarantor, or pursuant to the Registration Rights Agreement, the Senior Credit Facility or any other Credit Facility (as defined in the Indenture)), in any such case, in an aggregate principal amount in excess of $35 million, for a period of 120 days after the date of this Agreement, without the prior written consent of Lehman Brothers Inc. 6. EXPENSES. The Company agrees that, whether or not the transactions contemplated by this Agreement are consummated or this Agreement becomes effective or is terminated, to pay all costs, expenses, fees and taxes incident to and in connection with: (i) the preparation, printing and distribution of the Preliminary Offering Memorandum and the Offering Memorandum (including, without limitation, financial statements) and all amendments and supplements thereto (but not, however, legal fees and expenses of your counsel incurred in connection therewith), (ii) the preparation (including, without limitation, word processing and duplication costs) and delivery of all Blue Sky Memoranda and all other agreements, memoranda, correspondence and other documents printed and delivered in connection herewith and with the Exempt Resales (but not, however, legal fees and expenses of your counsel incurred in connection with any of the foregoing other than fees of such counsel plus reasonable disbursements incurred in connection with the preparation, printing and delivery of such Blue Sky Memoranda), (iii) the issuance and delivery by the Company of the Notes, (iv) the issuance and delivery by the Guarantors of the Guarantees, (v) the qualification of the Notes for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, the reasonable fees and disbursements of your counsel relating to such registration or qualification), (vi) furnishing such copies of the Preliminary Offering Memorandum and the Offering Memorandum, and all amendments and supplements thereto, as may be reasonably requested for use in connection with the Exempt Resales, (vii) the preparation of certificates for the Notes and Guarantees (including, without limitation, printing and engraving thereof), (viii) the fees, disbursements and expenses of the Company's counsel and accountants, (ix) all expenses and listing fees in connection with the application for quotation of the Initial Notes in PORTAL, (x) all fees and expenses of the Company in connection with approval of the Notes by DTC for "book-entry" transfer and (xi) the performance by the Company and the Guarantors of their other obligations under this Agreement; PROVIDED THAT, except as provided in Section 6(ii) and Section 10, the Initial Purchasers shall pay their own costs and expenses of their counsel. 7. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The respective obligations of the Initial Purchasers hereunder are subject to the accuracy, when made and again on the Closing Date (as if made again on and as of such date), of the representations and warranties of the Company and the 18 Guarantors contained herein, to the performance by the Company and the Guarantors of their obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum shall have been printed and copies distributed to you not later than 4:00 p.m., New York City time, on October 2, 1997, or as promptly as practicable thereafter, or at such later date and time as you may approve in writing. (b) No Initial Purchaser shall have discovered and disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of Milbank, Tweed, Hadley & McCloy, counsel for the Initial Purchasers, is material or omits to state a fact which, in the opinion of such counsel, is material or is necessary to make the statements, in the light of the circumstances under which they were made, not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the other Transaction Documents, the Offering Memorandum, and all other legal matters relating to this Agreement and the transactions contemplated hereby and the other Transaction Documents shall be reasonably satisfactory in all material respects to counsel for the Initial Purchasers, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. (d) Latham & Watkins shall have furnished to the Initial Purchasers its written opinion, as counsel to the Company and the Guarantors, addressed to the Initial Purchasers and dated as of the Closing Date, substantially in the form attached hereto as Exhibit B. The opinion of such counsel may be limited to the laws of the state of New York, the General Corporation Law of the state of Delaware and the federal laws of the United States. All or a portion of the opinions set forth in paragraph (q) of such opinion relating to UDLP may be delivered by internal counsel to UDLP or other counsel reasonably satisfactory to the Initial Purchasers. Additionally, (i) Latham & Watkins and Kirkland & Ellis shall have furnished to the Initial Purchasers their written opinions, as counsel to the Company, and FMC and Harsco, respectively, addressed to, or authorizing reliance by, the Initial Purchasers and dated the Closing Date, and (ii) Latham & Watkins shall have furnished to the Initial Purchasers its written opinion, as counsel to the Credit Parties (as defined in the Senior Credit Facility), addressed to, or authorizing reliance by, the Initial Purchasers and dated the Closing Date. (e) The Initial Purchasers shall have received from Milbank, Tweed, Hadley & McCloy, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Initial Notes, the Offering Memorandum and other related matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (f) The Initial Purchasers shall have received letters addressed to the Initial Purchasers, and dated the date hereof and the Closing Date from Ernst & Young LLP, independent certified public accountants, substantially in the forms heretofore approved by the Initial Purchasers. (g) The Company shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, of its President and its Secretary, stating that: 19 (i) The representations, warranties and agreements of the Company (after giving effect to all materiality qualifiers therein) and the Guarantors in Section 1 are true and correct as of such date and giving effect to the consummation of the transactions contemplated by the Transaction Documents, the Company and each Guarantor has complied with all its agreements contained herein, and the conditions on their part to be performed or satisfied hereunder have been fulfilled; and (ii) They have examined the Preliminary Offering Memorandum and the Offering Memorandum and, in their opinion (i) the Preliminary Offering Memorandum as of its date and the Offering Memorandum as of its date and the Closing Date did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum. (h) (i) None of the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP shall have sustained since the date of the latest audited financial statements included in the Offering Memorandum any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Memorandum or (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company, UDLP or any of the Subsidiaries and Foreign Affiliates of the Company and UDLP, taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Notes being delivered on such Closing Date on the terms and in the manner contemplated in the Offering Memorandum. (i) Prior to or substantially simultaneously with the closing of the transactions contemplated by the Operative Documents, the Company shall have (w) received the Equity Contribution, (x) received the proceeds of the Indebtedness incurred under the Senior Credit Facility, (y) issued the Seller Note in form and substance satisfactory to the Initial Purchasers, and (z) all conditions to the consummation of the Acquisition Agreement shall have been satisfied or waived, and the parties to the Acquisition Agreement shall be, in the reasonable judgment of the Initial Purchasers, prepared to close immediately, in each case on substantially the terms described in the Offering Memorandum; provided, however, that this condition shall not apply if the Effective Time is not on the Closing Date, in which event a certificate will be delivered with respect to this condition as contemplated by the Indenture at and as of the Effective Time. (j) Milbank, Tweed, Hadley & McCloy shall have been furnished with executed copies, certified by the Secretary of the Company, of the Transaction Documents and such other documents and opinions, in addition to those set forth above, as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Agreement and in order to evidence the accuracy, completeness or satisfaction in all material respects of any of the representations, warranties or conditions herein contained. 20 (k) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities. (l) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of a majority in interest of the several Initial Purchasers, impracticable or inadvisable to proceed with the public offering or delivery of the Notes being delivered on such Closing Date on the terms and in the manner contemplated in the Offering Memorandum. (m) The Initial Purchasers shall have received an opinion as to the solvency of the Company addressed to the Initial Purchasers and dated the Closing Date from Valuation Research Corporation in form and substance reasonably satisfactory to the Initial Purchasers. (n) The Initial Purchasers and counsel for the Initial Purchasers shall have received an opinion in form and substance reasonably satisfactory to the Initial Purchasers with respect to the pledge of the proceeds of the Notes and other amounts to the Trustee pursuant to the Indenture in the event the Acquisition is not consummated on the Closing Date. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers. 8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the Guarantors, jointly and severally, shall indemnify and hold harmless each Initial Purchaser, its officers and employees and each person, if any, who controls any Initial Purchaser within the meaning of the Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Notes), to which that Initial Purchaser, officer, employee or controlling person may become subject, under the Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto, (ii) the omission or alleged omission to state in any Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto any material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to act or any alleged act or failure to act by any Initial 21 Purchaser in connection with, or relating in any manner to, the Notes or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (PROVIDED that neither the Company nor the Guarantors shall be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Initial Purchaser through its gross negligence or willful misconduct), and shall reimburse each Initial Purchaser and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER, that neither the Company nor any of the Guarantors shall be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Offering Memorandum or the Offering Memorandum, or in any such amendment or supplement in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company by or on behalf of any Initial Purchaser specifically for inclusion therein. The foregoing indemnity agreement is in addition to any liability which the Company or any Guarantor may otherwise have to any Initial Purchaser or to any officer, employee or controlling person of that Initial Purchaser. (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, the Guarantors, their officers and employees, each of their directors, and each person, if any, who controls the Company or any Guarantor within the meaning of the Act or the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such Guarantor, director, officer or controlling person may become subject, under the Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state in any Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment or supplement thereto, any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company by or on behalf of that Initial Purchaser specifically for inclusion therein, and shall reimburse the Company, the Guarantors, and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company, the Guarantors, or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Initial Purchaser may otherwise have to the indemnified parties. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and, PROVIDED FURTHER, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party 22 otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that the Initial Purchasers shall have the right to employ counsel to represent jointly the Initial Purchasers and their respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Initial Purchasers against the Company under this Section 8 if, in the reasonable judgment of the Initial Purchasers, it is advisable for the Initial Purchasers, officers, employees and controlling persons to be jointly represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Company. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other from the offering of the Initial Notes or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Initial Purchasers on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Initial Notes purchased under this Agreement (before deducting expenses) received by the Company, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Initial Notes purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the Initial Notes under this Agreement, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Initial Purchasers, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or 23 omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Initial Notes purchased by it was resold to Eligible Purchasers exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this Section 8(d) are several in proportion to their respective underwriting obligations and not joint. (e) The Initial Purchasers confirm and the Company acknowledges that the last paragraph on the cover page and the stabilization legend on page ii and the information set forth in the 1st through the 9th and the 13th paragraphs under the caption "Plan of Distribution" in the Offering Memorandum constitute the only information concerning such Initial Purchasers furnished in writing to the Company by or on behalf of the Initial Purchasers specifically for inclusion in the Offering Memorandum. 9. TERMINATION. The obligations of the Initial Purchasers hereunder may be terminated by Lehman Brothers Inc. by notice given to the Company prior to delivery of and payment for the Initial Notes if, prior to that time, any of the events described in Sections 7(h) or 7(l) shall have occurred or if the Initial Purchasers shall decline to purchase the Initial Notes for any reason permitted under this Agreement. If, on the Closing Date, any of the Initial Purchasers default in the performance of its obligations under this Agreement, the remaining non-defaulting Initial Purchasers shall be obligated to purchase the principal amount of Notes which the defaulting Initial Purchaser agreed but failed to purchase on such Closing Date in the respective proportions which the principal amount of Notes set forth opposite the name of each remaining non-defaulting Initial Purchaser in Schedule I hereto bears to the aggregate principal amount of Notes set forth opposite the names of all the remaining non-defaulting Initial Purchasers in Schedule I hereto; PROVIDED, HOWEVER, that the remaining non-defaulting Initial Purchasers shall not be obligated to purchase any of the Notes on such Closing Date if the total principal amount of Notes which the defaulting Initial Purchasers agreed but failed to purchase on such date exceeds 9.09% of the aggregate principal amount of Notes to be purchased on such Closing Date, and any remaining non-defaulting Initial Purchaser shall not be obligated to purchase more than 110% of the principal amount of Notes which it agreed to purchase on such Closing Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded, the remaining non-defaulting Initial Purchasers or those other purchasers satisfactory to the Initial Purchasers who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all the Notes to be purchased on such Closing Date. If the remaining Initial Purchasers or other purchasers satisfactory to the Initial Purchasers do not elect to purchase the shares which the defaulting Initial Purchaser agreed but failed to purchase on such Closing Date, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 6 and except that the provisions of Section 8 shall not terminate and shall remain in full force and effect. As used in this Agreement, the term "Initial 24 Purchaser" includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule I hereto who, pursuant to this Section 9, purchases Notes which a defaulting Initial Purchaser agreed to but failed to purchase. Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company for damages caused by its default. If other purchasers are obligated or agree to purchase the Notes of a defaulting or withdrawing Initial Purchaser, either the non-defaulting Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement. 10. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If the Company shall fail to tender the Initial Notes for delivery to the Initial Purchasers by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the Initial Purchasers' obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse the Initial Purchasers for all reasonable out-of-pocket expenses (including the fees and disbursements of its counsel) incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase of the Initial Notes, and upon demand the Company shall pay the full amount thereof to Lehman Brothers Inc. 11. NOTICES, ETC. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail, telex or facsimile transmission to Lehman Brothers Inc., Three World Financial Center, New York, New York 10285, Attention: Syndicate Department (Fax: 212-526-6588), with a copy to Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York 10005, Attention: Arnold B. Peinado, III (Fax: 212-530-5219) and, in the case of any notice pursuant to Section 8, to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., Three World Financial Center, 10th Floor, New York, NY 10285; and (b) if to the Company or any Guarantor, shall be delivered or sent by mail, telex or facsimile transmission to United Defense Industries Inc, 1525 Wilson Boulevard, Suite 700, Arlington, Virginia 22209-2411, Attention: Chief Financial Officer, with a copy to Latham & Watkins, Sears Tower, Suite 5800, Chicago, Illinois 60606, Attention: Mark Stegemoeller. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by Lehman Brothers Inc. 12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company, the Guarantors and their respective personal representatives and successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (i) the representations, warranties, indemnities and agreements of the Company and the Guarantors contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control any Initial Purchaser within the meaning of Section 15 of the Act and (ii) the representations, warranties, indemnities and agreements of the Initial Purchasers contained in this Agreement shall be deemed to be for the benefit of directors of each of the 25 Company or the Guarantors, officers of each of the Company and the Guarantors and any person controlling the Company within the meaning of Section 15 of the Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 12, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 13. SURVIVAL. The respective indemnities, representations, warranties and agreements of the Company, the Guarantors and the Initial Purchasers contained in this Agreement or made by or on behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Notes and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them. 14. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY." For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. 17. HEADINGS. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. [SIGNATURE PAGE(S) FOLLOW] 26 If the foregoing correctly sets forth the agreement between the Company and the Initial Purchasers, please indicate your acceptance in the space provided for that purpose below. Very truly yours, UNITED DEFENSE INDUSTRIES, INC. By /s/ Allan M. Holt ----------------- Name: Allan M. Holt Title: President UDLP HOLDINGS CORP. By /s/ Allan M. Holt ----------------- Name: Allan M. Holt Title: President IRON HORSE INVESTORS, L.L.C. By /s/ Allan M. Holt ----------------- Name: Allan M. Holt Title: Chairman UNITED DEFENSE, L.P. (only upon consummation of the Acquisition) By: United Defense Industries, Inc., as General Partner By /s/ Allan M. Holt ----------------- Name: Allan M. Holt Title: President Accepted: LEHMAN BROTHERS INC. By /s/ Robert D. Redmond --------------------- Name: Robert D. Redmond Title: Managing Director BT ALEX. BROWN INCORPORATED By /s/ Amelia Silver ----------------- Name: Amelia Silver Title: Vice President CHASE SECURITIES INC. By /s/ Mark N. Lightcap -------------------- Name: Mark N. Lightcap Title: Managing Director SCHEDULE I Initial Purchaser Principal Amount of Notes ----------------- ------------------------- LEHMAN BROTHERS INC. $120,000,000 BT ALEX. BROWN INCORPORATED 60,000,000 CHASE SECURITIES INC. 20,000,000 ----------- TOTAL $200,000,000 EXHIBIT A [Registration Rights Agreement] EXHIBIT B FORM OF OPINION OF LATHAM & WATKINS (a) The Company is a corporation duly incorporated and validly existing and in good standing under the laws of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum. (b) UDLP is a limited partnership duly formed and validly existing and in good standing under the laws of Delaware with full partnership power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum. (c) Iron Horse is a limited liability corporation duly formed and validly existing and in good standing under the laws of Delaware with full limited liability company power and authority to own, lease and operate its properties and to conduct its business. (d) UDLP Holdings Corp. is a corporation duly incorporated and validly existing and in good standing under the laws of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business. (e) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Purchase Agreement, the Notes and the other Transaction Documents to which it is a party. (f) Each Guarantor (except UDLP) has and after giving effect to the Acquisition, UDLP will have, all requisite corporate, partnership or limited liability company power and authority, as applicable, to execute, deliver and perform its obligations under the Purchase Agreement, the Guarantees and the other Transaction Documents to which it is a party. (g) The Purchase Agreement has been duly and validly authorized, executed and delivered by the Company and each Guarantor (except UDLP) and, after giving effect to the Acquisition, the Purchase Agreement will be duly and validly authorized, executed and delivered by UDLP. (h) The Registration Rights Agreement has been duly and validly authorized, executed and delivered by the Company and each Guarantor (except UDLP) and, after giving effect to the Acquisition, the Registration Rights Agreement will be duly and validly authorized, executed and delivered by UDLP and, assuming due authorization, execution and delivery by the Initial Purchasers, constitutes the valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms. 1 (i) The Indenture has been duly and validly authorized, executed and delivered by the Company and each Guarantor (except UDLP) and, after giving effect to the Acquisition, the Indenture will be duly and validly authorized, executed and delivered by UDLP and, assuming due authorization, execution and delivery by the Trustee, constitutes the valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms; no qualification of the Indenture under the 1939 Act is required in connection with the offer and sale of the Initial Notes contemplated hereby or in connection with the Exempt Resales. The Indenture meets the requirements for qualification under the 1939 Act. (j) The Initial Notes are in the form contemplated by the Indenture. The Initial Notes have been duly and validly authorized and executed by the Company in accordance with the terms of the Indenture and, assuming due authentication of the Initial Notes by the Trustee, have been validly issued and delivered, and upon payment therefor by the Initial Purchasers in accordance with the Purchase Agreement will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms. (k) The Guarantees are in the form contemplated by the Indenture. The Guarantees to be endorsed on the Initial Notes have been duly and validly authorized and executed by each Guarantor (except UDLP) and, after giving effect to the Acquisition, the UDLP Guarantee will be duly and validly authorized and executed by UDLP in accordance with the terms of the Indenture and, assuming due authentication of the Initial Notes by the Trustee, have been validly issued and delivered, and upon payment for the Initial Notes by the Initial Purchasers in accordance with the Purchase Agreement will constitute valid and binding obligations of each of the Guarantor, entitled to the benefits of the Indenture and enforceable against each of the Guarantors in accordance with their terms. (l) The New Notes have been duly authorized and, when duly executed by the Company in accordance with the terms of the Indenture, authenticated by the Trustee and issued in exchange for the Initial Notes pursuant to the Registered Exchange Offer, will have been validly issued and delivered, and will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms. (m) The Guarantees to be endorsed on the New Notes have been duly authorized and, when duly executed by each Guarantor in accordance with the terms of the Indenture and when the New Notes are duly authenticated by the Trustee and issued in exchange for the Initial Notes pursuant to the Registered Exchange Offer, will have been validly issued and delivered, and will constitute valid and binding obligations of each of the Guarantors, entitled to the benefits of the Indenture, enforceable against each of the Guarantors in accordance with their terms. 2 (n) Each of the Transaction Documents (other than the Operative Documents) to which each of the Company and the Guarantors is a party has been duly and validly authorized, executed and delivered by the Company and the Guarantors, as the case may be (except UDLP) and after giving effect to the Acquisition each of the Transaction Documents (other than the Operative Documents) to which UDLP is a party will have been duly and validly authorized, executed and delivered by UDLP and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the valid and binding agreement of the Company and the Guarantors, as the case may be, enforceable against the Company and such Guarantors, as applicable, in accordance with its terms. (o) All the shares of Capital Stock of the Company and the Guarantors (except UDLP) have been duly authorized and validly issued, and are fully paid and nonassessable and, to the best knowledge of such counsel, are wholly owned by Iron Horse, the Company and/or one or more of such Guarantors free and clear of any lien, adverse claim, security interest, equity or other encumbrance (except pursuant to the Senior Credit Facility). After giving effect to the Acquisition, to the best knowledge of such counsel, all of the shares of Capital Stock of UDLP will be owned by the Company and/or one or more of the Guarantors free and clear of any lien, adverse claim, security interest, equity or other encumbrance (except pursuant to the Senior Credit Facility). (p) To the best knowledge of such counsel, there are no legal or governmental proceedings pending or threatened, against the Company or the Guarantors or to which any of their respective properties (or any of the properties to be acquired by the Company upon consummation of the transactions contemplated by the Acquisition Agreement), is subject, that are not disclosed in, or specifically contemplated by, the Offering Memorandum or the disclosure schedules to the Acquisition Agreement and which, if adversely decided, are reasonably likely to have a material adverse effect on the Company's business or financial condition (after giving effect to the indemnification provisions of the Acquisition Agreement and the terms of the Seller Note) or to materially affect the issuance of the Notes and the Guarantees or the consummation of the other transactions contemplated by the Transaction Documents. (q) Except as disclosed in, or specifically contemplated by, the Offering Memorandum, none of the issuance, offer or sale of the Notes and the Guarantees, the execution, delivery or performance by the Company or any Guarantor of the Purchase Agreement, the Guarantees or the other Transaction Documents to which the Company or any Guarantor is a party, compliance by the Company or such Guarantor with the provisions thereof nor consummation by the Company or any Guarantor of the transactions contemplated by the Transaction Documents to which the Company or any Guarantor is a party (i) requires any consent, approval, authorization or other order of, or registration or filing with, any U.S. Federal or New York court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required under the Act and the 1939 Act and compliance with the securities or Blue Sky laws of various jurisdictions and except as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate of incorporation or 3 bylaws, or other organizational documents, of the Company or any of the Guarantors, except any such conflict, breach or default determined to have occurred the allegation of which is disclosed in, or specifically contemplated by, the Offering Memorandum, or (iii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under any agreement to which the Company or any Guarantor is a party identified to such counsel as material (the "Material Agreements") or materially and adversely affect the issuance of the Notes and the Guarantees or the consummation of other transactions contemplated by the Transaction Documents, except any such conflict, breach or default determined to have occurred the allegation of which is disclosed in, or specifically contemplated by, the Offering Memorandum, or (iv) violates or will violate any federal or state law, statute, ordinance, or any rule, regulation, injunction or decree of any federal or state court or governmental agency to which the Company or any of the Guarantors or the property or assets of the Company or any of the Guarantors is subject or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Guarantor (except for liens arising under the Senior Credit Facility) pursuant to the terms of any agreement or instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor may be bound or to which any of the property or assets of the Company or any Guarantor is subject. (r) The Indenture, the Notes, Guarantees and the Registration Rights Agreement conform in all material respects to the descriptions thereof contained in the Offering Memorandum. (s) Except as set forth in the Offering Memorandum, to the best of such counsel's knowledge, no holder of securities of the Company or any Guarantor is entitled to have such securities registered under a registration statement filed by the Company pursuant to the Registration Rights Agreement. (t) None of the Company or any Guarantor is, or immediately after the sale of the Notes and Guarantees to be sold hereunder and the application of the proceeds from such sale (as described in the Offering Memorandum under the caption "Use of Proceeds") will be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (u) Assuming (i) the accuracy of, and compliance by you with, your representations, warranties, and covenants in Section 2 of the Purchase Agreement, (ii) that the initial resale of the Notes and Guarantees by you is made only to Eligible Purchasers, (iii) the accuracy of the Company's representations and warranties with respect to whether (x) any form of general solicitation was used by the Company or the Guarantors and (y) other offerings of securities are of the same class as other securities of the Company or the Guarantors that are listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system, (iv) the accuracy of the representations made by each Accredited Institution in the form of Annex A to the Offering Memorandum, and (v) that each QIB and Accredited Institution to whom you originally sell the Notes and Guarantees receives a copy of the Offering Memorandum at or prior to the delivery of a 4 confirmation of sale, no registration of the Notes and Guarantees under the Act and no qualification of the Indenture under the 1939 Act is required in connection with the purchase of the Notes and Guarantees by you, or the initial resale of the Notes and Guarantees by you to Eligible Purchasers, in each case in the manner contemplated by the Purchase Agreement and the Offering Memorandum. (v) Neither the consummation of the transactions contemplated by the Purchase Agreement nor the sale, issuance, execution or delivery of the Notes will violate Regulations G, T (assuming that you do not sell Notes to any person or entity subject to Regulation T for such person's or entity's own account), U or X of the Board of Governors of the Federal Reserve System. In addition, such counsel may also state that such counsel has participated in the conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent certified public accountants of the Company and the Guarantors, and your representatives and counsel at which the contents of the Offering Memorandum and related matters were discussed and, although such counsel is not passing upon, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum, and has not made any independent check or verification thereof, during the course of such participation (relying as to materiality to the extent such counsel deemed appropriate upon the statements of officers and other representatives of the Company and the Guarantors), no facts came to such counsel's attention that caused it to believe that the Offering Memorandum, on the date thereof or at the date of such opinion, contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel expresses no belief with respect to the financial statements, schedules and the other financial and statistical data included in the Offering Memorandum). The opinions set forth in paragraphs (i), (j), (k), (l), (m) and (n) hereof may be subject to the limitations, qualifications and exceptions set forth in paragraphs (i), (ii) and (iii) below and such counsel's opinion set forth in paragraph (h) may be subject to the limitations, qualifications and exceptions set forth in paragraphs (i), (ii), (iii) and (iv) below: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; (iii) such counsel need not express an opinion with respect to the waiver of rights and defenses contained in Section 4.06 of the Indenture; and 5 (iv) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy or prohibited by law. Such counsel need not express or render any opinion as to the applicability to the obligations of the Company or the Guarantors, under the Indenture, the Notes, the Guarantees, and the New Notes, of Sections 547 and 548 of the Bankruptcy Code or of the applicable state law (including without limitation, Article 10 of the New York Debtor and Creditor Law) relating to fraudulent transfers and obligations. Such counsel need not express any opinion with respect to paragraph (q) as to the application of federal or state securities laws, state procurement laws, antitrust laws, or trade regulation laws or other laws which, if violated, would not have a Material Adverse Effect on the Company and the Subsidiaries, taken as a whole, or their ability to perform their respective obligations under the Transaction Documents. Such counsel (i) in rendering the opinion in paragraph (o), need not conduct any UCC or similar searches for filings that may have been made in respect of the Capital Stock of the Company and the Guarantors and may assume the Capital Stock is duly pledged and in the possession of the lenders under the Senior Credit Facility, and (ii) in rendering the opinion in paragraph (p) or (q) with respect to legal or governmental proceedings, injunctions or decrees need not conduct any docket or similar searches of any court or governmental body. Such counsel may take such other exceptions as are customary or appropriate, including, with respect to clause (n), exceptions with respect to the enforceability opinions delivered in connection with the consummation of any of the other Transaction Documents. All or a portion of the opinions set forth in paragraph (q) relating to UDLP may be delivered by internal counsel to UDLP or other counsel reasonably satisfactory to the Initial Purchasers. No opinion need be given as to paragraph (q) with respect to any contract dealing with a Foreign Affiliate. 6 EX-4.4 15 EXHIBIT 4.4 REGISTRATION RIGHTS AGMT DTD 10/6/97 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT Dated as of October 6, 1997 by and among United Defense Industries, Inc., as Issuer, and United Defense, L.P., UDLP Holdings Corp., and Iron Horse Investors, L.L.C., as Guarantors and Lehman Brothers Inc., BT Alex. Brown Incorporated, and Chase Securities Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of October 6, 1997, by and among United Defense Industries, Inc., a Delaware corporation (the "COMPANY"), United Defense, L.P., a Delaware limited partnership, UDLP Holdings Corp., a Delaware corporation (at and as of the Effective Time (as defined in the Purchase Agreement referred to below), and Iron Horse Investors, L.L.C., a Delaware limited liability corporation (collectively, the "GUARANTORS"), and Lehman Brothers Inc., BT Alex. Brown Incorporated and Chase Securities Inc. (each an "INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom has agreed to purchase the Company's 8 3/4% Senior Subordinated Notes due 2007 (the "INITIAL NOTES" and, together with the New Notes (as defined), the "NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated October 1, 1997, (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Initial Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 7 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 of the Act. BUSINESS DAY: Any day except a Saturday, Sunday or other day in the City of New York, or in the city of the corporate trust office of the Trustee (as defined), on which banks are authorized to close. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. BROKER-DEALER TRANSFER RESTRICTED SECURITIES: New Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Initial Notes acquired directly from the Company or any of its affiliates). CLOSING DATE: The date hereof. COMMISSION: The Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the New Notes to be issued in the Exchange Offer, (b) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of New Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes tendered by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Notes, each Interest Payment Date. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE OFFER: The registration by the Company under the Act of the New Notes pursuant to the Exchange Offer Registration Statement pursuant to which the Company shall offer the Holders of all outstanding Initial Notes the opportunity to exchange all such outstanding Initial Notes tendered by such Holders in such exchange offer for a like principal amount of New Notes. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Initial Purchasers propose to sell the Initial Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, and to certain "institutional accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and (7) of Regulation D under the Act. GLOBAL NOTE HOLDER: As defined in the Indenture. HOLDERS: As defined in Section 2 hereof. INDEMNIFIED HOLDER: As defined in Section 8(a) hereof. INDENTURE: The Indenture, dated the Closing Date, among the Company, the Guarantors and Norwest Bank Minnesota, N.A., as trustee (the "TRUSTEE"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. INTEREST PAYMENT DATE: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. NEW NOTES: The Company 8 3/4% Senior Subordinated Notes due 2007 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) upon the request of any Holder of Initial Notes covered by a Shelf Registration Statement, in exchange for such Initial Notes. NOTES: The Initial Notes and the New Notes. PERSON: An individual, partnership, corporation, trust, unincorporated organization, or a government or agency or political subdivision thereof. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. 2 RECORD HOLDER: With respect to any Damages Payment Date, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors relating to (a) an offering of New Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) which is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein) or (d) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 120 days after the Closing Date, the Exchange Offer Registration Statement, (ii) use its best efforts to cause such Exchange Offer Registration Statement to be declared effective by the Commission at the earliest possible time, but in no event later than 180 days after the Closing Date, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause such Exchange Offer Registration Statement to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the New Notes to be made under the Blue Sky laws of such jurisdictions as are reasonably requested by the Holders and necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer 3 Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the New Notes to be offered in exchange for the Initial Notes that are Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers as contemplated by Section 3(c) below. Upon consummation of the Exchange Offer in accordance with this Section 2, the Issuers shall have no further registration obligations other than with respect to (i) Notes issued upon the request of any Holder of Initial Notes covered by a Shelf Registration Statement in exchange for such initial Notes, and (ii) Broker-Dealer Transfer Restricted Securities. (b) The Company and the Guarantors shall use their respective best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20 Business Days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their respective best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter. (c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Initial Notes that are Transfer Restricted Securities and that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities, may exchange such Initial Notes (other than Transfer Restricted Securities acquired directly from the Company or any Affiliate of the Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any New Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. The Company and the Guarantors shall use their respective best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers, and to ensure that such Registration Statement conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer Registration Statement is declared effective. The Company and the Guarantors shall promptly provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers promptly upon request, and in no event later than one Business Day after such request, at any time during such one-year period in order to facilitate such sales. 4 SECTION 4. SHELF REGISTRATION (a) SHELF REGISTRATION. If (i) the Company is not required to file an Exchange Offer Registration Statement with respect to the New Notes or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify the Company within 20 days following the Consummation of the Exchange Offer that (A) such Holder is prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement (as the same may be amended or supplemented) is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and owns Initial Notes acquired directly from the Company or any of its Affiliates, then the Company and the Guarantors shall use their best efforts to: (x) cause to be filed on or prior to 30 days after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement pursuant to clause (i) above or 30 days after the date on which the Company receives the notice specified in clause (ii) above, a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (in either event, the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof, and (y) cause such Shelf Registration Statement to become effective on or prior to 90 days after the date on which the Company becomes obligated to file such Shelf Registration Statement. If, after the Company has filed an Exchange Offer Registration Statement which satisfies the requirements of Section 3(a) above, the Company is required to file and make effective a Shelf Registration Statement solely because the Exchange Offer shall not be permitted under applicable federal law, then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above. Such an event shall have no effect on the requirements of clause (y) above. The Company and the Guarantors shall use their respective best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the date on which such Shelf Registration Statement first becomes effective under the Act or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 days after receipt of a request therefor, the information specified in item 507 of Regulation S-K of the Act and such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or 5 preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the Exchange Offer has not been Consummated within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable in connection with resales of Transfer Restricted Securities during the periods specified herein and is not succeeded within 30 days by another effective Registration Statement by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately; PROVIDED that such Registration Statement shall not cease to be effective or useable in connection with resales of Transfer Restricted Securities for more than 30 days in any calendar year (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby jointly and severally agree to pay liquidated damages to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.25 per week per $1,000 principal amount of Transfer Restricted Securities; PROVIDED THAT the Company and the Guarantors shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid to the Global Note Holder by wire transfer of immediately available funds or by federal funds check and to Holders of Certificated Securities on each Damages Payment Date by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. All obligations of the Company set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full. 6 SECTION 6. REGISTRATION PROCEDURES (a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all applicable provisions of Section 6(c) below, shall use their respective best efforts to effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If, following the date hereof there has been published a change in Commission policy with respect to exchange offers such as the Exchange Offer, such that in the reasonable opinion of counsel to the Company there is a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Initial Notes. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. In connection with the foregoing, the Company and the Guarantors hereby agree to take all such other reasonable actions as are requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Notes to be issued in the Exchange Offer and (C) it is acquiring the New Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise reasonably cooperate in the Company's and the Guarantors' preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of New Notes obtained by such Holder in exchange for Initial Notes acquired by such Holder directly from the Company or an Affiliate thereof. 7 (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the New Notes to be received in the Exchange Offer and that, to the best of the Company's and each Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the New Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) SHELF REGISTRATION STATEMENT. In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their respective best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. (c) GENERAL PROVISIONS. In connection with any Shelf Registration Statement and any related Prospectus required by this Agreement, and to the extent that an Exchange Offer Registration Statement is required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers, the Company and the Guarantors shall: (i) use their respective best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement, (1) in the case of clause (A), correcting any such misstatement or omission, and (2) in the case of clauses (A) and (B), use their respective best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter. (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep the applicable Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 8 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their respective reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to the Initial Purchasers, each selling Holder named in any Registration Statement or Prospectus and each of the underwriter(s) in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders and underwriter(s) in connection with, such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which the selling Holders of the Transfer Restricted Securities covered by such Registration Statement or the underwriter(s) in connection with such sale, if any, shall reasonably object within five Business Days after the receipt thereof. A selling Holder or underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission or fails to comply with the applicable requirements of the Act; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s) in connection with such sale, if any, make the Company's and 9 the Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the selling Holders, any managing underwriter participating in any disposition pursuant to such Registration Statement and any attorney or accountant retained by such selling Holders or any of such underwriter(s), all financial and other records, pertinent corporate documents of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such selling Holder, underwriter, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness if such Holders agree to maintain such information in the same manner as such Holder treats its own confidential information. (vii) if requested by any selling Holders or the underwriter(s) in connection with such sale, if any, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (viii) furnish to each selling Holder and each of the underwriter(s) in connection with such sale, if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); if such Holders agree to maintain such information in the same manner as such Holder treats its own confidential information. (ix) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (x) enter into such agreements (including an underwriting agreement) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any applicable Registration Statement and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an 10 Underwritten Registration, the Company and the Guarantors shall upon reasonable written request of any such Holder of Transfer Restricted Securities or underwriter: (A) furnish (or in the case of paragraphs (2) and (3), use its best efforts to furnish) to each selling Holder and each underwriter, if any, upon the effectiveness of the Shelf Registration Statement or, in the event that an Exchange Offer Registration Statement is required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers, to each Broker-Dealer upon Consummation of the Exchange Offer: (1) a certificate, dated, in the event that an Exchange Offer Registration Statement is required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers, the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed on behalf of the company and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and such Guarantor, confirming, as of the date thereof, the matters set forth in paragraphs (g), (h), (i) and (l) of Section 7 of the Purchase Agreement and such other similar matters as the Holders, underwriter(s) and/or Broker Dealers may reasonably request; (2) an opinion, dated, in the event that an Exchange Offer Registration Statement is required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers, the date of Consummation of the Exchange Offer, or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors covering matters similar to those set forth in paragraph (d) of Section 7 of the Purchase Agreement and such other matter as the Holders, underwriters and/or Broker Dealers may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company and the Guarantors and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the 11 circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated, in the event that an Exchange Offer Registration Statement is required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Broker-Dealers, the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 7(f) of the Purchase Agreement without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, in connection with any sale or resale pursuant to any Shelf Registration Statement the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by the selling Holders, the underwriter(s), if any, and Broker-Dealers, if any, to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Guarantors pursuant to this clause (x). The above shall be done at each closing under such underwriting or similar agreement, as and to the extent required thereunder, and if at any time the representations and warranties of the Company and the Guarantors contemplated in (A)(1) above cease to be true and correct in any material respect, the Company and the Guarantors shall so advise the underwriter(s), if any, the selling Holders and each Restricted Broker-Dealer promptly and if requested by such Persons, shall confirm such advice in writing; (xi) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by, the applicable Registration Statement; PROVIDED, HOWEVER, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; 12 (xii) issue, upon the request of any Holder of Initial Notes covered by any Shelf Registration Statement contemplated by this Agreement, New Notes having an aggregate principal amount equal to the aggregate principal amount of Initial Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such New Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Initial Notes held by such Holder shall be surrendered to the Company for cancellation; (xiii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to such sale of Transfer Restricted Securities; (xiv) use their respective best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xi) above; (xv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xvi) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xvii) cooperate and assist in any filings required to be made with the NASD and in the performance of any reasonable due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use their respective best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; PROVIDED that neither the Company nor the Guarantors shall take any position during review by the NASD that would, in any manner, create the implication that the offering of the Initial Notes on the Closing Date by the Company and the Guarantors should be or is subject to the rules and regulations of the NASD; (xviii) otherwise use their respective best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement 13 meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (xix) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xx) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. (d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(i) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or until it is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (the "ADVICE"). If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of either such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Purchaser or Holder with the NASD (and if applicable, the fees and expenses of any "qualified independent underwriter") and its counsel that may be required by the rules and regulations of the NASD); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates, if applicable, for the New Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public 14 accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of the persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "INDEMNIFIED HOLDER", to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by or on behalf of any of the Holders expressly for use therein. In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company or the Guarantors, such Indemnified Holder (or the Indemnified Holder controlled by such controlling Person) shall promptly notify the Company and the Guarantors in writing (PROVIDED, that the failure to give such notice shall not relieve the Company or the Guarantors of their obligations pursuant to this Agreement except to the extent it has been materially prejudiced by such failure). Such Indemnified Holder shall have the right to employ its own counsel in any such action but the fees and expenses of such counsel shall be paid by the indemnified party unless (i) the employment thereof has been specifically authorized by the indemnifying party in writing, (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in 15 the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party (regardless of whether it is ultimately determined that an Indemnified Holder is not entitled to indemnification hereunder). The Company and the Guarantors shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such Indemnified Holders, which firm shall be designated by the Holders of a majority in principal amount of Notes entitled to such indemnification. The Company and the Guarantors shall be liable for any settlement of any such action or proceeding effected with the Company's prior written consent, which consent shall not be withheld unreasonably, and the Company and the Guarantors agree to indemnify and hold harmless each Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Company. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors, officers, and any person controlling (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, and the respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company and the Guarantors to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by or on behalf of such Holder expressly for use in any Registration Statement. In case any action or proceeding shall be brought against the Company, any Guarantor or their respective directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Company and the Guarantors, and the Company, such Guarantor, such directors or officers or such controlling person shall have the rights and duties given to each Holder by the preceding paragraph. In no event shall any Holder be liable or responsible for any amount in excess of the amount by which the total received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or if such allocation is not permitted by applicable law, the relative fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable consideration. The relative fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Guarantor or by the Indemnified Holder and the parties' relative, intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or 16 payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Guarantors and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Holder or its related Indemnified Holders shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of its Transfer Restricted Securities pursuant to a Registration Statement exceeds the sum of (A) the amount paid by such Holder for such Transfer Restricted Securities PLUS (B) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Series A Notes held by each of the Holders hereunder and not joint. SECTION 9. RULE 144A The Company and each Guarantor hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company or such Guarantor is not subject to Section 13 or 15(d) of the Securities Exchange Act, to make available, upon request of any Holder of Transfer Restricted Securities, to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in customary underwriting arrangements entered into in connection therewith and (b) completes and executes all reasonable questionnaires, powers of attorney, and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS For any Underwritten Offering, the investment banker or investment bankers and manager or managers for any Underwritten Offering that will administer such offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in 17 such offering; PROVIDED THAT such investment bankers and managers must be reasonably satisfactory to the Company. Such investment bankers and managers are referred to herein as the "UNDERWRITERS." SECTION 12. MISCELLANEOUS (a) REMEDIES. Each Holder, in addition to being entitled to exercise all rights provided herein, in the Indenture, the Purchase Agreement or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company and the Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any Guarantor has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's and the Guarantors' securities under any agreement in effect on the date hereof. (c) ADJUSTMENTS AFFECTING THE NOTES. Neither the Company nor any Guarantor will take any action, or voluntarily permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 12(d)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (e) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (f) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and 18 (ii) if to the Company or the Guarantors: United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, VA 22209-2411 Telecopier No.: (703) 312-6139 Attention: Chief Financial Officer With a copy to: Latham & Watkins 5800 Sears Tower Chicago, IL 60606 Telecopier No.: (312) 993-9767 Attention: Mark A. Stegemoeller All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (h) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (i) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (k) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality 19 and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (l) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 20 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. UNITED DEFENSE INDUSTRIES, INC. By /s/ Allan M. Holt ------------------- Name: Allan M. Holt Title: President UNITED DEFENSE, L.P. (upon the consummation of the Acquisition) By: United Defense Industries, Inc., as General Partner By /s/ Allan M. Holt ------------------- Name: Allan M. Holt Title: President UDLP HOLDINGS CORP. By /s/ Allan M. Holt -------------------- Name: Allan M. Holt Title: President IRON HORSE INVESTORS, L.L.C. By /s/ Allan M. Holt -------------------- Name: Allan M. Holt Title: Chairman 21 Accepted: LEHMAN BROTHERS INC. B.T. ALEX. BROWN INCORPORATED CHASE SECURITIES INC. By: LEHMAN BROTHERS INC. By /s/ Edward B. McJeough ---------------------- Name: Edward B. McJeough Title: Managing Director 22 EX-4.5 16 EXHIBIT 4.5 CREDIT AGMT DTD 10/6/97 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CREDIT AGREEMENT among IRON HORSE INVESTORS, L.L.C., UNITED DEFENSE INDUSTRIES, INC., VARIOUS LENDING INSTITUTIONS, CITICORP USA, INC. and LEHMAN COMMERCIAL PAPER INC., as DOCUMENTATION AGENTS, and BANKERS TRUST COMPANY, as ADMINISTRATIVE AGENT and as SYNDICATION AGENT ____________________________________ Dated as of October 6, 1997 ____________________________________ $725,000,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . 1 1.01 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02 Minimum Borrowing Amounts, etc.. . . . . . . . . . . . . . . . . 3 1.03 Notice of Borrowing. . . . . . . . . . . . . . . . . . . . . . . 3 1.04 Disbursement of Funds. . . . . . . . . . . . . . . . . . . . . . 4 1.05 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.06 Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.07 Pro Rata Borrowings. . . . . . . . . . . . . . . . . . . . . . . 7 1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . 8 1.10 Increased Costs, Illegality, etc.. . . . . . . . . . . . . . . . 10 1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.12 Change of Lending Office . . . . . . . . . . . . . . . . . . . . 12 1.13 Replacement of Lenders . . . . . . . . . . . . . . . . . . . . . 13 SECTION 2. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . 14 2.01 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 14 2.02 Letter of Credit Requests; Notices of Issuance . . . . . . . . . 14 2.03 Agreement to Repay Letter of Credit Drawings . . . . . . . . . . 15 2.04 Letter of Credit Participations. . . . . . . . . . . . . . . . . 15 2.05 Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 3. Fees; Commitments. . . . . . . . . . . . . . . . . . . . . . . 18 3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.02 Voluntary Reduction of Commitments . . . . . . . . . . . . . . . 19 3.03 Mandatory Adjustments of Commitments, etc. . . . . . . . . . . . 20 SECTION 4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.01 Voluntary Prepayments. . . . . . . . . . . . . . . . . . . . . . 21 4.02 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . . 22 4.03 Method and Place of Payment. . . . . . . . . . . . . . . . . . . 30 4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 33 5.01 Conditions Precedent to Initial Borrowing Date . . . . . . . . . 33 5.02 Conditions Precedent to a Subsequent Borrowing Date. . . . . . . 39 5.03 Conditions Precedent to All Credit Events. . . . . . . . . . . . 39 SECTION 6. Representations, Warranties and Agreements . . . . . . . . . . 40 Page ---- 6.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . 40 6.02 Corporate Power and Authority. . . . . . . . . . . . . . . . . . 41 6.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.05 Use of Proceeds; Margin Regulations. . . . . . . . . . . . . . . 41 6.06 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . 42 6.07 Investment Company Act . . . . . . . . . . . . . . . . . . . . . 42 6.08 Public Utility Holding Company Act . . . . . . . . . . . . . . . 42 6.09 True and Complete Disclosure . . . . . . . . . . . . . . . . . . 42 6.10 Financial Condition; Financial Statements. . . . . . . . . . . . 43 6.11 Security Interests . . . . . . . . . . . . . . . . . . . . . . . 44 6.12 Consummation of Certain Transactions . . . . . . . . . . . . . . 44 6.13 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . 44 6.14 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . 45 6.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.16 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 46 6.17 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . 47 6.18 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 6.19 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . 48 6.20 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . 48 6.21 Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . 48 6.22 Special Purpose Corporations . . . . . . . . . . . . . . . . . . 48 SECTION 7. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . 49 7.01 Information Covenants. . . . . . . . . . . . . . . . . . . . . . 49 7.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . 51 7.03 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 7.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 52 7.05 Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . 52 7.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . 52 7.07 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.08 Good Repair. . . . . . . . . . . . . . . . . . . . . . . . . . . 54 7.09 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . 54 7.10 Additional Security; Further Assurances. . . . . . . . . . . . . 54 7.11 Interest Rate Agreement. . . . . . . . . . . . . . . . . . . . . 55 7.12 Compliance with Environmental Laws . . . . . . . . . . . . . . . 56 7.13 FNSS Disposition . . . . . . . . . . . . . . . . . . . . . . . . 57 7.14 FMC Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 7.15 Notices of Assignment. . . . . . . . . . . . . . . . . . . . . . 58 SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 58 (ii) Page ---- 8.01 Changes in Business. . . . . . . . . . . . . . . . . . . . . . . 58 8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.. . . . . 59 8.03 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 8.04 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 62 8.05 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . 63 8.06 Advances, Investments and Loans. . . . . . . . . . . . . . . . . 63 8.07 Limitation on Creation of Subsidiaries . . . . . . . . . . . . . 65 8.08 Modifications. . . . . . . . . . . . . . . . . . . . . . . . . . 65 8.09 Dividends, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 66 8.10 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 67 8.11 Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . . 67 8.12 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 68 8.13 Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . 68 8.14 Minimum Consolidated EBITDA. . . . . . . . . . . . . . . . . . . 69 8.15 Limitation On Issuance of Stock. . . . . . . . . . . . . . . . . 69 SECTION 9. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 69 9.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 9.02 Representations, etc.. . . . . . . . . . . . . . . . . . . . . . 69 9.03 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 9.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . 70 9.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . 70 9.06 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 9.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . 71 9.08 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 9.09 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 9.10 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . 72 9.11 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 11. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 99 11.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 99 11.02 Nature of Duties. . . . . . . . . . . . . . . . . . . . . . . . 99 11.03 Lack of Reliance on the Agents. . . . . . . . . . . . . . . . . 99 11.04 Certain Rights of the Agents. . . . . . . . . . . . . . . . . . 100 11.05 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 11.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 100 11.07 The Agents in Their Individual Capacity . . . . . . . . . . . . 100 11.08 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 11.09 Resignation by the Administrative Agent . . . . . . . . . . . . 101 (iii) Page ---- SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 102 12.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . 102 12.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . 103 12.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 12.04 Benefit of Agreement. . . . . . . . . . . . . . . . . . . . . . 103 12.05 No Waiver; Remedies Cumulative. . . . . . . . . . . . . . . . . 105 12.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . 106 12.07 Calculations; Computations. . . . . . . . . . . . . . . . . . . 106 12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . 107 12.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 107 12.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 107 12.11 Headings Descriptive. . . . . . . . . . . . . . . . . . . . . . 108 12.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . 108 12.13 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 12.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . 108 12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 109 12.16 Lender Register . . . . . . . . . . . . . . . . . . . . . . . . 110 SECTION 13. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . . 111 13.01 The Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . 111 13.02 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . 111 13.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . . . 111 13.04 Independent Obligation. . . . . . . . . . . . . . . . . . . . . 111 13.05 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . 112 13.06 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 13.07 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . 113 13.08 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 13.09 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . 114 (iv) ANNEX I -- Commitments ANNEX II -- Addresses ANNEX III -- Subsidiaries ANNEX IV -- Real Properties ANNEX V -- Existing Indebtedness ANNEX VI -- ERISA ANNEX VII -- Liens ANNEX VIII -- Existing Investments ANNEX IX -- Average Daily Amount Adjustments ANNEX X -- EBITDA Adjustments ANNEX XI -- Approvals ANNEX XII -- Litigation EXHIBIT A -- Form of Notice of Borrowing EXHIBIT B-1 -- Form of A Term Note EXHIBIT B-2 -- Form of B Term Note EXHIBIT B-3 -- Form of C Term Note EXHIBIT B-4 -- Form of Revolving Note EXHIBIT B-5 -- Form of Swingline Note EXHIBIT C -- Form of Letter of Credit Request EXHIBIT D -- Form of Section 4.04 Certificate EXHIBIT E-1 -- Form of Opinion of Latham & Watkins EXHIBIT E-2 -- Form of Opinion of White & Case EXHIBIT F -- Form of Officers' Certificate EXHIBIT G -- Form of Subsidiary Guaranty EXHIBIT H -- Form of Pledge Agreement EXHIBIT I -- Form of Security Agreement EXHIBIT J -- Form of Consent Letter EXHIBIT K -- Form of Assignment Agreement (v) CREDIT AGREEMENT, dated as of October 6, 1997, among IRON HORSE INVESTORS, L.L.C., a Delaware limited liability company, UNITED DEFENSE INDUSTRIES, INC., a Delaware corporation, the lenders from time to time party hereto (each, a "Lender" and, collectively, the "Lenders"), CITICORP USA, INC. and LEHMAN COMMERCIAL PAPER INC., as Documentation Agents (the "Documentation Agents") and BANKERS TRUST COMPANY, as Administrative Agent and as Syndication Agent (the "Administrative Agent" and together with the Documentation Agents, collectively, the "Agents"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 10 are used herein as so defined. W I T N E S S E T H : WHEREAS, subject to and upon the terms and conditions herein set forth, the Lenders are willing to make available to the Borrower the credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1. AMOUNT AND TERMS OF CREDIT. 1.01 COMMITMENT. Subject to and upon the terms and conditions herein set forth, each Lender severally agrees to make a loan or loans (each, a "Loan" and, collectively, the "Loans") to the Borrower, which Loans shall be drawn, to the extent such Lender has a commitment under such Facility, under the A Term Facility, the B Term Facility, the C Term Facility and the Revolving Facility, as set forth below: (a) Loans under the A Term Facility (each, an "A Term Loan" and, collectively, the "A Term Loans") (i) shall be made only pursuant to a drawing (x) on the Initial Borrowing Date in an aggregate amount equal to $100,000,000 and (y) in a minimum aggregate amount of $10 million on each of up to two Business Days on or prior to the A Termination Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans provided that all A Term Loans made as part of the same Borrowing shall, unless specifically provided herein, consist of A Term Loans of the same Type and (iii) shall not exceed in aggregate principal amount for any Lender at the time of incurrence thereof the A Term Commitment, if any, of such Lender as in effect on such date. Once repaid, A Term Loans may not be reborrowed. (b) Loans under the B Term Facility (each, a "B Term Loan" and, collectively, the "B Term Loans") (i) shall be made pursuant to a single drawing on the Initial Borrowing Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans provided that all B Term Loans made as part of the same Borrowing shall, unless specifically provided herein, consist of B Term Loans of the same Type and (iii) shall not exceed in aggregate principal amount for any Lender at the time of incurrence thereof the B Term Commitment, if any, of such Lender as in effect on such date. Once repaid, B Term Loans may not be reborrowed. (c) Loans under the C Term Facility (each, a "C Term Loan" and, collectively, the "C Term Loans") (i) shall be made pursuant to a single drawing on the Initial Borrowing Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans provided that all C Term Loans made as part of the same Borrowing shall, unless specifically provided herein, consist of C Term Loans of the same Type and (iii) shall not exceed in aggregate principal amount for any Lender at the time of incurrence thereof the C Term Commitment, if any, of such Lender as in effect on such date. Once repaid, C Term Loans may not be reborrowed. (d) Loans under the Revolving Facility (each, a "Revolving Loan" and, collectively, the "Revolving Loans") (i) shall be made at any time and from time to time after the Initial Borrowing Date and prior to the A/RF Maturity Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans provided that all Revolving Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Revolving Loans of the same Type, (iii) may be repaid and reborrowed in accordance with the provisions hereof, (iv) shall not exceed (giving effect to any incurrence thereof and the use of the proceeds of such incurrence) for any Lender in aggregate principal amount at any time outstanding that amount which, when combined with such Lender's Adjusted RF Percentage of the sum of (x) the Letter of Credit Outstandings at such time and (y) the outstanding principal amount of Swingline Loans at such time, equals the Revolving Commitment of such Lender and (v) shall not exceed in aggregate principal amount at any time outstanding that amount which, when combined with the aggregate principal amount of all Swingline Loans then outstanding, equals the Maximum RL Amount. (e) Subject to and upon the terms and conditions herein set forth, the Swingline Lender agrees to make at any time and from time to time after the Initial Borrowing Date and prior to the Swingline Expiry Date, a loan or loans to the Borrower (each, a "Swingline Loan" and, collectively, the "Swingline Loans"), which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed (giving effect to any incurrence thereof and the use of the proceeds of such incurrence) in aggregate principal amount at any time outstanding that amount which, when combined with the aggregate principal amount of all Revolving Loans made by Non-Defaulting Lenders then outstanding and the Letter of Credit Outstandings at such time, equals the Adjusted Total Revolving Commitment then in -2- effect (after giving effect to any changes thereto on such date) and (iv) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount or, when added to the outstanding principal amount of Revolving Loans then outstanding, the Maximum RL Amount. The Swingline Lender will not make a Swingline Loan after it has received written notice from the Required Lenders that one or more of the applicable conditions to Credit Events specified in Section 5.03 are not then satisfied until such conditions are satisfied. (f) On any Business Day, the Swingline Lender may, in its sole discretion, give notice to the RF Lenders that its outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (PROVIDED that each such notice shall be deemed to have been automatically given upon the occurrence of an Event of Default under Section 9.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 9), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all RF Lenders PRO RATA based on each RF Lender's Adjusted RF Percentage, and the proceeds thereof shall be applied directly to repay the Swingline Lender for such outstanding Swingline Loans. Each RF Lender hereby irrevocably agrees to make Base Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Lender notwithstanding: (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 5.03 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) the amount of the Total Revolving Commitment at such time. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each RF Lender (other than BTCo) hereby agrees that it shall forthwith purchase from the Swingline Lender (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the RF Lenders to share in such Swingline Loans ratably based upon their respective Adjusted RF Percentages, PROVIDED that all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the RF Lender purchasing same from and after such date of purchase. 1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount of each Borrowing shall not be less than the Minimum Borrowing Amount. More than one Borrowing may be incurred on any day, provided that at no time shall there be outstanding more than fifteen Borrowings of Eurodollar Loans. 1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to incur -3- Loans under any Facility (excluding Borrowings of Swingline Loans and Mandatory Borrowings), it shall give the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each proposed incurrence of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each proposed incurrence of Base Rate Loans. Each such notice (each, a "Notice of Borrowing") shall be in the form of Exhibit A and shall be irrevocable and shall specify (i) the Facility pursuant to which such incurrence is being made, (ii) the aggregate principal amount of the Loans to be made pursuant to such incurrence, (iii) the date of incurrence (which shall be a Business Day) and (iv) whether the respective Borrowing shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall promptly give each Lender written notice (or telephonic notice promptly confirmed in writing) of each proposed incurrence of Loans of such Lender's proportionate share thereof and of the other matters covered by the Notice of Borrowing. (b) (i) Whenever the Borrower desires to make a Borrowing of Swingline Loans hereunder, it shall give the Swingline Lender, prior to 2:00 P.M. (New York time) on the day such Swingline Loan is to be made, written notice (or telephonic notice promptly confirmed in writing) of each Swingline Loan to be made hereunder. Each such notice shall be irrevocable and shall specify in each case (x) the date of such Borrowing (which shall be a Business Day) and (y) the aggregate principal amount of the Swingline Loan to be made pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(f), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section 1.01(f). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent, the Swingline Lender (in the case of a Borrowing of Swingline Loans), or the Letter of Credit Issuer (in the case of the issuance of Letters of Credit), as the case may be, may prior to receipt of written confirmation act without liability upon the basis of and consistent with such telephonic notice, believed by the Administrative Agent, the Swingline Lender or the Letter of Credit Issuer in good faith to be from an Authorized Officer of the Borrower. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's, the Swingline Lender's or the Letter of Credit Issuer's record of the terms of such telephonic notice, unless such record reflects gross negligence or willful misconduct on the part of the Administrative Agent, the Swingline Lender or the Letter of Credit Issuer, as the case may be. 1.04 DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M. (New York time) on the date specified in each Notice of Borrowing or 2:00 P.M. (New York time) on the date specified in a notice described in Section 1.03(b)(i), each Lender with a Commitment under the respective Facility will make available its PRO RATA share of each -4- Borrowing requested to be made on such date or in the case of Swingline Loans, the Swingline Lender shall make available the full amount thereof in the manner provided below. All such amounts shall be made available to the Administrative Agent in Dollars and immediately available funds at the Payment Office and the Administrative Agent promptly will make available to the Borrower by depositing to its account at the Payment Office or as otherwise directed in the applicable Notice of Borrowing the aggregate of the amounts so made available in the type of funds received. Unless the Administrative Agent shall have been notified by any Lender prior to the date of the proposed incurrence that such Lender does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender and the Administrative Agent has made available same to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent may notify the Borrower, and, upon receipt of such notice, the Borrower shall promptly pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover on demand from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Lender, the overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance with Section 1.08, for the respective Loans. (b) Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. 1.05 NOTES. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made to it by each Lender shall be evidenced (i) if A Term Loans, by a promissory note substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, an "A Term Note" and, collectively, the "A Term Notes"), (ii) if B Term Loans, by a promissory note substantially in the form of Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a "B Term Note" and, collectively, the "B Term Notes"), (iii) C Term Loans, by a promissory note substantially in the form of Exhibit B-3 with blanks appropriately completed in conformity herewith (each, a "C Term Note" and, collectively, the "C Term Notes"), (iv) if Revolving Loans, by a promissory note substantially in the form of Exhibit B-4 with blanks appropriately completed in conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes") and (v) if Swingline Loans, by a promissory note substantially in the form of Exhibit B-5, with blanks appropriately completed in conformity herewith (the "Swingline -5- Note"). (b) The A Term Note issued to each Lender that makes any A Term Loan shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the A Term Commitment of such Lender (or in the case of a new A Term Note issued pursuant to Section 1.13 or 12.04, the A Term Loans and A Term Commitment, if any, of the assignee Lender) and be payable in the principal amount of A Term Loans evidenced thereby, (iv) mature on the A/RF Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The B Term Note issued to each Lender that makes any B Term Loan shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the B Term Loans made by such Lender on the Initial Borrowing Date (or in the case of a new B Term Note issued pursuant to Section 1.13 or 12.04, the respective B Term Loans evidenced thereby at the time of issuance) and be payable in the principal amount of B Term Loans evidenced thereby, (iv) mature on the B Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The C Term Note issued to each Lender that makes any C Term Loan shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the C Term Loans made by such Lender on the Initial Borrowing Date (or in the case of a new C Term Note issued pursuant to Section 1.13 or 12.04, the respective C Term Loans evidenced thereby at the time of issuance) and be payable in the principal amount of C Term Loans evidenced thereby, (iv) mature on the Final Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (e) The Revolving Note issued to each RF Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such RF Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the Revolving Commitment of such RF Lender and be payable in the principal amount of the Revolving Loans evidenced thereby, (iv) mature on the A/RF Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit -6- Documents. (f) The Swingline Note issued to the Swingline Lender shall (i) be executed by the Borrower, (ii) be payable to the order of the Swingline Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to mandatory prepayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (g) Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of any of its Notes, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation shall not affect the Borrower's obligations in respect of such Loans. 1.06 CONVERSIONS. The Borrower shall have the option to convert on any Business Day all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans (other than Swingline Loans which at all times shall be maintained as Base Rate Loans) owing pursuant to a single Facility into a Borrowing or Borrowings pursuant to such Facility of another Type of Loan provided that (i) no partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may not be converted into Eurodollar Loans when a Default under Section 9.01 or an Event of Default is in existence on the date of the proposed conversion if the Administrative Agent or the Required Lenders shall have determined in its or their sole discretion not to permit such conversion and (iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the Borrower giving the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' (or one Business Day's, in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each, a "Notice of Conversion") specifying the Loans to be so converted (including the relevant Facility), the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans. 1.07 PRO RATA BORROWINGS. All Loans under this Agreement (other than Swingline Loans) shall be made by the Lenders PRO RATA on the basis of their A Term Commitments, B Term Commitments, C Term Commitments or Revolving Commitments, as the case may be, PROVIDED, that each Mandatory Borrowing shall be funded on the basis of their Adjusted RF Percentages, if any. It is understood that no Lender shall be responsible for any default by any other Lender in its obligation to make Loans hereunder -7- and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fulfill its commitments hereunder. 1.08 INTEREST. (a) The unpaid principal amount of each Base Rate Loan shall bear interest from the date of the Borrowing thereof until the earlier of repayment or conversion thereof and maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Base Rate Margin plus the Base Rate in effect from time to time. (b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until the earlier of repayment or conversion thereof and maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate. (c) All overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall bear interest at a rate per annum equal to the Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the Applicable Base Rate Margin provided that principal in respect of Eurodollar Loans shall bear interest from the date the same becomes due (whether by acceleration or otherwise) until the end of the Interest Period then applicable to such Eurodollar Loan at a rate per annum equal to 2% in excess of the rate of interest applicable thereto on such date. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last Business Day of each January, April, July and October, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 12.07(b). (f) The Administrative Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower and the Lenders thereof. 1.09 INTEREST PERIODS. (a) At the time the Borrower gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration -8- of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower, be a one, two, three, six or, to the extent available to all Lenders with a Commitment under the respective Facility and so long as the Administration Agent consents thereto, nine or twelve month period. Notwithstanding anything to the contrary contained above: (i) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, PROVIDED that if any Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) no Interest Period with respect to a Borrowing of Revolving Loans shall extend beyond the A/RF Maturity Date; (v) no Interest Period with respect to any Term Loans under a Facility may be elected that would extend beyond any date upon which a Scheduled Repayment is required to be made in respect of such Term Loans if, after giving effect to the selection of such Interest Period, the aggregate principal amount of Term Loans maintained under the respective Facility as Eurodollar Loans with Interest Periods ending after such date would exceed the aggregate principal amount of Term Loans under such Facility permitted to be outstanding after such Scheduled Repayment; and (vi) no Interest Period may be elected at any time when a Default under Section 9.01 or an Event of Default is then in existence if the Administrative Agent or the Required Lenders shall have determined in its or their sole discretion not to permit such election. (b) If upon the expiration of any Interest Period, the Borrower has failed to (or may not) elect a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to con- -9- vert such Borrowing into a Borrowing of Base Rate Loans effective as of such expiration. 1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate or the making or continuance of any Eurodollar Loan has become impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the interbank Eurodollar market; (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans (other than taxes covered by Section 4.04 and any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges) because of (x) any change since the Effective Date in any applicable law, governmental rule, regulation, guideline or order (or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline or order) (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate) and/or (y) other circumstances affecting the interbank Eurodollar market or the position of such Lender in such market; or (iii) at any time, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Lender in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not having the force of law but with which such Lender customarily complies even though the failure to comply therewith would not be unlawful); then, and in any such event, such Lender (or the Administrative Agent in the case of clause (i) above) shall (x) on such date and (y) within ten Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) -10- above, the Borrower shall pay to such Lender, within 10 Business Days after Borrower's receipt of written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its reasonable discretion shall determine after consultation with the Borrower) as shall be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender, describing the basis for such increased costs and showing the calculation thereof, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the Borrower shall within the time period required by law) either (x) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the Borrower was notified by a Lender pursuant to Section 1.10(a)(ii) or (iii), or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' notice to the Administrative Agent, require the affected Lender to convert each such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the circumstances described in Section 1.10(a)(iii), shall occur no later than the last day of the Interest Period then applicable to such Eurodollar Loan (or such earlier date as shall be required by applicable law)); PROVIDED, that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 1.10(b). Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(b), will give prompt written notice thereof to the Borrower, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(b) upon the subsequent receipt of such notice. (c) If any Lender shall have determined that the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, in each case after the Effective Date, or compliance by such Lender or its parent corporation with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency first made after the Effective Date, has or would have the effect of reducing the rate of return on such Lender's or its parent corporation's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender or its parent corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's or its parent corporation's policies with respect to capital adequacy), then from time to time, within 10 Business Days after demand by such Lender (with a copy to -11- the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or its parent corporation for such reduction. Each Lender, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall describe the basis for such claim and set forth in reasonable detail the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such notice. 1.11 COMPENSATION. (a) The Borrower shall compensate each Lender, upon its written request (which request shall set forth the basis for requesting such compensation and reasonably detailed calculations thereof), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Loans but excluding in any event the loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any prepayment, repayment or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.10(b). (b) Notwithstanding anything in this Agreement to the contrary, to the extent any notice or request required by Section 1.10, 1.11, 2.05 or 4.04 is given by any Lender more than 180 days after such Lender obtained, or reasonably should have obtained, knowledge of the occurrence of the event giving rise to the additional costs, reductions in amounts, losses, taxes or other additional amounts of the type described in such Section, such Lender shall not be entitled to compensation under Section 1.10, 1.11, 2.05 or 4.04 for any amounts incurred or accruing prior to the giving of such notice to the Borrower. 1.12 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or 4.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Letter of Credit participations affected by such event, PROVIDED that such designation is made on such terms that such Lender and its lending office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Section 1.10, 2.05 or 4.04. -12- 1.13 REPLACEMENT OF LENDERS. (x) Upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 1.11, Section 2.05 or Section 4.04 with respect to any Lender which results in such Lender charging to the Borrower increased costs materially in excess of those being charged generally by the Lenders, (y) if a Lender becomes a Defaulting Lender and/or (z) in the case of a refusal by a Lender to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which has been approved by the Required Lenders, the Borrower shall have the right, if no Default under Section 9.01 or Event of Default then exists, to replace such Lender (the "Replaced Lender") with one or more other Eligible Transferee or Transferees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the "Replacement Lender") reasonably acceptable to the Administrative Agent, provided that (i) at the time of any replacement pursuant to this Section 1.13, the Replacement Lender shall enter into one or more Assignment Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to said Section 12.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of, and in each case participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender an amount equal to the sum of (A) an amount equal to the principal of, and all accrued and unpaid interest on, all outstanding Loans of the Replaced Lender, (B) an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Lender, together with all accrued and unpaid interest with respect thereto at such time and (C) an amount equal to all accrued and unpaid Fees owing to the Replaced Lender pursuant to Section 3.01, (y) the Letter of Credit Issuer an amount equal to such Replaced Lender's Adjusted RF Percentage (for this purpose, and for the purposes of clause (z) below, determined as if the adjustment described in clause (y) of the immediately succeeding sentence had been made with respect to such Replaced Lender) of any Unpaid Drawing (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Lender and (z) the Swingline Lender, any portion of a Mandatory Borrowing as to which the Replaced Lender is then in default, and (ii) all obligations of the Borrower owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender by the Borrower concurrently with such replacement. Upon the execution of the respective Assignment Agreements, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by the Borrower, (x) the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions applicable to the Replaced Lender under this Agreement, which shall survive as to such Replaced Lender and (y) in the case of a replacement of a Defaulting Lender with a Non-Defaulting Lender, the Adjusted RF Percentages of the respective Lenders and the Adjusted Total Revolving Commitment shall be automatically adjusted at such time to give effect to such replacement. -13- SECTION 2. LETTERS OF CREDIT. 2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request that the Letter of Credit Issuer at any time and from time to time on or after the Initial Borrowing Date and prior to the fifth Business Day prior to the A/RF Maturity Date to issue, for the account of the Borrower and in support of (x) trade obligations of the Borrower and its Subsidiaries incurred in the ordinary course of business (letters of credit issued for such purposes, "Trade Letters of Credit") and (y) any other lawful purposes of the Borrower and its Subsidiaries (letters of credit issued for such purposes, "Standby Letters of Credit"), and subject to and upon the terms and conditions herein set forth, the Letter of Credit Issuer agrees to issue from time to time, irrevocable letters of credit denominated in Dollars and issued on a sight basis only, in such form as may be approved by the Letter of Credit Issuer and the Administrative Agent. "Letters of Credit" shall include Trade Letters of Credit, Standby Letters of Credit and Existing Letters of Credit (each of which Existing Letters of Credit shall be deemed issued for all purposes of this Agreement on the Initial Borrowing Date). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued if after giving effect thereto the sum of the Letter of Credit Outstandings plus the aggregate principal amount of all Revolving Loans made by Non-Defaulting Lenders then outstanding and Swingline Loans then outstanding would exceed the Adjusted Total Revolving Commitment at such time; (ii) each Standby Letter of Credit shall have an expiry date occurring not later than three years after such Letter of Credit's date of issuance although (i) Standby Letters of Credit issued to replace and/or support letters of credit existing on the Initial Borrowing Date shall have an expiry equal to the then expiry of the letter of credit being replaced or supported and (ii) any Standby Letter of Credit may be extendable for successive periods of up to 12 months, but not beyond the third Business Day next preceding the A/RF Maturity Date, on terms acceptable to the Letter of Credit Issuer and in no event shall any Standby Letter of Credit have an expiry date occurring later than the third Business Day next preceding the A/RF Maturity Date; and (iii) each Trade Letter of Credit shall have an expiry date occurring not later than (x) 180 days after such Letter of Credit's date of issuance or (y) the date three Business Days prior to the A/RF Maturity Date. 2.02 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE. (a) Whenever it desires that a Letter of Credit be issued, the Borrower shall give the Administrative Agent and the Letter of Credit Issuer written notice (including by way of facsimile transmission) in the form of Exhibit C thereof prior to 1:00 P.M. (New York time) at least three Business Days (or such shorter period as may be acceptable to the Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) (each, a "Letter of Credit Request"), which Letter of Credit Request shall include any other documents that the Letter of Credit Issuer customarily requires in connection therewith. (b) The Letter of Credit Issuer shall, promptly after each issuance of a Standby Letter of Credit by it, give the Administrative Agent, each RF Lender and the -14- Borrower written notice of the issuance of such Standby Letter of Credit, accompanied by a copy of such Letter of Credit. The Administrative Agent will send to each RF Lender, upon each Letter of Credit Fee payment date, a report setting forth for the relevant period the daily aggregate Letter of Credit Outstandings during such period (based, to the extent relating to Letters of Credit not issued by BTCo, upon information supplied to the Administrative Agent by the Borrower). 2.03 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the Administrative Agent at the Payment Office, for any payment or disbursement made by the Letter of Credit Issuer under any Letter of Credit (each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing") promptly after, and in any event within three Business Days after the date on which, the Borrower is notified by the Letter of Credit Issuer of such payment or disbursement with interest on the amount so paid or disbursed by the Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date the Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the Base Rate plus the Applicable Base Rate Margin as in effect from time to time (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of such notice of payment or disbursement), such interest also to be payable on demand. (b) The Borrower's obligation under this Section 2.03 to reimburse the Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Letter of Credit Issuer, the Administrative Agent or any Lender, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform substantially to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing provided that the Borrower shall not be obligated to reimburse the Letter of Credit Issuer for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer as determined by a court of competent jurisdiction. 2.04 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of Credit Issuer shall be deemed to have sold and transferred to each other RF Lender, and each such RF Lender (each, a "Participant") shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Adjusted RF Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (although the Letter of Credit Fee shall be payable directly to the Administrative Agent for the account of the RF Lenders as provided in Section 3.01(c) and the Participants shall have no right to receive -15- any portion of any Facing Fees) and any security therefor or guaranty pertaining thereto. Upon any change in the Adjusted RL Percentages pursuant to Section 1.13 and/or 12.04(b) and/or as a result of a Lender Default, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.04 to reflect the new Adjusted RF Percentages of all of the Lenders with Revolving Commitments as a result thereof. (b) In determining whether to pay under any Letter of Credit, the Letter of Credit Issuer shall not have any obligation relative to the Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Letter of Credit Issuer under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Letter of Credit Issuer any resulting liability. (c) In the event that the Letter of Credit Issuer makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to the Letter of Credit Issuer pursuant to Section 2.03(a), the Letter of Credit Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of the Letter of Credit Issuer, the amount of such Participant's Adjusted RF Percentage of such payment in Dollars and in same day funds provided that no Participant shall be obligated to pay to the Administrative Agent its Adjusted RF Percentage of such unreimbursed amount for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer. If the Administrative Agent so notifies any Participant prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall make available to the Administrative Agent, such Participant's Adjusted RF Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Adjusted RF Percentage of the amount of such Unpaid Drawing available to the Administrative Agent, such Participant agrees to pay to the Administrative Agent for the account of the Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is so paid to the Administrative Agent at the overnight Federal Funds Effective Rate. The failure of any Participant to so pay to the Administrative Agent its Adjusted RF Percentage of any Unpaid Drawing shall not relieve any other Participant of its obligation hereunder to so pay to the Administrative Agent its Adjusted RF Percentage of any Unpaid Drawing on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to so pay to the Administrative Agent such other Participant's Adjusted RF Percentage of any such payment. (d) Whenever the Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Administrative Agent has received for the account of the -16- Letter of Credit Issuer any payments from the Participants pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its Adjusted RF Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant's Adjusted RF Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations. (e) The obligations of the Participants to make payments to the Administrative Agent for the account of the Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever (provided that no Participant shall be required to make payments resulting from the Administrative Agent's gross negligence or willful misconduct) and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which any Credit Party or any of their Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any Agent, the Letter of Credit Issuer, any Lender or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or other document presented under the 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; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. (f) To the extent the Letter of Credit Issuer is not indemnified by the Borrower, the Participants will reimburse and indemnify the Letter of Credit Issuer, in proportion to their respective RF Percentages, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Letter of Credit Issuer in performing its respective duties in any way relating to or arising out of its issuance of Letters of Credit; PROVIDED that no Participants shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, -17- actions, judgments, suits, costs, expenses or disbursements resulting from the Letter of Credit Issuer's gross negligence or willful misconduct. 2.05 INCREASED COSTS. If at any time after the Effective Date, the adoption or effectiveness of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Letter of Credit Issuer or any Participant with any request or directive (whether or not having the force of law) first made by any such authority, central bank or comparable agency, in each case after the Effective Date, shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by the Letter of Credit Issuer or such Participant's participation therein, or (ii) shall impose on the Letter of Credit Issuer or any Participant any other conditions affecting this Agreement, any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to the Letter of Credit Issuer or such Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by the Letter of Credit Issuer or such Participant hereunder (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges), then, within 10 Business Days of Borrower's receipt of a written demand to the Borrower by the Letter of Credit Issuer or such Participant (a copy of which notice shall be sent by the Letter of Credit Issuer or such Participant to the Administrative Agent), the Borrower shall pay to the Letter of Credit Issuer or such Participant such additional amount or amounts as will compensate the Letter of Credit Issuer or such Participant for such increased cost or reduction. A certificate submitted to the Borrower by the Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by the Letter of Credit Issuer or such Participant to the Administrative Agent), setting forth the basis for, and reasonably detailed calculations of, the determination of such additional amount or amounts necessary to compensate the Letter of Credit Issuer or such Participant as aforesaid shall be conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 2.05 upon the subsequent receipt thereof. SECTION 3. FEES; COMMITMENTS. 3.01 FEES. (a) The Borrower agrees to pay to the Administrative Agent a commitment commission (the "TL Commitment Commission") for the account for each Lender with an A Term Commitment that is a Non-Defaulting Lender for the period from and including the Initial Borrowing Date to but not including the date on which the Total A Term Commitment has been terminated, computed for each day at a rate per annum equal to the Applicable CC Percentage for such day on the A Term Commitment on such day of such Lender. Such TL Commitment Commission shall be due and payable in arrears on the last Business Day of each January, April, July and October on the date upon which the Total A Term Commitment is terminated. -18- (b) The Borrower agrees to pay to the Administrative Agent a commitment commission ("RL Commitment Commission") for the account of each RF Lender that is a Non-Defaulting Lender for the period from and including the Initial Borrowing Date to but not including the date upon which the Total Revolving Commitment has been terminated, computed for each day at the rate per annum equal to the Applicable CC Percentage for such day on the Unutilized Revolving Commitment on such day of such Lender. Such RL Commitment Commission shall be due and payable in arrears on the last Business Day of each January, April, July and October and on the date upon which the Total Revolving Commitment is terminated. (c) The Borrower agrees to pay to the Administrative Agent, for the account of each RF Lender that is a Non-Defaulting Lender, PRO RATA on the basis of their respective Adjusted RF Percentages, a fee in respect of each Letter of Credit (the "Letter of Credit Fee") computed for each day at a per annum rate equal to 1/4 of 1% less than the Applicable Eurodollar Margin for Revolving Loans on such day multiplied by the Stated Amount of all Letters of Credit outstanding on such day. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on the last Business Day of each January, April, July and October of each year and on the date upon which the Total Revolving Commitment is terminated. (d) The Borrower agrees to pay to the Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it (the "Facing Fee") computed for each day at the rate of 1/4 of 1% per annum on the Stated Amount of all Letters of Credit outstanding on such day, provided that in no event shall the annual Facing Fee with respect to any Letter of Credit be less than $500. Accrued Facing Fees shall be due and payable quarterly in arrears on the last Business Day of each January, April, July and October of each year and on the date upon which the Total Revolving Commitment is terminated. (e) The Borrower agrees to pay directly to the Letter of Credit Issuer upon each issuance of, payment under, and/or amendment of, a Letter of Credit such amount as shall at the time of such issuance, payment or amendment be the administrative charge which the Letter of Credit Issuer is customarily charging for issuances of, payments under or amendments of, letters of credit issued by it. (f) The Borrower shall pay to (x) each Agent on the Initial Borrowing Date, for its own account and/or for distribution to the Lenders, such fees as heretofore agreed by the Borrower and the Agents and (y) the Administrative Agent, for its own account, such other fees as agreed to between the Borrower and the Administrative Agent, when and as due. (g) All computations of Fees shall be made in accordance with Section 12.07(b). 3.02 VOLUNTARY REDUCTION OF COMMITMENTS. (a) Upon at least one -19- Business Day's prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at its Notice Office (which notice shall be deemed to be given on a certain day only if given before 2:00 P.M. (New York time) on such day and shall be promptly transmitted by the Administrative Agent to each of the Lenders), the Borrower shall have the right, without premium or penalty, to terminate or partially reduce the Total Unutilized Revolving Commitment provided that (x) any such partial reduction shall apply to proportionately and permanently reduce the Revolving Commitment of each Lender, (y) no such reduction shall reduce any Non-Defaulting Lender's Revolving Commitment in an amount greater than the then Unutilized Revolving Commitment of such Lender and (z) any partial reduction pursuant to this Section 3.02 shall be in the amount of at least $1,000,000. (b) At any time after the Initial Borrowing Date and prior to the A Termination Date upon at least one Business Day's prior written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, without premium or penalty, to terminate all or any portion of the remaining Total A Term Commitment. The amount of any reduction or termination of the Total A Term Commitment effected pursuant to this Section 3.02(b) and/or Section 3.03(b)(ii) and/or Section 3.03(b)(iii) shall be applied to reduce the remaining Scheduled Repayments of A Term Loans PRO RATA based upon the then remaining amount of each such Scheduled Repayment. 3.03 MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total Commitment (and the A Term Commitment, B Term Commitment, C Term Commitment and Revolving Commitment of each Lender) shall terminate in its entirety on the Expiration Date unless the Initial Borrowing Date has occurred on or before such date. (b) The Total A Term Commitment shall (i) be reduced on the date any A Term Loans are incurred in an amount equal to the aggregate principal amount of A Term Loans so incurred, (ii) terminate in its entirety (to the extent not theretofore terminated) at 5:00 P.M. (New York time) on the A Termination Date, whether or not any A Term Loans are incurred on such date and (iii) until terminated in full, be reduced on each day on which Term Loans are required to be repaid pursuant to Sections 4.02(A)(c), (d), (e), (f) and/or (g) by the amount, if any, by which the amount required to be applied pursuant to said Sections (determined as if an unlimited amount of Term Loans were actually outstanding) exceeds the aggregate principal amount of Term Loans being repaid. (c) Each of the Total B Term Commitment and Total C Term Commitment shall terminate in its entirety on the Initial Borrowing Date (after giving effect to the making of B Term Loans and C Term Loans on such date). (d) The Total Revolving Commitment shall terminate in its entirety on the A/RF Maturity Date. (e) To the extent gross cash proceeds from the issuance of the Senior -20- Subordinated Notes exceed $200,000,000 the Total Term Commitment shall, before Term Loans are extended on the Initial Borrowing Date, be permanently reduced by such excess amount. Any reduction to the Total Term Commitment pursuant to the immediately preceding sentence shall be applied PRO RATA to the Total B Term Commitment and Total C Term Commitment and shall reduce the Scheduled Repayments of the respective Term Loan Facilities PRO RATA based upon the amount of such Scheduled Repayments. (f) Each partial reduction of the Commitments under a Facility pursuant to this Section 3.03 shall apply proportionately to the Commitment under such Facility of each Lender. SECTION 4. PAYMENTS. 4.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay Loans in whole or in part, without premium or penalty, from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent at the Payment Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, whether such Loans are A Term Loans, B Term Loans, C Term Loans, Revolving Loans or Swingline Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be given by the Borrower prior to 3:00 P.M. (New York time) on the Business Day prior to the date of such prepayment (or in the case of Swingline Loans on the day of prepayment), and which notice shall promptly be transmitted by the Administrative Agent to each of the Lenders; (ii) (x) each partial prepayment of any Borrowing (other than a Borrowing of Swingline Loans) shall be in an aggregate principal amount of at least $1,000,000 and (y) each partial prepayment of Swingline Loans shall be in an aggregate principal amount of at least $250,000, provided that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied PRO RATA among such Loans provided that at the Borrower's election in connection with any prepayment of Revolving Loans pursuant to this Section 4.01, such prepayment shall not be applied to any Revolving Loans of a Defaulting Lender; and (iv) each prepayment of Term Loans pursuant to this Section 4.01 shall be applied to A Term Loans (in an amount equal to the A TF Percentage of such prepayment), B Term Loans (in an amount equal to the B TF Percentage of such prepayment) and C Term Loans (in an amount equal to the C TF Percentage of such prepayment) and shall reduce the remaining Scheduled Repayments of each of the A Term Loans, the B Term Loans and the C Term Loans (x) first, in direct order of maturity to those Scheduled Repayments which will be due and payable within twelve months after the date of the respective payment and (y) second, to the extent in excess thereof, on a PRO RATA basis (based upon the then remaining principal amount of each such Scheduled Repayment). -21- 4.02 MANDATORY PREPAYMENTS. (A) REQUIREMENTS: (a) (i) If on any date (and after giving effect to all other repayments on such date) the sum of the aggregate outstanding principal amount of Revolving Loans made by Non-Defaulting Lenders, the principal amount of Swingline Loans and the Letter of Credit Outstandings exceeds the Adjusted Total Revolving Commitment as then in effect, the Borrower shall repay on such date the principal of outstanding Swingline Loans and, after all Swingline Loans have been repaid in full, Revolving Loans of Non-Defaulting Lenders in an aggregate amount equal to such excess. If, after giving effect to the repayment of all outstanding Swingline Loans and Revolving Loans of Non-Defaulting Lenders, the Letter of Credit Outstandings exceeds the Adjusted Total Revolving Commitment then in effect, the Borrower shall pay to the Administrative Agent an amount in cash and/or Cash Equivalents equal to such excess and the Administrative Agent shall hold such payment as security for the obligations of the Borrower in respect of Letters of Credit pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent (which shall permit certain investments in Cash Equivalents reasonably satisfactory to the Administrative Agent, until all proceeds are applied to the secured obligations or until all Letters of Credit so secured expire undrawn or are otherwise terminated or all drawings thereunder are paid, at which time such amount shall be returned to the Borrower). In addition, if on any date the aggregate outstanding principal amount of Swingline Loans and Revolving Loans exceeds the Maximum RL Amount, the Borrower shall repay the principal of Swingline Loans, and after all Swingline Loans have been repaid in full, Revolving Loans of Non-Defaulting Banks in an amount equal to such excess. (ii) If on any date the aggregate outstanding principal amount of the Revolving Loans made by a Defaulting Lender exceeds the Revolving Commitment of such Defaulting Lender, the Borrower shall repay principal of Revolving Loans of such Defaulting Lender in an amount equal to such excess. -22- (b) (i) On each date set forth below, the Borrower shall repay the principal amount of A Term Loans set forth opposite such date (each such repayment, together with each repayment of B Term Loans required by clause (b)(ii) below and each repayment of C Term Loans required by clause (b)(iii) below, as the same may be reduced as provided in Sections 3.02(b), 4.01 and 4.02(B), a "Scheduled Repayment"): Date Amount ---- ------ January 31, 1998 $6,250,000 April 30, 1998 $6,250,000 July 31, 1998 $6,250,000 October 31, 1998 $6,250,000 January 31, 1999 $6,250,000 April 30, 1999 $6,250,000 July 31, 1999 $6,250,000 October 31, 1999 $6,250,000 January 31, 2000 $6,250,000 April 30, 2000 $6,250,000 July 31, 2000 $6,250,000 October 31, 2000 $6,250,000 January 31, 2001 $6,250,000 April 30, 2001 $6,250,000 July 31, 2001 $6,250,000 October 31, 2001 $6,250,000 January 31, 2002 $6,250,000 April 30, 2002 $6,250,000 July 31, 2002 $6,250,000 October 31, 2002 $6,250,000 January 31, 2003 $6,250,000 April 3, 2003 $6,250,000 July 31, 2003 $6,250,000 A/RF Maturity Date $6,250,000 -23- (ii) On each date set forth below, the Borrower shall repay the principal amount of B Term Loans set forth opposite such date: Date Amount ---- ------ January 31, 1998 $437,500 April 30, 1998 $437,500 July 31, 1998 $437,500 October 31, 1998 $437,500 January 31, 1999 $437,500 April 30, 1999 $437,500 July 31, 1999 $437,500 October 31, 1999 $437,500 January 31, 2000 $437,500 April 30, 2000 $437,500 July 31, 2000 $437,500 October 31, 2000 $437,500 January 31, 2001 $437,500 April 30, 2001 $437,500 July 31, 2001 $437,500 October 31, 2001 $437,500 January 31, 2002 $437,500 April 30, 2002 $437,500 July 31, 2002 $437,500 October 31, 2002 $437,500 January 31, 2003 $437,500 April 30, 2003 $437,500 July 31, 2003 $437,500 October 31, 2003 $437,500 January 31, 2004 $20,562,500 April 30, 2004 $20,562,500 July 31, 2004 $20,562,500 October 31, 2004 $20,562,500 January 31, 2005 $20,562,500 April 30, 2005 $20,562,500 July 31, 2005 $20,562,500 B Maturity Date $20,562,500 -24- (iii) On each date set forth below, the Borrower shall repay the principal amount of C Term Loans set forth opposite such date: Date Amount ---- ------ January 31, 1998 $425,000 April 30, 1998 $425,000 July 31, 1998 $425,000 October 31, 1998 $425,000 January 31, 1999 $425,000 April 30, 1999 $425,000 July 31, 1999 $425,000 October 31, 1999 $425,000 January 31, 2000 $425,000 April 30, 2000 $425,000 July 31, 2000 $425,000 October 31, 2000 $425,000 January 31, 2001 $425,000 April 30, 2001 $425,000 July 31, 2001 $425,000 October 31, 2001 $425,000 January 31, 2002 $425,000 April 30, 2002 $425,000 July 31, 2002 $425,000 October 31, 2002 $425,000 January 31, 2003 $425,000 April 30, 2003 $425,000 July 31, 2003 $425,000 October 31, 2003 $425,000 January 31, 2004 $425,000 April 30, 2004 $425,000 July 31, 2004 $425,000 October 31, 2004 $425,000 January 31, 2005 $425,000 April 30, 2005 $425,000 July 31, 2005 $425,000 October 31, 2005 $425,000 January 31, 2006 $39,100,000 -25- Date Amount ---- ------ April 30, 2006 $39,100,000 July 31, 2006 $39,100,000 Final Maturity Date $39,100,000 -26- (c) On the third Business Day following the date of receipt thereof by Holdings and/or any of its Subsidiaries of the Net Cash Proceeds from any Asset Sale, an amount equal to 100% of the Net Cash Proceeds from such Asset Sale shall be applied as a mandatory repayment of principal of the then outstanding Term Loans, PROVIDED that up to an aggregate of $15,000,000 per year (but no more than $40,000,000 in the aggregate for all Asset Sales after the Initial Borrowing Date) of the Net Cash Proceeds from Asset Sales shall not be required to be used to so repay Term Loans to the extent the Borrower elects, as hereinafter provided, to cause such Net Cash Proceeds to be reinvested in Reinvestment Assets (a "Reinvestment Election"). The Borrower may exercise its Reinvestment Election (within the parameters specified in the preceding sentence) with respect to an Asset Sale if (x) no Default or Event of Default exists and (y) the Borrower delivers a Reinvestment Notice to the Administrative Agent no later than three Business Days following the date of the consummation of the respective Asset Sale, with such Reinvestment Election being effective with respect to the Net Cash Proceeds of such Asset Sale equal to the Anticipated Reinvestment Amount specified in such Reinvestment Notice. (d) On the date of the receipt thereof by Holdings and/or any of its Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) of the incurrence of Indebtedness by Holdings or any of its Subsidiaries (other than Indebtedness permitted by Section 8.04), shall be applied as a mandatory repayment of principal of the then outstanding Term Loans. (e) On the date of the receipt thereof by Holdings or the Borrower, an amount equal to the EP Percentage of the proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) of any sale or issuance of its equity or any equity contribution (other than equity issued to management and other employees of Holdings and its Subsidiaries) shall be applied as a mandatory repayment of principal of the then outstanding Term Loans. (f) On each date which is 90 days after the last day of each fiscal year of the Borrower (commencing with the fiscal year ending on December 31, 1998), 75% (or, if the Leverage Ratio on the last day of such fiscal year is less than 4.0:1.0, 50%) of Excess Cash Flow for the fiscal year then last ended (or in the case of the fiscal year ending on December 31, 1998, the period commencing on the Initial Borrowing Date and ending on December 31, 1998) shall be applied as a mandatory repayment of principal of the then outstanding Term Loans. (g) On the Reinvestment Prepayment Date with respect to a Reinvestment Election, an amount equal to the Reinvestment Prepayment Amount, if any, for such Reinvestment Election shall be applied as a repayment of the principal amount of the then outstanding Term Loans. -27- (h) On the third Business Date following the date of the receipt thereof by Holdings and/or any of its Subsidiaries, an amount equal to 100% of any price adjustment in respect of the Acquisition shall be applied (i) to the extent such amount is less than $15,000,000, as a mandatory repayment of principal of outstanding Revolving Loans (but shall not permanently reduce Total Revolving Commitment) and (ii) to the extent such amount exceeds $15,000,000, such excess portion shall be applied as a mandatory repayment of principal of then outstanding Term Loans PRO RATA among same on the basis of the outstanding principal amount thereof. (i) To the extent not theretofore repaid pursuant to the provisions of this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (ii) all outstanding Swingline Loans and Revolving Loans shall be repaid in full upon the termination of the Total Revolving Commitment. (B) APPLICATION: (a) Each mandatory repayment of Term Loans required to be made pursuant to Section 4.02(A) shall be applied (i) (except in the cases of Sections 4.02(A)(b) and (h)) to the outstanding A Term Loans, if any, in an amount equal to the A TF Percentage of such prepayment, to the outstanding B Term Loans, if any, in an amount equal to the B TF Percentage of such prepayment and to the outstanding C Term Loans, if any, in an amount equal to the C TF Percentage of such prepayment and (ii) to reduce the then remaining Scheduled Repayments of the respective Facility (x) in the case of any mandatory repayment pursuant to Sections 4.02(A)(c), (d), (g) and/or (h) on a PRO RATA basis (based upon the then remaining Scheduled Repayments of the respective Facility) and (y) in the case of any mandatory repayments pursuant to Sections 4.02(A)(e) and (f), (I) first, in direct order of maturity to those Scheduled Repayments which will be due and payable within 12 months after the date of the respective payment and (II) second, to the extent in excess thereof, on a PRO RATA basis (based upon the then remaining principal amount of each such Scheduled Repayment). -28- (b) With respect to each prepayment of Loans required by Section 4.02, the Borrower may designate the Types of Loans which are to be prepaid and the specific Borrowing(s) under the affected Facility pursuant to which made PROVIDED that (i) if any prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for such Borrowing, such Borrowing shall be immediately converted into Base Rate Loans; (ii) each prepayment of any Loans under a Facility shall be applied PRO RATA among such Loans; and (iii) except for the differing treatments of Defaulting Lenders and Non-Defaulting Lenders as expressly provided in Section 4.02(A)(a), each prepayment of any Eurodollar Loans made pursuant to a Borrowing shall be applied PRO RATA among such Eurodollar Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. (c) Notwithstanding anything to the contrary contained in Section 4.02(B)(a), with respect to any mandatory repayments of B Term Loans or C Term Loans otherwise required pursuant to Section 4.02(A), if on or prior to the date the respective mandatory repayment is otherwise required to be made pursuant to such Section, the Borrower has given the Administrative Agent written notification that the Borrower has elected, in its sole discretion, to give each Lender with a B Term Loan or C Term Loan, as the case may be, the right to waive such Lender's rights to receive its PRO RATA percentage of such repayment (any such repayment, a "Specified Repayment"), the Administrative Agent shall notify such Lenders thereof and the amount required to be applied to each such Lender's B Term Loans and/or C Term Loans, as the case may be, pursuant to the Specified Repayment. In the event any such Lender desires to waive its right to receive any or all of its percentage of the Specified Repayment, such Lender shall so advise in writing the Administrative Agent no later than 5:00 P.M. (New York time) two Business Days after the date of such notice from the Administrative Agent, which reply shall also include the amount, if any, of its portion of the Specified Repayment that such Lender still desires to receive. If any such Lender does not reply to the Administrative Agent within the two Business Day period or responds but does not specify the amount of the Specified Repayment that such Lender wishes to receive, if any, such Lender will be deemed to have elected to receive 100% of the Specified Repayment. In the event that any such Lender waives its right to any such Specified Repayment, the Administrative Agent shall apply 100% of the amount so waived by such Lenders to repay the A Term Loans as otherwise provided in this Section 4.02(B) but not to reduce the Total A Term Commitment. All payments of the B Term Loans and C Term Loans shall be made PRO RATA among same reduced for any Lender who has waived any of its portion of a Specified Repayment by the amount so waived. -29- 4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable account of the Lenders entitled thereto, not later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds and in Dollars at the Payment Office, it being understood that written notice by the Borrower to the Administrative Agent to make a payment from the funds in the Borrower's account at the Payment Office shall constitute the making of such payment to the extent of such funds held in such account. Any payments under this Agreement which are made later than 1:00 P.M. (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. -30- 4.04 NET PAYMENTS. (a) All payments made by any Credit Party hereunder or under any Note will be made without setoff, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Lender, upon the written request of such Lender, for taxes imposed on or measured by the net income or net profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located and for any withholding of taxes as such Lender shall determine are payable by, or withheld from, such Lender, in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence. The Borrower will furnish to the Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender. -31- (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower and the Agent on or prior to the Effective Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 12.04 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit D (any such certificate, a "Section 4.04 Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 4.04 Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 12.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, Fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Lender in respect of income or similar taxes imposed by the United States if (I) such Lender has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 12.04(b), the Borrower agrees to pay any additional amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction -32- requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such Taxes. SECTION 5. CONDITIONS PRECEDENT. 5.01 CONDITIONS PRECEDENT TO INITIAL BORROWING DATE. The obligation of the Lenders to make Loans, and of the Letter of Credit Issuer to issue Letters of Credit, on the Initial Borrowing Date is subject to the satisfaction of each of the following conditions at such time: (a) EFFECTIVENESS; NOTES. (i) The Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent for the account of each Lender the appropriate Note or Notes executed by the Borrower, in each case, in the amount, maturity and as otherwise provided herein. (b) OPINIONS OF COUNSEL. The Administrative Agent shall have received opinions, addressed to each Agent and each of the Lenders and dated the Initial Borrowing Date, from (i) Latham & Watkins, special counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit E-1 hereto, (ii) White & Case, special counsel to the Agents, which opinion shall cover the matters contained in Exhibit E-2 hereto and (iii) such local counsel, if any, satisfactory to the Administrative Agent as it may request, which opinions shall cover the perfection of the security interests granted pursuant to the Mortgages and such other matters incident to the transactions contemplated herein as the Agents may reasonably request and shall be in form and substance satisfactory to the Agents. (c) CORPORATE PROCEEDINGS. (I) The Administrative Agent shall have received a certificate, dated the Initial Borrowing Date, signed by the President or any Vice-President of the Borrower in the form of Exhibit F with appropriate insertions and deletions, together with (x) copies of the certificate of incorporation, by-laws or other organizational documents of each Credit Party, (y) the resolutions of each Credit Party referred to in such certificate and all of the foregoing (including each such certificate of incorporation and by-laws) shall be satisfactory to the Administrative Agent and (z) a statement that all of the applicable conditions set forth in Sections 5.01(h) and (i) and 5.03 exist as of such date. -33- (II) On the Initial Borrowing Date, all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates and any other records of corporate proceedings and governmental approvals, if any, which the Agents may have reasonably requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities. (d) PLANS; ETC. On or prior to the Initial Borrowing Date, there shall have been made available to the Administrative Agent true and correct copies of: (i) all Plans (and for each Plan that is required to file an annual report on Internal Revenue Service Form 5500-series, a copy of the most recent such report (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information), and for each Plan that is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA, the most recently prepared actuarial valuation therefor) and any other "employee benefit plans," as defined in Section 3(3) of ERISA, and any other material agreements, plans or arrangements, with or for the benefit of current or former employees of Holdings, the Borrower or any of its Subsidiaries or any ERISA Affiliate (provided that the foregoing shall apply in the case of any multiemployer plan, as defined in 4001(a)(3) of ERISA, only to the extent that any document described therein is in the possession of Holdings, the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate or reasonably available thereto from the sponsor or trustee of any such plan); (ii) any collective bargaining agreements or any other similar agreement or arrangements covering the employees of Holdings or any of its Subsidiaries; (iii) all agreements entered into by Holdings or any Subsidiary governing the terms and relative rights of its capital stock; (iv) any material agreement with respect to the management of Holdings or any of its Subsidiaries; (v) any material employment agreements entered into by Holdings or any of its Subsidiaries; and (vi) any tax sharing, tax allocation and other similar agreements entered into by Holdings and/or any of its Subsidiaries with any entity not a Credit Party; with all of the foregoing to be reasonably satisfactory to the Administrative Agent. -34- (e) ADVERSE CHANGE, ETC. Since August 24, 1997, nothing shall have occurred, and the Administrative Agent shall not have become aware of any facts or conditions not previously known, in each case which the Administrative Agent shall determine (a) is reasonably likely to have, a material adverse effect on the rights or remedies of the Lenders or the Agents hereunder or under any other Credit Document, or on the ability of the Credit Parties taken as a whole to perform their obligations under the Credit Documents or (b) has had or is reasonably likely to have a Material Adverse Effect. (f) LITIGATION. There shall be no actions, suits or proceedings pending or threatened (a) with respect to the Transaction, this Agreement or any other Credit Document or (b) which the Administrative Agent shall determine has had or is reasonably likely to have (i) a Material Adverse Effect or (ii) a material adverse effect on the rights or remedies of the Lenders or the Agents hereunder or under any other Credit Document or on the ability of the Credit Parties taken as a whole to perform their obligations under the Credit Documents. -35- (g) APPROVALS. Except as set forth on Annex XI, all material necessary governmental and third party approvals in connection with the Transaction and/or the Credit Documents shall have been obtained and remain in effect (other than immaterial approvals and/or consents with respect to the Acquisition), and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains or prevents such transactions or imposes, in the reasonable judgment of the Administrative Agent, materially adverse conditions upon the consummation of the Transaction. (h) CAPITALIZATION. (I) On or prior to the Initial Borrowing Date, (i) the Initial Investors shall have contributed approximately $173 million in cash to Holdings as a common equity contribution (the "Equity Contribution") in compliance with the Equity Documents and all applicable law and, as a result thereof, Carlyle and Carlyle Affiliates shall own not less than 67% of all of the issued and outstanding equity of Holdings, (ii) Holdings shall have contributed the full amount received by it pursuant to preceding clause (i) to the capital of the Borrower as a common equity contribution, (iii) the Borrower shall have utilized the full amount of such cash contribution to make payments owing in connection with the Transaction prior to, or concurrently with, the utilization of any proceeds of Loans for such purpose and (iv) the amount of the Equity Contribution, when aggregated with the cash proceeds of the issuance or incurrence of the Senior Subordinated Notes, the Seller Note, the Term Loans and Revolving Loans of up to $15 million, shall be sufficient to consummate the Acquisition and to pay all fees and expenses arising in connection with the Transaction. (II) On or prior to the Initial Borrowing Date, (i) the Borrower shall have received gross cash proceeds of at least $200 million from the issuance by the Borrower of the Senior Subordinated Notes and shall have utilized the full amount of such cash proceeds to make payments owing in connection with the Transaction prior to, or concurrently with, the utilization of any proceeds of Loans for such purpose. (i) CONSUMMATION OF THE ACQUISITION, ETC. (I) On or prior to the Initial Borrowing Date, (i) the Acquisition, including all of the terms and conditions thereof, shall have been duly approved by the board of directors and (if required by applicable law) the shareholders of Holdings, the Borrower and the Sellers and (ii) the Acquisition shall have been consummated in accordance with the Acquisition Documents and all applicable laws. (II) On or prior to the Initial Borrowing Date, the Administrative Agent shall have received true and correct copies of each of the Transaction Documents certified as such by an Authorized Officer of the Borrower, each of which shall have been duly authorized, executed and delivered by the parties thereto and shall be in full force and effect and in form and substance (including all terms and conditions thereof) satisfactory to the Administrative Agent. On or prior to the Initial Borrowing Date, all conditions precedent set forth in the Acquisition Documents and the Equity Documents shall have been satisfied and not waived (unless waived with the consent of the Administrative Agent). -36- (j) SUBSIDIARY GUARANTY. Each Domestic Subsidiary (other than any Inactive Subsidiary) existing on the Initial Borrowing Date shall have duly authorized, executed and delivered a Subsidiary Guaranty in the form of Exhibit G hereto (as modified, amended or supplemented from time to time in accordance with the terms hereof and thereof, the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force and effect. (k) SECURITY DOCUMENTS. (I) Each Credit Party shall have each duly authorized, executed and delivered a Pledge Agreement in the form of Exhibit H (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "Pledge Agreement") and shall have delivered to the Collateral Agent, as pledgee thereunder, all of the certificates representing the Pledged Securities referred to therein, endorsed in blank or accompanied by executed and undated stock powers, and the Pledge Agreement shall be in full force and effect. (II) Each Credit Party shall have each duly authorized, executed and delivered a Security Agreement substantially in the form of Exhibit I (as modified, supplemented or amended from time to time, the "Security Agreement") covering all of such Credit Party's present and future Security Agreement Collateral, in each case together with: (i) executed copies of Financing Statements (Form UCC-1) in appropriate form for filing under the UCC of each jurisdiction as may be necessary to perfect the security interests purported to be created by the Security Agreement; (ii) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of recent date listing all effective financing statements that name any Credit Party as debtor and that are filed in the jurisdictions referred to in clause (i), together with copies of such financing statements (none of which shall cover the Collateral except (x) those with respect to which appropriate termination statements executed by the secured lender thereunder have been filed or delivered to the Administrative Agent and (y) to the extent evidencing Permitted Liens); (iii) evidence of the completion of or arrangements for all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Security Agreement; and (iv) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Security Agreement have been taken; and the Security Agreement shall be in full force and effect. (III) The Collateral Agent shall have received: -37- (i) fully executed counterparts of deeds of trust, mortgages and similar documents, in each case in form and substance reasonably satisfactory to the Collateral Agent (as amended, modified or supplemented from time to time in accordance with the terms thereof and hereof, each a "Mortgage" and, collectively, the "Mortgages") with respect to each of the Mortgaged Properties, and arrangements reasonably satisfactory to the Collateral Agent shall be in place to provide that counterparts of such Mortgages shall be recorded on the Initial Borrowing Date in all places to the extent necessary or desirable, in the reasonable judgment of the Collateral Agent, effectively to create a valid and enforceable first priority mortgage Lien, subject only to Permitted Liens, on each such Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Agents and the Lenders; and (ii) mortgagee title insurance policies (or binding commitments to issue such title insurance policies) issued by title insurers reasonably satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts reasonably satisfactory to the Collateral Agent and assuring the Collateral Agent that the Mortgages are valid and enforceable first priority mortgage Liens on the respective Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Liens, and such Mortgage Policies shall be in form and substance reasonably satisfactory to the Collateral Agent and (A) shall include (to the extent available in the respective jurisdiction of each Mortgaged Property) an endorsement for future advances under this Agreement, the Notes and the Mortgages, and for such other matters that the Collateral Agent in its discretion may reasonably request and (B) shall not include an exception for mechanics' liens. (l) SOLVENCY. The Borrower shall have delivered to the Administrative Agent, a solvency opinion, dated the Initial Borrowing Date, in form and substance satisfactory to the Administrative Agent from Valuation Research setting forth the conclusions that, after giving effect to the Transaction and the incurrence of all the financings contemplated herein, Holdings and its Subsidiaries taken as a whole are not insolvent and will not be rendered insolvent by the indebtedness incurred in connection therewith, and will not be left with unreasonably small capital with which to engage in their businesses and will not have incurred debts beyond their ability to pay such debts as they mature. (m) INSURANCE POLICIES. The Collateral Agent shall have received evidence of insurance complying with the requirements of Section 7.03 for the business and properties of Holdings and its Subsidiary Guarantors, in form and substance reasonably satisfactory to the Administrative Agent and, with respect to all casualty insurance, naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be cancelled or revised without at least 30 days' prior written notice by the insurer to the Collateral Agent. -38- (n) EXISTING INDEBTEDNESS. On the Initial Borrowing Date and after giving effect to the Transaction and the Loans then incurred, neither Holdings nor any of its Subsidiaries shall have any preferred stock or Indebtedness outstanding except for (i) the Loans, (ii) the Senior Subordinated Notes, (iii) the Seller Note, (iv) the Indebtedness set forth on Annex V hereto and (v) up to $3,000,000 of additional Indebtedness not described in clauses (i)-(iv) above) (the amounts specified in clauses (iv) and (v), the "Existing Indebtedness"), with all of the Existing Indebtedness (x) to remain outstanding without any default or events of default existing thereunder as of the Initial Borrowing Date or arising as a result of the Transaction and (y) to be satisfactory to the Administrative Agent as to amount and terms and conditions. (o) CONSENT LETTER. The Administrative Agent shall have received a letter from CT Corporation System, substantially in the form of Exhibit J hereto, indicating its consent to its appointment by each Credit Party as its agent to receive service of process. (p) FEES. The Borrower shall have paid to the Agents and the Lenders all Fees and expenses agreed upon by such parties to be paid on or prior to the Initial Borrowing Date. 5.02 CONDITIONS PRECEDENT TO A SUBSEQUENT BORROWING DATE. The obligation of the Lenders to make A Term Loans on a Subsequent Borrowing Date is subject at the time of such incurrence of A Term Loans, to the satisfaction of the following conditions: (a) Either (i) the Borrower shall have obtained all consents, approvals and/or agreements, in each case on terms and conditions satisfactory to the Administrative Agent, with the government of Turkey (and all agencies thereof, including, without limitation, the Under Secretariat for Defense Industries), FNSS and Nurol Inasaat ve Ticaret A.S. (collectively, the "Turkish Entities") evidencing the Turkish Entities' acknowledgement of the Acquisition and consent to the change of ownership and control effected thereby; or (ii) the one year anniversary of the Initial Borrowing Date shall have occurred without any interruption during such year in the payments to UDLP pursuant to the Turkish JV Agreement; or (iii) the Borrower is then required pursuant to the terms of the Seller Note Documents to repay the Seller Note in an amount not less than the amount of the requested Borrowing of A Term Loans. (b) There shall have been no material amendment, modification or change (other than any amendment, modification or change satisfactory to the Administrative Agent) to the Turkish JV Agreement which is materially adverse to the interests of the Lenders. 5.03 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation of each Lender to make Loans (including Loans made on the Initial Borrowing Date) and the obligation of the Letter of Credit Issuer to issue any Letter of Credit is subject, at the time of each such Credit Event, to the satisfaction of the following conditions: -39- (a) NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. The Administrative Agent shall have received a Notice of Borrowing meeting the requirements of Section 1.02 or a Letter of Credit Request meeting the requirements of Section 2.02, as the case may be. (b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each Credit Event and also after giving effect thereto, (i) there shall exist no Default or Event of Default and (ii) all representations and warranties made by any Credit Party contained herein or in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Credit Event, except to the extent that such representations and warranties expressly relate to an earlier date. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by the Borrower that all of the applicable conditions specified in Section 5.01 (in the case of Credit Events occurring on the Initial Borrowing Date), 5.02 (in the case of A Term Loans incurred on the Second Borrowing Date) and/or 5.03, as the case may be, exist as of that time. All of the certificates, legal opinions and other documents and papers referred to in Section 5.01, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders and shall be reasonably satisfactory in form and substance to the Administrative Agent. SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to induce the Lenders to enter into this Agreement and to make the Loans and issue and/or participate in Letters of Credit provided for herein, each of Holdings and the Borrower makes the following representations and warranties to, and agreements with, the Lenders, all of which shall survive the execution and delivery of this Agreement and the making of the Loans: 6.01 CORPORATE STATUS. Each of Holdings and its Subsidiaries (i) is a duly organized and validly existing corporation, partnership and/or limited liability company and is in good standing, in each case under the laws of the jurisdiction of its organization and has the organizational power and authority to own its property and assets and to transact the business in which it is engaged and (ii) is duly qualified and is authorized to do business and, to the extent relevant, is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified, authorized or in good standing is reasonably likely to have a Material Adverse Effect. -40- 6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the organizational power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is a party and has taken all necessary action to authorize the execution, delivery and performance of the Credit Documents to which it is a party. Each Credit Party has duly executed and delivered each Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such Person enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (regardless of whether enforcement is sought in equity or at law). 6.03 NO VIOLATION. Neither the execution, delivery or performance by any Credit Party of the Credit Documents to which it is a party nor compliance with the terms and provisions thereof, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Security Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of Holdings or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust or other material agreement or instrument to which Holdings or any of its Subsidiaries is a party or by which it or any of its property or assets are bound or to which it may be subject or (iii) will violate any provision of the organizational documents (including by-laws) of Holdings or any of its Subsidiaries. 6.04 LITIGATION. Except as set forth in Annex XII, there are no actions, suits or proceedings pending or, to the best of its knowledge, threatened with respect to Holdings or any of its Subsidiaries (i) that have, or that could reasonably be expected to have, a Material Adverse Effect or (ii) that have, or that could reasonably be expected to have, a material adverse effect on (a) the rights or remedies of the Lenders or on the ability of the Credit Parties taken as a whole to perform their obligations under the other Credit Documents or (b) the consummation of the Transaction. 6.05 USE OF PROCEEDS; MARGIN REGULATIONS . (a) The proceeds of all Term Loans incurred on the Initial Borrowing Date shall be utilized (i) to finance the Acquisition and (ii) to pay certain fees and expenses relating to the Transaction. The proceeds of all A Term Loans incurred on the Second Borrowing Date shall be utilized solely to repay the Seller Note. (b) (i) The proceeds of all Revolving Loans and all Swingline Loans may be used after the Initial Borrowing Date for general corporate and working capital purposes provided that no more than $15,000,000 of the proceeds of Revolving Loans may be used for the purposes described in the first sentence of Section 6.05(a), and PROVIDED FURTHER that after the Total Term Commitment has terminated, Revolving Loans may also be used to refinance the Seller Note. -41- (c) Neither the making of any Loan hereunder, nor the use of the proceeds thereof, will violate the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. 6.06 GOVERNMENTAL APPROVALS. Except for filings and recordings in connection with the Security Documents and to the extent any Notices are required to be filed, no order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any Credit Document except, in any such case, as expressly provided herein or in the Security Documents. 6.07 INVESTMENT COMPANY ACT. Neither Holdings nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 6.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Holdings nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 6.09 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of Holdings or any of its Subsidiaries in writing to the Agents or any Lender for purposes of or in connection with this Agreement or any transaction contemplated herein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any Credit Party in writing to the Lenders hereunder will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided. The projections and PRO FORMA financial information contained in such materials are based on good faith estimates and assumptions believed by Holdings and the Borrower to be reasonable at the time made, it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There is no fact known to Holdings or any of its Subsidiaries (other than matters relating to general economic conditions or conditions affecting the Business generally) which would have a Material Adverse Effect, which has not been disclosed herein or in such other documents, certificates and statements furnished to the Lenders for use in connection with the transactions contemplated hereby. -42- 6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as of the Initial Borrowing Date, on a PRO FORMA basis after giving effect to the Transaction and all Indebtedness incurred, and to be incurred (including, without limitation, the Loans and the Senior Subordinated Notes), and Liens created, and to be created, by each Credit Party in connection therewith, (x) the fair valuation of all of the tangible and intangible assets of Holdings and its Subsidiaries (on a consolidated basis) will exceed their debts, (y) Holdings and its Subsidiaries will not have incurred or intended to incur debts beyond their ability to pay such debts as such debts mature and (z) Holdings and its Subsidiaries will not have unreasonably small capital with which to conduct their business. For purposes of this Section 6.10, "debt" means any liability on a claim, and "claim" means (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (b) The consolidated balance sheet of UDLP at December 31, 1996 and June 30, 1997 and the related consolidated statements of operations and cash flows of UDLP for the fiscal year or the six-month period, as the case may be, ended as of said dates, which, in the case of the annual financial statements, have been audited by Ernst & Young LLP independent certified public accountants, who delivered an unqualified opinion in respect therewith, copies of all of which have heretofore been furnished to each Lender, present fairly the consolidated financial position of UDLP and its Subsidiaries at the dates of said statements and the results for the periods covered thereby in accordance with GAAP, except to the extent provided in the notes to said financial statements and, in the case of the June 30, 1997 financial statements, subject to normal year-end audit adjustment. All such financial statements have been prepared in accordance with GAAP and practices consistently applied except to the extent provided in the notes to said financial statements. The PRO FORMA consolidated balance sheet of the Borrower as of June 30, 1997, a copy of which has heretofore been furnished to each Lender, presents a good faith estimate of the consolidated PRO FORMA financial condition of the Borrower (after giving effect to the Transaction) as at the date thereof. Nothing has occurred since June 30, 1997 that has had or is reasonably likely to have a Material Adverse Effect. (c) Except as reflected in the financial statements described in Section 6.10(b) or in the footnotes thereto, there were as of the Initial Borrowing Date no liabilities or obligations with respect to Holdings or any of its Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would be material to Holdings and its Subsidiaries taken as a whole, except as incurred in the ordinary course of business consistent with past practices. -43- 6.11 SECURITY INTERESTS. On and after the Initial Borrowing Date, each of the Security Documents creates, as security for the obligations purported to be secured thereby, a valid and enforceable security interest in and Lien on all of the Collateral subject thereto, superior to and prior to the rights of all third Persons and subject to no other Liens (other than Permitted Liens relating thereto), in favor of the Collateral Agent for the benefit of the Secured Creditors, which have been (or will be within the time required by the Credit Documents) perfected under applicable law. No filings or recordings are required in order to perfect, or continue the perfection of, the security interests created under any Security Document except for filings or recordings required in connection with any such Security Document (other than the Pledge Agreement) which (x) shall have been made upon or prior to (or are the subject of arrangements, reasonably satisfactory to the Administrative Agent, for filing on or promptly after the date of) the execution and delivery thereof and/or (y) constitute supplemental filings in respect of after acquired property or continuation statements. 6.12 CONSUMMATION OF CERTAIN TRANSACTIONS. As of the Initial Borrowing Date, the Acquisition and the Equity Contribution shall have been consummated in accordance with the material terms and conditions of the respective Transaction Documents and all applicable laws. All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the consummation of the Acquisition and/or Equity Contribution. All representations and warranties (except by Persons other than Holdings or the Borrower) set forth in the Transaction Documents and, to the knowledge of Holdings and the Borrower, all representations and warranties made by all other Persons in the Transaction Documents were true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of the Initial Borrowing Date as if such representations and warranties were made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. 6.13 TAX RETURNS AND PAYMENTS. Each of Holdings and its Subsidiaries has filed all federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, except for those contested in good faith and adequately disclosed and fully provided for on the financial statements of Holdings, the Borrower and their respective Subsidiaries if and to the extent required by generally accepted accounting principles. Each of Holdings and its Subsidiaries have at all times paid, or have provided adequate reserves (in the good faith judgment of the management of the Borrower) for the payment of, all federal, state and foreign income taxes applicable for all prior fiscal years which are still open for audit and for the current fiscal year to date. There is no action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of Holdings or the Borrower, threatened by any authority regarding any taxes relating to Holdings or any of its Subsidiaries which is reasonably likely to have a Material Adverse Effect. -44- 6.14 COMPLIANCE WITH ERISA. (a) (i) Annex VI sets forth each Plan and Multiemployer Plan; (ii) except as set forth on Annex VI, each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws, including without limitation ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred with respect to a Plan; to the knowledge of Borrower, no Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability which, when added to the aggregate amount of Unfunded Current Liabilities with respect to all other Plans, exceeds $10,000,000; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan or a Multiemployer Plan have been timely made; neither Holdings, the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan or a Multiemployer Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or reasonably expects to incur any such liability under any of the foregoing sections with respect to any Plan or any Multiemployer Plan; no condition exists which presents a material risk to Holdings, the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or on account of a Plan or, to the knowledge of Borrower, of any Multiemployer Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of Holdings, the Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not exceed $10,000,000; except as would not result in a material liability, each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of Holdings, the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of Holdings, the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is reasonably likely to arise on account of any Plan; and Holdings, the Borrower and its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them without incurring any material liability. -45- (ii) Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been timely made. Neither Holdings, the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of the Borrower's most recently ended fiscal year on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities by more than $1,000,000. 6.15 SUBSIDIARIES. On and as of the Initial Borrowing Date and after giving effect to the consummation of the Transaction, (i) Holdings has no direct Subsidiaries other than the Borrower and (ii) the Borrower has no Subsidiaries other than those Subsidiaries listed on Annex III. Annex III correctly sets forth, as of the Initial Borrowing Date and after giving effect to the Transaction, the percentage ownership (direct and indirect) of the Borrower in each class of capital stock of each of its Subsidiaries and also identifies the direct owner thereof. 6.16 INTELLECTUAL PROPERTY. Each of Holdings and its Subsidiaries owns or holds a valid license to use all the patents, trademarks, service marks, trade names, technology, know-how, copyrights, licenses, franchises and formulas or rights with respect to the foregoing, that are used in the operation of the business of Holdings or such Subsidiary as presently conducted and are material to such business where the failure to own or hold a valid license is reasonably likely to have a Material Adverse Effect. -46- 6.17 ENVIRONMENTAL MATTERS. (a) Each of Holdings and its Subsidiaries is in compliance with all applicable Environmental Laws governing its business for which failure to comply is reasonably likely to have a Material Adverse Effect, and neither Holdings nor any of its Subsidiaries is liable for any material penalties, fines or forfeitures for failure to comply with any of the foregoing in the manner set forth above. All licenses, permits, registrations or approvals required for the business of Holdings and each of its Subsidiaries, as conducted as of the Initial Borrowing Date, under any Environmental Law have been secured and each of Holdings and its Subsidiaries is in substantial compliance therewith, except such licenses, permits, registrations or approvals the failure to secure or to comply therewith is not reasonably likely to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries is in any respect in noncompliance with, breach of or default under any applicable writ, order, judgment, injunction, or decree to which Holdings or such Subsidiary is a party or which could affect the ability of Holdings or such Subsidiary to operate any real property and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would reasonably be expected to constitute noncompliance, breach of or default thereunder, except in each such case, such noncompliance, breaches or defaults as are not reasonably likely to, in the aggregate, have a Material Adverse Effect. There are as of the Initial Borrowing Date no Environmental Claims pending or, to the best knowledge of Holdings or the Borrower threatened, which (i) question the validity, term or entitlement of the Borrower or any Subsidiary for any permit, license, order or registration required for the operation of any facility which the Borrower or any of its Subsidiaries currently operates and (ii) wherein any decision, ruling or finding is reasonably likely to have a Material Adverse Effect. There are no facts, circumstances, conditions or occurrences concerning the business or operations of the Borrower or any of its Subsidiaries, or any Real Property at any time owned or operated by the Borrower or any of its Subsidiaries or on any property adjacent to any such Real Property that could reasonably be expected (i) to form the basis of an Environmental Claim against Holdings, any of its Subsidiaries or any of their respective Real Property or (ii) to cause any such currently owned or operated Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property under any Environmental Law, except in each such case, such Environmental Claims or restrictions that individually, or in the aggregate, are not reasonably likely to have a Material Adverse Effect. (b) Hazardous Materials have not at any time been (i) generated, used, treated or stored on, or transported to or from, any Real Property owned or operated by Holdings or any of its Subsidiaries or (ii) released on or from any such Real Property, in each case where such occurrence or event individually or in the aggregate is reasonably likely to have a Material Adverse Effect. -47- 6.18 PROPERTIES. Holdings and each of its Subsidiaries have good and marketable title to, or a validly subsisting leasehold interest in, all material properties owned and used by them, including all Real Property reflected in the consolidated balance sheets of UDLP at December 31, 1996 referred to in Section 6.10(b), free and clear of all Liens, other than (i) as referred to in the consolidated balance sheet or in the notes thereto or (ii) otherwise permitted by Section 8.03. Annex IV contains a true and complete list of each Real Property owned or leased by the Borrower or any of its Subsidiaries (with an annual base rental obligation in excess of $250,000) as of the Initial Borrowing Date and after giving effect to the Transaction, and the type of interest therein held by Holdings or the respective Subsidiary. 6.19 LABOR RELATIONS. No Credit Party is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (i) no unfair labor practice complaint pending against any Credit Party or, to the best of its knowledge, threatened against any of them, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against any Credit Party or, to the best of its knowledge, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against any Credit Party or, to the best of its knowledge, threatened against any Credit Party and (iii) no union representation question existing with respect to the employees of any Credit Party and no union organizing activities are taking place, except with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate, such as is not reasonably likely to have a Material Adverse Effect. 6.20 COMPLIANCE WITH STATUTES, ETC. Each of Holdings and each of its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such non-compliance as is not reasonably likely to, individually or in the aggregate, have a Material Adverse Effect. 6.21 SUBORDINATION. The subordination provisions contained in the Senior Subordinated Notes and the Seller Note Documents are enforceable by the Lenders against the Borrower and the holders of such Senior Subordinated Notes or the Seller Note, as the case may be, and all Obligations of the Borrower are or will be within the definition of "Senior Indebtedness" included in such provisions of the Senior Subordinated Note Documents and the Seller Note Documents. 6.22 SPECIAL PURPOSE CORPORATIONS. Each of Holdings and the Borrower was formed to effect the Transaction. Prior to the consummation of the Transaction, (i) Holdings had no significant assets (other than the capital stock of the Borrower) or liabilities and (ii) the Borrower had no significant assets or liabilities (other than those liabilities under the Acquisition Documents). -48- SECTION 7. AFFIRMATIVE COVENANTS. Holdings and the Borrower hereby covenant and agree that for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations (other than any indemnities described in Section 12.13 which are not then owing) incurred hereunder, are paid in full: 7.01 INFORMATION COVENANTS. Holdings will furnish to each Lender: (a) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower and its Subsidiaries, as at the end of such fiscal year and the related consolidated statements of operations and of cash flows for such fiscal year, in each case commencing with the year ended December 31, 1998, setting forth comparative consolidated figures for the preceding fiscal year, and examined by independent certified public accountants of recognized national standing whose opinion shall not be qualified as to the scope of audit and as to the status of the Borrower or any Subsidiary Guarantor as a going concern, together with a certificate of such accounting firm stating that in the course of its regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, no Default or Event of Default which has occurred and is continuing has come to their attention or, if such a Default or Event of Default has come to their attention a statement as to the nature thereof. (b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year, the unaudited consolidated balance sheet of the Borrower and its Subsidiaries, as at the end of such quarterly period and the related unaudited consolidated statements of operations and of cash flows for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in each case, commencing with the quarter ending March 31, 1999, setting forth comparative consolidated figures for the related periods in the prior fiscal year, all of which shall be in reasonable detail and certified by the chief financial officer or controller of the Borrower, subject to changes resulting from audit and normal year-end audit adjustments. (c) MONTHLY REPORTS. Within 30 days after the end of each monthly accounting period of each fiscal year (other than the last monthly accounting period in such fiscal year) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries, as at the end of such period and the related unaudited consolidated statements of operations and cash flows for such period, and commencing with the January 1999 report, setting forth comparative figures for the corresponding period of the previous year, all of which shall be certified by the chief financial officer or controller of the Borrower subject to changes resulting from audit and normal year-end audit adjustments. -49- (d) BUDGETS; ETC. Not more than 30 days after the commencement of each fiscal year of the Borrower, a consolidated budget of the Borrower and its Subsidiaries in reasonable detail for each of the twelve months of such fiscal year as customarily prepared by management for its internal use setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. Together with each delivery of consolidated financial statements pursuant to Sections 7.01(a) and (b), a comparison of the current year-to-date financial results against the budgets required to be submitted pursuant to this clause (d) shall be presented. (e) OFFICER'S CERTIFICATES. At the time of the delivery of the financial statements provided for in Sections 7.01(a), (b) and (c), a certificate of the chief financial officer, controller or other Authorized Officer of the Borrower to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate (x) in the case of the certificate delivered pursuant to Sections 7.01(a) and (b), shall set forth the calculations required to establish (I) the Leverage Ratio for the Test Period ending on the last day of the fiscal period covered by such financial statements and (II) whether Holdings and its Subsidiaries were in compliance with the provisions of Sections 8.11, 8.12, 8.13 and 8.14 as at the end of such fiscal period, and (y) in the case of the certificate delivered pursuant to Section 7.01(a), for each year commencing with the year ending December 31, 1998, shall set forth the amount of the Excess Cash Flow for the relevant period ending on the last day of the fiscal year covered by such financial statements. (f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event within ten Business Days after any officer of Holdings or the Borrower obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or Event of Default which notice shall specify the nature thereof, the period of existence thereof and what action Holdings or the Borrower proposes to take with respect thereto and (y) the commencement of, or any significant adverse development in, any litigation or governmental proceeding pending against Holdings or any of its Subsidiaries which is reasonably likely to have a Material Adverse Effect or is reasonably likely to have a material adverse effect on the ability of the Credit Parties to perform their obligations under the Credit Documents. (g) ENVIRONMENTAL MATTERS. Promptly after obtaining knowledge of any of the following (but only to the extent (A) not disclosed in an environmental report delivered to the Administrative Agent on or prior to the Initial Borrowing Date and (B) that any of the following could reasonably be expected to (x) have a Material Adverse Effect, either individually or in the aggregate, or (y) result in a remedial cost to UDLP (I) in respect of liabilities not otherwise covered by existing indemnities, in excess of $2,000,000 or (II) in respect of liabilities covered by existing indemnities, in excess of $20,000,000), written notice of: (i) any pending or threatened Environmental Claim against Holdings or any of its Subsidiaries or any Real Property owned or operated by the Borrower or any of its Subsidiaries; -50- (ii) any condition or occurrence on any Real Property owned or operated by the Borrower or any of its Subsidiaries that (x) results in noncompliance by Holdings or any of its Subsidiaries with any applicable Environmental Law or (y) is reasonably likely to result in an Environmental Claim against Holdings or any of its Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned or operated by the Borrower or any of its Subsidiaries that is reasonably likely to result in such Real Property being subject to any restrictions on the ownership, occupancy, use or transferability by Holdings or its Subsidiary, as the case may be, of its interest in such Real Property under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned or operated by the Borrower or any of its Subsidiaries. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and Holdings' or the relevant Subsidiary's response or proposed response thereto. In addition, the Borrower agrees to provide the Lenders with such detailed reports relating to any of the matters set forth in clauses (i)-(iv) above as may reasonably be requested by the Administrative Agent or the Required Lenders. (h) OTHER INFORMATION. Promptly upon transmission thereof, (i) copies of any filings and registrations with, and reports to, the Securities and Exchange Commission or any successor thereto (the "SEC") by Holdings or any of its Subsidiaries, (ii) copies of all financial statements, proxy statements, notices and reports as Holdings or any of its Subsidiaries shall send generally to analysts and the holders of the Senior Subordinated Notes in their capacity as such holders (to the extent not otherwise delivered to the Lenders pursuant to this Agreement) and with reasonable promptness, such other information or documents (financial or otherwise) as the Administrative Agent on its own behalf or on behalf of the Required Lenders may reasonably request from time to time. 7.02 BOOKS, RECORDS AND INSPECTIONS. Holdings will, and will cause its Subsidiaries to, permit, upon reasonable notice to the chief financial officer, controller or any other Authorized Officer of the Borrower, officers and designated representatives of the Administrative Agent or the Required Lenders to visit and inspect any of the properties or assets of Holdings and any of its Subsidiaries in their possession and to examine the books of account of Holdings and any of its Subsidiaries and discuss the affairs, finances and accounts of Holdings and of any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or the Required Lenders may desire. -51- 7.03 INSURANCE. Holdings will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance with reputable and solvent insurers in such amounts, covering such risks and liabilities and with such deductibles or self-insured retentions as are in accordance with normal industry practice (which, in any event, shall not include earthquake insurance for leased office, lab and shop space). Holdings will, and will cause each of its Subsidiaries to, furnish to the Administrative Agent on the Initial Borrowing Date and thereafter annually, upon request of the Administrative Agent, a summary of the insurance carried together with certificates of insurance and other evidence of such insurance, if any, naming the Collateral Agent as an additional insured and/or loss payee, to the extent of its interests therein. 7.04 PAYMENT OF TAXES. Holdings will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, would become a Lien or charge upon any material properties of Holdings or any of its Subsidiaries, PROVIDED that neither Holdings nor any Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves (in the good faith judgment of the management of Holdings) with respect thereto in accordance with GAAP. 7.05 CORPORATE FRANCHISES. Holdings will do, and will cause each Subsidiary to do, or cause to be done, all things reasonably necessary to preserve and keep in full force and effect its existence and to preserve its material rights and franchises, other than those the failure to preserve which could not reasonably be expected to have a Material Adverse Effect, PROVIDED that any transaction permitted by Section 8.02 will not constitute a breach of this Section 7.05. 7.06 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause each Subsidiary to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property other than those the non-compliance with which is not reasonably likely to have a Material Adverse Effect or have a material adverse effect on the ability of the Credit Parties to perform their obligations under the Credit Documents. -52- 7.07 ERISA. As soon as possible and, in any event, within ten (10) days after Holdings or the Borrower knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to each of the Lender a certificate of the chief financial officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that Holdings, the Borrower, any Subsidiary or any ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by Holdings, the Borrower, any Subsidiary, any ERISA Affiliate, the PBGC, a Plan or Multiemployer Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred (except to the extent that the Borrower has previously delivered to the Lender a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may reasonably be expected to be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect to a Plan, Multiemployer Plan or Foreign Pension Plan has not been timely made; that a Plan or Multiemployer Plan has been or may be reasonably be expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability which, when added to the aggregate amount of Unfunded Current Liabilities with respect to all other Plans, exceeds the aggregate amount of such Unfunded Current Liabilities that existed on the Initial Borrowing Date by $10,000,000; that proceedings may reasonably be expected to be or have been instituted to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Multiemployer Plan; that Holdings, the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or may reasonably be expected to incur any material liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan or Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that Holdings, the Borrower or any Subsidiary of the Borrower may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan in addition to the liability that existed on the Initial Borrowing Date pursuant to any such plan or plans. Upon request by any Lender, the Borrower will deliver to such Lender a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the -53- related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Lenders pursuant to the first sentence hereof, copies of any records, documents or other information required to be furnished to the PBGC, and any material notices received by Holdings, the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan, Multiemployer Plan or Foreign Pension Plan shall be delivered to the Lender no later than ten days after the date such records, documents and/or information has been furnished to the PBGC or such notice has been received by Holdings, the Borrower, the Subsidiary or the ERISA Affiliate, as applicable. 7.08 GOOD REPAIR. Holdings will, and will cause each of its Subsidiaries to, ensure that its material properties and equipment used or useful in its business are kept in good repair, working order and condition, normal wear and tear excepted, and, subject to Section 8.05, that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner useful or customary for companies in similar businesses. 7.09 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings will, for financial reporting purposes, cause (i) each of its, and each of its Subsidiaries', fiscal years and fourth fiscal quarters to end on December 31 of each year and (ii) each of its, and each of its Subsidiaries', first three fiscal quarters to end on the last day of March, June and September of each year. 7.10 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) Holdings will cause the Borrower and the Subsidiary Guarantors to grant to the Collateral Agent security interests and mortgages in owned Real Property with a fair market value of $5,000,000 or more acquired after the Initial Borrowing Date as may be reasonably requested from time to time by the Administrative Agent and/or the Required Lenders (collectively, the "Additional Mortgages"). All such security interests and mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and shall constitute valid and enforceable Liens superior to and prior to the rights of all third Persons and subject to no other Liens except Permitted Liens. The Additional Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Furthermore, Holdings shall cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be reasonably requested by the Administrative Agent to assure itself that this Section 7.10(a) has been complied with. -54- (b) Holdings will, and will cause its Subsidiaries to, at the expense of the Borrower make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or confirmatory instruments and take such further steps relating to the collateral covered by any of the Security Documents as the Collateral Agent may reasonably require. (c) Prior to the 60 day after the Initial Borrowing Date, the Borrower shall have delivered to the Collateral Agent surveys, in form and substance satisfactory to the Collateral Agent, of the Mortgaged Properties, dated a recent date and certified in a manner acceptable to the Collateral Agent by a licensed surveyor satisfactory to the Collateral Agent. (d) Each of the Credit Parties agrees that each action required above by this Section 7.10(a) and (b) shall be completed as soon as possible, but in no event later than 60 days after such action is requested to be taken by the Administrative Agent, the Collateral Agent or the Required Lenders, as the case may be, PROVIDED that in no event shall the Borrower be required to take any action, other than using its reasonable commercial efforts without any material expenditure, to obtain consents from third parties with respect to its compliance with this Section 7.10. 7.11 INTEREST RATE AGREEMENT. The Borrower (x) will, no later than the date occurring 90 days after the Initial Borrowing Date, enter into Interest Rate Agreements which cover for at least three years from the Initial Borrowing Date at least 35% of the outstanding Term Loans establishing a ceiling on the Eurodollar Rate of 9% on terms reasonably satisfactory to the Administrative Agent and (y) may enter into Interest Rate Agreements which cover additional amounts of outstanding Term Loans on terms (and in such amounts) reasonably satisfactory to the Administrative Agent. -55- 7.12 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a)(i) The Borrower will comply, and will cause each of its Subsidiaries to comply, with all Environmental Laws applicable to the ownership, lease or use of all Real Property now or hereafter owned, leased or operated by the Borrower or any of its Subsidiaries, will promptly pay or cause to be paid all costs and expenses incurred in connection with such compliance, and will keep or cause to be kept all such Real Property free and clear of any Liens imposed pursuant to such Environmental Laws and (ii) neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of Hazardous Materials on any Real Property now or hereafter owned, leased or operated by the Borrower or any of its Subsidiaries, or transport or permit the transportation of Hazardous Materials to or from any such Real Property, except to the extent that the failure to comply with the requirements specified in clause (i) or (ii) above, either individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. If legally required to do so under any applicable directive or order of any governmental agency, the Borrower agrees to undertake, and cause each of its Subsidiaries to undertake, any clean up, removal, remedial or other action necessary to remove and clean up any Hazardous Materials from any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries in accordance with, in all material respects, the requirements of all applicable Environmental Laws and in accordance with, in all material respects, such orders and directives of all governmental authorities, except to the extent that the Borrower or such Subsidiary is contesting such order or directive in good faith and by appropriate proceedings and for which adequate reserves have been established to the extent required by GAAP; PROVIDED that it will not constitute a breach of this Section 7.12 if a Person other than the Borrower and its Subsidiaries takes such action on behalf of the Borrower and its Subsidiaries. -56- (b) At the request of the Administrative Agent or the Required Lenders at any time and from time to time during the continuance of an Event of Default, upon the reasonable belief by the Administrative Agent that the Borrower or any of its Subsidiaries has breached in any material respect any representation or covenant herein with respect to any environmental matters affecting any Mortgaged Property and such breach is continuing and/or a notice has been provided under Section 7.01(g), the Borrower will provide, at its sole cost and expense (or will cause the relevant Subsidiary to provide at its sole cost and expense), an environmental site assessment report reasonable in scope concerning any Mortgaged Property that is the subject of the breach or notice of the Borrower or its Subsidiaries, prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or Release or absence of Hazardous Materials on or from any such Mortgaged Property and the potential cost of any removal or remedial action in connection with any Hazardous Materials on such Mortgaged Property. If the Borrower fails to provide the same after thirty days' notice and the Event of Default is continuing, the Administrative Agent may order the same, and the Borrower shall grant and hereby grants to the Administrative Agent and the Lenders and their agents access to such Mortgaged Property and specifically grants the Administrative Agent and the Lenders an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment all at the Borrower's reasonable expense, which assessments, if obtained, will be provided to the Borrower. 7.13 FNSS DISPOSITION. The Borrower will cause UDLP to apply the proceeds from an FNSS Disposition consummated while the Seller Note is outstanding to the repayment of the Seller Note (to the extent required by the terms of the Seller Note). 7.14 FMC ARABIA. Upon the request of the Administrative Agent or the Required Lenders, the Borrower and/or UDLP will require FMC Corporation to transfer record ownership of the interests in FMC Arabia beneficially owned by UDLP to UDLP free and clear of all Liens at any time no adverse tax consequences would result therefrom. -57- 7.15 NOTICES OF ASSIGNMENT. At any time, upon the written request, and in the sole discretion, of the Required Lenders, each Credit Party shall promptly, and in any event within 5 Business Days of the delivery of such written request, deliver to the Administrative Agent duly completed Notices of Assignment (the "Notices") pursuant to the provisions of the Assignment of Claims Act of 1940, 31 U.S.C. Section 3727(c), with respect to each material contract of a Credit Party with the U.S. government or any branch, agency, bureau or subdivision thereof and, until otherwise directed by the Required Lenders, shall thereafter update each such Notice, and provide (and update) Notices with respect to any additional contracts between a Credit Party and the U.S. government or any branch, agency, bureau or subdivision thereof. Upon the occurrence and during the continuation of any Event of Default, the Required Banks may direct the Administrative Agent to file Notices with respect to any or all of the contracts of the Credit Parties with the U.S. government or any branch, agency, bureau or subdivision thereof. After any such filing and for so long as an Event of Default is continuing, the Credit Parties shall take all action necessary to maintain such filings and to make filings with respect to any additional material contracts between a Credit Party and the U.S. government or any branch, agency, bureau or subdivision thereof. SECTION 8. NEGATIVE COVENANTS. Holdings and the Borrower hereby covenant and agree that for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations (other than any indemnities described in Section 12.13 which are not then owing) incurred hereunder, are paid in full: 8.01 CHANGES IN BUSINESS. (a) The Borrower will not permit at any time the business activities taken as a whole conducted by the Borrower and its Subsidiaries to be materially different from the business activities taken as a whole (including incidental activities) conducted by the Borrower and its Subsidiaries on the Initial Borrowing Date (after giving effect to the Transaction) and businesses reasonably related thereto and reasonable extensions thereof targeted to governmental, commercial and other customers (the "Business"). (b) Holdings will not engage in any business other than its ownership of the capital stock of, and the management of, the Borrower, provided that Holdings may engage in those activities that are incidental to (x) the maintenance of its corporate existence in compliance with applicable law, (y) legal, tax and accounting matters in connection with any of the foregoing activities and (z) the entering into, and performing its obligations under, this Agreement and the other Documents to which it is a party. -58- 8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. Holdings will not, and will not permit any Subsidiary to, wind up, liquidate or dissolve its affairs, or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets (other than inventory or obsolete equipment or excess equipment no longer needed in the conduct of the business in the ordinary course of business) or purchase, lease or otherwise acquire all or any part of the property or assets of any Person (other than purchases or other acquisitions of inventory, leases, materials and equipment in the ordinary course of business) or agree to do any of the foregoing at any future time without a contingency relating to obtaining any required approval hereunder, except that the following shall be permitted: (a) any Subsidiary of the Borrower may be merged or consolidated with or into, or be liquidated into, the Borrower or a Subsidiary Guarantor (so long as the Borrower or such Subsidiary Guarantor is the surviving corporation), or all or any part of its business, properties and assets may be conveyed, leased, sold or transferred to the Borrower or any Subsidiary Guarantor, PROVIDED that neither the Borrower nor any Subsidiary Guarantor may be a party to any merger, consolidation or liquidation otherwise permitted by this clause (a) involving a Person that is not a Wholly-Owned Subsidiary other than in a Permitted Acquisition; (b) capital expenditures to the extent within the limitations set forth in Section 8.05 hereof; (c) the investments, acquisitions and transfers or dispositions of properties permitted pursuant to Section 8.06; (d) each of the Borrower and any Subsidiary may lease (as lessee) real or personal property in the ordinary course of business (so long as such lease does not create a Capitalized Lease Obligation not otherwise permitted by Section 8.04(d) or would not violate Section 8.07); (e) licenses or sublicenses by the Borrower and its Subsidiaries of intellectual property in the ordinary course of business, PROVIDED, that such licenses or sublicenses shall not interfere with the business of the Borrower or any Subsidiary; -59- (f) other sales or dispositions of assets to the extent that the aggregate Net Cash Proceeds received from all such sales and dispositions permitted by this clause (f) shall not exceed $55 million in the aggregate and $25 million in any fiscal year of the Borrower, PROVIDED that (x) each such sale shall be in an amount at least equal to the fair market value thereof and for proceeds consisting of at least 75% cash (with the assumption of Indebtedness and the sale for cash within 30 days of receipt of securities received counted as cash) and (y) the Net Cash Proceeds of any such sale are applied to repay the Loans to the extent required by Section 4.02(A)(c), and, PROVIDED FURTHER, that the sale or disposition of the capital stock of any Subsidiary of the Borrower shall be prohibited unless it is for all of the outstanding capital stock of such Subsidiary owned by the Borrower and its Subsidiaries; (g) the Acquisition; (h) leases and subleases permitted under Section 8.03(g); (i) the transfer of the stock of FMC Arabia to a new Subsidiary to preserve tax benefits; and (j) involuntary sales of interests in Joint Ventures and Foreign Subsidiaries pursuant to mandatory puts, calls and similar arrangements (to the extent in effect on the date hereof in the case of the Existing Joint Ventures). 8.03 LIENS. Holdings will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of Holdings or any such Subsidiary whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to Holdings or any of its Subsidiaries) or assign any right to receive income, except: (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Borrower) have been established; (b) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law which were incurred in the ordinary course of business, such as carriers', warehousemen's and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower or any of its Subsidiaries or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; -60- (c) Liens created by or pursuant to this Agreement or the other Credit Documents; (d) Liens created pursuant to Capital Leases permitted by Section 8.04(c). (e) Liens arising from judgments, decrees or attachments and Liens securing appeal bonds arising from judgments, in each case in circumstances not constituting an Event of Default under Section 9.09; (f) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); (g) leases or subleases granted to others not interfering in any material respect with the business of the Borrower or any of its Subsidiaries; (h) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Holdings or any of its Subsidiaries; (i) Liens arising from UCC financing statements regarding leases permitted by this Agreement; (j) (x) receipt of progress payments and advances from customers in the ordinary course of business to the extent same creates a Lien on the related inventory and (y) purchase money Liens securing payables arising from the purchase by the Borrower or any Subsidiary Guarantor of any equipment or goods in the normal course of business, PROVIDED that such payables shall not constitute Indebtedness; (k) any interest or title of a lessor under any lease permitted by this Agreement; (l) Liens in existence on, and which are to continue in effect after, the Initial Borrowing Date which are listed, and the property subject thereto described in, Annex VII, without giving effect to any extension or renewal thereof; and -61- (m) Liens arising pursuant to purchase money mortgages or security interests securing Indebtedness representing the purchase price (or financing of the purchase price within 90 days after the respective purchase) of assets acquired by the Borrower or any Subsidiary Guarantor after the Initial Borrowing Date, PROVIDED that (x) any such Liens attach only to the assets so acquired, (y) the Indebtedness secured by any such Lien does not exceed 100%, nor is less than 70%, of the lesser of the fair market value or purchase price of the property being purchased at the time of the incurrence of such Indebtedness and (z) all Indebtedness secured by Liens created pursuant to this clause (m) shall not exceed $15,000,000 at any time outstanding. 8.04 INDEBTEDNESS. Holdings will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (b) Indebtedness owing by (i) any Subsidiary Guarantor to another Subsidiary Guarantor or the Borrower and/or (ii) the Borrower to any Subsidiary Guarantor; (c) Capitalized Lease Obligations of the Borrower and its Subsidiary Guarantors initially incurred after the Initial Borrowing Date, PROVIDED that the aggregate Capitalized Lease Obligations under all Capital Leases entered into after Initial Borrowing Date shall not exceed $15,000,000; (d) Indebtedness under Interest Rate Agreements to the extent entered into in compliance with Section 7.11; (e) Indebtedness incurred pursuant to purchase money mortgages permitted by Section 8.03(m); (f) Indebtedness of the Borrower evidenced by the Senior Subordinated Notes and the guaranty of such Indebtedness by the Guarantors; (g) Indebtedness of the Borrower evidenced by the Seller Note in an aggregate principal amount not to exceed $50,000,000, less the aggregate amount of all repayments of principal thereon effected after the Initial Borrowing Date, and the guaranty of such Indebtedness by the Guarantors; (h) Existing Indebtedness, without giving effect to any subsequent extension, renewal or refinancing thereof; -62- (i) Contingent Obligations (including under letters of credit and other guaranties) of the Borrower and its Subsidiaries with respect to Indebtedness and other obligations of Joint Ventures and Foreign Subsidiaries in an aggregate amount at any time outstanding which, when added to all investments, loans and advances made pursuant to Section 8.06(j) and then outstanding, is not in excess of the Investment Basket; (j) letters of credit under which the Borrower is the account party denominated in other than Dollars in an aggregate amount not in excess of the equivalent of $25,000,000; and (k) additional unsecured Indebtedness of the Borrower and the Subsidiary Guarantors not to exceed an aggregate outstanding principal amount of $10,000,000 at any time. 8.05 CAPITAL EXPENDITURES. (a) Holdings will not, and will not permit any of its Subsidiaries to, incur Consolidated Capital Expenditures, provided that the Borrower and its Subsidiaries may make Consolidated Capital Expenditures not to exceed in the aggregate (x) $12,000,000 during the period from the Initial Borrowing Date to the end of its fiscal year ending December 31, 1997, (y) $32,000,000 during each of its next two subsequent fiscal years and (z) $30,000,000 during each subsequent fiscal year thereafter. (b) In the event that the maximum amount which is permitted to be expended in respect of Consolidated Capital Expenditures during any fiscal year pursuant to Section 8.05(a) (without giving effect to this clause (b)) is not fully expended during such fiscal year, the maximum amount which may be expended during the immediately succeeding fiscal year pursuant to Section 8.05(a) shall be increased by such unutilized amount up to a maximum increase in any fiscal year of not more than $10,000,000. 8.06 ADVANCES, INVESTMENTS AND LOANS. Holdings will not, and will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to any Person, except: (a) the Borrower or any Subsidiary may invest in cash and Cash Equivalents; (b) the Borrower and any Subsidiary may acquire and hold receivables owing to them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms and/or reasonable extensions thereof; (c) the intercompany Indebtedness described in Section 8.04(b) shall be permitted; -63- (d) loans and advances to officers, directors and employees in the ordinary course of business (x) for relocation purposes and (y) otherwise in an aggregate principal amount not to exceed $500,000 at any time outstanding shall be permitted; (e) the Borrower and each Subsidiary may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (f) Interest Rate Agreements entered into pursuant to Section 7.11 shall be permitted; (g) advances, loans and investments in existence on the Effective Date and listed on Annex VIII, without giving effect to any additions thereto or replacements thereof, shall be permitted; (h) the Borrower and each Subsidiary may make capital contributions to any of their Subsidiaries to the extent a Subsidiary Guarantor; (i) Subsidiaries may be established or created in accordance with the provisions of Section 8.07; (j) the Borrower or any Subsidiary may enter into, invest in (including contributions of cash, copyrights, patents and other intellectual property, and the use of personnel and/or the issuance of non-exclusive licenses of intellectual property) and make Loans and advances to Joint Ventures and Foreign Subsidiaries in an aggregate amount (calculated without regard to any write-downs or write-offs and excluding the value of the use of personnel and/or non-exclusive licenses of intellectual property) at any time outstanding (x) not in excess of (A) the Investment Basket at such time less (B) $15 million and (y) which, when added to the aggregate amount of all Contingent Obligations then outstanding pursuant to Section 8.04(i), is not in excess of the Investment Basket at such time; (k) the Borrower or any Subsidiary Guarantor may maintain the loans to and investments in the Existing Joint Ventures and Foreign Subsidiaries which are outstanding on the Initial Borrowing Date; (l) the Borrower or any Subsidiary Guarantor may acquire assets from, or all of the equity interests in, any Person engaged in the Business for cash consideration not exceeding $30 million in the aggregate, provided that the Borrower shall be in compliance on a PRO FORMA basis with all the Covenants contained in this Agreement after giving effect to each such acquisition (a "Permitted Acquisition"); and -64- (m) loans and investments not otherwise permitted by the foregoing clauses (a) through (l), provided that the aggregate amount of the loans and investments made pursuant to this clause (m) shall not exceed $5,000,000. 8.07 LIMITATION ON CREATION OF SUBSIDIARIES. Holdings will not, and will not permit any Subsidiary Guarantor to, establish, create or acquire any direct Subsidiary and will not permit any Inactive Subsidiary to acquire assets or commence business; PROVIDED that, the Borrower and its Subsidiaries shall be permitted to establish, create or acquire (x) Wholly-Owned Subsidiaries, and/or an Inactive Subsidiary may cease to continue to be an Inactive Subsidiary so long as (i) 100% of the capital stock of such new Subsidiary is pledged pursuant to the Pledge Agreement and the certificates representing such stock, together with stock powers duly executed in blank, are delivered to the Collateral Agent and (ii) such new Subsidiary or former Inactive Subsidiary, if in each case a Domestic Subsidiary, executes a counterpart of the Subsidiary Guaranty, the Pledge Agreement and the Security Agreement, in each case on the same basis (and to the same extent) as such Subsidiary or former Inactive Subsidiary would have executed such Credit Documents if it were a Credit Party on the Initial Borrowing Date and (y) Joint Ventures and Foreign Subsidiaries to the extent otherwise permitted hereunder. 8.08 MODIFICATIONS. Holdings will not, and will not permit any of its Subsidiaries to: (a) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) or exchange of the Senior Subordinated Notes, the Seller Note or any Existing Indebtedness; (b) amend or modify (or permit the amendment or modification of) in any manner adverse to the interests of the Lenders, any provisions of any Senior Subordinated Note Documents or any Seller Note Document; and/or (c) amend, modify or change in any manner adverse to the interests of the Lenders the organizational documents (including by-laws) of any Credit Party or any agreement entered into by the Borrower with respect to its capital stock, or any Acquisition Document or enter into any new agreement in any manner adverse to the interests of the Lenders with respect to the capital stock of the Borrower. -65- 8.09 DIVIDENDS, ETC. (a) Holdings will not, and will not permit any of its Subsidiaries to, declare or pay any dividends (other than dividends payable solely in capital stock of such Person) or return any capital to, its stockholders, members and/or other owners or authorize or make any other distribution, payment or delivery of property or cash to its stockholders, members and/or other owners as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock or other ownership interests now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock or other ownership interests of Holdings or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing "Dividends"), except that: (i) Holdings may pay Dividends in connection with a recapitalization or other restructuring of its capital provided that (i) all such Dividends will be paid to Carlyle and/or Carlyle Affiliates and (ii) the amount of Dividends so paid shall be not in excess of the proceeds of substantially contemporaneous equity issuances to Carlyle and/or Carlyle Affiliates; (ii) any Subsidiary of the Borrower may pay dividends or return capital or make distributions and other similar payments with regard to its capital stock or other membership interests to the Borrower or to a Subsidiary of the Borrower; and (iii) each of Holdings and the Borrower may redeem or repurchase its membership interests or stock from officers, employees and directors (or their estates) upon the death, permanent disability, retirement or termination of employment of any such Person or otherwise in accordance with any stock option plan or any employee stock ownership plan, PROVIDED that (x) no Default or Event of Default is then in existence or would arise therefrom and (y) the aggregate amount of all cash paid in respect of all such shares and interests so redeemed or repurchased in any calendar year does not exceed $2,000,000. -66- (b) Holdings will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist (other than as a result of a requirement of law) any encumbrance or restriction which prohibits or otherwise restricts (A) the ability of any Subsidiary to (a) pay dividends or make other distributions or pay any Indebtedness owed to Holdings or any Subsidiary, (b) make loans or advances to Holdings or any Subsidiary, (c) transfer any of its properties or assets to Holdings or any Subsidiary or (B) the ability of Holdings or any other Subsidiary of Holdings to create, incur, assume or suffer to exist any Lien upon its property or assets to secure the Obligations, other than prohibitions or restrictions existing under or by reason of: (i) this Agreement, the other Credit Documents and the Senior Subordinated Note Documents; (ii) applicable law; (iii) customary non-assignment provisions entered into in the ordinary course of business and consistent with past practices; (iv) any restriction or encumbrance with respect to a Subsidiary imposed pursuant to an agreement which has been entered into for the sale or disposition of all or substantially all of the capital stock or assets of such Subsidiary, so long as such sale or disposition is permitted under this Agreement; and (v) Liens permitted under Sections 8.03(d) and (m) and any documents or instruments governing the terms of any Indebtedness or other obligations secured by any such Liens, PROVIDED that such prohibitions or restrictions apply only to the assets subject to such Liens. 8.10 TRANSACTIONS WITH AFFILIATES. Holdings will not, and will not permit any Subsidiary to, enter into any transaction or series of transactions after the Initial Borrowing Date whether or not in the ordinary course of business, with any Affiliate other than on terms and conditions substantially as favorable to Holdings or such Subsidiary as would be obtainable by Holdings or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate, PROVIDED that the foregoing restrictions shall not apply to (i) the Management Agreement, (ii) employment arrangements entered into in the ordinary course of business with officers of Holdings and its Subsidiaries and (iii) customary fees paid to members of the Board of Directors of Holdings and of its Subsidiaries. 8.11 INTEREST COVERAGE RATIO. The Borrower will not permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense for any Test Period ending on the last day of any fiscal quarter set forth below to be less than the ratio set forth opposite such fiscal quarter: Fiscal Quarter Ending: Ratio ---------------------- ----- December 31, 1997 through September 30, 2000 1.75:1.00 December 31, 2000 through September 30, 2001 1.80:1.00 December 31, 2001 through September 30, 2002 2.00:1.00 -67- December 31, 2002 through September 30, 2003 2.20:1.00 December 31, 2003 through September 2004 2.30:1.00 December 31, 2004 through September 2005 2.50:1.00 Thereafter 2.70:1.00 8.12 LEVERAGE RATIO. The Borrower will not permit the Leverage Ratio determined as at the end of any Test Period ending on the last day of any fiscal quarter set forth below, to be more than the ratio set forth opposite such fiscal quarter: Fiscal Quarter Ending: Ratio ---------------------- ----- December 31, 1997 through September 30, 2000 6.25:1.00 December 31, 2000 through September 30, 2001 5.75:1.00 December 31, 2001 through September 30, 2002 5.25:1.00 December 31, 2002 through September 30, 2003 4.75:1.00 December 31, 2003 through September 30, 2004 4.25:1.00 December 31, 2004 through September 30, 2005 3.75:1.00 Thereafter 3.25:1.00 8.13 MINIMUM CONSOLIDATED NET WORTH. The Borrower will not permit Consolidated Net Worth at any time to be less than $25,000,000. -68- 8.14 MINIMUM CONSOLIDATED EBITDA. The Borrower will not permit Consolidated EBITDA for any Test Period ending on the last day of any fiscal quarter set forth below to be less than the amount set forth opposite such fiscal quarter: Fiscal Quarter Ending: Amount ---------------------- ------ December 31, 1997 through September 30, 1998 $116,000,000 December 31, 1998 through September 30, 1999 $112,000,000 December 31, 1999 through September 30, 2001 $100,000,000 Thereafter $104,000,000 8.15 LIMITATION ON ISSUANCE OF STOCK. Holdings will not permit any of its Subsidiaries, directly or indirectly, to issue any shares of its capital stock or other securities (or warrants, rights or options to acquire shares or other equity securities), except (i) for replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and similar issuances which do not decrease the percentage ownership of the Borrower and its Subsidiaries taken as a whole in any class of the capital stock of such Subsidiary, (iii) for issuances to the Borrower or any of its Subsidiaries in connection with the creation of new Wholly-Owned Subsidiaries permitted under Section 8.07 and (iv) to qualify directors to the extent required by applicable law. SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the following specified events (each, an "Event of Default"): 9.01 PAYMENTS. The Borrower shall (i) default in the payment when due of any principal of the Loans or any Unpaid Drawing or (ii) default, and such default shall continue for three or more Business Days, in the payment when due of any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document; or 9.02 REPRESENTATIONS, ETC. Any representation, warranty or statement made by any Credit Party herein or in any other Credit Document or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.03 COVENANTS. Any Credit Party shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.11 or 8, or (b) default in the due performance or observance by it of any term, covenant or agreement -69- (other than those referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after written notice to the defaulting party by the Administrative Agent or the Required Lenders; or 9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) Holdings or any of its Subsidiaries shall (i) default in any payment with respect to any Indebtedness (other than the Obligations or the Seller Note) beyond the period of grace, if any, applicable thereto or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness to become due prior to its stated maturity; or (b) any such Indebtedness of Holdings or any of its Subsidiaries shall be declared to be due and payable (or shall be required to be prepaid as a result of a default thereunder or of an event of the type that constitutes an Event of Default) prior to the stated maturity thereof, PROVIDED that it shall not constitute an Event of Default pursuant to this Section 9.04 unless the aggregate principal amount of all Indebtedness referred to in clauses (a) and (b) above exceeds $10,000,000 in the aggregate at any one time; or 9.05 BANKRUPTCY, ETC. Holdings or any of its Material Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against Holdings or any of its Material Subsidiaries and the petition is not controverted within 20 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Holdings or any of its Material Subsidiaries; or Holdings or any of its Material Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Holdings or any of its Material Subsidiaries; or there is commenced against Holdings or any of its Material Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or Holdings or any of its Material Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; Holdings or any of its Material Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or Holdings or any of its Material Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by Holdings or any of its Material Subsidiaries for the purpose of effecting any of the foregoing; or 9.06 ERISA. (a) Any Plan or Multiemployer Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any -70- amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is likely to have a trustee appointed to administer such Plan, any Plan or Multiemployer Plan which is subject to Title IV of ERISA is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to a Plan, Multiemployer Plan or a Foreign Pension Plan has not been timely made, Holdings, the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate has incurred or is likely to incur any liability to or on account of a Plan or Multiemployer Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or Holdings, the Borrower or any Subsidiary of the Borrower has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or Plans or Foreign Pension Plans; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually, and/or in the aggregate, in the opinion of the Required Lenders, has had, or is reasonably likely to have, a Material Adverse Effect; or 9.07 SECURITY DOCUMENTS. (a) Except in each case to the extent resulting from the negligent or willful failure of the Collateral Agent, any Security Document shall cease to be, in any material respect, in full force and effect, or shall cease, in any material respect, to give the Collateral Agent the Liens, powers and privileges purported to be created thereby in favor of the Collateral Agent, or (b) any Credit Party shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to any such Security Document and such default shall continue unremedied for a period of at least 30 days after written notice to the respective Credit Party by the Administrative Agent; or 9.08 GUARANTY. Any of the Guaranties or any material provision thereof shall cease to be in full force and effect, or any Guarantor or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under any Guaranty; or 9.09 JUDGMENTS. One or more judgments or decrees shall be entered against Holdings or any of its Subsidiaries involving a liability (to the extent not paid or covered by insurance) in excess of $10,000,000 in the aggregate for all such judgments and -71- decrees for Holdings and its Subsidiaries and all such judgments and decrees in excess of such amount shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof; or 9.10 ANCILLARY AGREEMENTS. Any default or defaults shall occur under any of the Ancillary Agreements which individually or in the aggregate is reasonably likely to have a Material Adverse Effect; or 9.11 CHANGE OF CONTROL. A Change of Control shall occur and be continuing; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Lenders, by written notice to the Borrower and Holdings, take any or all of the following actions, without prejudice to the rights of the Administrative Agent or any Lender to enforce its claims against any Guarantor or the Borrower, except as otherwise specifically provided for in this Agreement (PROVIDED that, if an Event of Default specified in Section 9.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment of each Lender shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all obligations owing hereunder (including Unpaid Drawings) and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or all of the Liens and security interests created pursuant to the Security Documents; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; and (v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 9.05 in respect of the Borrower, it will pay) to the Collateral Agent at the Payment Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations in respect of Letters of Credit then outstanding equal to the aggregate Stated Amount of all Letters of Credit then outstanding. SECTION 10. DEFINITIONS. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "A Term Commitment" shall mean, with respect to each Lender, the amount, if any, set forth opposite such Lender's name on Annex I hereto directly below the column entitled "A Term Commitment" as the same may be (x) reduced or terminated from time to time pursuant to Section 3.02, 3.03 and/or 9 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 and/or 12.04 -72- "A Term Facility" shall mean the Facility evidenced by the Total A Term Commitment. "A Term Loan" shall have the meaning provided in Section 1.01(a). "A Term Note" shall have the meaning provided in Section 1.05(a). "A Termination Date" shall mean the third anniversary of the Initial Borrowing Date. "A TF Percentage" shall mean, at any time of determination thereof, a fraction (expressed as a percentage) the numerator of which is equal to the sum of (x) the aggregate principal amount of A Term Loans outstanding at such time and (y) the Total A Term Commitment at such time and the denominator of which is equal to the sum of (x) the aggregate principal amount of Term Loans outstanding at such time and (y) the Total A Term Commitment at such time provided that at any time that no A Term Loans are outstanding (including upon the application of only a portion of any required prepayment of Term Loans under Section 4.02(A)), the A TF Percentage shall be zero. "Acquisition" shall mean the acquisition by the Borrower directly and indirectly of all the outstanding partnership interests of UDLP pursuant to the Acquisition Documents. "Acquisition Agreement" shall mean the Purchase Agreement, dated as of August 25, 1997 among FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and United Defense Industries, Inc. (f/k/a Iron Horse Acquisition Corp.), as supplemented. "Acquisition Documents" shall mean the Acquisition Agreement and all other material agreements and documents relating to the Acquisition (including the Ancillary Agreements), as same may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "Additional Mortgages" shall have the meaning provided in Section 7.10. "Adjusted Cash Flow" for any fiscal year shall mean Consolidated Net Income for such fiscal year (after provision for taxes) PLUS (without duplication) the amount of all net non-cash charges (including, without limitation, depreciation, deferred tax expense, non-cash interest expense, amortization and other non-cash charges) that were deducted in arriving at Consolidated Net Income for such fiscal year to the extent not representing a cash payment to be made in the future, MINUS (without duplication) (x) the amount of all non-cash gains and gains from sales of assets (other than sales of inventory and equipment in the normal course of business) that were added in arriving at Consolidated Net Income for such fiscal year and (y) the positive difference, if any, between actual taxes -73- paid in respect of such fiscal year and tax expense deducted in arriving at Consolidated Net Income for such fiscal year. "Adjusted RF Percentage" shall mean (x) at a time when no Lender Default exists, for each Lender, such Lender's RF Percentage and (y) at a time when a Lender Default exists (i) for each Lender that is a Defaulting Lender, zero and (ii) for each Lender that is a Non-Defaulting Lender, the percentage determined by dividing such Lender's Revolving Commitment at such time by the Adjusted Total Revolving Commitment at such time, it being understood that all references herein to Revolving Commitments and the Adjusted Total Revolving Commitment at a time when the Total Revolving Commitment has been terminated shall be references to the Revolving Commitments or Adjusted Total Revolving Commitment, as the case may be, in effect immediately prior to such termination, PROVIDED that (A) no Lender's Adjusted RF Percentage shall change upon the occurrence of a Lender Default from that in effect immediately prior to such Lender Default if after giving effect to such Lender Default, and any repayment of Revolving Loans and Swingline Loans at such time pursuant to Section 4.02(A)(a) or otherwise, the sum of (i) the aggregate outstanding principal amount of Revolving Loans of all Non-Defaulting Lenders, plus (ii) the aggregate outstanding principal amount of all Swingline Loans, plus (iii) the aggregate amount of Letter of Credit Outstandings, exceeds the Adjusted Total Revolving Commitment; (B) the changes to the Adjusted RF Percentage that would have become effective upon the occurrence of a Lender Default but that did not become effective as a result of the preceding clause (A) shall become effective on the first date after the occurrence of the relevant Lender Default on which the sum of (i) the aggregate outstanding principal amount of the Revolving Loans of all Non-Defaulting Lenders, plus (ii) the aggregate outstanding principal amount of all Swingline Loans, plus (iii) the aggregate amount of Letter of Credit Outstandings is equal to or less than the Adjusted Total Revolving Commitment; and (C) if (i) a Non-Defaulting Lender's Adjusted RF Percentage is changed pursuant to the preceding clause (B) and (ii) any repayment of such Lender's Revolving Loans, Swingline Loans or Unpaid Drawings that were made during the period commencing after the date of the relevant Lender Default and ending on the date of such change to its Adjusted RF Percentage must be returned to the Borrower as a preferential or similar payment in any bankruptcy or similar proceeding of the Borrower, then the change to such Non-Defaulting Lender's Adjusted RF Percentage effected pursuant to said clause (B) shall be reduced to that positive change, if any, as would have been made to its Adjusted RF Percentage if (x) such repayments had not been made and (y) the maximum change to its Adjusted RF Percentage would have resulted in the sum of the outstanding principal of Revolving Loans made by such Lender plus such Lender's new Adjusted RF Percentage of the outstanding principal amount of Swingline Loans and of Letter of Credit Outstandings equalling such Lender's Revolving Commitment at such time. "Adjusted Total Revolving Commitment" shall mean at any time the Total Revolving Commitment less the aggregate Revolving Commitments of all Defaulting Lenders. "Administrative Agent" shall have the meaning provided in the first -74- paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to Section 11.09. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Agents" shall have the meaning provided in the first paragraph of this Agreement. "Agreement" shall mean this Credit Agreement, as the same may be from time to time further modified, amended and/or supplemented. "Ancillary Agreements" shall have the meaning provided in the Acquisition Agreement. "Anticipated Reinvestment Amount" shall mean, with respect to any Reinvestment Election, the amount specified in the Reinvestment Notice delivered by the Borrower in connection therewith as the amount of the Net Cash Proceeds from the related Asset Sale that the Borrower intends to use to purchase, construct or otherwise acquire Reinvestment Assets. "Applicable Base Rate Margin" shall mean (i) in the case of A Term Loans, Revolving Loans and Swingline Loans, 1.25% LESS the Margin Reduction Discount, if any, (ii) in the case of B Term Loans, 1.50% LESS the Margin Reduction Discount, if any, and (iii) in the case of C Term Loans, 1.75% LESS the Margin Reduction Discount, if any. "Applicable CC Percentage" shall mean (i) .25% at any time that the Applicable Eurodollar Margin for Revolving Loans is 1.125%; (ii) .375% at any time the Applicable Eurodollar Margin for Revolving Loans is greater than 1.125% but less than 2.00%; and (iii) .50% at all other times. "Applicable Eurodollar Margin" shall mean (i) in the case of A Term Loans and Revolving Loans, 2.25% LESS the Margin Reduction Discount, if any, (ii) in the case of B Term Loans, 2.50% LESS the Margin Reduction Discount, if any, and (iii) in the case of C Term Loans, 2.75% LESS the Margin Reduction Discount, if any. "A/RF Maturity Date" shall mean the sixth anniversary of the Initial Borrowing Date. -75- "Asset Sale" shall mean and include (x) the sale, transfer or other disposition by Holdings or any Subsidiary to any Person other than the Borrower or any Subsidiary Guarantor of any asset of the Borrower or such Subsidiary (other than sales, transfers or other dispositions in the ordinary course of business of inventory and/or obsolete or excess equipment) and/or (y) the receipt by Holdings or any Subsidiary of any insurance, condemnation or similar proceeds in connection with a casualty or taking of any of its assets in excess of the costs incurred by Holdings and its Subsidiaries in respect of such event and of repairing or replacing the assets so damaged, destroyed or taken but in all cases only to the extent that the aggregate Net Cash Proceeds of all such sales, transfers, dispositions and receipts after the Initial Borrowing Date are in excess of $10 million. "Assignment Agreement" shall mean the Assignment Agreement in the form of Exhibit K (appropriately completed). "Authorized Officer" shall mean any senior officer of Holdings or the Borrower designated as such in writing to the Administrative Agent by Holdings or by the Borrower. "Average Daily Amount of Revolving Loans" for any Test Period shall mean the average daily outstanding principal amount of Revolving Loans during such Test Period provided that for any Test Period ending on or prior to September 30, 1998, Average Daily Amount of Revolving Loans shall mean the average daily outstanding principal amount of Revolving Loans during the period from the Effective Date to the end of such Test Period plus the amount specified on Annex IX hereto as applicable for such Test Period. "B Maturity Date" shall mean the eighth anniversary of the Initial Borrowing Date. "B Term Commitment" shall mean, with respect to each Lender, the amount, if any, set forth opposite such Lender's name on Annex I hereto directly below the column entitled "B Term Commitment" as the same may be terminated pursuant to Section 3.03. "B Term Facility" shall mean the Facility evidenced by the Total B Term Commitment. "B Term Loan" shall have the meaning provided in Section 1.01(b). "B Term Note" shall have the meaning provided in Section 1.05(a). "B TF Percentage" shall mean, at any time of determination thereof, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principle amount of B Term Loans outstanding at such time and the denominator of which is equal to the sum of (x) the aggregate principle amount of Term Loans outstanding at such time and, -76- if any A Term Loans are then outstanding, (y) the Total A Term Commitment at such time, PROVIDED that the B TF Percentage shall be readjusted for any required repayment of Term Loans under Section 4.02(A) at such time, if any, that no A Term Loans remain outstanding. "Bankruptcy Code" shall have the meaning provided in Section 9.05. "Base Rate" at any time shall mean the higher of (i) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate and (ii) the Prime Lending Rate. "Base Rate Loan" shall mean each Loan bearing interest at the rates provided in Section 1.08(a). "Borrower" shall mean United Defense Industries, Inc., a Delaware corporation. "Borrowing" shall mean the incurrence of (i) Swingline Loans by the Borrower from the Swingline Lender on a given date or (ii) one Type of Loan pursuant to a single Facility by the Borrower from the Lenders having Commitments with respect to such Facility on a PRO RATA basis on a given date (or resulting from conversions on a given date), having in the case of Eurodollar Loans the same Interest Period; PROVIDED that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "BTCo" shall mean Bankers Trust Company in its individual capacity. "Business" shall have the meaning provided in Section 8.01(a). "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the interbank Eurodollar market. "C Term Commitment" shall mean, with respect to each Lender, the amount, if any, set forth opposite such Lender's name on Annex I hereto directly below the column entitled "C Term Commitment" as the same may be terminated pursuant to Section 3.03. "C Term Facility" shall mean the Facility evidenced by the Total C Term Commitment. "C Term Loan" shall have the meaning provided in Section 1.01(c). -77- "C Term Note" shall have the meaning provided in Section 1.05(a). "C TF Percentage" shall mean, at any time of determination thereof, a percentage equal to 100% minus the sum of the A TF Percentage at such time and the B TF Percentage at such time. "Capital Lease" as applied to any Person shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Carlyle" shall mean TC Group L.L.C. (which operates under the trade name "the Carlyle Group"), a Delaware limited liability company. "Carlyle Affiliate" shall mean any entity controlled directly or indirectly by Carlyle. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) Dollar denominated time deposits, certificates of deposit and bankers' acceptances of (x) any Lender that is a domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (y) any bank (or the parent company of such bank) whose short-term commercial paper rating from Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc. ("S&P") is at least A-1 or the equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each case with maturities of not more than one year from the date of acquisition, (iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within six months after the date of acquisition, (v) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or -78- Moody's, and (vi) investments in money market funds substantially all of whose assets are comprised of securities of the type described in clauses (i) through (v) above. "Cash Proceeds" shall mean, with respect to any Asset Sale, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such Asset Sale, other than the portion of such deferred payment constituting interest, but only as and when so received) received by the Borrower and/or any Subsidiary from such Asset Sale. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ET SEQ. "Change of Control" shall mean, at any time and for any reason whatsoever, (a) Holdings shall cease to own directly 100% on a fully diluted basis of the economic and voting interest in the Borrower's capital stock other than up to 10% of such capital stock (on a fully diluted basis) representing stock issued or issuable to management pursuant to stock option plans or (b) Carlyle and Carlyle Affiliates shall cease to have beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) on a fully diluted basis in the aggregate (i) prior to any public offerings by Holdings of at least $40,000,000 of its capital stock or membership interests (a "PO"), at least 51% of the economic and voting interest in Holdings' capital stock and/or membership interests or on and after a PO, at least 30% of the voting interests in Holdings capital stock and/or membership interests or such higher percentage that exceeds the highest percentage of Holdings' capital stock and/or membership interests owned by any other person or group (as defined in Section 13(d) of the Exchange Act) or (c) the Board of Directors of Holdings shall cease to consist of a majority of Continuing Directors or (d) a "change of control" or similar event shall occur as provided in the Senior Subordinated Note Indenture. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all of the Collateral as defined in each of the Security Documents. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Lenders. "Commitment" shall mean, with respect to each Lender, such Lender's Term Commitment and Revolving Commitment. "Commitment Commission" shall mean the RL Commitment Commission -79- and the TL Commitment Commission. "Consolidated Capital Expenditures" shall mean, for any period, the aggregate of all cash expenditures (including in all events all amounts expended under Capital Leases but excluding any amount representing capitalized interest) by the Borrower and its Subsidiaries during that period that, in conformity with GAAP, are or are required to be included in the property, plant or equipment reflected in the consolidated balance sheet of the Borrower and its Subsidiaries, PROVIDED that Consolidated Capital Expenditures shall in any event (x) exclude the purchase price paid in cash in connection with the acquisition of any Person (including through the purchase of all of the capital stock or other ownership interests of such Person or through merger or consolidation) to the extent allocable to property, plant and equipment and (y) exclude amounts expended to acquire Reinvestment Assets. "Consolidated Debt" shall mean, as of any date of determination, (i) the aggregate stated balance sheet amount of all Indebtedness of the Borrower and its Subsidiaries on a consolidated basis as determined in accordance with GAAP plus (ii) any Indebtedness for borrowed money of any other Person as to which the Borrower and/or any of its Subsidiaries has created a guarantee or other Contingent Obligation (but only to the extent of such guarantee or other Contingent Obligation). "Consolidated EBIT" shall mean, for any period, (A) the sum of the amounts for such period of (i) Consolidated Net Income, (ii) provisions for taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization or write-off of deferred financing costs to the extent deducted in determining Consolidated Net Income and (v) losses on sales of assets (excluding sales in the ordinary course of business) and other extraordinary losses and other one-time charges LESS (B) the sum of (i) any cash payments made in such period in respect of an event as to which a one-time non-cash charge was previously incurred and (ii) gains on sales of assets (excluding sales in the ordinary course of business) and other extraordinary gains and other one-time non-cash gains, all as determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" shall mean, for any period, the sum of the amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense, (iii) amortization expense including any amortization or write-off related to the write-up of any assets as a result of purchase accounting and (iv) LIFO charges, provided that (A) Consolidated EBITDA for any Test Period ending on or prior to June 30, 1998 shall mean the sum of (x) Consolidated EBITDA of the Borrower for the period commencing October 6, 1997 and ending on such date, as determined without regard to this proviso, PLUS (y) the amounts set forth in Annex X hereto as applicable to Consolidated EBITDA for such Test Period and (B) when determining the Leverage Ratio, Consolidated EBITDA for any Test Period during which a Permitted Acquisition is consummated shall be determined on a PRO FORMA basis as if such Permitted Acquisition was consummated on the first day of such Test Period. "Consolidated Interest Expense" shall mean, for any period, total interest -80- expense (including the portion that is attributable to Capital Leases in accordance with GAAP) of the Borrower and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and without duplication net costs and/or net benefits under Interest Rate Agreements, but excluding, however, amortization of deferred financing costs to the extent included in total interest expense) less (y) the interest income of such Persons for such period PROVIDED that Consolidated Interest Expense for any Test Period ending on or prior to June 30, 1998 shall mean Consolidated Interest Expense for such Test Period as determined without regard to this proviso that is annualized. "Consolidated Net Income" shall mean for any period, the net income (or loss) of the Borrower and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, PROVIDED that there shall be excluded from the calculation thereof (without duplication) (i) the income (or loss) of any Person (other than Subsidiaries of the Borrower) in which any other Person (other than the Borrower or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person's assets are acquired by the Borrower or any of its Subsidiaries and (iii) the income of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary. "Consolidated Net Worth" shall mean, at any time for the determination thereof, all amounts which, in conformity with GAAP, would be included under the caption "total shareholders' equity" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries as at such date, PROVIDED that any amortization of purchase accounting write-ups for inventory, property, plant and equipment, and in-place research and development shall be excluded from the calculation of Consolidated Net Worth. "Contingent Obligations" shall mean as to any Person any obligation of such Person guaranteeing or intending to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) 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 (d) otherwise to assure or hold -81- harmless the owner of such primary obligation against loss in respect thereof, PROVIDED, HOWEVER, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated maximum of the Contingent Obligation or, if none, the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if there is no stated or determinable amount of the primary obligation, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Continuing Directors" shall mean the directors of Holdings on the Initial Borrowing Date and each other director if such director's nomination for the election to the Board of Directors of Holdings is recommended by a majority of the then Continuing Directors. "Credit Documents" shall mean this Agreement, the Notes, the Security Documents, the Subsidiary Guaranty and any documents executed in connection therewith. "Credit Event" shall mean and include the making of a Loan or the issuance of a Letter of Credit. "Credit Party" shall mean Holdings, the Borrower and the Subsidiary Guarantors. "Deemed ECF" shall mean for any fiscal year of Holdings any prepayments of the principal of Term Loans made during such year pursuant to Section 4.01. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" shall mean any Lender with respect to which a Lender Default is in effect. "Dividends" shall have the meaning provided in Section 8.09. "Documentation Agents" shall have the meaning provided in the first paragraph of this Agreement. "Documents" shall mean, collectively, the Credit Documents and the Transaction Documents. "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Domestic Subsidiary" shall mean each Subsidiary of the Borrower that is -82- not a Foreign Subsidiary. "Effective Date" shall have the meaning provided in Section 12.10. "Eligible Transferee" shall mean and include a commercial bank, financial institution or other institutional "accredited investor" as defined in SEC Regulation D. "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by the Borrower or any of its Subsidiaries solely in the ordinary course of such Person's business and not in response to any third party action or request of any kind) or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, "Claims"), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" means any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code and rule of common law now or hereafter in effect and in each case as amended, and any binding judicial or administrative interpretation thereof, including any binding judicial or administrative order, consent decree or judgment, relating to the environment or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C. Section 7401 ET SEQ.; the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 3808 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; and any applicable state and local or foreign counterparts or equivalents. "EP Percentage" shall mean in the case of (i) equity issued to, or equity contributions made by, Persons (or controlling or controlled affiliates thereof) who are owners of the equity of Holdings on the Initial Borrowing Date, except for any such issuance or contribution described in the following clause (ii), 50%, (ii) equity issued to, or equity contributions made by, any Person (whether or not an existing shareholder of Holdings) that are to be utilized solely for investments in privatizations, co-productions, Joint Ventures and Foreign Subsidiaries or to fund Dividends as permitted by Section 8.09(a)(i), 0% and (iii) all other equity issuances and equity contributions, 100%. "Equity Contribution" shall have the meaning provided in Section 5.01(h). "Equity Documents" shall mean all the agreements governing or relating to the Equity Contribution. -83- "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with Holdings, the Borrower or a Subsidiary of the Borrower would be deemed to be a "single employer" (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary of the Borrower being or having been a general partner of such person. "Eurodollar Loans" shall mean each Loan bearing interest at the rates provided in Section 1.08(b). "Eurodollar Rate" shall mean with respect to each Interest Period for a Eurodollar Loan, (i) the offered quotation to first-class banks in the interbank Eurodollar market by the Administrative Agent for dollar deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loans for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loans, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall have the meaning provided in Section 9. "Excess Cash Flow" shall mean, for any period, the remainder of (i) Adjusted Cash Flow for such period, plus (ii) to the extent not included in (i) above, any amounts received by Holdings and its Subsidiaries in settlement of, or in payment of any judgments resulting from, actions, suits or proceedings with respect to Holdings and/or its Subsidiaries from the first day to the last day of such period, minus (iii) the sum of (x) the amount of Consolidated Capital Expenditures made in compliance with Section 8.05 during such period (less any amount thereof financed through the incurrence of Indebtedness), (y) any repayments or prepayments during such period of the principal amount of Term Loans, except prepayments of the principal amount of Term Loans made pursuant to Sections 4.02(A)(c), (d), (e), (f) and/or (g) and (z) the net amount of investments, loans and advances made pursuant to Section 8.06 during such period (giving effect to any return on any such investment, loan or advance) except to the extent made in reliance on clause (ii) of the definition of Investment Basket. -84- "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" shall have the meaning provided in Section 5.01(n). "Existing Joint Ventures" shall mean each of FNSS and FMC Arabia. "Existing Letters of Credit" shall mean each letter of credit outstanding on the Initial Borrowing Date that is (x) issued by a Person that becomes a Lender hereunder on or prior to the Initial Borrowing Date, (y) to remain outstanding after the Initial Borrowing Date and (z) listed on Annex V, Part II, hereto, it being understood that each such letter of credit shall retain the expiry applicable to it on the Initial Borrowing Date and may be extendable upon expiry for successive periods of up to 12 months, but not beyond the third Business Day prior to the A/RF Maturity Date, on terms acceptable to the respective Letter of Credit Issuer and the Administrative Agent. "Expiration Date" shall mean November 26, 1997. "Facility" shall mean any of the credit facilities established under this Agreement, I.E., the A Term Facility, the B Term Facility, the C Term Facility or the Revolving Facility. "Facing Fee" shall have the meaning provided in Section 3.01(d). "Federal Funds Effective Rate" shall mean for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean all amounts payable pursuant to, or referred to in, Section 3.01. "Final Maturity Date" shall mean the ninth anniversary of the Initial Borrowing Date. "FMC Arabia" shall mean FMC Arabia Limited, a limited liability company organized under the laws of the Kingdom of Saudi Arabia. "FNSS" shall mean FMC-Nurol Savunma Sanayii A.S. and its successors. "FNSS Disposition" shall mean any disposition of all or substantially all of -85- UDLP's Turkish businesses or of any of the UDLP interests in FNSS, including pursuant to a Call or Liquidation (as both terms are defined in the Seller Note). "Foreign Pension Plan" shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by Holdings, the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. "Foreign Subsidiary" shall mean each Subsidiary of the Borrower which is not incorporated or organized in the United States or any State or territory thereof. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect on the date of this Agreement; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 8, including defined terms as used therein, are subject (to the extent provided therein) to Section 12.07(a). "Guaranteed Creditors" shall mean and include each of the Agents, the Collateral Agent, the Lenders and each party (other than any Credit Party) party to an Interest Rate Agreement to the extent that such party constitutes a Secured Creditor. "Guaranteed Obligations" shall mean (i) the principal and interest on each Note issued by the Borrower, and Loans made, under this Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to any Lender or any Agent and/or the Collateral Agent now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Credit Document and the due performance and compliance with all the terms, conditions and agreements contained in the Credit Documents by the Borrower and (ii) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the Borrower owing under any Interest Rate Agreement entered into by the Borrower with a Secured Creditor, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein. "Guarantor" shall mean Holdings and each Subsidiary Guarantor. "Guaranty" shall mean and include each of the Holdings Guaranty and the Subsidiary Guaranty. "Hazardous Materials" means (a) any petroleum or petroleum products, -86- radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contains, electric fluid containing levels of polychlorinated biphenyls, and radon gas and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous waste," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants," or words of similar import, under any applicable Environmental Law. "Holdings" shall mean Iron Horse Investors, L.L.C., a Delaware limited liability company. "Holdings Guaranty" shall mean the guaranty of Holdings pursuant to Section 13. "Inactive Subsidiary" shall mean any Subsidiary of the Borrower that owns (and continues to own) no assets (other than nominal assets, which shall not include any partnership interest in UDLP) and is (and continues to be) inactive. "Indebtedness" of any Person Shall mean, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such indebtedness has been assumed (to the extent of the fair market value of such property), (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, I.E., take-or-pay and similar obligations, (vii) all net obligations of such Person under Interest Rate Agreements and (viii) all Contingent Obligations of such Person, (other than Contingent Obligations arising from the guaranty by such Person of the obligations of the Borrower and/or its Subsidiaries to the extent such guaranteed obligations do not constitute Indebtedness and are otherwise permitted hereunder), PROVIDED that Indebtedness shall not include trade payables, accrued expenses and receipt of progress and advance payments, in each case arising in the ordinary course of business. "Initial Borrowing Date" shall mean the date upon which the initial Borrowing of Loans occurs. "Initial Investors" shall mean Carlyle, Carlyle Affiliates and the other owners of the capital stock of Holdings on the Initial Borrowing Date, after giving effect to the Transaction. "Interest Period" with respect to any Loan shall mean the interest period applicable thereto, as determined pursuant to Section 1.09. -87- "Interest Rate Agreement" shall mean any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement or other similar agreement or arrangement designed to protect the Borrower or any Subsidiary against fluctuations in interest rates. "Investment Basket" shall mean at any time (i) $30 million plus (ii) 25% (or, if the Leverage Ratio on the last day of such fiscal year is less than 4.0:1.0, 50%) of aggregate Excess Cash Flow for each period (an "ECF Period") then ended for which Excess Cash Flow had been, at the time, determined for purposes of Section 4.02(A)(f) and as to which at least 90 days have passed since the end of such period plus (iii) 25% (or if the Leverage Ratio on the last day of such fiscal year is less than 4.0:1.0, 50%) of aggregate Deemed ECF for each ECF Period plus (iv) if the Leverage Ratio at the end of the last Test Period then ended was less than 4.0:1.0, $50 million plus (v) only in the case of any determination prior to the 90th day following the fiscal year ending December 31, 1998, the lesser of $7,500,000 and 25% of the principal payments of Term Loans made pursuant to Section 4.01 after the Initial Borrowing Date and on or prior to December 31, 1997. "Joint Venture" means any Person formed for the purpose of exploiting business opportunities to the extent, in the case of any Person organized or created under the laws of the United States or any State thereof, less than 80% of the ownership interests therein are owned directly and indirectly by the Borrower, and shall include in any event the Existing Joint Ventures to the extent the Borrower continues to own directly and indirectly less than 80% of the ownership interest therein. "Leasehold" of any Person means all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Lender" shall have the meaning provided in the first paragraph of this Agreement. "Lender Default" shall mean (i) the refusal (which has not been retracted) of a Lender to make available its portion of any incurrence of Loans or to fund its portion of any unreimbursed payment under Section 2.04(c) or (ii) a Lender having notified the Administrative Agent and/or the Borrower that it does not intend to comply with the obligations under Section 1.01 or under Section 2.04(c), in the case of either clause (i) or (ii) as a result of the appointment of a receiver or conservator with respect to such Lender at the direction or request of any regulatory agency or authority. "Lender Register" shall have the meaning provided in Section 12.16. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.01(c). -88- "Letter of Credit Issuer" shall mean (i) BTCo, (ii) with respect to each Existing Letter of Credit, the Lender issuing same and (iii) any Lender which at the request of the Borrower and with the consent of the Administrative Agent agrees in such Lender's sole discretion to become a Letter of Credit issuer for the purpose of issuing Letters of Credit pursuant to Section 2. "Letter of Credit Outstandings" shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.02(a). "Leverage Ratio" shall mean, at any date of determination, the ratio of (x) the sum of (i) Consolidated Debt on such date less the outstanding principal amount of Revolving Loans on such date included in Consolidated Debt plus (ii) the Average Daily Amount of Revolving Loans for the Test Period ended on such date to (y) Consolidated EBITDA for the Test Period ending on such date. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). "Loan" shall have the meaning provided in Section 1.01. "Management Agreement" shall mean the management agreement with Carlyle and/or Carlyle Affiliates, as in effect on the Initial Borrowing Date. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(f). "Margin Reduction Discount" shall mean zero, PROVIDED that the Margin Reduction Discount shall be increased to .25%, .625%, .875% or 1.125%, per annum as the case may be, as specified in clauses (i), (ii), (iii) or (iv) below, at any time after the Initial Borrowing Date, when, and for so long as, the ratio set forth in such clause has been satisfied as at the end of the then Relevant Test Periods: (i) the Margin Reduction Discount shall be .25% per annum in the event that as of the end of the Relevant Test Period the Leverage Ratio is equal to or greater than 4.50 to 1 but less than 4.75 to 1; or (ii) the Margin Reduction Discount shall be .625% per annum in the event that as of the end of the Relevant Test Period the Leverage Ratio is equal to or greater than 4.25 to 1 but less than 4.50 to 1; (iii) the Margin Reduction Discount shall be .875% per annum in the event -89- that as of the end of the Relevant Test Period the Leverage Ratio is equal to greater than 3.75 to 1 but less than 4.25 to 1; and (iv) the Margin Reduction Discount shall be 1.125% per annum (or, in the case of B Term Loans or C Term Loans, 1.00%) in the event that as of the end of the Relevant Test Period the Leverage Ratio is less than 3.75 to 1. The Leverage Ratio shall be determined for the Relevant Test Period, by delivery of an officer's certificate of the Borrower to the Lenders pursuant to Section 7.01(e), which certificate shall set forth the calculation of the Leverage Ratio. The Margin Reduction Discount so determined shall apply, except as set forth below, from the date on which such officer's certificate is delivered to the Administrative Agent to the earlier of (x) the date on which the next certificate is delivered to the Administrative Agent pursuant to Section 7.01(e) and (y) the 45th day following the end of the fiscal quarter in which such first certificate was delivered to the Administrative Agent (or the 90th day if such fiscal quarter was the last fiscal quarter of a fiscal year). Notwithstanding anything to the contrary contained above, the Margin Reduction Discount shall be zero (x) if no officer's certificate has been delivered to the Lenders pursuant to Section 7.01(e) which sets forth the Leverage Ratio for the Relevant Test Period or the financial statements upon which any such calculations are based have not been delivered, until such a certificate and/or financial statements are delivered and (y) at all times when there shall exist a Default under Section 9.01 or an Event of Default. It is understood and agreed that the Margin Reduction Discount as provided above shall in no event be cumulative and only the Margin Reduction Discount available pursuant to any of clause (i), (ii), (iii) or (iv) if any, contained in this definition shall be applicable. "Margin Stock" shall have the meaning provided in Regulation U. "Material Adverse Effect" shall mean a material adverse effect on the business, property, assets, liabilities or condition (financial or otherwise) of (x) Holdings and its Subsidiaries taken as a whole after giving effect to the Transaction and (y) for purposes of Section 5.01, the Business. "Material Subsidiary" shall mean any Subsidiary having gross assets at any time with a value of at least 5% of consolidated gross assets of the Borrower and its Subsidiaries and/or gross revenues for the last four fiscal quarters of at least 5% of the consolidated gross revenues of the Borrower and its Subsidiaries. "Maximum RL Amount" shall mean at any time $150 million. "Maximum Swingline Amount" shall mean the lesser of $20,000,000 and the amount of the Total Revolving Commitment. "Minimum Borrowing Amount" shall mean (i) for Term Loans, Revolving Loans and Swingline Loans maintained as Base Rate Loans, $250,000 and (ii) for Term Loans and Revolving Loans maintained as Eurodollar Loans, $1,000,000. -90- "Mortgage" shall have the meaning provided in Section 5.01(k)(III). "Mortgage Policies" shall have the meaning provided in Section 5.01(k)(III). "Mortgaged Properties" shall mean the Real Property of UDLP and its Subsidiaries listed on Annex IV and designated as "Mortgaged Properties" therein. "Multiemployer Plan" shall mean any multiemployer plan as defined in section 4001(a)(3) of ERISA which is contributed to by (or to which there is an obligation to contribute of) Holdings or any of its Subsidiaries or an ERISA Affiliate and each such plan for the five year period immediately following the latest date on which Holdings, any such Subsidiary or ERISA Affiliate contributed to or had an obligation to contribute to such plan. "Net Cash Proceeds" shall mean, with respect to any Asset Sale, the Cash Proceeds resulting therefrom net (without duplication) of expenses of sale (including payment of principal, premium and interest of Indebtedness secured by the assets the subject of the Asset Sale and required to be, and which is, repaid under the terms thereof as a result of such Asset Sale), and incremental taxes paid or payable as a result thereof and other amounts owing to governmental entities as a result of such sale, it being understood that the Net Cash Proceeds from an FNSS Disposition consummated while the Seller Note is outstanding will be reduced by the amount of the proceeds of such FNSS Disposition applied to repay the Seller Note. "Non-Defaulting Lender" shall mean a Lender that is not a Defaulting Lender. "Note" shall mean and include each A Term Note, each B Term Note, each C Term Note, each Revolving Note and the Swingline Note. "Notice" shall have the meaning provided in Section 7.15. "Notice of Borrowing" shall have the meaning provided in Section 1.03. "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Administrative Agent at 130 Liberty Street, New York, New York or such other office as the Administrative Agent may designate to the Borrower in writing from time to time. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Administrative Agent, the Collateral Agent, the Documentation Agents or any Lender pursuant to the terms of this Agreement or any other Credit Document. -91- "Participant" shall have the meaning provided in Section 2.04(a). "Payment Office" shall mean the office of the Administrative Agent at 130 Liberty Street, New York, New York or such other office as the Administrative Agent may designate to the Borrower in writing from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Acquisition" shall have the meaning provided in Section 8.06(l). "Permitted Liens" shall mean Liens described in Section 8.03. "Person" shall mean any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any pension plan as defined in Section 3(2) of ERISA (other than a multiemployer plan as defined in Section 3(37) of ERISA), which is maintained or contributed to by (or to which there is an obligation to contribute of) Holdings or any of its Subsidiaries or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which Holdings, any such Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Pledge Agreement" shall have the meaning provided in Section 5.01(k)(I). "Pledged Securities" shall mean all the Pledged Securities as defined in the Pledge Agreement. "Prime Lending Rate" shall mean the rate which Bankers Trust Company announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers Trust Company may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "RCRA" shall mean the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 ET SEQ. "Real Property" of any Person shall mean all of the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Regulation D" shall mean Regulation D of the Board of Governors of -92- the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "Reinvestment Assets" shall mean any assets to be employed in the business of the Borrower and its Subsidiaries as described in Section 8.01. "Reinvestment Election" shall have the meaning provided in Section 4.02(A)(c). "Reinvestment Notice" shall mean a written notice signed by an Authorized Officer of the Borrower stating that the Borrower, in good faith, intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale to purchase, construct or otherwise acquire Reinvestment Assets. "Reinvestment Prepayment Amount" shall mean, with respect to any Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date relating thereto by which (a) the Anticipated Reinvestment Amount in respect of such Reinvestment Election exceeds (b) the aggregate amount thereof expended by Holdings and its Subsidiaries to acquire Reinvestment Assets. "Reinvestment Prepayment Date" shall mean, with respect to any Reinvestment Election, the earliest of (i) the date, if any, upon which the Administrative Agent, on behalf of the Required Lenders, shall have delivered a written termination notice to the Borrower, provided that such notice may only be given while an Event of Default under 9.01 exists, (ii) the date occurring 360 days after such Reinvestment Election and (iii) the date on which the Borrower shall have determined not to proceed with the purchase, construction or other acquisition of Reinvestment Assets with the related Anticipated Reinvestment Amount. "Relevant Test Period" shall mean, at any time, the Test Period ending on the last day of the then most recently ended fiscal quarter of the Borrower with respect to which an officer's certificate has been delivered to the Lenders pursuant to Section 7.01(e). "Replaced Lender" shall have the meaning provided in Section 1.13. "Replacement Lender" shall have the meaning provided in Section 1.13. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043. -93- "Required Lenders" shall mean Non-Defaulting Lenders the outstanding principal amount of Term Loans of which plus the Revolving Commitments (or, if the Total Revolving Commitment has been terminated, the Revolving Commitment immediately prior to such termination) of which constitute greater than 50% of the sum of the total outstanding principal amount of Term Loans and of the Revolving Commitments (or, if the Total Revolving Commitment has been terminated, the Revolving Commitment immediately prior to such termination) of all Non-Defaulting Lenders. "Required TF Lenders" with respect to the A Term Facility, the B Term Facility or the C Term Facility, respectively, shall mean Lenders the sum of whose outstanding Term Loans under such Facility represents an amount greater than 50% of the sum of all outstanding Term Loans under such Facility. "Revolving Commitment" shall mean, with respect to each Lender, the amount set forth opposite such Lender's name in Annex I hereto directly below the column entitled "Revolving Commitment," as the same may be (x) reduced or terminated from time to time pursuant to Section 3.02, 3.03 and/or 9 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 and/or 12.04. "Revolving Facility" shall mean the Facility evidenced by the Total Revolving Commitment. "Revolving Loan" shall have the meaning provided in Section 1.01(d). "Revolving Note" shall have the meaning provided in Section 1.05(a). "RF Lender" shall mean at any time each Lender with a Revolving Commitment or with outstanding Revolving Loans. "RF Percentage" shall mean at any time for each RF Lender, the percentage obtained by dividing such Lender's Revolving Commitment by the Total Revolving Commitment provided that if the Total Revolving Commitment has been terminated, the RF Percentage of each RF Lender shall be determined by dividing such RF Lender's Revolving Commitment immediately prior to such termination by the Total Revolving Commitment immediately prior to such termination. "RL Commitment Commission" shall have the meaning provided in Section 3.01(b). "Scheduled Repayment" shall have the meaning provided in Section 4.02(A)(b). "SEC" shall have the meaning provided in Section 7.01(h). -94- "SEC Regulation D" shall mean Regulation D as promulgated under the Securities Act of 1933, as amended, as the same may be in effect from time to time. "Section 4.04 Certificate" shall have the meaning provided in Section 4.04(b)(ii). "Secured Creditor" shall mean and include any Secured Creditor as defined in any Security Document. "Security Agreement" shall have the meaning provided in Section 5.01(k)(II). "Security Agreement Collateral" shall mean all "Collateral" as defined in the relevant Security Agreement. "Security Documents" shall mean the Pledge Agreement, the Security Agreement, each Mortgage and each Additional Mortgage, if any. "Seller" shall have the meaning provided in the Acquisition Agreement. "Seller Note" shall mean the promissory note issued by the Borrower to FMC Corporation, Harsco Corporation and/or Harsco UDLP Corporation in the principal amount of $50,000,000 pursuant to the Acquisition Agreement, which promissory note shall be consistent with the term sheet attached to the Supplemental Agreement No. 1, dated as of August 25, 1997, to the Acquisition Agreement and otherwise on terms and conditions satisfactory to the Administrative Agent. "Seller Note Documents" shall mean all agreements (including Supplemental Agreement No. 1, dated as of August 25, 1997, to the Acquisition Agreement), instruments governing and/or evidencing the Seller Note. "Senior Subordinated Note Documents" shall mean and include each of the documents, instruments (including the Senior Subordinated Notes) and other agreements entered into by the Borrower (including, without limitation, the Senior Subordinated Note Indenture and any documents in respect of any Senior Subordinated Notes issued upon the exchange offer as contemplated by the Senior Subordinated Note Indenture) relating to the issuance by the Borrower of the Senior Subordinated Notes, as in effect on the Initial Borrowing Date and as the same may be entered into, supplemented, amended or modified from time to time in accordance with the terms hereof and thereof. "Senior Subordinated Note Indenture" shall mean an Indenture entered into by and between the Borrower and Norwest Bank Minnesota, N.A., as trustee thereunder, with respect to Senior Subordinated Notes as in effect on the Initial Borrowing Date and as the same may be executed, modified, amended or supplemented from time to time in accordance with the terms hereof and thereof. -95- "Senior Subordinated Notes" shall mean the Senior Subordinated Notes due 2007 in an initial aggregate amount of $200,000,000 and issued by the Borrower under the Senior Subordinated Note Indenture and all Senior Subordinated Notes with substantially similar terms issued upon the exchange offer as contemplated in the Senior Subordinated Note Indenture, as in effect on the Initial Borrowing Date and as the same may be issued, supplemented, amended or modified from time to time in accordance with the terms thereof and hereof. "Specified Repayment" shall have the meaning provided in Section 4.02(B)(c). "Standby Letter of Credit" shall have the meaning provided in Section 2.01(a). "Stated Amount" of each Letter of Credit shall mean the maximum available to be drawn thereunder (regardless of whether any conditions for drawing could then be met). "Subsequent Borrowing Date" shall mean each date occurring after the Initial Borrowing Date and on or prior to the A Termination Date on which A Term Loans are incurred to refinance all or a portion of the Seller Note. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time, provided that "Subsidiary" shall in no event include any Joint Venture or any Foreign Subsidiary. Unless otherwise expressly provided, all references herein to "Subsidiary" shall mean a Subsidiary of Holdings. "Subsidiary Guarantors" shall mean each Domestic Subsidiary other than Inactive Subsidiaries. "Subsidiary Guaranty" shall have the meaning provided in Section 5.01(j). "Supermajority Lenders" shall mean Non-Defaulting Lenders the outstanding principal amount of Term Loans of which plus the Revolving Commitments (or, if the Total Revolving Commitment has been terminated, the Revolving Commitment immediately prior to such termination) of which constitute greater than 75% of the sum of the total outstanding principal amount of Term Loans and of the Revolving Commitments (or, if the Total Revolving Commitment has been terminated, the Revolving Commitment -96- immediately prior to such termination) of all Non-Defaulting Lenders. "Swingline Expiry Date" shall mean the date which is five Business Days prior to the A/RF Maturity Date. "Swingline Lender" shall mean BTCo or, in the event BTCo ceases to be Swingline Lender upon agreement with the Borrower, any Lender which at the request of the Borrower and the consent of the Administrative Agent agrees in such Lender's sole discretion to become the Swingline Lender. "Swingline Loan" shall have the meaning provided in Section 1.01(e). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Taxes" shall have the meaning provided in Section 4.04(a). "Term Commitment" shall mean for any Lender the sum of its A Term Commitment, its B Term Commitment and its C Term Commitment. "Term Loans" shall mean, collectively, the A Term Loans, the B Term Loans and the C Term Loans. "Test Period" shall mean at any time (i) for any determination made on or prior to September 30, 1998, the period (taken as one accounting period) from the Initial Borrowing Date to the last day of the fiscal quarter of the Borrower then ending or then last ended and (ii) for any determination made thereafter, the four consecutive fiscal quarters of the Borrower (taken as one accounting period) then ending or then last ended. "TL Commitment Commission" shall the meaning provided in Section 3.01(a). "Total A Term Commitment" shall mean the sum of the A Term Commitments of each of the Lenders. "Total B Term Commitment" shall mean the sum of the B Term Commitments of each of the Lenders. "Total C Term Commitment" shall mean the sum of the C Term Commitments of each of the Lenders. "Total Commitment" shall mean the sum of the Total A Term Commitment, the Total B Term Commitment, the Total C Term Commitment and the Total Revolving Commitment. "Total Revolving Commitment" shall mean the sum of the Revolving -97- Commitments of each of the Lenders. "Total Term Commitment" shall mean, at any time, the sum of the Total A Term Commitment, Total B Term Commitment and Total C Term Commitment. "Total Unutilized Revolving Commitment" shall mean, at any time, (i) the Total Revolving Commitment at such time less (ii) the sum of the aggregate principal amount of all Revolving Loans and Swingline Loans at such time plus the Letter of Credit Outstandings at such time. "Trade Letter of Credit" shall have the meaning provided in Section 2.01(a). "Transaction" shall mean (i) the consummation of the Equity Contribution, (ii) the consummation of the Acquisition, (iii) the issuance of the Senior Subordinated Notes and (iv) the incurrence of Term Loans and issuance of Letters of Credit, if any, on the Initial Borrowing Date. "Transaction Documents" shall mean the Acquisition Documents, the Equity Documents and the Senior Subordinated Note Documents. "Turkish JV Agreement" shall mean the Restated Joint Venture Agreement of FNSS, dated as of July 1, 1997, as in effect on the date hereof. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, I.E., a Base Rate Loan or Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code. "UDLP" shall mean United Defense, L.P., a Delaware limited partnership. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year, determined in accordance with actuarial assumptions at such time consistent with Statement of Financial Accounting Standards No. 87, exceeds the market value of the assets allocable thereto. "Unpaid Drawing" shall have the meaning provided in Section 2.03(a). "Unutilized Revolving Commitment" for any RF Lender at any time shall mean the excess of (i) the Revolving Commitment of such Lender over (ii) the sum of (x) the aggregate outstanding principal amount of Revolving Loans and Swingline Loans made by such Lender plus (y) an amount equal to such Lender's Adjusted RF Percentage of the Letter of Credit Outstandings at such time. "U.S." shall mean the United States of America. -98- "Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of such Person to the extent all of the capital stock or other ownership interests in such Subsidiary, other than directors' qualifying shares, is owned directly or indirectly by such Person. "Written" or "in writing" shall mean any form of written communication or a communication by means of telex, facsimile transmission, telegraph or cable. SECTION 11. THE AGENT. 11.01 APPOINTMENT. The Lenders hereby designate BTCo as Administrative Agent (for purposes of this Section 11, the terms "Administrative Agent" shall include BTCo in its capacity as Syndication Agent pursuant to this Agreement and as Collateral Agent pursuant to the Security Documents) to act as specified herein and in the other Credit Documents. The Lenders hereby designate Citibank, N.A. and Lehman Commercial Paper Inc. as Documentation Agents to act as specified herein and in the other Credit Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, any Agent to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of each Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. Each Agent may perform any of their duties hereunder by or through their respective officers, directors, agents, employees or affiliates. 11.02 NATURE OF DUTIES. The Agents shall not have any duties or responsibilities except those expressly set forth in this Agreement and the Security Documents. No Agent nor or any of its respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by their gross negligence or willful misconduct. The duties of the Agents shall be mechanical and administrative in nature; the Agents shall not have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon the Agents any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein. 11.03 LACK OF RELIANCE ON THE AGENTS. Independently and without reliance upon the Agents, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of Holdings and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of Holdings and its Subsidiaries and, except as expressly provided in this Agreement, the Agents shall not have any duty or -99- responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. The Agents shall not be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of Holdings and its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of Holdings and its Subsidiaries or the existence or possible existence of any Default or Event of Default. 11.04 CERTAIN RIGHTS OF THE AGENTS. If the Agents shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Agents shall be entitled to refrain from such act or taking such action unless and until the Agents shall have received instructions from the Required Lenders; and the Agents shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, neither any Lender nor the holder of any Note shall have any right of action whatsoever against the Agents as a result of the Agents acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders. 11.05 RELIANCE. Each of the Agents shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype, facsimile or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that such Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by such Agent. 11.06 INDEMNIFICATION. To the extent the Agents are not reimbursed and indemnified by the Borrower, each Defaulting Lender (to the extent so able) and the Non-Defaulting Lenders will reimburse and indemnify the Agents, in proportion to their respective Loans and Commitments, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Agents in performing their respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document; PROVIDED that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of any Agent. 11.07 THE AGENTS IN THEIR INDIVIDUAL CAPACITY. With respect to its obligation to make Loans under this Agreement, the Agents shall have the rights and powers -100- specified herein for a "Lender" and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term "Lenders," "Required Lenders," "holders of Notes" or any similar terms shall, unless the context clearly otherwise indicates, include the Agents in their individual capacity. The Agents may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if it were not performing the duties specified herein, and may accept fees and other consideration from Holdings, or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. 11.08 HOLDERS. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 11.09 RESIGNATION BY THE ADMINISTRATIVE AGENT. (a) The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days' prior written notice to the Borrower and the Lenders. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Required Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower. (c) If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower, shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above. (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 30th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent's resignation shall become effective and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above. -101- (e) Either Documentation Agent may resign from the performance of all of its functions and duties hereunder and/or under the other Credit Documents at any time by giving 5 Business Days' prior written notice to the Lenders. Such resignation shall take effect at the end of such 5 Business Days. SECTION 12. MISCELLANEOUS. 12.01 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of White & Case) and of the Agents and each of the Lenders in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel for the Agents and for each of the Lenders, provided that, except in the case of a bankruptcy of any Credit Party, no more than one counsel for the Agents and the Lenders may be used in any jurisdiction); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender (including in its capacity as Agent or Letter of Credit Issuer), its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not the Agents or any Lender is a party thereto and whether or not any such investigation, litigation or other proceeding is between or among the Agents, any Lender, any Credit Party or any third Person or otherwise) related to the entering into and/or performance of any Document or the use of the proceeds of any Loans hereunder or the Transaction or the consummation of any transactions contemplated in any Credit Document, or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property owned or at any time operated by the Borrower or any of its Subsidiaries, the release, generation, storage, transportation, handling or disposal of Hazardous Materials at any location, whether or not owned or operated by the Borrower or any of its Subsidiaries, the non-compliance of any Real Property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any Real Property, or any Environmental Claim asserted against the Borrower, any of its Subsidiaries or any Real Property owned or at any time operated by Holdings or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to -102- be indemnified or of any other Indemnitee who is such Person or an affiliate of such Person). 12.02 RIGHT OF SETOFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, if an Event of Default then exists, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special but not trust accounts) and any other Indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of any Credit Party against and on account of the Obligations and liabilities of such Credit Party to such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of such Credit Party purchased by such Lender pursuant to Section 12.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 12.03 NOTICES. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier, facsimile or cable communication) and mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered, if to a Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Lender, at its address specified for such Lender on Annex II hereto; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and shall be effective when received. 12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, PROVIDED that neither the Borrower nor Holdings may assign or transfer any of its rights or obligations hereunder without the prior written consent of the Lenders. Each Lender may at any time grant participations in any of its rights hereunder or under any of the Notes to another financial institution, PROVIDED that in the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, except that the participant shall be entitled to the benefits of Sections 1.10, 2.05 and 4.04 of this Agreement to the extent that such Lender would be entitled to such benefits if the participation had not been entered into or sold, and, PROVIDED FURTHER, that no Lender shall transfer, grant or assign any participation under which the participant shall have rights to approve any amendment to or waiver of this -103- Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating (it being understood that any waiver of the application of any prepayment or the method of any application of any prepayment to, the amortization of the Term Loans shall not constitute an extension of the final maturity date), or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant's participating interest in any Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment, or a mandatory prepayment, shall not constitute a change in the terms of any Commitment), (ii) release all or substantially all of the Collateral or (iii) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or any other Credit Document. (b) Notwithstanding the foregoing, (x) any Lender may assign all or a portion of its outstanding A Term Loans, B Term Loans and/or C Term Loans and/or A Term Commitment and/or Revolving Commitment and its rights and obligations hereunder to (i) one or more Lenders and/or Affiliates of such Lender which are Eligible Transferees or (ii) in the case of any Lender that is a fund that invests in loans, any other fund that invests in loans and is managed and/or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor, and (y) with the consent of the Administrative Agent and the Borrower (which consents shall not be unreasonably withheld), any Lender may assign all or a portion of its outstanding A Term Loans, B Term Loans and/or C Term Loans its A Term Commitment and/or Revolving Commitment) and its rights and obligations hereunder to one or more Eligible Transferees (treating any fund that invests in loans and any other fund that invests in loans and is managed and/or advised by the same investment advisor of such fund or by an Affiliate of such investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee). No assignment pursuant to the immediately preceding sentence shall to the extent such assignment represents an assignment to an institution other than one or more Lenders hereunder, be in an aggregate amount less than $5,000,000 unless the entire Commitment of the assigning Lender is so assigned. If any Lender so sells or assigns all or a part of its rights hereunder or under the Notes, any reference in this Agreement or the Notes to such assigning Lender shall thereafter refer to such Lender and to the respective assignee to the extent of their respective interests and the respective assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would if it were such assigning Lender. Each assignment pursuant to this Section 12.04(b) shall be effected by the assigning Lender and the assignee Lender executing an Assignment Agreement and giving the Administrative Agent written notice thereof. At the time of any such assignment, (i) either the assigning or the assignee Lender shall pay to the Administrative Agent a nonrefundable assignment fee of $3,500, (ii) Annex I shall be deemed to be amended to reflect the Commitments and Loans of the respective assignee (which shall result in a direct reduction to the Commitment or Commitments of the assigning Lender) and of the other Lenders, and (iii) upon surrender of the old Notes the -104- Borrower will, at its own expense, issue new Notes to the respective assignee and to the assigning Lender in conformity with the requirements of Section 1.05, PROVIDED FURTHER that such transfer or assignment will not become effective until recorded by the Administrative Agent on the Lender Register pursuant to Section 12.16. To the extent of any assignment pursuant to this Section 12.04(b) to a Person which is not already a Lender hereunder and which is not a United States Person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a Section 4.04 Certificate) described in Section 4.04(b). To the extent that an assignment pursuant to this Section 12.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, 1.11, 2.05, or 4.04 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). Nothing in this clause (b) shall prevent or prohibit any Lender from pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank and, with the consent of the Administrative Agent and the Borrower, any Lender which is a fund may pledge all or any portion of its Loans and Notes to its trustee in support of its obligations to its trustee. (c) Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participation therein shall be permitted if such transfer, assignment or grant would require the Borrower to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any State. (d) Each Lender initially party to this Agreement hereby represents, and each Person that became a Lender pursuant to an assignment permitted by this Section 12 will, upon its becoming party to this Agreement, represent that it is an Eligible Transferee which makes or invests in loans in the ordinary course of its business and that it will make or acquire Loans for its own account in the ordinary course of such business, PROVIDED that subject to the preceding clauses (a) and (b), the disposition of any promissory notes or other evidences of or interests in Indebtedness held by such Lender shall at all times be within its exclusive control. 12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Credit Party and any Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which any Agent or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of -105- the rights of the Agents or the Lenders to any other or further action in any circumstances without notice or demand. 12.06 PAYMENTS PRO RATA. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of any Credit Party in respect of any Obligations of such Credit Party hereunder, it shall distribute such payment to the Lenders (other than any Lender that has expressly waived its right to receive its pro rata share thereof) PRO RATA based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all of the Lenders in such amount, PROVIDED that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 12.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders. 12.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders), PROVIDED that (x) except as otherwise specifically provided herein, all computations of Excess Cash Flow and all computations determining compliance with Sections 8.11 through 8.14, inclusive, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 1996 historical financial statements of UDLP delivered to the Lenders pursuant to Section 6.10(b) and (y) that if at any time such computations utilize accounting principles different from those utilized in the financial statements furnished to the Lenders, such financial statements shall be accompanied by reconciliation work-sheets. (b) All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 365 or 366 days, as the case may be, provided -106- that interest on Eurodollar Loans shall be calculated on the actual number of days elapsed over a year of 360 days. 12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) This Agreement and the other Credit Documents and the rights and obligations of the parties hereunder and thereunder shall be construed in accordance with and be governed by the law of the state of New York. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York sitting in the Borough of Manhattan or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, each Credit Party hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Credit Party further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each Credit Party located outside New York City and by hand delivery to each Credit Party located within New York City, at its address for notices pursuant to Section 12.03, such service to become effective 30 days after such mailing. Each Credit Party hereby irrevocably designates appoints and empowers CT Corporation System, with offices on the date hereof located at 1633 Broadway, New York, New York 10019, as its agent for service of process in respect of any such action or proceeding. Nothing herein shall affect the right of the Administrative Agent, any Lender to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Credit Party in any other jurisdiction. (b) Each Credit Party hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) Each of the parties to this Agreement hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement, the other Credit Documents or the transactions contemplated hereby or thereby. 12.09 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 12.10 EFFECTIVENESS. This Agreement shall become effective on the date (the "Effective Date") on which Holdings, the Borrower and each of the Lenders shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent at the Payment Office of the Administrative Agent or, in -107- the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written telex or facsimile transmission notice (actually received) at such office that the same has been signed and mailed to it. 12.11 HEADINGS DESCRIPTIVE. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12 AMENDMENT OR WAIVER. Neither this Agreement nor any terms hereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Borrower, Holdings and the Required Lenders, PROVIDED that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) directly affected thereby, (i) extend the A TF Maturity Date, the B TF Maturity Date, the C TF Maturity Date or the RF Maturity Date (it being understood that any waiver of any prepayment of, or the method of application of any prepayment to the amortization of, the Loans shall not constitute any such extension), or extend any stated maturity of any Letter of Credit beyond the A/RF Maturity Date, or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees thereon, or reduce the principal amount thereof, or increase the Commitment of any Lender over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment or an adjustment of the Adjusted RF Percentages as a result of a Defaulting Lender shall not constitute a change in the terms of any Commitment of any Lender), (ii) amend, modify or waive any provision of this Section 12.12, (iii) reduce the percentage specified in, or (except to give effect to any additional facilities hereunder) otherwise modify, the definition of Required Lenders, (iv) consent to the assignment or transfer by the Borrower or Holdings of any of its rights and obligations under this Agreement or (v) release all or substantially all of the Collateral; PROVIDED FURTHER, that no such change, waiver, discharge or termination shall, (x) without the consent of the Required TF Lenders under a Facility, amend the definition of Required TF Lenders or amend, waive or reduce any Scheduled Repayment applicable to such Facility or any mandatory repayment applicable to such Facility to the extent such repayment is not then being waived with respect to all Facilities, (y) without the consent of the Letter of Credit Issuer or the Administrative Agent, as the case may be, amend any provision of Section 2 or 11, as the case may be or (z) without the consent of the Supermajority Lenders, release UDLP from the Subsidiary Guaranty. 12.13 SURVIVAL. All indemnities set forth herein including, without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.06 or 12.01 shall survive the execution and delivery of this Agreement and the making and repayment of the Loans. 12.14 DOMICILE OF LOANS. Each Lender may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Lender, PROVIDED that the Borrower shall not be responsible for costs arising under Section 1.10, 2.05 or 4.04 resulting from any such transfer (other than a transfer pursuant to Section 1.12) -108- to the extent not otherwise applicable to such Lender prior to such transfer. 12.15 CONFIDENTIALITY. Each of the Lenders agrees that it will use its best efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, counsel or other professional advisors, to affiliates or to another Lender if the Lender or such Lender's holding or parent company in its sole discretion determines that any such party should have access to such information) any information with respect to Holdings or any of its Subsidiaries which is furnished pursuant to this Agreement and which is designated by Holdings or the Borrower to the Lenders in writing as confidential; PROVIDED, that any Lender may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors or to the NAIC, (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation (notice of which will be promptly sent to the Borrower to the extent permitted by Law), (d) in order to comply with any law, order, regulation or ruling applicable to such Lender, and (e) to any prospective transferee in connection with any contemplated transfer of any of the Notes or any interest therein by such Lender; PROVIDED, that such prospective transferee is notified of the confidentiality requirements relating thereto and agrees to abide by such requirements. No Lender shall be obligated or required to return any materials furnished by Holdings or any Subsidiary. The Borrower and Holdings hereby agree that the failure of a Lender to comply with the provisions of this Section 12.15 shall not relieve the Credit Parties of any of their obligations to such Lender under this Agreement and the other Credit Documents. -109- 12.16 LENDER REGISTER. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 12.16, to maintain a register (the "Lender Register") on which it will record the Commitments from time to time of each of the Lender, the Loans made by each of the Lender and each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Lender Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Lender Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment Agreement pursuant to Section 12.04(b). The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 12.16 (but excluding such losses, claims, liabilities or liabilities incurred by reason of the Administrative Agent's gross negligence or willful misconduct). -110- SECTION 13. HOLDINGS GUARANTY. 13.01 THE GUARANTY. In order to induce the Lenders to enter into this Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by Holdings from the proceeds of the Loans and the issuance of the Letters of Credit, Holdings hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, acceleration or otherwise, of any and all of the Guaranteed Obligations. If any of the Guaranteed Obligations becomes due and payable hereunder, Holdings unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, together with any and all expenses which may be incurred by the Guaranteed Creditors in collecting any of the Guaranteed Obligations. If claim is ever made upon any Guaranteed Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event Holdings agrees that any such judgment, decree, order, settlement or compromise shall be binding upon Holdings, notwithstanding any revocation of this Guaranty or any other instrument evidencing any liability of the Borrower, and Holdings shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 13.02 BANKRUPTCY. Additionally, Holdings unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations to the Guaranteed Creditors whether or not due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 9.05, and unconditionally promises to pay such indebtedness on demand, in lawful money to the United States. 13.03 NATURE OF LIABILITY. The liability of Holdings hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations whether executed by Holdings, any other guarantor or by any other party, and the liability of Holdings hereunder is not affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty or undertaking as to the Guaranteed Obligations, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to the Guaranteed Creditors on the Guaranteed Obligations which any such Guaranteed Creditor repays to the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and Holdings waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 13.04 INDEPENDENT OBLIGATION. The obligations of Holdings hereunder are -111- independent of the obligations of any other guarantor, any other party or the Borrower, and a separate action or actions may be brought and prosecuted against Holdings whether or not action is brought against any other guarantor, any other party or the Borrower and whether or not any other guarantor, any other party or the Borrower be joined in any such action or actions. Holdings waives, to the full extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement hereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to Holdings. 13.05 AUTHORIZATION. Holdings authorizes the Guaranteed Creditors without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may substitute the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Guaranteed Creditors; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Guaranteed Creditors regardless of what liability or liabilities of the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, this Agreement, any other Credit Document or any of the instruments or -112- agreements referred to herein or therein, or otherwise amend, modify or supplement this Agreement, any other Credit Document or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of Holdings from its liabilities under this Guaranty. 13.06 RELIANCE. It is not necessary for the Guaranteed Creditors to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 13.07 SUBORDINATION. Any of the indebtedness of the Borrower now or hereafter owing to Holdings is hereby subordinated to the Guaranteed Obligations of the Borrower; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of the Borrower to Holdings shall be collected, enforced and received by Holdings for the benefit of the Guaranteed Creditors and be paid over to the Administrative Agent on behalf of the Guaranteed Creditors on account of the Guaranteed Obligations, but without affecting or impairing in any manner the liability of Holdings under the other provisions of this Guaranty. Prior to the transfer by Holdings of any note or negotiable instrument evidencing any of the indebtedness of the Borrower to Holdings, shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, Holdings hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash. 13.08 WAIVER. (a) Holdings waives any right (except as shall be required by applicable statute and cannot be waived) to require any Guaranteed Creditor (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party or (iii) pursue any other remedy in any Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or arising out of any defense of the Borrower, any other guarantor or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out the disability of the Borrower, any other guarantor or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower than payment in full of the Guaranteed Obligations. The Guaranteed Creditors may, at their election, foreclose on any security held by the Collateral Agent or any other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Guaranteed Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of Holdings hereunder -113- except to the extent the Guaranteed Obligations have been paid. (b) Holdings waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. Holdings assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances, bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which Holdings assumes and incurs hereunder, and agrees that the Guaranteed Creditors shall have no duty to advise Holdings of information known to them regarding such circumstances or risks. 13.09 ENFORCEMENT. The Guaranteed Creditors agree that this Guaranty may be enforced only by the action of the Administrative Agent or the Collateral Agent, in each case acting upon the instructions of the Required Lenders and no Guaranteed Creditor shall have any right individually to seek to enforce or to enforce this Guaranty or to realize upon the security to be granted by the Security Documents, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent for the benefit of the Creditors upon the terms of this Guaranty and the Security Documents. * * * -114- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. 1001 Pennsylvania Avenue, N.W. IRON HORSE INVESTORS, L.L.C. Suite 220 South Washington, D.C. 20004 Telecopy No.: 202-347-9250 By: Attention: Allan M. Holt ----------------------- Name: Title: 1001 Pennsylvania Avenue, N.W. UNITED DEFENSE INDUSTRIES, INC. Suite 220 South Washington, D.C. 20004 Telecopy No.: 202-347-9250 By: Attention: Allan M. Holt ----------------------- Name: Title: BANKERS TRUST COMPANY, Individually and as Administrative Agent and as Syndication Agent By: ------------------------- Name: Title: CITICORP USA, INC., Individually and as a Documentation Agent By: ------------------------- Name: Title: LEHMAN COMMERCIAL PAPER INC., Individually and as a Documentation Agent By: ------------------------- Name: Title: BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION By: ------------------------- Name: Title: THE BANK OF NOVA SCOTIA By: ------------------------- Name: Title: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By: ------------------------- Name: Title: By: ------------------------- Name: Title: CREDIT LYONNAIS NEW YORK BRANCH By: ------------------------- Name: Title: FLEET NATIONAL BANK By: ------------------------- Name: Title: MERITA BANK LTD NEW YORK BRANCH By: ------------------------- Name: Title: By: ------------------------- Name: Title: NATIONAL CITY BANK By: ------------------------- Name: Title: THE FIRST NATIONAL BANK OF CHICAGO By: ------------------------- Name: Title: PNC BANK, NATIONAL ASSOCIATION By: ------------------------- Name: Title: THE BANK OF NEW YORK By: ------------------------- Name: Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By: ------------------------- Name: Title: SANWA BUSINESS CREDIT CORPORATION By: ------------------------- Name: Title: BANKBOSTON, N.A. By: ------------------------- Name: Title: NATEXIS BANQUE BFCE, formerly BANQUE FRANCAISE DU COMMERCE EXTERIEUR By: ------------------------- Name: Title: CORESTATES BANK, N.A. By: ------------------------- Name: Title: CREDITANSTALT CORPORATE FINANCE, INC. By: ------------------------- Name: Title: DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: ------------------------- Name: Title: By: ------------------------- Name: Title: FIRST SOURCE FINANCIAL INC. By: ------------------------- Name: Title: FIRST UNION NATIONAL BANK By: ------------------------- Name: Title: HELLER FINANCIAL, INC. By: ------------------------- Name: Title: IMPERIAL BANK By: ------------------------- Name: Title: THE ROYAL BANK OF CANADA By: ------------------------- Name: Title: SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION By: ------------------------- Name: Title: ALLSTATE LIFE INSURANCE COMPANY By: ------------------------- Name: Title: APPALOOSA LIMITED PARTNERSHIP By: ------------------------- Name: Title: PRIME INCOME TRUST By: ------------------------- Name: Title: ING HIGH INCOME PRINCIPAL PRESERVATION OFFERING, L.P. ING CAPITAL ADVISORS, INC., as Investment Advisor By: ------------------------- Name: Title: MASSACHUSETTS MUTUAL By: ------------------------- Name: Title: METROPOLITAN LIFE INSURANCE COMPANY By: ------------------------- Name: Title: OAK HILL SECURITIES FUND, L.P. By: OAK HILL SECURITIES GENPAR, L.P., its General Partner By: OAK HILL SECURITIES MGP, INC., its General Partner By: ------------------------- Name: Title: OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (A UNIT OF THE CHASE MANHATTAN BANK) By: ------------------------- Name: Title: ROYALTON COMPANY By: PACIFIC INVESTMENT MANAGEMENT COMPANY, as its Investment Advisor By: ------------------------- Name: Title: PILGRIM AMERICA PRIME RATE TRUST By: ------------------------- Name: Title: PPM AMERICA INC. By: ------------------------- Name: Title: PARIBAS CAPITAL FUNDING LLC By: ------------------------- Name: Title: KZH SOLEIL CORPORATION By: ------------------------- Name: Title: ANNEX I COMMITMENTS
A Term B Term C Term Revolving Lender Commitment Commitment Commitment Commitment ------ ---------- ---------- ---------- ---------- Bankers Trust Company $9,868,421.05 $74,565,217.38 $72,634,784.62 $15,131,578.95 Citicorp USA, Inc. $9,868,421.05 $______________ $______________ $15,131,578.95 Lehman Commercial Paper Inc. $9,868,421.05 $ 5,072,463.77 $ 4,927,536.23 $15,131,578.95 Bank of America N.T. & S.A. $8,684,210.53 $______________ $______________ $13,315,789.47 Prime Income Trust $____________ $10,652,173.91 $10,347,826.09 $______________ Oak Hill Securities Fund, L.P. $____________ $10,652,173.91 $10,347,826.09 $______________ Pilgrim America Prime Rate Trust $____________ $10,652,173.91 $10,347,826.09 $______________ Merrill Lynch $____________ $5,073,463.77 $4,927,536.23 $______________ The Bank of New York $6,710,526.32 $______________ $______________ $10,289,473.68 Corestates Bank, N.A. $6,710,526.32 $______________ $______________ $10,289,473.68 The First National Bank of Chicago $6,710,526.32 $______________ $______________ $10,289,473.68 The Royal Bank of Canada $6,710,526.32 $______________ $______________ $10,289,473.68 Southern Pacific Thrift & Loan Assocation $6,710,526.32 $______________ $______________ $10,289,473.68 Appaloosa Limited Partnership $____________ $ 8,115,942.03 $ 7,884,057.97 $______________ ING Capital Advisors, Inc. $____________ $ 3,043,478.26 $ 2,956,521.74 $______________ Massachusetts Mutual $____________ $ 8,115,942.03 $ 7,884,057.97 $______________ PPM America, Inc. $____________ $ 8,115,942.03 $ 7,884,057.97 $______________ Trust Company of the West $____________ $ 7,101,449.28 $ 6,898,550.72 $______________ The Bank of Nova Scotia $4,342,105.26 $______________ $______________ $ 6,657,894.74 BankBoston, N.A. $4,342,105.26 $______________ $______________ $ 6,657,894.74 Banque Francaise du Commerce Exterieur $4,342,105.26 $______________ $______________ $ 6,657,894.74 Paribas Capital Funding LLC $4,342,105.26 $______________ $______________ $ 6,657,894.74 ANNEX I Page 2 Compagnie Financiere de CIC $4,342,105.26 $______________ $______________ $ 6,657,894.74 Credit Lyonnais New York Branch $4,342,105.26 $______________ $______________ $ 6,657,894.74 CreditAnstaldt Corporate Finance, Inc. $4,342,105.26 $______________ $______________ $ 6,657,894.74 Dresdner Bank, AG $4,342,105.26 $______________ $______________ $ 6,657,894.74 Fleet National Bank $4,342,105.26 $______________ $______________ $ 6,657,894.74 First Source Financial Inc. $4,342,105.26 $______________ $______________ $ 6,657,894.74 First Union National Bank $4,342,105.26 $______________ $______________ $ 6,657,894.74 Heller Financial, Inc. $4,342,105.26 $______________ $______________ $ 6,657,894.74 Imperial Bank $4,342,105.26 $______________ $______________ $ 6,657,894.74 Merita Bank Ltd New York Branch $4,342,105.26 $______________ $______________ $ 6,657,894.74 The Mitsubishi Trust and Banking Corporation $4,342,105.26 $______________ $______________ $ 6,657,894.74 National City Bank $4,342,105.26 $______________ $______________ $ 6,657,894.74 PNC Bank, N.A. $4,342,105.26 $______________ $______________ $ 6,657,894.74 Sanwa Business Credit Corporation $4,342,105.26 $______________ $______________ $ 6,657,894.74 Allstate Life Insurance Company $____________ $ 5,072,463.77 $ 4,927,536.23 $______________ Metropolitan Life $____________ $ 5,072,463.77 $ 4,927,536.23 $______________ Octagon Credit Investors $____________ $ 5,072,463.77 $ 4,927,536.23 $______________ KZH Soleil $____________ $ 5,072,463.77 $ 4,927,536.23 $______________ Royalton Company $____________ $ 3,550,724.64 $ 3,449,275.36 $______________ Total: $150,000,000.00 $175,000,000.00 $170,000,000.00 $230,000,000.00 --------------- -------------- -------------- -------------- --------------- -------------- -------------- --------------
ANNEX II ADDRESSES Bankers Trust Company 130 Liberty Street New York, New York 10006 Attention: Anthony Logrippo Telephone. No.: 212-250-4886 Telecopier No.: 212-250-7218 Citicorp USA, Inc. 399 Park Avenue New York, New York 10043 Attention: John Podkowsky Telephone No.: 212-559-3540 Telecopier No.: 212-559-____ Lehman Commercial Paper Inc. 3 World Financial Center New York, New York 10285 Attention: Dennis Dee Telephone No.: 212-566-4059 Telecopier No.: 212-528-0819 Attention: Michelle Swanson Telephone No.: 212-526-0330 Telecopier No.: 212-528-0819 ANNEX II Page 2 Bank of America National Trust & Savings Association 335 Madison Avenue New York, New York 10017 Attention: Elizabeth Borow Telephone No.: 212-503-8236 Telecopier No.: 212-503-7502 The Bank of New York One Wall Street New York, NY 10286 Attention: David Seigel Telephone No.: (212) 635-6899 Telecopier No.: (212) 635-6434 Attention: Helen Sarro Telephone No.: (212) 635-7196 Telecopier No.: (212) 635-7345 Attention: Alan Lyster Telephone No.: (212) 635-6895 Attention: Helen Sarrow Telephone No.: (212) 635-6898 Telecopier No.: (212) 635-6434 The Bank of Nova Scotia One Liberty Plaza New York, NY 10006 Attention: James Trimbel Telephone No.: (212) 225-5011 Telecopier No.: (212) 225-5090 BankBoston, N.A. 100 Federal Street Diversified Finance Boston, MA 02110 ANNEX II Page 3 Attention: Gregory Clark Telephone No.: (617) 434-8223 Telecopier No.: (617) ________ Banque Francaise du Commerce Exterieur 645 Fifth Avenue New York, NY 10022 Attention: Bill Maier Telephone No.: (212) 872-5050 Telecopier No.: (212) 872-5045 Compagnie Financiere de CIC et de L'Union Europeenne 520 Madison Avenue - 37th Floor New York, NY 10022 Attention: Brian O'Leary Telephone No.: (212) 715-4422 Telecopier No.: (212) 715-4535 Corestates Bank, N.A. 1339 Chestnut Street Philadelphia, PA 19107 Attention: John Brady Telephone No.: (215) 973-2160 Telecopier No.: (215) 973-6745 CreditAnstalt Corporate Finance, Inc. 4 Embarcadero Center Suite 1630 San Francisco, CA 94111 Attention: Greg Roux Telephone No.: (415) 788-1371 Telecopier No.: (415) 788-0622 Dresdner Bank, AG ANNEX II Page 4 75 Wall Street New York, NY 10005 Attention: Peter Kay Telephone No.: (212) 429-3203 Telecopier No.: (212) ________ Credit Lyonnais New York Branch 1301 Avenue of the Americas 18th Floor New York, NY 10019 Attention: Attila Koc Telephone No.: (212) 261-7358 Telecopier No.: (212) 459-3176 First Source Financial LLP 2850 West Golf Road 5th Floor Rolling Meadows, IL 60008 Attention: Mike Danehl Telephone No.: (847) 734-2059 Telecopier No.: (847) 734-7910 Fleet National Bank One Federal Street Mail Stop: MA OF 0308 Boston, MA 02110 Attention: Robert Rubino Telephone No.: (617) 346-4853 Telecopier No.: (617) 346-4806 with a copy to: One Landmark Square 12th Floor Stamford, CT 06904 ANNEX II Page 5 Attention: Gary Kearns Telephone No.: (203) 358-2029 Telecopier No.: (203) 358-6111 The First National Bank of Chicago One First National Plaza Chicago, IL 60670 Attention: Ann Kalaska Telephone No.: (312) 732-1028 Telecopier No.: (312) 732-3596 with a copy to: 153 West 51st Street New York, NY 10019 Attention: Lynn Dillon Telephone No.: (212) 373-1373 Telecopier No.: (212) 373-1403 Attention: Amy Golz Telephone No.: (212) 373-1023 Telecopier No.: (212) 373-1180 First Union National Bank 301 South College Street, 19th Floor TW 18 Charlotte, NC 28288 Attention: Dave Sozio Telephone No.: (704) 760-5943 Telecopier No.: (704) 760-3300 Attention: Kevin McGrath Telephone No.: (704) 760-5920 Telecopier No.: (704) 760-3300 Attention: Campbell Tucker Telephone No.: (704) 374-8565 ANNEX II Page 6 Telecopier No.: (704) ________ Heller Financial, Inc. 500 West Monroe Street Chicago, IL 60661 Attention: Kathy Inorio Telephone No.: (312) 441-7775 Telecopier No.: (312) 441-7357 Merita Bank Ltd New York Branch 437 Madison Avenue 21st Floor New York, NY 10022 Attention: Frank Maffei Telephone No.: (212) 318-9561 Telecopier No.: (212) 318-9318 The Mitsubishi Trust and Banking Corporation 520 Madison Avenue 26th Floor New York, NY 10022 Attention: David Lerner Telephone No.: (212) 891-8371 Telecopier No.: (212) 644-6825 National City Bank National City Center 1900 East Ninth Street - Location #2102 Cleveland, OH 44114 ANNEX II Page 7 Attention: Andrew Walshaw Telephone No.: (216) 575-2193 Telecopier No.: (216) 575-9396 PNC Bank, National Association Fifth Avenue and Wood Street Suite 3140 Pittsburgh, PA 15522 Attention: Jim Fink Telephone No.: (412) 762-8746 Telecopier No.: (412) ________ 345 Park Avenue - 29th Floor New York, NY 10154 Attention: Tom Caldwell Telephone No.: (212) 409-3700 Telecopier No.: (212) 409-____ Royal Bank of Canada 1 Financial Square Old Slip and Front Street 24th Floor New York, NY 10005 Attention: Michael Korine Telephone No.: (212) 428-6258 Telecopier No.: (212) 428-6459 Sanwa Business Credit Corporation One South Wacker Drive Suite 2800 Chicago, IL 60606 Attention: Greg Cooper Telephone No.: (312) 853-1401 Telecopier No.: (312) 782-6035 ANNEX II Page 8 Southern Pacific Thrift & Loan Association 12300 Wilshire Blvd. Suite 200 Los Angeles, CA 90025 Attention: Chris Kelleher Telephone No.: (310) 442-3351 Telecopier No.: (310) 207-4067 Allstate Life Insurance Company Allstate Plaza West Northbrook, IL 60062 Attention: Jane Nelson Telephone No.: (708)_____________ Telecopier No.: (708) 402-5199 Appaloosa Limited Partnership 51 JFK Parkway Short Hills, NJ 07078 Attention: Jim Bolin Telephone No.: (201) 376-5400 Telecopier No.: (201) 376-5415 Prime Income Trust Two World Trade Center New York, NY 10048 Attention: Rafael Scolari Telephone No.: (212) 392-5686 Telecopier No.: (212) 392-5345 Ing High Income Principal Preservation 333 South Grand Avenue Los Angeles, CA 90071 Attention: Kathleen Lenarcic ANNEX II Page 9 Telephone No.: (213) 346-3971 Telecopier No.: (213) 346-3995 Massachusetts Mutual 1295 State Street Springfield, MA 01111 Attention: John Wheeler Telephone No.: (413) 744-6228 Telecopier No.: (413) 744-2022 Metropolitan Life 334 Madison Street Convent Station, NJ 07691 Attention: James Dingler Telephone No.: (201) 254-3206 Telecopier No.: (201) 254-3050 Oak Hill Securities 65 East 55th St., 32nd Floor New York, NY 10022 Attention: Scott Krase Telephone No.: (212) 326-1551 Telecopier No.: (212) 593-3596 Octagon Credit Investors 380 Madison Avenue 12th Floor New York, NY 10017 Attention: Richard Stewart Telephone No.: (212) 622-3070 Telecopier No.: (212) 622-3797 ANNEX II Page 10 Royalton Company 840 Newport Center Drive Newport Beach, CA 92658 Attention: Jason Roziak Telephone No.: (714) 640-3407 Telecopier No.: (714) 725-6839 Pilgrim America Prime Rate Trust Pilgrim America Prime Income Trust Two Renaissance Square 40 North Central Avenue Suite 1200 Phoenix, AZ 85004 Attention: Tim Hunt Telephone No.: (602) 417-8257 Telecopier No.: (602) 417-8327 PPM America Inc. 225 West Wacker Drive Suite 1200 Chicago, IL 60606 Attention: Michael Dire Telephone No.: (312) 634-2500 Telecopier No.: (312) 634-0054 Imperial Bank 9920 S. La Cienega Blvd, 14th Fl. Inglewood, CA, 90301 Attention: John Faivace Telephone No.: (310) 417-5676 Telecopier No.: (310) 417-5997 ANNEX II Page 11 Paribas Capital Funding LLC 787 Seventh Avenue New York, NY 10019 Attention: Eric Green Telephone No.: (212) 841-2535 Telecopier No.: (212) 841-2144 KZH-Soleil Corporation c/o The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, NY 10001 Attention: Virginia Conway Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 ANNEX X ADDED EBITDA Test Period Ending: Amount ------------------- ------ December 31, 1997 $100,600,000 plus September EBITDA (as defined below) March 31, 1998 $ 50,900,000 plus September EBITDA June 30, 1998 September EBITDA September EBITDA shall mean the Consolidated EBITDA of UDLP for the quarter ending September 30, 1997 as provided to the Administrative Agent no later than 60 days after the Initial Borrowing Date by the Borrower, provided same is calculated on a basis satisfactory to the Administrative Agent. EX-5.1 17 EXHIBIT 5.1 OPINION OF L&W [LATHAM & WATKINS LETTERHEAD] December 31, 1997 United Defense Industries, Inc. 1525 Wilson Boulevard, Suite 700 Arlington, Virginia 22209-2411 Re: Registration Statement on Form S-4 ---------------------------------- Ladies and Gentlemen: In connection with the registration of $200,000,000 aggregate principal amount of its 8-3/4% Senior Subordinated Notes due 2007, Series B (the "New Notes") by United Defense Industries, Inc., a corporation incorporated under the laws of the State of Delaware (the "Company"), together with guarantees of the New Notes (the "Guarantees") by UDLP Holdings Corp., a Delaware corporation, Iron Horse Investors, L.L.C., a Delaware limited liability company, and United Defense, L.P., a Delaware limited partnership (collectively, the "Guarantors"), on Form S-4 filed with the Securities and Exchange Commission (the "Commission") on December 31, 1997 (the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. The New Notes will be issued pursuant to an indenture (the "Indenture"), dated as of October 6, 1997, among the Company and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). The New Notes will be issued in exchange for the Company's outstanding 8-3/4% Senior Subordinated Notes due 2007, Series A (the "Old Notes") on the terms set forth in the prospectus contained in the Registration Statement and the Letter of Transmittal filed as an exhibit thereto (the "Exchange Offer"). In our capacity as your special counsel, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise United Defense Industries, Inc. December 31, 1997 Page 2 identified to our satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies. We are opining herein as to the effect on the subject transactions only of the internal laws of the State of New York and the General Corporation Law of the State of Delaware and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or, in the case of Delaware, any other laws, or as to any matters of municipal law or the laws of any local agencies within any state. Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof: 1. The New Notes, when duly executed, issued, authenticated and delivered in accordance with the terms of the Exchange Offer and the Indenture, will be legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 2. The Guarantees, when duly executed and delivered and when the New Notes are duly executed, issued, authenticated and delivered in accordance with the terms of the Exchange Offer and the Indenture, will be legally valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms. The opinions rendered in paragraphs 1 and 2 above are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought and (iii) we express no opinion concerning the enforceability of the waiver of rights or defenses contained in Section 4.06 of the Indenture. To the extent that the obligations of the Company and the Guarantors under the Indenture may be dependent upon such matters, we have assumed for purposes of this opinion that (i) the Trustee is validly existing and in good standing under the laws of its jurisdiction of organization; (ii) the Trustee has been duly qualified to engage in the activities contemplated by the Indenture; (iii) the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; (iv) the Trustee is in compliance generally, and with respect United Defense Industries, Inc. December 31, 1997 Page 3 to acting as Trustee under the Indenture, with all applicable laws and regulations; and (v) the Trustee has the requisite organizational and other power and authority to perform its obligations under the Indenture. We have not been requested to express and, with your knowledge and consent, do not render any opinion with respect to the applicability to the obligations of the Company or the Guarantors under the New Notes, the Guarantees or the Indenture of Sections 547 and 548 of Title 11 of the Bankruptcy Reform Act of 1978, as amended, or applicable state law (including, without limitation, Article 10 of the New York Debtor & Creditor Law) relating to fraudulent transfers and obligations. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters". Very truly yours, /s/ Latham & Watkins EX-10.11 18 EXHIBIT 10.11 TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT This TRANSITION SERVICES AGREEMENT (this "AGREEMENT") is made as of October 6, 1997, by and among FMC Corporation, a Delaware corporation ("FMC"), United Defense, L.P., a Delaware limited partnership ("UDLP"), and United Defense Industries, Inc. (formerly known as Iron Horse Acquisition Corp.), a Delaware corporation ("BUYER"). FMC, UDLP and Buyer are referred to herein collectively as the "PARTIES" and individually as a "PARTY." W I T N E S S E T H: WHEREAS, pursuant to that certain Purchase Agreement, dated as of August 25, 1997, by and among FMC, Harsco Corporation, Harsco UDLP Corporation and Buyer (the "PURCHASE AGREEMENT"), Buyer has agreed to acquire all of the outstanding partnership interests of UDLP; WHEREAS, pursuant to the Management Services Agreement between FMC and UDLP, dated as of January 1, 1994 (the "MANAGEMENT SERVICES AGREEMENT"), FMC has provided certain administrative, corporate and other services to UDLP; WHEREAS, Buyer desires that, after the Closing, FMC continue to provide to Buyer or an Affiliate of Buyer certain of such services on a transitional basis; and WHEREAS, capitalized terms used herein and not otherwise defined herein have the meanings given to such terms in the Purchase Agreement; NOW, THEREFORE, in consideration of the premises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: 1. TRANSITION SERVICES. Upon the terms and subject to the conditions set forth in this Agreement, during the term of this Agreement as set forth in Section 5 below (the "TRANSITION PERIOD"), FMC shall provide, or cause its Affiliates to provide, to Buyer or its Affiliates, from the date of this Agreement and for the period of time set forth in Section 5 with respect to each of the services, the respective services set forth on ANNEX A attached hereto, and such other transition assistance as may be agreed upon by FMC and Buyer during the Transition Period, in the manner and at a relative level of service, where applicable, consistent in all material respects with that provided by FMC and/or its Affiliates prior to the date hereof. Unless otherwise agreed by FMC and Buyer, such services shall be provided at the cost specified beside each such service on ANNEX A. 2. BILLING AND PAYMENT. Buyer shall pay, or cause to be paid, net of any applicable withholding taxes, any bills and invoices that it receives from FMC for services provided by FMC or any of its Affiliates under or pursuant to this Agreement. Such charges may, at FMC's option, be billed as incurred if the amount involved equals or exceeds $10,000, or, if such charges do not exceed $10,000, at the end of each calendar month during the Transition Period. All invoices shall, not later than thirty (30) days following receipt by Buyer of FMC's invoice, be paid by wire transfer in accordance with the written instructions provided by FMC, subject to receiving from FMC, if reasonably requested by Buyer, any appropriate support documentation for such bills and invoices. Services requiring use of checks issued by FMC or other fund transfers by FMC on behalf of Buyer will be provided only to the extent funded by a Buyer account or to the extent that Buyer provides FMC with immediately available funds prior to FMC's issuance of the check or the fund transfer, as the case may be. 3. GENERAL INTENT. Buyer and its Affiliates agree to use reasonable commercial efforts to end their need to use the assistance contemplated by this Agreement with respect to each service specified in ANNEX A attached hereto not later than the end of the period specified in Section 5 below or ANNEX A attached hereto for the provision of each such service. 4. VALIDITY OF DOCUMENTS. The Parties shall be entitled to rely upon the genuineness, validity or truthfulness of any document, instrument or other writing presented in connection with this Agreement unless such document, instrument or other writing appears on its face to be fraudulent, false or forged. 5. TERM OF AGREEMENT. The term of this Agreement shall commence on the date hereof and shall continue (unless sooner terminated pursuant to the terms hereof) for a period of six (6) months, or such earlier, shorter or longer period as may be agreed upon by FMC and Buyer or provided in ANNEX A attached hereto with respect to particular services described in ANNEX A attached hereto. 6. PARTIAL TERMINATION. Any and all of the services provided hereunder are only terminable earlier than the period specified in Section 5 above or ANNEX A attached hereto by Buyer on thirty (30) days' prior written notice to FMC. Any such termination shall be final. 7. ACCESS. Subject to Section 10 below, with respect to each service provided by FMC or any of its Affiliates hereunder, Buyer and FMC shall provide the other Party and its personnel with access to the equipment, office and storage space and systems relating to such service during normal business hours for the term of the applicable Transition Period to the extent reasonably required in connection with the provision of such services hereunder; PROVIDED that such access shall be supervised by the appropriate personnel of the Parties. 8. TERMINATION OF MANAGEMENT SERVICES AGREEMENT. FMC and UDLP agree that the Management Services Agreement shall be terminated as of the date hereof and that management services shall be provided by FMC to Buyer and its Affiliates from and after the date hereof only pursuant to this Agreement, subject to the terms and conditions contained herein. -2- 9. ASSIGNMENT. This Agreement shall not be assignable in whole or in part by any Party hereto without the prior written consent of the other Parties hereto, except that Buyer may assign any of its rights under this Agreement to UDLP or any of Buyer's other Affiliates. 10. CONFIDENTIALITY. Each Party shall cause each of its Affiliates and each of their respective officers, directors and employees to hold all information relating to the business of the other Parties disclosed to it by reason of this Agreement confidential and will not disclose any of such information to any person or entity unless legally compelled to disclose such information; PROVIDED, HOWEVER, that to the extent that any of them may become so legally compelled they may only disclose such information if they shall first have used reasonable efforts to, and, if practicable, shall have afforded the other Parties the opportunity to obtain, an appropriate protective order or other satisfactory assurance of confidential treatment for the information required to be so disclosed. 11. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 12. LIMITATION OF LIABILITY. No Party shall be liable to the other or any third party for any special, consequential or exemplary damages (including lost or anticipated revenues or profits relating to the same) arising from any claim relating to this Agreement or any of the services provided hereunder, whether such claim is based on warranty, contract, tort (including negligence or strict liability) or otherwise, even if an authorized representative of such Party is advised of the possibility or likelihood of the same. 13. COUNTERPARTS. This Agreement may be executed in one or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. 14. NOTICES. Unless otherwise indicated herein, all notices, requests, demands or other communications to FMC and Buyer shall be deemed to have been given or made when deposited in the mails, registered or certified mail, return receipt requested, postage prepaid, or by means of overnight delivery service when delivered to such service addressed or by facsimile to FMC or Buyer at the following address: TO FMC: FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 Attention: General Counsel Fax No. (312) 861-6012 -3- COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Glen E. Hess, P.C. Fax No. (312) 861-2200 TO BUYER: Iron Horse Acquisition Corp. c/o TC Group, L.L.C. 1001 Pennsylvania Avenue, N.W. Suite 220 South Washington, D.C. 20004 Attention: Allan M. Holt Fax No.: (202) 347-9250 COPY TO: Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Attention: Bruce E. Rosenblum Fax No.: (202) 637-2201 15. MODIFICATION, NONWAIVER, SEVERABILITY. Neither this Agreement nor any part hereof may be changed, altered or amended orally. Any modification must be by written instrument signed by FMC and Buyer. Failure by any Party to exercise promptly any right granted herein or to require strict performance of any obligation imposed hereunder shall not be deemed a waiver of such right. If any provision of this Agreement is held ineffective for any reason, the other provisions shall remain effective. 16. INTERPRETATION. The headings and captions contained in this Agreement and in ANNEX A attached hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The use of the word "including" herein shall mean "including without limitation." 17. NO STRICT CONSTRUCTION. The language used in this Agreement shall be deemed to be the language chosen by the Parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person or entity. 18. ENTIRE AGREEMENT. This Agreement and the Purchase Agreement contain the entire agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter. 19. RELATIONSHIP OF PARTIES. Except as specifically provided herein, none of the Parties shall act or represent or hold itself out as having authority to act as an agent or partner of any -4- other Party, or in any way bind or commit any other Party to any obligations. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust or other association of any kind, each Party being individually responsible only for its obligations as set forth in this Agreement. 20. FORCE MAJEURE. If FMC is prevented from complying, either totally or in part, with any of the terms or provisions of this Agreement by reason of fire, flood, storm, strike, lockout or other labor trouble, any law, order, proclamation, regulation, ordinance, demand or requirement of any governmental authority, riot, war, rebellion or other causes beyond the reasonable control of FMC, or other acts of God, then upon written notice to Buyer, the affected provisions and/or other requirements of this Agreement shall be suspended during the period of such disability and FMC shall have no liability to Buyer in connection therewith. FMC shall use reasonable efforts to remove such disability within thirty (30) days of giving notice of such disability. 21. USE AND RESALE. The services provided by FMC or its Affiliates to Buyer or its Affiliates hereunder shall be used only by Buyer and its Affiliates solely in connection with the operation of the business of UDLP or its successor entities and neither Buyer nor any of its Affiliates shall resell, license the use of or otherwise permit the use by others of any such services except in the ordinary course of business consistent with past practice in the conduct of the business of UDLP. * * * * * -5- IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date and year first set forth above. FMC CORPORATION By: /s/ Charlotte Mitchell Smith ------------------------------- Title: Assistant Secretary UNITED DEFENSE, L.P. By: UDLP Holdings Corp. Title: Managing General Partner By: /s/ Allan M. Holt -------------------------- Title: President UNITED DEFENSE INDUSTRIES, INC. By: /s/ Allan M. Holt ------------------------------- Title: President -6- EX-10.12 19 TECHNOLOGY & ENVIRONMENT SERV. AGREEMENT TECHNOLOGY AND ENVIRONMENTAL SERVICES AGREEMENT This TECHNOLOGY AND ENVIRONMENTAL SERVICES AGREEMENT (this "AGREEMENT") is made as of October 6, 1997, by and among FMC Corporation, a Delaware corporation ("FMC"), and United Defense Industries, Inc. (formerly known as Iron Horse Acquisition Corp.), a Delaware corporation ("BUYER"). FMC and Buyer are referred to herein collectively as the "PARTIES" and individually as a "PARTY." W I T N E S S E T H: WHEREAS, prior to the date hereof, FMC's Corporate Technology Center ("CTC") and other business units of FMC have provided certain technology, environmental and other similar services to United Defense, L.P. ("UDLP") and FMC; WHEREAS, pursuant to that certain Purchase Agreement, dated as of August 25, 1997, by and among FMC, Harsco Corporation, Harsco UDLP Corporation and Buyer (the "PURCHASE AGREEMENT"), FMC has agreed to transfer to UDLP at the Closing (i) all of FMC's right, title and interest in and to CTC (other than the real property associated therewith) and (ii) certain personnel performing CTC and corporate services for FMC and UDLP prior to the Closing (the "SERVICE PERSONNEL"), and Buyer has agreed to acquire all of the outstanding partnership interests of UDLP; WHEREAS, FMC desires that, after the Closing, Buyer, UDLP or another Affiliate of Buyer continue to provide to FMC certain of such services formerly provided by CTC to FMC for the term specified herein; and WHEREAS, capitalized terms used herein and not otherwise defined herein have the meanings given to such terms in the Purchase Agreement; NOW, THEREFORE, in consideration of the premises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: 1. APPLICABLE SERVICES. Upon the terms and subject to the conditions set forth in this Agreement, during the term of this Agreement as set forth in Section 4 below (the "SERVICE PERIOD"), Buyer shall provide, or cause its Affiliates to provide, to FMC or its Affiliates, from the date of this Agreement and for the period of time set forth in Section 4 with respect to each of the services, the respective services set forth on ANNEX A attached hereto, and such other assistance as may be agreed upon by FMC and Buyer during the Service Period, in the manner and at a relative level of service, where applicable, consistent in all material respects with that provided by the Service Personnel prior to the date hereof. Unless otherwise agreed by FMC and Buyer, such services shall be provided at the cost specified beside each such service on ANNEX A. 2. BILLING AND PAYMENT. FMC shall pay, or cause to be paid, net of any applicable withholding taxes, any bills and invoices that it receives from Buyer for services provided by Buyer or any of its Affiliates under or pursuant to this Agreement. Such charges may, at Buyer's option, be billed as incurred if the amount involved equals or exceeds $10,000, or if such charges do not exceed $10,000, at the end of each calendar month during the Service Period. All invoices shall, not later than thirty (30) days following receipt by FMC of Buyer's invoice, be paid by wire transfer in accordance with the written instructions provided by Buyer, subject to receiving from Buyer, if reasonably requested by FMC, any appropriate support documentation for such bills and invoices. Services requiring use of checks issued by Buyer or other fund transfers by Buyer on behalf of FMC will be provided only to the extent funded by a FMC account or to the extent that FMC provides Buyer with immediately available funds prior to Buyer's issuance of the check or the fund transfer, as the case may be. 3. VALIDITY OF DOCUMENTS. The Parties shall be entitled to rely upon the genuineness, validity or truthfulness of any document, instrument or other writing presented in connection with this Agreement unless such document, instrument or other writing appears on its face to be fraudulent, false or forged. 4. TERM OF AGREEMENT. The term of this Agreement shall commence on the date hereof and shall continue (unless sooner terminated pursuant to the terms hereof) for a period of [five (5) years], or such earlier, shorter or longer period as may be agreed upon by FMC and Buyer or provided in ANNEX A attached hereto with respect to particular services described in ANNEX A attached hereto; PROVIDED that unless either party gives written notice of its desire to terminate this Agreement at least 180 days prior to the date of the expiration of such five-year term, this Agreement shall be automatically renewed for an additional five-year term. 5. PARTIAL TERMINATION. Any and all of the services provided hereunder are only terminable earlier than the period specified in Section 4 above or ANNEX A attached hereto by FMC on thirty (30) days' prior written notice to Buyer. Any such termination shall be final. 6. ACCESS. Subject to Section 8 below, with respect to each service provided by Buyer or any of its Affiliates hereunder, Buyer and FMC shall provide the other Party and its personnel with access to the equipment, office and storage space and systems relating to such service during normal business hours for the term of the applicable Service Period to the extent reasonably required in connection with the provision of such services hereunder; PROVIDED that such access shall be supervised by the appropriate personnel of the Parties. 7. ASSIGNMENT. This Agreement shall not be assignable in whole or in part by any Party hereto without the prior written consent of the other Parties hereto, except that FMC may assign any of its rights under this Agreement to any of FMC's Affiliates. -2- 8. CONFIDENTIALITY. Each Party shall cause each of its Affiliates and each of their respective officers, directors and employees to hold all information relating to the business of the other Parties disclosed to it by reason of this Agreement confidential and will not disclose any of such information to any person or entity unless legally compelled to disclose such information; PROVIDED, HOWEVER, that to the extent that any of them may become so legally compelled they may only disclose such information if they shall first have used reasonable efforts to, and, if practicable, shall have afforded the other Parties the opportunity to obtain, an appropriate protective order or other satisfactory assurance of confidential treatment for the information required to be so disclosed. 9. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 10. LIMITATION OF LIABILITY. No Party shall be liable to the other or any third party for any special, consequential or exemplary damages (including lost or anticipated revenues or profits relating to the same) arising from any claim relating to this Agreement or any of the services provided hereunder, whether such claim is based on warranty, contract, tort (including negligence or strict liability) or otherwise, even if an authorized representative of such Party is advised of the possibility or likelihood of the same. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. 12. NOTICES. Unless otherwise indicated herein, all notices, requests, demands or other communications to FMC and Buyer shall be deemed to have been given or made when deposited in the mails, registered or certified mail, return receipt requested, postage prepaid, or by means of overnight delivery service when delivered to such service addressed or by facsimile to FMC or Buyer at the following address: TO FMC: FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 Attention: General Counsel Fax No. (312) 861-6012 COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Glen E. Hess, P.C. Fax No. (312) 861-2200 TO BUYER: Iron Horse Acquisition Corp. -3- c/o TC Group, L.L.C. 1001 Pennsylvania Avenue, N.W. Suite 220 South Washington, D.C. 20004 Attention: Allan M. Holt Fax No.: (202) 347-9250 COPY TO: Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Attention: Bruce E. Rosenblum Fax No.: (202) 637-2201 13. MODIFICATION, NONWAIVER, SEVERABILITY. Neither this Agreement nor any part hereof may be changed, altered or amended orally. Any modification must be by written instrument signed by FMC and Buyer. Failure by any Party to exercise promptly any right granted herein or to require strict performance of any obligation imposed hereunder shall not be deemed a waiver of such right. If any provision of this Agreement is held ineffective for any reason, the other provisions shall remain effective. 14. INTERPRETATION. The headings and captions contained in this Agreement and in ANNEX A attached hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The use of the word "including" herein shall mean "including without limitation." 15. NO STRICT CONSTRUCTION. The language used in this Agreement shall be deemed to be the language chosen by the Parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person or entity. 16. ENTIRE AGREEMENT. This Agreement and the Purchase Agreement contain the entire agreement and understanding among the Parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter. 17. RELATIONSHIP OF PARTIES. Except as specifically provided herein, none of the Parties shall act or represent or hold itself out as having authority to act as an agent or partner of any other Party, or in any way bind or commit any other Party to any obligations. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust or other association of any kind, each Party being individually responsible only for its obligations as set forth in this Agreement. 18. FORCE MAJEURE. If Buyer is prevented from complying, either totally or in part, with any of the terms or provisions of this Agreement by reason of fire, flood, storm, strike, lockout -4- or other labor trouble, any law, order, proclamation, regulation, ordinance, demand or requirement of any governmental authority, riot, war, rebellion or other causes beyond the reasonable control of Buyer, or other acts of God, then upon written notice to FMC, the affected provisions and/or other requirements of this Agreement shall be suspended during the period of such disability and Buyer shall have no liability to FMC in connection therewith. Buyer shall use reasonable efforts to remove such disability within thirty (30) days of giving notice of such disability. * * * * * -5- IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date and year first set forth above. FMC CORPORATION By: /s/ Charlotte Mitchell Smith ---------------------------- Title: Assistant Secretary UNITED DEFENSE INDUSTRIES, INC. By: /s/ Allan M. Holt ----------------- Title: President -6- EX-10.13 20 AMENDED & RESTATED LEASE AGMT DATED 10/6/97 AMENDED AND RESTATED LEASE AGREEMENT by and between FMC CORPORATION as LANDLORD and UNITED DEFENSE, L.P. as TENANT Dated as of: October 6, 1997 TABLE OF CONTENTS Page ---- 1. Demise of Premises . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 2 3. Title and Condition. . . . . . . . . . . . . . . . . . . . . . . . . 4 4. Use of Leased Premises; Quiet Enjoyment. . . . . . . . . . . . . . . 5 5. Term; Renewal Option . . . . . . . . . . . . . . . . . . . . . . . . 5 6. Cancellation Option. . . . . . . . . . . . . . . . . . . . . . . . . 6 7. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8. Net Lease; Non-Terminability . . . . . . . . . . . . . . . . . . . . 7 9. Payment of Impositions; Compliance with Law. . . . . . . . . . . . . 8 10. Liens; Recording and Title . . . . . . . . . . . . . . . . . . . . . 8 11. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . . 9 13. Alterations. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 14. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 15. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 16. Restoration; Reduction of Rent . . . . . . . . . . . . . . . . . . .14 17. Assignment and Subletting. . . . . . . . . . . . . . . . . . . . . .15 18. Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . .16 19. Conditional Limitations; Default Provision . . . . . . . . . . . . .17 20. Additional Rights of Landlord. . . . . . . . . . . . . . . . . . . .18 -ii- 21. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 22. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . .19 23. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 24. No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . .20 25. Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . .21 26. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . .21 27. Amendment and Restatement of Existing Lease. . . . . . . . . . . . .21 EXHIBITS Exhibit A (Land) Exhibit B (Buildings) Exhibit C (Building Equipment) Exhibit D (Land Improvements) SCHEDULES Schedule I (Annual Rent and Term for Each Parcel) -iii- AMENDED AND RESTATED LEASE AGREEMENT AMENDED AND RESTATED LEASE AGREEMENT, made as of October 6, 1997, between FMC CORPORATION, a Delaware corporation ("LANDLORD"), with an address of 200 East Randolph Drive, Chicago, Illinois 60601, and UNITED DEFENSE, L.P., a Delaware limited partnership ("TENANT"), with an address of 1525 Wilson Boulevard, Suite 700, Arlington, Virginia 22209. RECITALS: A. Landlord is a party to and Tenant is the subject of a certain Purchase Agreement by and among Landlord, Harsco Corporation, a Delaware corporation, Harsco UDLP Corporation, a Pennsylvania business corporation, and Iron Horse Acquisition Corp., a Delaware corporation ("BUYER"), dated as of August 25, 1997 (the "PURCHASE AGREEMENT"), whereby Landlord and Harsco will cause to be sold to Buyer all of the general partner and limited partner interests of Tenant. Capitalized terms used herein and not expressly defined herein shall have the definition given to them in the Purchase Agreement. B. The execution and delivery of this Agreement by Landlord and Tenant is a condition to the sale of the general partner and limited partner interests to Buyer. In consideration of the rents and provisions herein stipulated to be paid and performed, Landlord and Tenant hereby covenant and agree as follows: 1. DEMISE OF PREMISES. Landlord hereby demises and lets to Tenant, and Tenant hereby takes and leases from Landlord, for the term or terms and upon the provisions hereinafter specified, the following described property (collectively, the "LEASED PREMISES"): (i) each of the five (5) parcels of real property described and depicted in EXHIBIT A attached hereto and made a part hereof, together with the easements, rights and appurtenances thereunto belonging or pertaining (collectively, the "LAND"); (ii) the buildings, structures now constructed on the Land and as more particularly described on EXHIBIT B attached hereto (the "BUILDINGS"); (iii) all machinery and equipment installed therein or used therewith and more particularly described on EXHIBIT C attached hereto (collectively, the "BUILDING EQUIPMENT"); and (iv) the roadways, driveways, utilities and other improvements owned by Landlord and located on, over or under the Land more particularly described on EXHIBIT D attached hereto (collectively the "LAND IMPROVEMENTS"). The Building Equipment does not include trade fixtures, production equipment, machinery and related tools and equipment and other assets existing at the Leased Premises immediately prior to the Commencement Date transferred and conveyed to Tenant pursuant to the Section 5(g) of the Purchase Agreement, which shall remain the property of Tenant during and after the term of this Lease. Each parcel of the Leased Premises is hereinafter individually referred to from time to time as a "LEASED PROPERTY". The Leased Premises shall not include any parcel or improvements thereon with respect to any period following the termination or cancellation of this lease with respect thereto. -1- 2. CERTAIN DEFINITIONS. "ADDITIONAL RENT" shall have the meaning ascribed to it in paragraph 7(b). "ADJOINING PROPERTY" shall mean all sidewalks, curbs, gores and vault spaces adjoining any of the Leased Premises. "ALTERATIONS" shall mean all changes, additions, improvements or repairs to, all alterations, reconstruction, renewals or removals of and all substitutions or replacements for any of the Building and Land Improvements or Building Equipment, both interior and exterior, structural and nonstructural, and ordinary and extraordinary, the cost of which exceeds, in any instance, $500,000.00. "BASIC RENT" shall have the meaning ascribed to it in paragraph 7(a). "BASIC RENT PAYMENT DATES" shall have the meaning ascribed to it in paragraph 7(a). "BUILDING EQUIPMENT" shall have the meaning ascribed to it in paragraph 1. "CANCELED PREMISES" shall have the meaning ascribed to it in paragraph 6. "COMMENCEMENT" or "COMMENCEMENT DATE" shall have the meaning ascribed to it in paragraph 5(a). "CONDEMNATION" shall mean a Taking or a Requisition. "CONDEMNATION NOTICE" shall mean notice or knowledge of the initiation of or intention to initiate any proceeding for Condemnation. "DEFAULT RATE" shall have the meaning ascribed to it in paragraph 7(c). "EVENT OF DEFAULT" shall have the meaning ascribed to it in paragraph 19(a). "IMPOSITIONS" shall have the meaning ascribed to it in paragraph 9(a). "IMPROVEMENTS" shall mean collectively the Buildings and the Land Improvements as defined in paragraph 1. "LAND" shall have the meaning ascribed to it in paragraph 1. "LAW" shall mean any constitution, statute, rule of law, code, ordinance, order, judgment, decree, injunction, rule, regulation or requirement, whether now existing or hereafter enacted even if unforeseen or extraordinary, of every duly constituted governmental authority, court, agency, or subdivision of any of the foregoing. -2- "LEASED PREMISES" shall have the meaning ascribed to it in paragraph 1. "LEASED PROPERTY" shall have the meaning ascribed to it in paragraph 1. "LEGAL REQUIREMENTS" shall mean all present and future Laws other than Laws relating to environmental protection, and all covenants, restrictions and conditions now or hereafter of record which may be applicable to Landlord, Tenant or to any of the Leased Premises, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction of any of the Leased Premises, even if compliance therewith necessitates structural changes or improvements or results in interference with the use or enjoyment of any of the Leased Premises. "NET AWARD" shall mean the entire award payable to Landlord by reason of a Condemnation, less any expenses incurred by Landlord in collecting such award. "NET PROCEEDS" shall mean the entire proceeds of any insurance required under paragraph 15(a), to the extent payable to Landlord, less any expenses incurred by Landlord in collecting such proceeds. "PURCHASE AGREEMENT" shall have the meaning ascribed to it in paragraph A of the Recitals hereto. "PERMITTED ENCUMBRANCES" shall mean, with respect to the Leased Premises, all encumbrances and other matters affecting title of the type described in clauses (i) - (ix) of Section 4C(f) of the Purchase Agreement. "PERMITTED USES" shall have the meaning ascribed to it in paragraph 4(b). "PERSON" shall mean any individual, partnership, association, corporation or other entity. "REMAINING LEASED PREMISES" shall have the meaning ascribed to it in paragraph 14(c). "REMAINING SUM" shall have the meaning ascribed to it in paragraph 16(a). "RENT" shall mean Basic Rent and Additional Rent. "REQUISITION" shall mean any temporary requisition or confiscation of the use or occupancy of any of the Leased Premises by any governmental authority, civil or military, whether pursuant to an agreement with such governmental authority in settlement of or under threat of any such requisition or confiscation, or otherwise. "RESTORATION SUM" shall have the meaning ascribed to it in paragraph 14(c). "SET-OFF" shall have the meaning ascribed to it in paragraph 8(a). -3- "STATE" shall mean the State of California. "STRUCTURAL COMPONENTS" shall have the meaning ascribed to it in paragraph 12(a). "TAKING" shall mean any taking of any of the Leased Premises in or by condemnation or other eminent domain proceedings pursuant to any Law, general or special, or by reason of any agreement with any condemnor in settlement of or under threat of any such condemnation or other eminent domain proceeding, or by any other means, or any de facto condemnation. "TERM" shall have the meaning ascribed to it in paragraph 5. "EXPIRATION DATES" shall have the meaning ascribed to it in paragraph 5. 3. TITLE AND CONDITION. (a) The Leased Premises are demised and let subject only to the Permitted Encumbrances. The representations and warranties set forth in Sections 4C(f) and 4C(n) of the Purchase Agreement are hereby incorporated herein by reference and made with respect to the Leased Premises, subject to all terms and limitations of Section 11 of the Purchase Agreement, and any breach of such representations and warranties with respect to the Leased Premises herein shall be treated in accordance with Section 11 of the Purchase Agreement. (b) EXCEPT AS OTHERWISE SET FORTH IN THE PURCHASE AGREEMENT OR THIS LEASE: (i) LANDLORD HAS NOT MADE AND WILL NOT MAKE ANY INSPECTION OF ANY OF THE LEASED PREMISES; (ii) LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES "AS IS, WHERE IS AND WITH ALL FAULTS" SUBJECT, HOWEVER, TO THE REPRESENTATIONS AND WARRANTIES OF LANDLORD MADE HEREIN; (iii) TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES OTHER THAN AS SPECIFICALLY SET FORTH HEREIN; AND (iv) LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO FOR ANY DAMAGES RELATED THERETO EXCEPT FOR SUCH DAMAGES AS ARE DIRECTLY ATTRIBUTABLE TO SUCH BREACH OF A REPRESENTATION OR WARRANTY EXPRESSLY SET FORTH HEREIN (INCLUDING STRICT LIABILITY IN TORT). (c) Landlord hereby assigns, without recourse or warranty whatsoever, to Tenant all warranties, guaranties and indemnities, express or implied, and similar rights which Landlord may have against any manufacturer, seller, engineer, contractor or builder in respect of any of the Leased Premises, including any rights and remedies existing under contract or pursuant to the Uniform Commercial Code and including all warranties then existing relating to the purchase by Landlord of the Leased Premises or the construction of the Improvements thereon. Such assignment shall remain in effect so long as no Event of Default which has not been cured by Tenant and which -4- Tenant is not in the process of curing pursuant to paragraph 19(a) exists hereunder or until the termination of this Lease. Upon the occurrence and during the continuance of an Event of Default or upon termination of this Lease, such assignment shall cease and all the said warranties, guaranties, indemnities and other rights shall automatically revert to Landlord without the requirement of any further action by the parties. (d) If Landlord desires to sell all or any of the Leased Premises during the Term, Landlord shall notify Tenant of such sale promptly upon entering any written agreement for such sale. Any sale of the Leased Premises by Landlord shall be subject to this Lease and all of Tenant's rights hereunder. Landlord and Landlord's purchaser shall certify in writing to Tenant that Landlord has delivered a true and accurate copy of this Lease, including any amendments and supplements thereto and any notices issued hereunder to date of sale, to the purchaser, and Landlord's transaction documents shall include a specific notice to the purchaser by Landlord and a specific agreement by said purchaser that the Leased Premises are conveyed under and subject to this Lease. (e) Landlord shall not cause or permit the Leased Premises to be or become subject during the Term to any lien other than a lien permitted under paragraph 3(a). 4. USE OF LEASED PREMISES; QUIET ENJOYMENT. (a) No Alterations may be made except in accordance with paragraph 13. Tenant shall not permit any unlawful occupation, business or trade to be conducted on any of the Leased Premises or any use to be made thereof contrary to any applicable Legal Requirement then in effect. Tenant shall not use or occupy or permit any of the Leased Premises to be used or occupied, nor do or permit anything to be done in or on any of the Leased Premises, in a manner which would or might reasonably be expected to (i) violate any certificate of occupancy or Law affecting any of the Leased Premises, (ii) make void or voidable any insurance then in force with respect to any of the Leased Premises, (iii) make it impossible to obtain fire or other insurance which Tenant is required to furnish hereunder, (iv) cause material structural injury to any of the Improvements, or (v) constitute a public or private nuisance or waste. Subject to the foregoing, and the remaining terms and conditions of this Lease, Tenant may make any lawful use of the Leased Premises reasonably related to the operation of the business currently conducted thereon. (b) Landlord represents and warrants to Tenant that Landlord owns the Leased Premises in fee simple subject to the Permitted Encumbrances and has the full right and authority to lease same to Tenant. So long as no Event of Default exists hereunder, Landlord covenants that Tenant shall peacefully and quietly occupy and enjoy the Leased Premises for the uses and purposes existing as of the date hereof or otherwise permitted pursuant to the terms of this Lease (the "PERMITTED USES"); and Landlord shall defend such peaceful and quiet enjoyment against the claims of all parties other than parties claiming by or through Tenant; provided that Landlord may enter upon and examine any of the Leased Premises at reasonable times and may take such action with respect to the Leased Premises as is permitted by any provision hereof. 5. TERM; RENEWAL OPTION. -5- (a) Subject to the provisions hereof, Tenant shall have and hold the Leased Premises for a term (the "TERM") commencing on the Closing Date of the Purchase Agreement (the "COMMENCEMENT DATE") and ending with respect to each Leased Property on the date indicated on SCHEDULE I attached hereto and made a part hereof (each an "Expiration Date", respectively). (b) Tenant shall have the right to renew such term with respect to one or more of Parcels 3B (subject to Section 6 hereof), 4, 6 and 7 for an additional period of four (4) years, with Basic Rent as determined as set forth below, upon written notice to Landlord not less than sixty (60) days prior to the expiration of such term, provided that if Tenant desires to exercise such option with respect to Parcel 4 or 7, respectively, Tenant shall be required to also exercise such option with respect to Parcel 7 or 4, respectively. If Tenant gives Landlord notice of its election to extend the term of this Lease with respect to one or more of Parcels 4, 6 and 7 in accordance with this paragraph 5, Landlord and Tenant shall each select one (1) MAI certified real estate appraiser who is duly licensed to perform such appraisals in the State and is experienced in performing appraisals of industrial plant real property in the Santa Clara area. The appraisers shall agree to a Basic Rent with respect to such parcels taking into consideration the market rental rates for similar properties in the Santa Clara area and submit the same in writing to Landlord and Tenant within forty-five (45) days following their appointment. If the two (2) appraisers cannot agree, their separate determinations shall be averaged and such average shall be deemed to be their decision. If Landlord and Tenant both accept the decision of the two (2) appraisers, such decision shall be the Basic Rent for such parcels. If either Landlord or Tenant rejects the decision of the two (2) appraisers, the two (2) appraisers shall jointly select a third appraiser who is qualified hereunder within ten (10) days following notice of rejection. The third appraiser shall submit a proposed Basic Rent with respect to such parcels within thirty (30) days following appointment. So long as the third appraiser's proposed Basic Rent with respect to such parcels is neither less than 80% of nor more than 120% of the original two (2) appraisers' decision (whether determined by their agreement or by averaging), it shall be final and binding on Landlord and Tenant as the Basic Rent for such parcels. If the third appraiser's proposed Basic Rent with respect to such parcels is less than 80% of the previous appraisers' decision, it shall be increased to equal 80% of said amount, and if it is more than 120% of the previous appraisers' decision, it shall be decreased to equal 120% of said amount and shall thereafter be final and binding on Landlord and Tenant as the Basic Rent for such parcels. 6. CANCELLATION OPTION. At any time following December 31, 1998, Landlord or Tenant may, upon 180 days prior written notice to the other party, cancel this Lease with respect to parcel 3B as described and depicted on attached EXHIBIT A and all appurtenances, Building Equipment and Improvements located on such parcel (the "CANCELED PREMISES"). Upon such partial cancellation by Landlord, this Lease shall be of no further force and effect with respect to the Canceled Premises and Tenant shall immediately leave and surrender the Canceled Premises to Landlord in accordance with all requirements of this Lease, including paragraph 23 of this Lease 7. RENT. (a) Tenant shall pay to Landlord as annual rent for each Leased Property included in the Leased Premises the amount indicated on SCHEDULE I attached hereto for such Leased Property (collectively, the "BASIC RENT"), in equal monthly installments commencing on the Commencement -6- Date and continuing on the first day of each month thereafter during the Term (the said days being called the "BASIC RENT PAYMENT DATES"), and shall pay the same at Landlord's address set forth above, or at such other places or to such other Persons as Landlord from time to time may designate to Tenant in writing. Each rental payment shall be made in funds which at the time of such payment shall be legal tender for the payment of public or private debts in the United States of America. If the Commencement Date shall be other than the first day of the month in which the Commencement Date falls, pro rata Basic Rent for the period from the Commencement Date through the last day of the month in which the Commencement Date falls shall be paid on the first Basic Rent Payment Date. In no event shall Tenant be charged Basic Rent, Additional Rent (as hereinafter defined) or any other sums hereunder, or have any duties or obligations whatsoever hereunder with respect to a given Leased Property if the term of this Lease with respect to such Leased Property has expired or been canceled pursuant to paragraph 6, other than any duties or obligations which arose prior to such expirations or cancellation; provided, however, that Tenant shall not be required to complete any repairs to the Structural Components required pursuant to paragraphs 12(a) or 15(c) if such repair cannot reasonably be completed prior to the expiration of the Term. (b) Tenant shall pay and discharge when the same shall become due, as additional rent, all other amounts and obligations which Tenant assumes or agrees to pay or discharge pursuant to this Lease, together with every fine, penalty, interest and cost which may be lawfully added by the third party payee or collecting authority for nonpayment or late payment thereof (collectively, "ADDITIONAL RENT"). In the event of any failure by Tenant to pay or discharge any of the foregoing, Landlord shall have all rights, powers and remedies provided herein, by law or otherwise, in the event of nonpayment of Basic Rent. Any unearned prepaid Rent existing at expiration of the Term or at the time of any permitted termination of this Lease by Tenant or Landlord shall be paid to Tenant within thirty (30) days following such expiration or termination. (c) In the event of and from and after the date of occurrence of any Event of Default in the payment of any sum payable hereunder by Tenant as Rent and until such Event of Default is fully cured, Tenant shall pay to Landlord, within ten (10) days following demand by Landlord, as Additional Rent, interest on the principal amount of the unpaid sums at the annual rate (the "DEFAULT RATE") which is equal to one-month LIBOR on the following sums until paid in full: (i) all overdue installments of Basic Rent from the respective due dates thereof, (ii) all overdue amounts of Additional Rent relating to obligations which Landlord shall have paid on behalf of Tenant, from the date of payment thereof by Landlord, and (iii) on all other overdue amounts of Additional Rent from the date Landlord demands payment. If, at any time, any sum paid or payable by Tenant to Landlord under any provision of this Lease exceeds the maximum amount permitted by applicable law, such sum shall be immediately and automatically reduced to the maximum amount permitted by applicable law and any sum paid in excess of such maximum amount shall, as of the date of such payment, be automatically credited to the advance payment of Basic Rent next becoming due and otherwise unpaid. (d) In the event of termination of this Lease as to the entire Leased Premises pursuant to paragraph 14(a) or 14(c) of this Lease, Tenant's obligation to pay Rent or any other sum payable under this Lease by Tenant shall terminate on the effective date of such termination. -7- 8. NET LEASE; NON-TERMINABILITY. (a) This is a net lease and Basic Rent, Additional Rent and all other sums payable hereunder by Tenant shall be paid without notice or demand, and without set-off, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense (collectively, a "SET-OFF"). (b) This Lease shall not terminate, Tenant shall not have any right to terminate this Lease during the Term (except as otherwise expressly provided herein, including paragraph 6, or in the Participation Agreement), Tenant shall not be entitled to any Set-Off of or to Basic Rent, Additional Rent or any other sums payable under this Lease (except as otherwise expressly provided herein), and the obligations of Tenant under this Lease shall not be affected by any interference with Tenant's use of any of the Leased Premises unless such interference results from Landlord's failure to defend and provide for Tenant's quiet and peaceable possession and enjoyment of the Leased Premises. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent covenants and agreements, that Basic Rent, Additional Rent and all other sums payable by Tenant hereunder shall continue to be payable in all other events, and shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease. 9. PAYMENT OF IMPOSITIONS; COMPLIANCE WITH LAW. (a) Subject to the provisions of paragraph 18 hereof relating to contests, Tenant shall, before interest or penalties are due thereon, pay and discharge as Additional Rent hereunder all real and personal property taxes, all charges for any easement or agreement maintained for the benefit of any of the Leased Premises, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, all charges for utility and communication services relating to any of the Leased Premises, and all other public charges whether of a like or different nature, even if unforeseen or extraordinary, to the extent imposed upon or assessed against for periods of time during the Term (i) Tenant or any of the Leased Premises or (ii) any activity conducted on the Leased Premises by Tenant (collectively, the "IMPOSITIONS"). In the event that any assessment against any of the Leased Premises may be paid in installments, Tenant shall have the option to pay such assessment in installments; and, in such event, Tenant shall be liable only for those installments which become due and payable during the Term. Tenant shall prepare and file all tax reports required by governmental authorities which relate to the Impositions. Tenant shall deliver to Landlord, within fifteen (15) days of receipt thereof, copies of all settlements and notices pertaining to the Impositions which may be issued by any governmental authority and, within ninety (90) days after the end of each calendar year of the Term, receipts for payments of all Impositions made during such year. (b) Tenant shall promptly comply with and conform to all of the Legal Requirements, subject to the provisions of paragraph 18 hereof. -8- 10. LIENS; RECORDING AND TITLE. (a) Subject to the provisions of paragraph 18 hereof relating to contests, Tenant shall not, directly or indirectly, create or permit to be created or to remain, and shall promptly discharge or remove, any lien on any of the Leased Premises or Basic Rent, Additional Rent or any other sums payable by Tenant under this Lease, other than any Permitted Encumbrances and any mortgage, lien, encumbrance or other charge created by or resulting from any act or omission of Landlord before or after Commencement. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS, OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED PREMISES. (b) If requested by Landlord or Tenant, the other party shall, at the expense of the requesting party, execute, deliver and, when appropriate, record, file or register from time to time all such instruments as may be required by any present or future Law in order to evidence the respective interests of Landlord and Tenant in any of the Leased Premises and shall, cause this Lease, or a memorandum of this Lease, and any supplement hereto or to such other instrument, if any, as may be appropriate, to be recorded, filed or registered and re-recorded, refiled or re-registered in such manner and in such places as may be required or permitted by any present or future Law in order to publish notices and protect the validity or priority of this Lease. (c) Nothing in this Lease and no action or inaction by Landlord shall be deemed or construed to mean that Landlord has granted to Tenant any right, power or permission to do any act or to make any agreement which may create, give rise to, or be the foundation for, any right, title, interest or lien in or upon the estate of Landlord, subject to this Lease, in any of the Leased Premises. 11. INDEMNIFICATION. Tenant hereby agrees to indemnify and defend Landlord and its officers and directors against, and hold them harmless from, any loss, liability, claim, damage or expense (including reasonable legal fees and expenses, collectively, a "LOSS") for or on account of or arising from or in connection with or otherwise with respect to (i) any liability assumed by Tenant under any of this Lease and (ii) the conduct of the business of Tenant at the Leased Premises after the Commencement Date and any liability of Tenant incurred in connection therewith or relating thereto. Pursuant to the terms of this indemnity, the Landlord shall be indemnified by Tenant against Losses or claims of third parties arising from the liabilities and business activities of Tenant described in the preceding sentence and made against the Landlord's officers, directors or employees by reason of the fact that such Persons are officers, directors, or employees of the Landlord, except in cases of Landlord's own negligence or wilful misconduct, or instances of default under this Lease by Landlord. The termination of any claim, issue or matter with respect to Landlord by judgment or settlement shall not in itself create a presumption that the Landlord is not entitled to an indemnity hereunder. -9- 12. MAINTENANCE AND REPAIR. (a) Tenant shall at all times maintain the Leased Premises and, to the extent required by applicable Legal Requirements, the Adjoining Property in substantially the same condition of repair and appearance existing at Commencement in compliance with all Legal Requirements now or hereafter enacted, and, in the case of the Building Equipment, in as good mechanical condition as it was in at the Commencement, except for ordinary wear and tear, and, with the exception of the roofs and the material structural elements of the Improvements (collectively, the "STRUCTURAL COMPONENTS"), shall promptly perform all work (substantially equivalent in quality and workmanship to the original work) of every kind and nature, whether foreseen or unforeseen, which may be required to be made upon or in connection with any of the Leased Premises in order to keep and maintain the Land and Improvements in as good repair and appearance as they were at Commencement, except for ordinary wear and tear. Tenant's obligations under this paragraph 12 shall include, but not be limited to, maintaining and repairing the following: (i) all heating, air-conditioning and ventilating equipment and systems, and all utility conduits, fixtures and equipment; (ii) all interior walls and surfaces; (iii) all floors and ceilings; (iv) all signs; (v) all glass, windows and doors; and (vi) all landscaping, roadways, parking or other exterior improvements to the Land (including ice and snow removal). Landlord shall not be required to perform any work, whether foreseen or unforeseen, or to maintain any of the Leased Premises or Adjoining Property in any way other than with respect to the Structural Components. In the event that the Structural Components shall require repair or restoration during the term hereof, then, subject to paragraph 15(c), Landlord shall make or cause to be made such repairs or restoration as shall be required to maintain the Structural Components in normal operating condition promptly and with reasonable diligence following written notice of the need therefor from Tenant, provided that Tenant shall, if requested so to do by Landlord, cause such repairs to be made, in which case Landlord shall pay for the cost of such repairs promptly following receipt of invoices therefor. Any work performed by Tenant pursuant to this Subparagraph (a) or pursuant to Subparagraph (b) of this paragraph 12 shall be made in conformity with the provisions of paragraph 13. (b) In the event that any Improvement, constructed by Tenant after Commencement, shall encroach upon any property, street or right-of-way adjoining any of the Leased Premises or upon any Adjoining Property, shall violate the provisions of any restrictive covenant affecting any of the Leased Premises, shall hinder or obstruct any easement or right-of-way to which any of the Leased Premises is subject, or shall impair the rights of others in, to or under any of the foregoing, Tenant shall, promptly after receiving notice or otherwise acquiring knowledge thereof, either (i) obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation, hindrance, obstruction or impairment, whether the same shall affect Landlord, Tenant or both, or (ii) take such action and perform such work as shall be necessary to remove all such encroachments, hindrances or obstructions and to end all such violations or impairments. (c) Landlord shall have the right (but no obligation), upon notice to Tenant (or without notice in case of emergency), to enter upon any of the Leased Premises for the purpose of performing any work which may be necessary by reason of Tenant's failure to comply with any provision of subparagraphs (a) and (b) of this paragraph 12. Promptly thereafter, Landlord shall -10- notify Tenant of such entry (if occurring in emergency without prior notice) and shall specify the cost thereof. Except in case of emergency, the right of entry shall be exercised at reasonable times and at reasonable hours. The cost of any such entry, together with the cost of all work performed in connection therewith, shall be Additional Rent; and Tenant shall pay the same to Landlord within ten (10) days following written demand therefor by Landlord which shall be accompanied by an itemized statement of such costs. If not paid by Tenant within thirty (30) days after proper demand by Landlord, any sums payable under this paragraph 12(c) shall thereafter be subject to payment by Tenant of interest thereon at the Default Rate. 13. ALTERATIONS. Except as otherwise provided in this paragraph 13 and in paragraph 12, Tenant shall not (a) make any Alterations or (b) construct upon the Land any additional Improvements, without the prior written approval of Landlord. Such approval shall not be unreasonably withheld by Landlord, taking into account the Permitted Uses. In addition, Tenant shall not do any other act which, in the reasonable opinion of Landlord, tends to materially impair the value of the Leased Premises for the Permitted Uses. In the event that Landlord gives its prior written consent to any of the actions enumerated in clauses (a) or (b) above, Tenant agrees that (i) all such Alterations, construction or installations shall be performed in a good and workmanlike manner, (ii) all such Alterations, construction and installations shall be expeditiously completed in compliance with all Legal Requirements, (iii) all work done in connection with any such Alteration, construction or installation shall comply with the requirements of all insurance policies required to be maintained by Tenant hereunder, (iv) prior to commencement of any such work, Tenant shall give Landlord not less than ten (10) days' prior written notice to permit Landlord to file notices of non-responsibility, and Tenant shall not commence any work until such ten (10) day period has expired, (v) Tenant shall promptly pay all costs and expenses of any such Alteration, construction or installation and shall discharge or remove all liens filed against any of the Leased Premises arising out of the same, (vi) Tenant shall procure (with joinder in any application by Landlord, if necessary) and pay for all permits and licenses required in connection with any such Alteration, construction or installation, (vii) all such Alterations, construction and installations shall be the separate property of Tenant during the Term and shall, without further action of the parties, become the property of Landlord upon expiration of the Term, and (viii) Tenant shall comply, to the extent reasonably requested by Landlord, with the provisions of clause (i) and the documentary requirements of clause (iii) of paragraph 16(a). 14. CONDEMNATION. (a) Immediately upon Landlord or Tenant receiving or acquiring a Condemnation Notice, Landlord or Tenant shall notify the other party thereof. Landlord, at Landlord's expense, shall be entitled to participate in any Condemnation proceeding and/or negotiations under threat thereof and to contest the Condemnation and/or the amount of the award therefor. Subject to the provisions of this paragraph 14, Tenant hereby irrevocably assigns to Landlord any award or payment to which Tenant is or may be entitled by reason of any Condemnation, whether the same shall be paid or payable for Tenant's leasehold interest hereunder or otherwise; but nothing in this Lease shall impair Tenant's right to any award or payment on account of Tenant's trade equipment, moving expenses or loss of business, if available, to the extent that and so long as (i) Tenant shall have the right to make, and does make, a separate claim therefor against the condemnor, and (ii) such -11- claim does not in any way reduce either the amount of the award otherwise payable to Landlord for the Condemnation of Landlord's fee interest in the Leased Premises or the amount of the award (if any) otherwise payable for the Condemnation of Tenant's leasehold interest hereunder. As to the portion of the Leased Premises actually taken in condemnation, this Lease shall terminate solely with respect to such portion on the effective date of the condemnation, which shall be the date on which Tenant no longer has physical or legal possession, whichever first occurs, of the portion of the Leased Premises actually taken. Upon any such termination, the obligations of Tenant to pay Rent with respect to the portion of the Leased Premises so taken shall terminate with respect to Additional Rent and shall be subject to adjustment in accordance with paragraph 16(c) with respect to Basic Rent. (b) The entire Net Award for such Condemnation shall be retained by Landlord, and Landlord shall have no obligation to Tenant concerning application of such Net Award except as set forth in paragraphs 14(c) and (d) below. (c) If any portion of the Improvements (including for all purposes of this paragraph 14 Building Equipment or any appurtenance to the Leased Premises) is taken in Condemnation, which Tenant, in Tenant's commercially reasonable discretion and taking into account the Permitted Uses, considers necessary to the performance of its business operations at the Leased Premises (taken as a whole), then Tenant may require Landlord to make available to Tenant the Net Award for restoration and replacement of the Improvements on the remaining Leased Premises affected by such Condemnation (the "REMAINING LEASED PREMISES"). If Tenant elects to restore said Improvements on the Remaining Leased Premises, Tenant shall provide written notice of such election to Landlord. Such notice may be given by Tenant at any time after receipt of the Condemnation Notice, but no later than thirty (30) days following the effective date of the Condemnation as determined under paragraph 14(a). In such case, restoration of the Remaining Leased Premises shall be performed under paragraph 15 of this Lease. In such event, Landlord shall submit a proposed division of the Net Award setting forth the amount thereof to be retained by Landlord under paragraph 14(b) and the remaining amount to be applied to restoration of the Leased Premises under this paragraph 14(c) (the "RESTORATION SUM"). The amount of the Restoration Sum shall be based upon the cost of replacing the Improvements Tenant has elected to restore on the Remaining Leased Premises. Tenant shall have thirty (30) days following receipt of Landlord's written proposal to accept or reject Landlord's proposed Restoration Sum and to provide Landlord with written notice of Tenant's decision. If Tenant rejects Landlord's proposed Restoration Sum, Tenant may: (i) terminate this Lease as to the entire Leased Premises, or (ii) require that determination of the Restoration Sum be submitted to binding arbitration under paragraph 14(d), or (iii) rescind its election to restore the subject Improvements. (d) If Tenant gives Landlord notice of election of arbitration as permitted under paragraph 14(c), Landlord and Tenant shall each select one (1) MAI certified real estate appraiser who is duly licensed to perform such appraisals in the State and is experienced in performing appraisals of industrial plant real property in the Santa Clara area. The appraisers shall agree to a Restoration Sum and submit the same in writing to Landlord and Tenant within forty-five (45) days following their appointment. If the two (2) appraisers cannot agree, their separate determinations shall be averaged and such average shall be deemed to be their decision. If Landlord and Tenant -12- both accept the decision of the two (2) appraisers, restoration of the subject Improvements on the Remaining Leased Premises to be restored shall proceed under paragraph 16. If either Landlord or Tenant rejects the decision of the two (2) appraisers, the two (2) appraisers shall jointly select a third appraiser who is qualified hereunder within ten (10) days following notice of rejection. The third appraiser shall submit a proposed Restoration Sum within thirty (30) days following appointment. So long as the third appraiser's proposed Restoration Sum is neither less than 80% of nor more than 120% of the original two (2) appraisers' decision (whether determined by their agreement or by averaging), it shall be final and binding on Landlord and Tenant. If the third appraiser's proposed Restoration Sum is less than 80% of the previous appraisers' decision, it shall be increased to equal 80% of said amount, and if it is more than 120% of the previous appraisers' decision, it shall be decreased to equal 120% of said amount and shall thereafter be final and binding on Landlord and Tenant. (e) During restoration of the Improvements taken in condemnation, the Basic Rent payable by Tenant shall be reduced or abated as provided in paragraph 16(c) of this lease. 15. INSURANCE. (a) Landlord, at its sole cost and expense, shall obtain, maintain and keep in full force and effect "all risks" property insurance (including flood and earthquake coverage) which shall insure the Improvements and Building Equipment against physical damage or destruction in the form from time to time in general use in the State; provided, however, that Tenant shall be solely responsible for all insurance relating to all other contents of all Buildings and Improvements. Said policy or policies shall insure the Improvements and Building Equipment on a replacement cost basis for their full insurable value. Copies of such policy or policies shall be delivered to Tenant on or before Commencement. Such policies shall include an undertaking by the insurer to notify Landlord and Tenant in writing not less than thirty (30) days prior to any material change, cancellation or other termination thereof. Such policy shall contain a deductible in an amount determined by Landlord in Landlord's commercially reasonable judgment. Any deductible will be for the account of Tenant. (b) Tenant, at its sole cost and expense, shall also obtain, maintain and keep in full force and effect the following insurance: (i) "All risk" property insurance (including flood and earthquake coverage) against physical damage or destruction upon all property of every description and kind owned by Tenant or owned by third parties and in the custody of Tenant and located at the Leased Premises. (ii) Comprehensive general liability insurance coverage to include personal injury, bodily injury, broad form property damage, operations hazard, owner's protective coverage, blanket contractual liability, products and completed operations liability, naming Landlord as an additional insured, in an amount per occurrence of not less than $1,000,000 combined single limit bodily injury and property damage. -13- (iii) Business interruption insurance in such amounts as will, in Tenant's commercially reasonable judgment, reimburse Tenant for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent tenants or assumed by Tenant pursuant to this Lease or attributable to prevention or denial of access to the Leased Premises as a result of such perils. All insurance policies required pursuant to paragraphs 15(a) and 15(b) shall be taken out with insurers rated B+ or better by A.M. Best Company of Oldwick, New Jersey, and who are licensed to do business in the State. In the event that A.M. Best Company (or its successor) no longer rates insurance policies, then such policy supplied by Tenant shall be subject to Landlord's reasonable approval. A certificate evidencing such insurance as Landlord and Tenant are required to obtain hereunder (unless delivery of a policy is otherwise required by this paragraph 15) shall be delivered to Landlord and Tenant respectively on or before Commencement. Such certificate shall include an undertaking by the insurer to notify Landlord in writing not less than thirty (30) days prior to any material change, cancellation or other termination thereof. Notwithstanding anything contained herein to the contrary, Tenant may obtain any of the aforesaid insurance with a deductible or retention in an amount determined by Tenant in Tenant's commercially reasonable judgment. (c) In the event of any casualty resulting in damage to any of the Improvements and/or Building Equipment, the Term shall, notwithstanding such casualty, continue and Tenant shall promptly after such casualty, as required in paragraph 12(a), commence and diligently continue to restore the Improvements and Building Equipment (including, subject to the limitations set forth below, the Structural Components) and Building Equipment as nearly as possible to their condition and character immediately prior to such damage, in accordance with the provisions of paragraphs 13 and 16. During restoration of the damaged Improvements and/or Building Equipment, the Basic Rent payable by Tenant shall be reduced or abated as provided in paragraph 16(c) of this Lease. Upon the payment to Landlord of the Net Proceeds of the insurance maintained by Landlord pursuant to Section 15(a) and applicable to such casualty, Landlord shall make such Net Proceeds available to Tenant for restoration in accordance with and subject to the provisions of paragraph 16(a). If any condition of paragraph 16(a) for disbursement of the Net Proceeds by Landlord is not satisfied, Landlord may retain the Net Proceeds until all such conditions have been satisfied. Notwithstanding anything to the contrary herein provided, Tenants obligation to so restore the Structural Components and Building Equipment shall be limited to Net Proceeds made available to Tenant for such purpose pursuant hereto. (d) Landlord and Tenant each hereby release the other from any and all liability or responsibility for any direct or consequential loss, injury or damage to the Leased Premises, or its contents, caused by fire or any other casualty, during the Term, even if such fire or other casualty may have been caused by the negligence (but not the willful act) of the other party or one for whom such party may be responsible. Inasmuch as the above mutual waivers will preclude the assignment of any aforesaid claim by way of subrogation (or otherwise) to an insurance company (or any other person), Tenant hereby agrees, if required by the policies of fire and other property insurance required to be maintained by Tenant pursuant hereto, to give written notice of the terms of said mutual waivers, and to have said insurance policies properly endorsed, if necessary, to prevent the invalidation of said insurance coverage by reason of said waivers. -14- 16. RESTORATION; REDUCTION OF RENT. (a) In the event that Net Proceeds or a Net Award (including, for purposes of this paragraph, any portion thereof representing a Restoration Sum) are made available by Landlord for the restoration of any of the Land, Improvements or Building Equipment, Landlord shall disburse such Net Proceeds or Net Award only in accordance with the following conditions: (i) Prior to commencement of restoration, the architects, contracts, contractors and plans and specifications for the restoration shall have been approved by Landlord, which approval shall not be unreasonably withheld; Landlord shall be provided with acceptable performance and payment bonds which insure satisfactory completion of the restoration, are in an amount and form and have a surety acceptable to Landlord, and name Landlord and Tenant as additional dual obligees; and such waivers of mechanics' and materialmen's liens as are appropriate to the restoration and are legal in the State shall have been filed; (ii) At the time of any disbursement, no Event of Default in payment of any Rent or other sum required to be paid by Tenant under this Lease shall exist and no mechanics' or materialmen's liens shall have been filed against any of the Leased Premises and remain undischarged or not fully insured or bonded to the satisfaction of Landlord or not properly made subject to a permitted contest by Tenant as provided in paragraph 18; (iii) Disbursements shall be made from time to time (not less often than monthly) in an amount not exceeding the cost of the work completed since the last disbursement in accordance with such terms and procedures as Landlord shall reasonably require and upon receipt of (A) satisfactory evidence, including architects' certificates, of the stage of completion, of the estimated cost of completion and of performance of the work to date in a good and workmanlike manner in accordance with the contracts and plans and specifications, (B) waivers of liens, (C) contractors' and subcontractors' sworn statements as to completed work for which payment is requested, (D) a satisfactory bringdown of title indicating no liens prohibited by clause (ii) hereof, and (E) other evidence of cost and payment reasonably requested by Landlord for verification that the amounts disbursed from time to time are represented by work that is completed, in place and free and clear of mechanics' and materialmen's lien claims; (iv) Each request for disbursement shall be accompanied by a certificate of Tenant, signed by the general partner of Tenant, describing the work for which payment is requested, stating that the work has been completed, the cost incurred in connection therewith and stating that Tenant has not previously received payment for such work; (v) The restoration fund shall be invested in a separate bank account or accounts insured by an agency of the United States, and all interest on the fund shall be added to and become part of the fund (provided that Landlord shall have no duty with respect to the amount of interest or the safety or security of the account or accounts in which the fund is kept or invested); -15- (vi) At all times the undisbursed balance of the restoration fund held by Landlord shall be not less than the cost of completing the restoration work free and clear of all liens. If any sum remains in the restoration fund after completion of restoration (the "REMAINING SUM"), such sum shall be retained by Landlord. (b) In the event that there is a Remaining Sum upon completion of restoration which is retained by Landlord, it shall be immediately credited in full to Tenant as prepayment of Tenant's Rent obligations next falling due under this Lease. (c) The Basic Rent payable by Tenant shall be abated or reduced during the period of time that all or any portion of the Leased Premises is unusable by or unavailable to Tenant as the result of casualty damage or condemnation. The amount of any reduction in the Basic Rent shall be mutually agreed by Landlord and Tenant, based upon the pro rata portion of the value of the Land, including appurtenances, and Improvements, and/or Building Equipment, which is unavailable to or unusable by Tenant for the Permitted Uses. Landlord and Tenant shall agree to the amount of the Rent reduction within thirty (30) days following occurrence of the casualty damage or the effective date of the condemnation. Such agreement shall be reduced to a writing signed by Landlord and Tenant and shall become part of this Lease. If Landlord and Tenant cannot reach agreement on the amount of the Rent reduction within the thirty (30) day period provided herein, the amount of reduction of the Basic Rent shall be immediately submitted to arbitration in accordance with the provisions of Section 29 of the Purchase Agreement. The Basic Rent abatement shall terminate upon completion of restoration of the Leased Premises, and Tenant shall thereafter resume payment of the full Basic Rent provided in this Lease; PROVIDED, HOWEVER, if less than all of the Improvements are restored, then the Basic Rent shall be adjusted by mutual agreement of Landlord and Tenant. 17. ASSIGNMENT AND SUBLETTING. (a) Tenant may not sublet all or any part of the Leased Premises at any time to any other party without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed No sublease consented to by Landlord shall impose any additional obligations on Landlord under this Lease. Within ten (10) days after the execution and delivery of any such sublease, Tenant shall deliver an original counterpart thereof to Landlord. Upon the occurrence and during the continuance of an Event of Default under this Lease, Landlord shall have the right immediately or at any time thereafter to collect and enjoy all rents and other sums of money payable under any sublease of any of the Leased Premises, and Tenant hereby irrevocably and unconditionally assigns such rents and money to Landlord, which assignment may be exercised upon and after (but not before) the occurrence of an Event of Default. (b) Tenant may not assign, transfer or otherwise convey all or any part of this Lease without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed; provided, however, that no such consent shall be required in connection with the assignment of this Lease to a party to whom Tenant is permitted to and does assign its rights under the Purchase Agreement pursuant to Section 12(iii) thereof. For purposes of this Lease, an -16- assignment of this Lease is deemed to include an assignment by operation of law, including but not limited to: (i) any merger or combination of Tenant with any other entity; (ii) any sale, transfer or other disposition of a majority of the assets of Tenant; and (iii) any change in control of Tenant or any parent entity if such entity directly or indirectly controls Tenant. ANY ASSIGNMENT OR SUBLETTING OF THIS LEASE IN VIOLATION OF THIS PARAGRAPH 17 SHALL BE VOID. (c) Notwithstanding the foregoing, Tenant shall be expressly permitted to execute a leasehold mortgage or collateral assignment with respect to this Lease in favor of any lender or lenders who provide financing to Tenant or an affiliate of Tenant, provided Tenant shall have first obtained Landlord's consent thereto in writing, which consent shall not be withheld if such mortgage or collateral assignment imposes no material obligation or burden on Landlord. 18. PERMITTED CONTESTS. In instances where payment, compliance or performance is otherwise the obligation of Tenant under this Lease, Tenant shall not be required to (i) pay any Imposition, (ii) comply with any Legal Requirement, (iii) discharge or remove any lien referred to in paragraph 10 or 13, (iv) take any action with respect to any encroachment, violation, hindrance, obstruction or impairment referred to in paragraph 12(b), or (v) comply with a provision of an insurance policy carried hereunder or a requirement of an insurer thereunder, so long as Tenant shall contest, in good faith and at its expense, the existence, the amount or the validity thereof, the amount of the damages caused thereby or the extent of its or Landlord's liability therefor, by appropriate proceedings which shall operate during the pendency thereof to prevent (i) the collection of, or other realization upon, the Imposition, lien or claim so contested, (ii) the sale, forfeiture or loss of any of the Leased Premises, any Basic Rent or any Additional Rent to satisfy the same or to pay any damages caused by the violation of any such Legal Requirement or by any such encroachment, violation, hindrance, obstruction or impairment, (iii) any interference with the use or occupancy of any of the Leased Premises, (iv) any interference with the payment of any Basic Rent or any Additional Rent; and (v) the cancellation or modification of any fire or other insurance policy, or any restriction on its full enforceability by Tenant or Landlord in accordance with its terms or on the right to collect the proceeds thereof. While any proceedings which comply with the requirements of this paragraph 18 are pending, Landlord shall not have the right to pay, remove or cause to be discharged the Imposition, lien or claim thereby being contested. Tenant further agrees that each such contest shall be promptly and diligently prosecuted to a final conclusion, except that Tenant shall, so long as the conditions of this paragraph 18 are at all times complied with, have the right to attempt to settle or compromise such contest through negotiations. Tenant shall pay, and save Landlord harmless against, any and all losses, judgments, decrees and costs (including all reasonable attorneys' fees and expenses) in connection with any such contest and shall, promptly after the final determination of such contest, fully pay and discharge the amounts which shall be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all penalties, fines, interest, costs and expenses thereof or in connection therewith, and perform all acts, the performance of which shall be ordered or decreed as a result thereof. No such contest shall subject Landlord to the risk of any civil or criminal liability. -17- 19. CONDITIONAL LIMITATIONS; DEFAULT PROVISION. (a) The occurrence of any one or more of the following shall constitute an "EVENT OF DEFAULT" under this Lease: (i) a failure by Tenant to make when due any payment of the Basic Rent, Additional Rent or other sum herein required to be paid by Tenant which failure shall continue for ten (10) days after written demand for such payment by Landlord; (ii) a material failure by Tenant duly to perform and observe, or a material violation or breach of, any other provision hereof which failure, violation or breach shall continue for thirty (30) or more days after written and specific demand for its cure is made by Landlord to Tenant unless such failure, violation or breach is incapable of cure within thirty (30) days and Tenant shall have commenced the cure of the same and shall be diligently pursuing the same to completion. (b) If an Event of Default shall have occurred, Landlord shall have the right at its option, then or at any time thereafter to do any one or more of the following without demand upon or notice to Tenant: (i) Landlord may give Tenant notice of Landlord's intention to terminate this Lease on a date specified in such notice, which date shall not be less than sixty (60) days following such notice. Upon the date therein specified, the Term, the estate hereby granted and all rights of Tenant hereunder, shall expire and terminate as if such date were the date hereinbefore fixed for the expiration of the Term. Nevertheless, Tenant shall be and remain liable for all of its obligations under this Lease, including its liability for Rent, as hereinafter provided. (ii) Landlord may, whether or not the Term of this Lease shall have been terminated pursuant to clause (i) above, (A) give Tenant notice to surrender any of the Leased Premises to Landlord on a date specified in such notice, which date shall not be less than sixty (60) days following the giving of such notice, at which time Tenant shall surrender and deliver possession of the Leased Premises or the specified portion thereof to Landlord, or (B) reenter and repossess any of the Leased Premises, with legal process, or without legal process upon ninety (90) days notice to Tenant, by peaceably entering the Leased Premises and changing locks or by summary proceedings, ejectment or any other lawful means or procedure. Upon or any time after taking possession of any of the Leased Premises, Landlord may, by peaceable means or legal process, remove any Persons or property therefrom. Landlord shall be under no liability for or by reason of any such entry, repossession or removal. No such notice or demand to Tenant to surrender or deliver possession of the Leased Premises or entry or repossession shall be construed as an election by Landlord to terminate this Lease unless Landlord gives a written notice of such intention to Tenant pursuant to clause (i) above. (iii) Whether or not this Lease shall have been terminated pursuant to clause (i) above or Landlord shall have taken possession of the Leased Premises pursuant to clause (ii) above, Landlord shall have the right (but shall be under no obligation) (A) to reenter the Leased Premises at any time and from time to time and/or (B) to relet any of the Leased Premises to such tenant or tenants, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term), for such rent, on such conditions and for such uses as Landlord, in its absolute discretion, may determine, and Landlord may collect and receive -18- any rents payable by reason of such reletting. Any rents received by Landlord, less Landlord's costs of reletting, shall be credited to Tenant's Rent liability under this Lease. Landlord shall have any and all duties to mitigate damages provided by any applicable law. Landlord shall not otherwise be responsible or liable for any failure to relet the Leased Premises or any part thereof or for any failure to collect any rent due upon any such reletting. Landlord may make such Alterations as Landlord, in its sole discretion, may deem advisable. Such Alterations shall be made at Landlord's expense unless Landlord is otherwise permitted to make them under paragraph 12(c) hereof. Landlord may appoint a receiver to protect Landlord's interest under this Lease and may eject some, all or no persons from the Leased Premises. Landlord shall be entitled to receive and retain all rents, profits and income from the use, operation or occupance of any of the Leased Premises. (iv) Landlord may exercise any other right or remedy now or hereafter existing by Law or in equity. (c) This Lease shall continue in full force and effect, all of Tenant's liabilities and obligations hereunder shall continue and Landlord may enforce all of its rights and remedies hereunder, including the right to receive Rent and all other sums payable to Landlord hereunder, unless this Lease shall terminate pursuant to paragraph 5 or be terminated pursuant to paragraphs 6 and 14, whether or not (i) Tenant shall have abandoned the Leased Premises, (ii) Landlord shall have exercised any rights or remedies hereunder, including the right to perform work pursuant to paragraph 12(c) hereof, or (iii) a receiver is appointed to protect Landlord's interest under this Lease. No expiration or termination of this Lease pursuant to paragraph 19(b)(i) or any other provision of this Lease, by operation of law or otherwise, before the Expiration Dates provided in paragraph 5 or, if applicable, the date of any termination occurring under paragraphs 6 and 14, no repossession of any of the Leased Premises pursuant to paragraph 19(b)(ii) or otherwise (unless Landlord shall occupy the Leased Premises or any portion thereof for use by Landlord or any affiliate of Landlord for its own business purposes), nor any reletting of any of the Leased Premises pursuant to paragraph 19(b)(iii) shall relieve Tenant of any of its liabilities for Rent (except to the extent that Tenant is entitled to receive credit for net rents received by Landlord resulting from reletting of any portion of the Leased Premises), all of which shall survive such expiration, termination, repossession or reletting. (d) With respect to any remedy or proceeding of Landlord hereunder, Tenant and Landlord waive any right to a trial by jury. 20. ADDITIONAL RIGHTS OF LANDLORD (a) No right or remedy conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing by Law or in equity. Upon the occurrence of any Event of Default, Landlord shall have the right (but no obligation) to perform any act required of Tenant hereunder, whether as agent for Tenant or otherwise; and the cost thereof shall be Additional Rent hereunder and shall be paid by Tenant to Landlord, together with interest thereon at the Default Rate from the Date payment of such cost is demanded by Landlord, until it shall be fully paid by Tenant. Tenant acknowledges that time is of -19- the essence in the performance of its obligations under this Lease. No failure of Landlord (i) to insist at any time upon the strict performance of any provision of this Lease, or (ii) to exercise any option, right, power or remedy contained in this Lease shall be construed as a waiver, modification or relinquishment thereof. A receipt by Landlord of any Basic or Additional Rent or other sum due hereunder with knowledge of the breach of any provision contained in this Lease shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in a writing signed by Landlord. In addition to the other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by applicable Law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the provisions of this Lease, or to specific performance of any of the provisions of this Lease. Tenant shall likewise have recourse, to the extent permitted by applicable law, to injunctive relief and specific performance, in the event of violation, or attempted or threatened violation, of any of the provisions of this Lease by Landlord. (b) In the event of any litigation commenced by Landlord or Tenant for enforcement of or damages for breach of any term, covenant, provision or obligation of this Lease, the prevailing party shall be entitled to receive reimbursement from the other party of all costs and expenses incurred in such proceedings by the prevailing party, including reasonable attorneys fees and expenses. (c) If Landlord shall be made a party to any litigation commenced by any third party and pertaining to any obligation assumed or to be performed by Tenant under this Lease and not performed by Tenant as required hereunder, Tenant shall pay all costs and reasonable attorney's fees incurred or paid by Landlord in connection with such litigation. 21. NOTICES. All notices, demands, requests, consents, approvals, offers, statements and other instruments or communications (other than payments of Rent) required or permitted to be given pursuant to the provisions of this Lease shall be in writing and shall be deemed to have been given for all purposes when given in accordance with the provisions of Section 18 of the Purchase Agreement. 22. ESTOPPEL CERTIFICATE. Tenant shall, at any time and from time to time, upon not less than twenty (20) days' prior written request by Landlord, execute, acknowledge and deliver to Landlord a statement in writing, executed by a general partner of Tenant, certifying (i) that this Lease is unmodified (including by any disputes over agreements or forbearance agreements that may modify this Lease) and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified, and setting forth such modifications), (ii) the dates to which Basic Rent, Additional Rent and all other sums payable hereunder have been paid, (iii) that, to the knowledge of the signer of such certificate, no default by either Landlord or Tenant exists hereunder and no event has occurred which would with notice or passage of time, or both, constitute a breach or default or permit termination, modification or acceleration under this Lease (or specifying each such default, or event of which the signer may have knowledge), and (iv) containing such other statements as Landlord or Landlord's lender may reasonably request. If Tenant fails to so deliver such an estoppel certificate, such failure shall be deemed an Event of Default under this Lease by Tenant. It is intended that any such statements by Tenant may be relied upon by Landlord or any -20- prospective purchaser from Landlord of the Leased Premises, but only if such Persons other than Landlord are specifically identified to Tenant upon request by Landlord for the estoppel certificate. Any certificate required under this paragraph 22 shall (i) state briefly the nature and scope of the examination or investigation upon which the statements contained in such certificate are based, which nature and scope shall be reasonably satisfactory to Landlord, and (ii) certify to the correctness of the statements contained therein. 23. SURRENDER. (a) Upon the expiration or earlier termination of this Lease, Tenant shall peaceably leave and surrender the Leased Premises (except for any portion thereof with respect to which this Lease has previously terminated) to Landlord in substantially the same condition in which the Leased Premises were originally received from Landlord at Commencement, except as repaired, rebuilt, restored, altered, replaced or added to as permitted or required by any provision of this Lease, and except for ordinary wear and tear and for any damage by fire or other casualty which Tenant is not required by the provisions of this Lease to repair or restore. Tenant shall remove from the Leased Premises on or prior to such expiration or earlier termination all trade equipment and other property which is owned by Tenant or third parties other than Landlord and Tenant, and Tenant, at its expense, shall, on or prior to such expiration or earlier termination, repair any damage caused by such removal. Property not so removed shall, at the option of Landlord, become the property of Landlord. Landlord may thereafter cause such property to be removed from the Leased Premises subject to the provisions of any agreement made in writing between Landlord and any third party having an interest in such property; and the cost of removing and disposing of such property and repairing any damage to any of the Leased Premises caused by such removal shall be borne by Tenant. (b) Upon surrender of the Leased Premises in accordance with the provisions of paragraph 23(a) hereof, Landlord shall, after deducting therefrom any amounts then due and owing from Tenant to Landlord hereunder, pay to Tenant the then remaining unamortized, unrecovered and unrecoverable cost to Tenant of all Alterations constituting capital improvements made by Tenant to the Leased Premises during the Term. 24. NO MERGER OF TITLE. There shall be no merger of this Lease nor of the leasehold estate created by this Lease with the fee estate in or ownership of any of the Leased Premises by reason of the fact that the same Person may acquire or hold or own, directly or indirectly, (a) the leasehold estate created by this Lease or any part thereof or interest therein or any interest of Tenant in this Lease, and (b) the fee estate or ownership of any of the Leased Premises or any interest in such fee estate or ownership; and no such merger shall occur unless and until all Persons having any interest in (i) this Lease as Tenant or the leasehold estate created by this Lease, and (ii) this Lease as Landlord or the fee estate in or ownership of the Leased Premises or any part thereof sought to be merged shall join in a written instrument effecting such merger and shall duly record the same. 25. ENVIRONMENTAL. The condition of the Leased Premises with respect to compliance with Laws concerning environmental protection and Landlord's and Tenant's respective obligations pertaining thereto are treated in detail in the Purchase Agreement. Landlord and Tenant each hereby -21- acknowledge that their respective obligations to comply with all laws concerning environmental protection are governed solely by the Purchase Agreement, and hereby covenant and agree one with the other to perform all such obligations as set forth in Section 8(f) of the Purchase Agreement. 26. MISCELLANEOUS. The paragraph headings in this Lease are used only for convenience in finding the subject matters and are not a part of this Lease or to be used in determining the intent of the parties or otherwise interpreting this Lease. As used in this Lease, the singular shall include the plural as the context requires. In the event any one or more of the provisions contained in this Lease shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Lease, but this Lease shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. This Lease shall be governed and construed according to the Laws of the State. 27. AMENDMENT AND RESTATEMENT OF EXISTING LEASE. Each of the parties hereto hereby agrees and acknowledges that this Amended and Restated Lease Agreement amends and restates in its entirety the Lease Agreement (the "Existing Lease"), dated as of January 1, 1994, by and between FMC Corporation and United Defense, L.P., the terms and conditions of which shall be of no further force or effect. * * * * * -22- IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly executed as of the day and year first above written. LANDLORD: FMC CORPORATION, a Delaware corporation By: /s/ Charlotte Mitchell Smith ---------------------------- Title: Assistant Secretary TENANT: UNITED DEFENSE, L.P., a Delaware limited partnership By: UDLP Holdings Corp. Title: General Partner By: /s/ Allan M. Holt ----------------- Title: President -23- EXHIBIT A LAND 1. Parcel 3A as depicted on attached map. 2. Parcel 3B as depicted on attached map. 3. Parcel 4 as depicted on attached map. 4. Parcel 6 as depicted on attached map. 5. Parcel 7 as depicted on attached map. -24- EXHIBIT B BUILDINGS 1. Parcel 3A - plants 1, 2, 3, 4, 5A, 5B, 6, 8, 9, 10, 18, and 47; office buildings 63, 64 and 95; and buildings 91P, 92A, 92F, 93A, and 93B. 2. Parcel 3B - buildings 5C, 11, 20, 25A, 25B, 25C, 27, the terminal ballistics building, the Test Track and the chemical storage drum area. 3. Parcel 4 - Plant 12, Prototype Facilities 4. Parcel 6 - Office Building 5. Parcel 7 - Corporate Technology Center -25- SCHEDULE I Annual Rent and Term for Each Parcel PARCEL ANNUAL RENT COMMENCEMENT DATE EXPIRATION DATE ------ ----------- ----------------- --------------- 3A 1997 - $500,000.00 Closing March 31, 1998 1998 - $125,000.00 3B $300,000.00 Closing October 1, 2001 4 $1,412,400.00 Closing October 1, 2001 6 $512,400.00 Closing October 1, 2001 7 $1,279,680.00 Closing October 1, 2001 -26- EX-10.14 21 AMENDED & RESTATED HARSCO INTELLECTUAL AMENDED AND RESTATED HARSCO INTELLECTUAL PROPERTY AGREEMENT This Amended and Restated Intellectual Property Agreement ("Agreement") is made as of October 6, 1997 ("Effective Date") by and between Harsco Corporation, a Delaware corporation ("Harsco"), and United Defense, L.P. ("UD"), a Delaware limited partnership. WHEREAS, the parties entered into the Harsco Intellectual Property Agreement dated January 1, 1994 ("Closing Date") in connection with the formation of UD, and the parties now wish to further clarify their respective rights and obligations thereunder; WHEREAS, Harsco transferred certain assets to UD, including certain intellectual and proprietary property and rights which were exclusively used or intended by Harsco for exclusive use in the business of Harsco's BMY-Combat Systems Division prior to the Closing Date; WHEREAS, as a condition of such transfer UD granted back to Harsco the exclusive right and license, with the right to sublicense, under and to such assets in all fields other than the fields of business of UD; WHEREAS, Harsco is the owner of the letters patent, utility models, inventor's certificates and registered copyrights and applications therefor listed in Schedule B appended hereto, the claimed or protected subject matters of which were made, used, sold or practiced or intended by Harsco for manufacture, use, sale and practice, but not exclusively, in the business of Harsco's BMY-Combat Systems Division prior to the Closing Date; WHEREAS, Harsco possesses, owns and/or has rights in trade secrets, know-how, information, unregistered copyrights and mask works and materials used or intended by Harsco for use, but not exclusively, in the business of Harsco's BMY-Combat Systems Division prior to the Closing Date; WHEREAS, Harsco owns the registered and unregistered trademarks, trade names and service marks and applications for registration listed in Schedule B appended hereto, which marks and names were used, but not exclusively, in the business of Harsco's BMY-Combat Systems Division prior to the Closing Date; and WHEREAS, UD desires to acquire a license under and to the Harsco Licensed Intellectual Property (as defined herein) subject to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual covenants, and subject to the terms and conditions contained herein, the parties hereby agree as follows. ARTICLE I DEFINITIONS As used herein unless the context otherwise requires: 1.1 "Harsco Statutory Rights" means (i) letters patent, utility models, inventor's certificates, registered copyrights and registered mask works; (ii) applications for any of the foregoing and rights which may issue on such application; and (iii) any reissues, continuations, continuations-in-part, extensions, divisions, re-examinations and renewals of the foregoing, in which Harsco owned all or a part of the right, title and interest on the Closing Date. 1.2 "Harsco Data Rights" means unregistered copyrights and mask work rights and trade secrets and confidential information and knowledge possessed by Harsco on the Closing Date, including, but not limited to, ideas, inventions, blueprints, know-how, formulae, manufacturing and production processes and techniques, research and development information, software, drawings, specifications, designs, plans, proposals, technical data, financial and accounting data, business and marketing plans and customer and supplier lists. 1.3 "Harsco Marks" means the registered and unregistered trademarks, trade names, service marks, trade dress, logos and applications for registration thereof, all right, title and interest in which were owned by Harsco on the Closing Date, including, without limitation the BMY Mark. 1.4 "Harsco Transferred IP Rights" means Harsco Statutory Rights, Harsco Marks and Harsco Data Rights, exclusively used or intended for exclusive use in the business of Harsco's BMY-Combat Systems Division on or prior to the Closing Date including, without limitation, the Harsco Statutory Rights and Harsco Marks listed in Schedule A hereto together with the BMY Mark transferred to UD hereby. 1.5 "Harsco Licensed Intellectual Property" means Harsco Statutory Rights, Harsco Marks and Harsco Data Rights used or intended for use, but not exclusively, in the business of Harsco's BMY-Combat Systems Division on or prior to the Closing Date including, without limitation, the Harsco Statutory Rights and Harsco Marks listed in Schedule B hereto. 1.6 "The Field" means the development, manufacture, retrofit, installation, overhaul, repair, engineering, design, service, sale and marketing of (i) any military vehicle system or weapon system or station or component thereof and (ii) forgings, castings and fabrications for commercial customers. 1.7 "Harsco Defense Business" means the entire business and operations of the BMY-Combat Systems Division, as conducted as of the Closing Date. 2 1.8 "Permitted Activities" means (i) the development, manufacture, retrofit, installation, repair, overhaul, engineer, design, service, sale and marketing of armor and armor kits for sale to the military and other customers, (ii) such activities as are reasonably necessary for Harsco to complete the termination and winding up of its former truck and bus business, and (iii) the development, manufacture, retrofit, installation, repair, overhaul, engineer, design, service, sale and marketing of any component part or subsystem of military vehicle systems which are substantially the same as classes of products or services that primarily are commercially sold by Harsco for non-military uses. 1.9 "BMY Mark" means the registered trademarks in and to the name "BMY." ARTICLE II GRANTS 2.1 Harsco grants to UD an exclusive, irrevocable, worldwide, royalty-free right and license, with the right to sublicense, under and to Harsco Licensed Intellectual Property in The Field other than any Permitted Activity; for the Permitted Activity UD shall have a sole, irrevocable, worldwide, royalty-free right and license, with the right to sublicense. 2.2 UD grants to Harsco: (a) an exclusive, irrevocable, worldwide, royalty-free right and license, with the right to sublicense, under and to the Harsco Transferred IP Rights and the BMY Mark in all fields other than The Field; and (b) a non-exclusive, irrevocable, worldwide, royalty-free right and license, without the right to sublicense, under and to the Harsco Transferred IP Rights and the BMY Mark for use in any Permitted Activity. 2.3 Harsco hereby transfers, conveys and assigns to UD all of its right, title and interest in and to the BMY Mark and any goodwill associated therewith (subject to the license granted in Section 2.2 hereto). Harsco agrees to take all actions reasonably requested by UD, at UD's expense, to record such assignment in all jurisdictions in which the BMY Mark is registered. 2.4 No right or license is granted hereby by implication or otherwise under any patent, utility model, inventors certificate, copyright, trade secret, mask work or trademark except as specifically provided herein. 3 ARTICLE III COOPERATION 3.1 UD agrees, at Harsco's request on reasonable notice, to disclose and make available to Harsco, Harsco Data Rights constituting a part of Harsco Transferred IP Rights to the full extent required by Harsco to use the same and to replicate products, processes and the like in which the same are embodied or used. 3.2 Harsco agrees, at UD's request on reasonable notice, to disclose and make available to UD Harsco Data Rights constituting a part of Harsco Licensed Intellectual Property to the full extent required by UD to use the same and to replicate products, processes and the like in which the same are embodied or used. 3.3 UD and Harsco each agree, in performance of Section 3.1 and 3.2, to: (a) make copies of drawings, blue prints, manuals, internal documentation, and the like available as and to the extent requested and at the other party's expense; (b) provide access to files containing information responsive to Sections 3.1 and 3.2; and (c) make qualified personnel available to assist the other at the reasonable request and at the expense of the other. 3.4 The provisions of this Article III shall terminate upon the twelfth anniversary of the Closing Date. 3.5 Should either party decide not to pay any or all of the required maintenance fees on any of the intellectual property licensed hereunder, it shall immediately notify the other party of its decision, and that party shall have the right (but not the obligation) to pay such maintenance fees. ARTICLE IV PRESERVATION/ENFORCEMENT OF RIGHTS 4.1 UD acknowledges and agrees that Harsco Licensed Intellectual Property includes trade secrets and confidential information of Harsco and agrees not to disclose to any third party (except pursuant hereto and notwithstanding termination hereof) Harsco Data Rights except to the extent the same and its manner of utilization and combination can be shown to be generally known in the relevant trade(s), to have been in UD's possession prior to receipt from Harsco, to have been received from a third party not obligated to Harsco with respect thereto or to have been independently developed for UD by its employees who did not have access to Harsco Data Rights. 4 Any permitted disclosure to a third party shall be made pursuant to a written agreement containing restrictions on disclosure no less restrictive than those contained herein. 4.2 Harsco and UD acknowledge and agree that Harsco Transferred IP Rights include trade secrets and confidential information and each agree not to disclose to any third party Harsco Transferred IP Rights except to the extent the same and its manner of utilization and combination can be shown to be generally known in the relevant trade(s), to have been in the recipient's possession prior to receipt from the other party, to have been received from a third party not obligated to the other party with respect thereto or to have been independently developed by employees of the receiving party who did not have access to the Harsco Transferred IP Rights. 4.3 Each party agrees to use Harsco Marks owned by the other only as an adjective and never in juxtaposition to a mark of any other person or entity. Each party agrees to identify the other as the owner of such Harsco Marks owned by the other and to indicate their registration, as appropriate, at least once in or on each document or thing where such Harsco Mark owned by the other is used and otherwise to fully comply with those steps and practices necessary to preserve the other party's title and rights in the Marks. 4.4 Each party agrees, in its manufacture of articles and products on or with respect to which an Harsco Mark owned by the other is used, to conform to the standards of quality established by Harsco during its operations of the Harsco Defense Business and such other quality standards as may hereafter reasonably be established by the party owning such Harsco Mark. Each party shall, upon reasonable notice, be entitled to inspect the facilities of the other party to ensure that said quality standards are being maintained. 4.5 Each party shall notify the other of any infringement, misappropriation, conversion, unauthorized use or the like by a third party of any Harsco Transferred IP Rights or Harsco Licensed Intellectual Property transferred or licensed exclusively pursuant hereto which becomes known to it. The parties agree to consult as to the appropriate action to be taken and, if the parties fail to reach a timely agreement under the particular circumstances, UD shall have the right to take such action(s) as it deems appropriate to obtain redress with respect to such third party activity in The Field and Harsco shall have the right to take such action(s) as it deems appropriate to obtain redress with respect to such third party activity in fields other than The Field. Any action taken by Harsco or UD singularly pursuant to this Section, shall be at the expense and for the benefit (including any award of damages or compensation) of the party which takes action. The parties agree to cooperate in the conduct of any action(s) brought or taken pursuant to this Section. 5 ARTICLE V COMPENSATION Each party agrees to compensate the other for copies of drawings, documents and things made available pursuant to Section 3.3(a) and personnel made available pursuant to Section 3.3(c) in accordance with the standard practice of such party. ARTICLE VI TERMINATION 6.1 As to each Harsco Statutory Right licensed hereunder, all grants, obligations and provisions herein relating thereto shall continue in full force and effect, unless sooner terminated as herein provided, until its expiration date or until a final decree of invalidity thereof from which no appeal can be or is taken. 6.2 Harsco may terminate the right and license granted to UD pursuant to Section 2.1 hereof with respect to Harsco Marks constituting Harsco Licensed Intellectual Property upon written notice to UD if UD remains in default of, or fails to correct a failure to comply with, Section 4.3 hereof for a period of sixty (60) days after written notice of such default or failure is given by Harsco to UD. 6.3 UD may terminate the right and license granted to Harsco pursuant to Section 2.2 hereof with respect to Harsco Marks constituting Harsco Transferred IP Rights upon written notice to Harsco if Harsco remains in default of, or fails to correct a failure to comply with, Section 4.3 hereof for a period of sixty (60) days after written notice of such default or failure is given by UD to Harsco. ARTICLE VII INDEMNIFICATION; LIMITATION OF LIABILITY 7.1 Each party shall defend, indemnify and hold the other party and its subsidiaries and affiliates, and its and their officers, directors, shareholders, employees and agents harmless and shall pay all losses, damages, fees, expenses or costs (including reasonable attorneys' fees) incurred by the indemnified party based upon any claim or action: (a) arising from any act or omission of the indemnifying party, or its shareholders, officers, directors, employees or agents constituting gross negligence or willful misconduct related to this Agreement; or (b) arising from the misuse, disclosure or misappropriation by any third party of any confidential information of the indemnified party obtained from the indemnifying party by such third party in violation of this Agreement. 6 7.2 EXCEPT AS SET FORTH IN THE PURCHASE AGREEMENT DATED AUGUST 25, 1997 BY AND AMONG HARSCO, FMC CORPORATION, HARSCO UDLP CORPORATION AND IRON HORSE ACQUISITION CORP., HARSCO MAKES NO WARRANTY, EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY SET FORTH HEREIN, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 7.3 The dispute resolution procedures set forth in Article 29 of the Purchase Agreement dated August 25, 1997 by and among Harsco, FMC Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp., shall apply to any dispute between the parties regarding this Agreement. ARTICLE VIII MISCELLANEOUS 8.1 Harsco may assign this Agreement and any rights hereunder in whole or in part by way of sale of assets, merger or consolidation, without the prior written consent of UD. UD may, without the prior written consent of Harsco, assign this Agreement (i) to any purchaser of all or substantially all of its assets, (ii) in part with respect to the intellectual property used in connection with the business of any business unit, whether by way of sale of assets, merger or consolidation, of UD, to any purchaser of all or substantially all of the assets of such business unit of UD, or (iii) as collateral to any financing source of UD or its affiliates. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns. 8.2 The disclosure and obligation to disclose classified information, as provided in Part 125.3 of the United States Code of Federal Regulations, Title 22, shall be subject to and in accordance with the requirements of the U.S. Department of Defense Industrial Security Manual. The parties hereby agree to be bound by and to comply with the requirements of said Security Manual in its treatment and use of classified information disclosed by other pursuant hereto. If required by the U.S. Office of Munitions Control, each agrees to execute a U.S. nontransfer and use certificate. The obligation to disclose information which is unclassified shall be subject to the requirements of Part 125.2 of the U.S. International Traffic in Arms Regulations. 8.3 This Agreement is subject to all United States laws and regulations relating to exports, and to all administrative acts of the U.S. Government pursuant to such laws and regulations. 8.4 Sections 4.1, 4.2, 7.1 and 7.2 shall survive termination of this Agreement for any reason. 7 8.5 This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein express or implied shall give or be construed to give to any person or entity, other than the parties hereto and such permitted assigns, any legal or equitable rights hereunder. 8.6 This Agreement may be amended, or any provision of this Agreement may be waived; PROVIDED, HOWEVER, that any such amendment or waiver shall be binding upon a party only if set forth in a writing executed by such party and referring specifically to the provision alleged to have been amended or waived. No course of dealing between or among any persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. 8.7 All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by prepaid telex, cable or telecopy, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows: IF TO UD, United Defense, L.P. 1525 Wilson Blvd. Arlington, Virginia 22209 Attention: Thomas W. Rabaut WITH A COPY TO: Latham & Watkins 1001 Pennsylvania Avenue N.W. Suite 1300 Washington, D.C. 20004 Attention: Bruce E. Rosenblum IF TO HARSCO, Harsco Corporation 350 Poplar Church Road Camp Hill, PA 17011 Telecopy No.: (717) 763-6402 Attention: Paul C. Coppock 8 WITH A COPY TO: Morgan, Lewis & Bockius 1800 M Street, N.W. Washington, D.C. 20036 Telecopy No.: (202) 467-7176 Attention: Lloyd H. Feller 8.8 The headings and captions contained in this Agreement or any exhibit or schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The use of the word "including" herein shall mean "including without limitation." 8.9 Notwithstanding the fact that this Agreement has been drafted or prepared by one of the parties, each of the parties confirms that each of them and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the parties, and the language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person. 8.10 This Agreement may be executed in one or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party. 8.11 This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter. 8.12 The parties acknowledge that each of them has been represented by counsel in connection with this Agreement and the transactions contemplated hereby. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. 8.13 Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and effective under applicable law, but if any provision of this Agreement or the application of any such provision to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 8.14 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. HARSCO CORPORATION UNITED DEFENSE, L.P. BY: /s/ Leonard A. Campanaro BY: UDLP Holdings Corp. -------------------------- ITS: Sr. Vice President & CFO ITS: General Partner BY: /s/ Allan M. Holt ------------------------ ITS: President 10 EX-10.15 22 AMENDED & RESTATED FMC INTELLECTUAL AGMT AMENDED AND RESTATED FMC INTELLECTUAL PROPERTY AGREEMENT This Amended and Restated Intellectual Property Agreement ("Agreement") is made as of October 6, 1997 ("Effective Date") by and between FMC Corporation, a Delaware corporation ("FMC"), and United Defense, L.P. ("UD"), a Delaware limited partnership. WHEREAS, the parties entered into the FMC Intellectual Property Agreement dated January 1, 1994 ("Closing Date") in connection with the formation of UD, and the parties now wish to further clarify their respective rights and obligations thereunder; WHEREAS, FMC transferred certain assets to UD, including certain intellectual and proprietary property and rights which were exclusively used or intended by FMC for exclusive use in the business of FMC's Defense Systems Group prior to the Closing Date; WHEREAS, as a condition of such transfer UD granted back to FMC the exclusive right and license, with the right to sublicense, under and to such assets in all fields other than the fields of business of UD; WHEREAS, FMC is the owner of the letters patent, utility models, inventor's certificates and registered copyrights and applications therefor listed in Schedule B appended hereto, the claimed or protected subject matters of which were made, used, sold or practiced or intended by FMC for manufacture, use, sale and practice, but not exclusively, in the business of FMC's Defense Systems Group prior to the Closing Date; WHEREAS, FMC possesses, owns and/or has rights in trade secrets, know-how, information, unregistered copyrights and mask works and materials used or intended by FMC for use, but not exclusively, in the business of FMC's Defense Systems Group prior to the Closing Date; WHEREAS, FMC owns the registered and unregistered trademarks, trade names and service marks and applications for registration listed in Schedule B appended hereto, which marks and names were used, but not exclusively, in the business of FMC's Defense System Group prior to the Closing Date; WHEREAS, FMC transferred to UD on October 6, 1997 certain of the assets of its Corporate Technology Center, and UD desires to use certain intellectual property assets that were used by the Corporate Technology Center prior to such date; WHEREAS, FMC is the owner of the letters patent, utility models, inventor's certificates and registered copyrights and applications therefor listed in Schedule C appended hereto, the claimed or protected subjects matter of which were made, used, sold or practiced or intended by FMC for manufacture, use, sale and practice by the Corporate Technology Center on or prior to the Effective Date; WHEREAS, FMC possesses, owns and/or has rights in trade secrets, know-how, information, unregistered copyrights and mask works and materials used or intended by FMC for use by the Corporate Technology Center on or prior to the Effective Date; and WHEREAS, UD desires to acquire a license under and to the FMC Licensed Intellectual Property (as defined herein) and the CTC Licensed Intellectual Property (as defined herein) subject to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual covenants, and subject to the terms and conditions contained herein, the parties hereby agree as follows. ARTICLE I DEFINITIONS As used herein unless the context otherwise requires: 1.1 "FMC Statutory Rights" means (i) letters patent, utility models, inventor's certificates, registered copyrights and registered mask works; (ii) applications for any of the foregoing and rights which may issue on such application; and (iii) any reissues, continuations, continuations-in-part, extensions, divisions, re-examinations and renewals of the foregoing, in which FMC owned all or a part of the right, title and interest on the Closing Date. 1.2 "FMC Data Rights" means unregistered copyrights and mask work rights and trade secrets and confidential information and knowledge possessed by FMC on the Closing Date, including, but not limited to, ideas, inventions, blueprints, know-how, formulae, manufacturing and production processes and techniques, research and development information, software, drawings, specifications, designs, plans, proposals, technical data, financial and accounting data, business and marketing plans and customer and supplier lists. 1.3 "FMC Marks" means the registered and unregistered trademarks, trade names, service marks, trade dress, logos and applications for registration thereof, all right, title and interest in which were owned by FMC on the Closing Date. 2 1.4 "FMC Transferred IP Rights" means FMC Statutory Rights, FMC Marks and FMC Data Rights exclusively used or intended for exclusive use in the business of FMC's Defense Systems Group on or prior to the Closing Date including, without limitation, the FMC Statutory Rights and FMC Marks listed in Schedule A hereto. 1.5 "FMC Licensed Intellectual Property" means FMC Statutory Rights, FMC Marks and FMC Data Rights used or intended for use, but not exclusively, in the business of FMC's Defense Systems Group on or prior to the Closing Date including, without limitation, the FMC Statutory Rights and FMC Marks listed in Schedule B hereto but excluding any CTC Licensed Intellectual Property. 1.6 "CTC" means the Corporate Technology Center that had been operated as a part of FMC until October 6, 1997. 1.7 "CTC Business" means the business of conducting modeling, simulations and testing and such other business activities as are conducted by CTC as of the Effective Date, except for such activities conducted by the CTC employees located in Princeton, New Jersey. 1.8 "CTC Statutory Rights" means (i) letters patent, utility models, inventor's certificates, registered copyrights and registered mask works; (ii) applications for any of the foregoing and rights which may issue on such application; and (iii) any reissues, continuations, continuations-in-part, extensions, divisions, re-examinations and renewals of the foregoing, in which FMC acquired ownership of all or a part of the right, title and interest, and which were used by CTC, on or prior to the Effective Date. 1.9 "CTC Data Rights" means unregistered copyrights and mask work rights and trade secrets and confidential information and knowledge possessed by CTC on the Effective Date, including, but not limited to, ideas, inventions, blueprints, know-how, formulae, manufacturing and production processes and techniques, research and development information, software, drawings, specifications, designs, plans, proposals, technical data, financial and accounting data, business and marketing plans and customer and supplier lists. 1.10 "CTC Licensed Intellectual Property" means CTC Statutory Rights and CTC Data Rights, including, without limitation, the CTC Statutory Rights listed in Schedule C. 1.11 "The Field" means the development, manufacture, retrofit, installation, overhaul, repair, engineering, design, service, sale and marketing of (i) any military vehicle system or weapon 3 system or station or component thereof and (ii) forgings, castings and fabrications for commercial customers. 1.12 "FMC Defense Business" means the entire business and operations of the Defense Systems Group, as conducted as of the Closing Date. 1.13 "Permitted Activities" shall mean the development, manufacture, retrofit, installation, repair, overhaul, engineer, design, service, sale and marketing of any component part or subsystem of military vehicle systems which are substantially the same as classes of products or services that primarily are commercially sold by FMC for non-military uses. ARTICLE II GRANTS 2.1 FMC grants to UD: (a) an exclusive, irrevocable, worldwide, royalty-free right and license, with the right to sublicense, under and to FMC Licensed Intellectual Property and CTC Licensed Intellectual Property in The Field other than any Permitted Activity; for the Permitted Activity UD shall have a sole, irrevocable worldwide, royalty-free right and license, with the right to sublicense; (b) a sole, irrevocable, worldwide, royalty-free right and license, with the right to sublicense, under and to the CTC Licensed Intellectual Property for use in the CTC Business, except that UD shall not use the CTC Licensed Intellectual Property in the provision of services to any third party that competes with FMC to the extent such services relate to the product lines listed in Schedule D and provided further that such limitation on the use of the CTC Licensed Intellectual Property shall terminate three years from the Effective Date; and (c) in order for UD to provide services to FMC, a non-exclusive, irrevocable, worldwide, royalty-free right and license, without the right to sublicense, under and to the CTC Licensed Intellectual Property. 2.2 UD grants to FMC: (a) an exclusive, irrevocable, worldwide, royalty-free right and license, with the right to sublicense, under and to the FMC Transferred IP Rights in all fields other than The Field; and 4 (b) a non-exclusive, irrevocable, worldwide, royalty-free right and license, without the right to sublicense, under and to the FMC Transferred IP Rights for use in any Permitted Activity. 2.3 No right or license is granted hereby by implication or otherwise under any patent, utility model, inventors certificate, copyright, trade secret, mask work or trademark except as specifically provided herein. ARTICLE III COOPERATION 3.1 UD agrees, at FMC's request on reasonable notice, to disclose and make available to FMC, FMC Data Rights constituting a part of FMC Transferred IP Rights to the full extent required by FMC to use the same and to replicate products, processes and the like in which the same are embodied or used. 3.2 FMC agrees, at UD's request on reasonable notice, to disclose and make available to UD FMC Data Rights constituting a part of FMC Licensed Intellectual Property and CTC Data Rights constituting a part of CTC Licensed Intellectual Property to the full extent required by UD to use the same and to replicate products, processes and the like in which the same are embodied or used. 3.3 UD and FMC each agree, in performance of Section 3.1 and 3.2, to: (a) make copies of drawings, blue prints, manuals, internal documentation, and the like available as and to the extent requested and at the other party's expense; (b) provide access to files containing information responsive to Sections 3.1 and 3.2; and (c) make qualified personnel available to assist the other at the reasonable request and at the expense of the other. 3.4 The provisions of this Article III shall terminate upon the twelfth anniversary of the Closing Date. 3.5 Should either party decide not to pay any or all of the required maintenance fees on any of the intellectual property licensed hereunder, it shall immediately notify the other party of its decision, and that party shall have the right (but not the obligation) to pay such maintenance fees. 5 ARTICLE IV PRESERVATION/ENFORCEMENT OF RIGHTS 4.1 UD acknowledges and agrees that FMC Licensed Intellectual Property and CTC Licensed Intellectual Property include trade secrets and confidential information of FMC and agrees not to disclose to any third party (except pursuant hereto and notwithstanding termination hereof) FMC Data Rights or CTC Data Rights except to the extent the same and its manner of utilization and combination can be shown to be generally known in the relevant trade(s), to have been in UD's possession prior to receipt from FMC, to have been received from a third party not obligated to FMC with respect thereto or to have been independently developed for UD by its employees who did not have access to FMC Data Rights or to CTC Data Rights. Any permitted disclosure to a third party shall be made pursuant to a written agreement containing restrictions on disclosure no less restrictive than those contained herein. 4.2 FMC and UD acknowledge and agree that FMC Transferred IP Rights include trade secrets and confidential information and each agree not to disclose to any third party FMC Transferred IP Rights except to the extent the same and its manner of utilization and combination can be shown to be generally known in the relevant trade(s), to have been in the recipient's possession prior to receipt from the other party, to have been received from a third party not obligated to the other party with respect thereto or to have been independently developed by employees of the receiving party who did not have access to the FMC Transferred IP Rights. 4.3 Each party agrees to use FMC Marks owned by the other only as an adjective and never in juxtaposition to a mark of any other person or entity. Each party agrees to identify the other as the owner of such FMC Marks owned by the other and to indicate their registration, as appropriate, at least once in or on each document or thing where such FMC Mark owned by the other is used and otherwise to fully comply with those steps and practices necessary to preserve the other party's title and rights in the Marks. 4.4 Each party agrees, in its manufacture of articles and products on or with respect to which an FMC Mark owned by the other is used, to conform to the standards of quality established by FMC during its operations of the FMC Defense Business and such other quality standards as may hereafter reasonably be established by the party owning such FMC Mark. Each party shall, upon reasonable notice, be entitled to inspect the facilities of the other party to ensure that said quality standards are being maintained. 6 4.5 Each party shall notify the other of any infringement, misappropriation, conversion, unauthorized use or the like by a third party of any FMC Transferred IP Rights, FMC Licensed Intellectual Property or CTC Licensed Intellectual Property transferred or licensed exclusively pursuant hereto which becomes known to it. The parties agree to consult as to the appropriate action to be taken and, if the parties fail to reach a timely agreement under the particular circumstances, UD shall have the right to take such action(s) as it deems appropriate to obtain redress with respect to such third party activity in The Field or the CTC Business and FMC shall have the right to take such action(s) as it deems appropriate to obtain redress with respect to such third party activity in fields other than The Field or the CTC Business. Any action taken by FMC or UD singularly pursuant to this Section, shall be at the expense and for the benefit (including any award of damages or compensation) of the party which takes action. The parties agree to cooperate in the conduct of any action(s) brought or taken pursuant to this Section. ARTICLE V COMPENSATION Each party agrees to compensate the other for copies of drawings, documents and things made available pursuant to Section 3.3(a) and personnel made available pursuant to Section 3.3(c) in accordance with the standard practice of such party. ARTICLE VI TERMINATION 6.1 As to each FMC Statutory Right and CTC Statutory Right licensed hereunder, all grants, obligations and provisions herein relating thereto shall continue in full force and effect, unless sooner terminated as herein provided, until its expiration date or until a final decree of invalidity thereof from which no appeal can be or is taken. 6.2 FMC may terminate the right and license granted to UD pursuant to Section 2.1 hereof with respect to FMC Marks constituting FMC Licensed Intellectual Property upon written notice to UD if UD remains in default of, or fails to correct a failure to comply with, Section 4.3 hereof for a period of sixty (60) days after written notice of such default or failure is given by FMC to UD. 6.3 UD may terminate the right and license granted to FMC pursuant to Section 2.2 hereof with respect to FMC Marks constituting FMC Transferred IP Rights upon written notice to 7 FMC if FMC remains in default of, or fails to correct a failure to comply with, Section 4.3 hereof for a period of sixty (60) days after written notice of such default or failure is given by UD to FMC. ARTICLE VII INDEMNIFICATION; LIMITATION OF LIABILITY 7.1 Each party shall defend, indemnify and hold the other party and its subsidiaries and affiliates, and its and their officers, directors, shareholders, employees and agents harmless and shall pay all losses, damages, fees, expenses or costs (including reasonable attorneys' fees) incurred by the indemnified party based upon any claim or action: (a) arising from any act or omission of the indemnifying party, or its shareholders, officers, directors, employees or agents constituting gross negligence or willful misconduct related to this Agreement; or (b) arising from the misuse, disclosure or misappropriation by any third party of any confidential information of the indemnified party obtained from the indemnifying party by such third party in violation of this Agreement. 7.2 EXCEPT AS SET FORTH IN THE PURCHASE AGREEMENT DATED AUGUST 25, 1997 BY AND AMONG FMC, HARSCO CORPORATION, HARSCO UDLP CORPORATION AND IRON HORSE ACQUISITION CORP., FMC MAKES NO WARRANTY, EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY SET FORTH HEREIN, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 7.3 The dispute resolution procedures set forth in Article 29 of the Purchase Agreement dated August 25, 1997 by and among FMC, Harsco Corporation, Harsco UDLP Corporation and Iron Horse Acquisition Corp., shall apply to any dispute between the parties regarding this Agreement. ARTICLE VIII MISCELLANEOUS 8.1 FMC may assign this Agreement and any rights hereunder in whole or in part by way of sale of assets, merger or consolidation, without the prior written consent of UD. UD may, without the prior written consent of FMC, assign this Agreement (i) to any purchaser of all or substantially all of its assets, (ii) in part with respect to the intellectual property used in connection with the business of any business unit, whether by way of sale of assets, merger or consolidation, of UD, to any purchaser of all or substantially all of the assets of such business unit of UD, or (iii) as collateral 8 to any financing source of UD or its affiliates. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns. 8.2 The disclosure and obligation to disclose classified information, as provided in Part 125.3 of the United States Code of Federal Regulations, Title 22, shall be subject to and in accordance with the requirements of the U.S. Department of Defense Industrial Security Manual. The parties hereby agree to be bound by and to comply with the requirements of said Security Manual in its treatment and use of classified information disclosed by other pursuant hereto. If required by the U.S. Office of Munitions Control, each agrees to execute a U.S. nontransfer and use certificate. The obligation to disclose information which is unclassified shall be subject to the requirements of Part 125.2 of the U.S. International Traffic in Arms Regulations. 8.3 This Agreement is subject to all United States laws and regulations relating to exports, and to all administrative acts of the U.S. Government pursuant to such laws and regulations. 8.4 Sections 4.1, 4.2, 7.1 and 7.2 shall survive termination of this Agreement for any reason. 8.5 This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein express or implied shall give or be construed to give to any person or entity, other than the parties hereto and such permitted assigns, any legal or equitable rights hereunder. 8.6 This Agreement may be amended, or any provision of this Agreement may be waived; PROVIDED, HOWEVER, that any such amendment or waiver shall be binding upon a party only if set forth in a writing executed by such party and referring specifically to the provision alleged to have been amended or waived. No course of dealing between or among any persons having any interest in this Agreement shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. 8.7 All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by prepaid telex, cable or telecopy, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows: 9 IF TO UD, United Defense, L.P. 1525 Wilson Blvd. Arlington, Virginia 22209 Attention: Thomas W. Rabaut WITH A COPY TO: Latham & Watkins 1001 Pennsylvania Avenue N.W. Suite 1300 Washington, D.C. 20004 Attention: Bruce E. Rosenblum IF TO FMC, FMC Corporation 200 East Randolph Drive Chicago, Illinois 60601 Telecopy No.: (312) 861-6012 Attention: J. Paul McGrath WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Telecopy No.: (312) 861-2200 Attention: Glen E. Hess, P.C. 8.8 The headings and captions contained in this Agreement or any exhibit or schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The use of the word "including" herein shall mean "including without limitation." 8.9 Notwithstanding the fact that this Agreement has been drafted or prepared by one of the parties, each of the parties confirms that each of them and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the parties, and 10 the language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any person. 8.10 This Agreement may be executed in one or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party. 8.11 This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter. 8.12 The parties acknowledge that each of them has been represented by counsel in connection with this Agreement and the transactions contemplated hereby. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. 8.13 Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and effective under applicable law, but if any provision of this Agreement or the application of any such provision to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 8.14 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 8.15 This Agreement shall not be interpreted in any manner as to supersede, modify or alter the agreement between the parties dated August 20, 1997 relating to the "electric drive technology," which agreement shall remain valid and enforceable pursuant to its terms. * * * * * 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. FMC CORPORATION UNITED DEFENSE, L.P. BY: /s/ Charlotte Mitchell Smith BY: /s/ UDLP Holdings Corp. ---------------------------- ----------------------- NAME: Assistant Secretary ITS: General Partner BY: /s/ Allan M. Holt ---------------------- ITS: President 12 EX-10.16 23 EXHIBIT 10.16 CARLYLE MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT This Management Agreement (the "AGREEMENT") is made as of the 6th day of October, 1997, by and between United Defense Industries, Inc., a Delaware Corporation ("UDI"), United Defense, L.P., a Delaware limited partnership (the "COMPANY"), and TC Group Management, L.L.C., a Delaware limited liability company ("CARLYLE"). RECITALS: WHEREAS, Carlyle, by and through its officers, employees, agents, representatives and affiliates, has expertise in the areas of corporate management, finance, product strategy, investment, acquisitions and other matters relating to the business of the Company and UDI; WHEREAS, UDI and a subsidiary of UDI collectively own 100% of the outstanding partnership interests of the Company; and WHEREAS, the Company and UDI desire to avail themselves of the expertise of Carlyle in the aforesaid areas, in which they acknowledge the expertise of Carlyle. AGREEMENT: NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and conditions herein set forth, the parties hereto agree as follows: 1. APPOINTMENT. The Company and UDI hereby appoint Carlyle to render the advisory and consulting services described in Section 2 hereof for the term of this Agreement. 2. SERVICES. (a) Carlyle hereby agrees that during the term of this Agreement it shall render to the Company and UDI, by and through such of Carlyle's officers, employees, agents, representatives and affiliates as Carlyle, in its sole discretion, shall designate from time to time, advisory, consulting and other services (the "OVERSIGHT SERVICES") in relation to the day-to-day operations of the Company and UDI, strategic planning, domestic and international marketing and financial oversight and including, without limitation, advisory and consulting services in relation to the selection, retention and supervision of independent auditors, the selection, retention and supervision of outside legal counsel, and the selection, retention and supervision of investment bankers or other financial advisors or consultants. (b) The parties hereto acknowledge that certain events will require Carlyle to render services beyond the scope of activities which the parties contemplate as part of the Oversight Services and for which Carlyle shall be entitled to additional compensation hereunder. It is expressly agreed that the Oversight Services shall not include Investment Banking Services and Management Equity Consulting Services. "INVESTMENT BANKING SERVICES" means investment banking, financial advisory or any other services rendered by Carlyle to the Company or UDI in connection with (i) the acquisition by UDI and its subsidiaries of all of the outstanding partnership interests of the Company pursuant to that certain Purchase Agreement, dated as of August 25, 1997, by and between FMC Corporation, Harsco Corporation, Harsco UDLP Corporation and UDI and the financing thereof (together, the "ACQUISITION TRANSACTIONS"), (ii) any acquisitions and divestitures by the Company or UDI or any of their subsidiaries, including, without limitation, the sale of substantially all of the assets of the Company, whether by a sale of assets, the capital stock of UDI, merger or otherwise, and the acquisition or sale of any subsidiary or division of UDI or the Company, or (iii) the public or private sale of debt or equity securities of the Company or UDI or any similar financing transactions. "MANAGEMENT EQUITY CONSULTING SERVICES" means consulting services performed by Carlyle in connection with the structuring and implementation of an executive stock option plan or similar equity plan, an employee stock purchase or equity purchase plan and employment agreements for certain key executives of UDI and UDLP. The Investment Banking Services and the Management Equity Consulting Services shall be referred to herein as "ADDITIONAL SERVICES," and together with the Oversight Services, the "SERVICES." 3. FEES. (a) In consideration of the performance of the Oversight Services contemplated by Section 2(a) hereof, the Company and its successors agree to pay to Carlyle an aggregate per annum fee (the "FEE") equal to Two Million Dollars ($2,000,000), commencing on the date hereof and continuing until such time as this Agreement is terminated in accordance with Section 6 or by the mutual written consent of the parties hereto. The Fee shall be payable quarterly in advance. Fee payments shall be non-refundable. (b) In consideration of the Investment Banking Services provided to UDI and the Company in connection with the Acquisition Transactions, the Company shall pay to Carlyle Four Million Five Hundred Thousand Dollars ($4,500,000) in cash, payable at such time as the Acquisition Transactions are consummated. (c) In consideration of the performance of the Management Equity Consulting Services to be provided to UDI and the Company, the Company shall pay to Carlyle Two Million Dollars ($2,000,000) in cash, payable after Carlyle has completed performance of the Management Equity Consulting Services. Performance of the Management Equity Consulting Services shall be deemed to be complete when each of the following conditions has been satisfied: (i) the Board of Directors of UDI adopts UDI's initial employee stock option plan (or similar management equity incentive compensation program) or determines that no such plan should be adopted, (ii) UDI completes the currently contemplated employee stock offering or the Board of Directors of UDI determines that UDI should not effect such an offering and (iii) Carlyle (on behalf of UDI and the Company) completes negotiation of definitive employment agreements between UDI and the key management employees (if any) designated by the Board of Directors of UDI. (d) In consideration of the Additional Services provided to the Company or UDI in connection with the events described in clauses (ii) and (iii) of the definition of Investment Banking Services, Carlyle shall be entitled to receive additional reasonable compensation as agreed upon by the parties hereto and approved by the majority of the disinterested members of the Board of Directors of UDI. 4. REIMBURSEMENTS. In addition to the compensation payable to Carlyle pursuant to Section 3 hereof, the Company shall, at the direction of Carlyle, pay directly, or reimburse Carlyle for, its reasonable Out-of-Pocket Expenses. For the purposes of this Agreement, the term "OUT-OF-POCKET EXPENSES" shall mean the amounts actually paid by Carlyle in cash in connection with its performance of the Services, including, without limitation, reasonable (i) fees and disbursements (including, without limitation, underwriting fees) of any independent professionals and organizations, including, without limitation, independent auditors, outside legal counsel, consultants, investment bankers or financial advisors, (ii) costs of any outside services or independent contractors such as financial printers, couriers, business publications or similar services and (iii) transportation, per diem, telephone calls, word processing expenses or any similar expense not associated with its ordinary operations. All reimbursements for Out-of-Pocket Expenses shall be made promptly upon or as soon as practicable after presentation by Carlyle to the Company of the statement in connection therewith. 5. INDEMNIFICATION. The Company and UDI will jointly and severally indemnify and hold harmless Carlyle and its officers, employees, agents, representatives, members and affiliates (each being an "INDEMNIFIED PARTY") from and against any and all losses, costs, expenses, claims, damages and liabilities (the "LIABILITIES") to which such Indemnified Party may become subject under any applicable federal or state law, or any claim made by any third party, or otherwise, to the extent they relate to or arise out of the performance of the Services contemplated by this Agreement or the engagement of Carlyle pursuant to, and the performance by Carlyle of the Services contemplated by, this Agreement. The Company will reimburse any Indemnified Party for all reasonable costs and expenses (including reasonable attorneys' fees and expenses) as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim for which the Indemnified Party would be entitled to indemnification under the terms of the previous sentence, or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party hereto, provided that, subject to the following sentence, the Company and UDI shall be entitled to jointly assume the defense thereof at their own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment. Any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense, and in any action, claim or proceeding in which the Company and UDI, on the one hand, and an Indemnified Party, on the other hand, is, or is reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel at the Company's and UDI's expense and to control its own defense of such action, claim or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the Company, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable. The Company and UDI agree that neither the Company nor UDI will, without the prior written consent of the applicable Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of the applicable Indemnified Party and each other Indemnified Party from all liability arising or that may arise out of such claim, action or proceeding. Provided that the Company or UDI are not in breach of its indemnification obligations hereunder, no Indemnified Party shall settle or compromise any claim subject to indemnification hereunder without the consent of the Company and UDI. The Company and UDI will not be liable under the foregoing indemnification provision to the extent that any loss, claim, damage, liability, cost or expense is determined by a court, in a final judgment from which no further appeal may be taken, to have resulted solely from the gross negligence or willful misconduct of Carlyle. If an Indemnified Party is reimbursed hereunder for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Liabilities in question resulted solely from the gross negligence or willful misconduct of Carlyle. 6. TERM. This Agreement shall be in effect on the date hereof and shall continue until such time as Carlyle or one or more of its affiliates collectively control, in the aggregate, less than 10% of the outstanding shares of voting common stock of UDI. The provisions of Sections 5, 7 and 8 and otherwise as the context so requires shall survive the termination of this Agreement. 7. PERMISSIBLE ACTIVITIES. Nothing herein shall in any way preclude Carlyle or its officers, employees, agents, representatives, members or affiliates from engaging in any business activities or from performing services for its or their own account or for the account of others, including for companies that may be in competition with the business conducted by the Company. 8. GENERAL. (a) No amendment or waiver of any provision of this Agreement, or consent to any departure by either party from any such provision, shall be effective unless the same shall be in writing and signed by the parties to this Agreement, and, in any case, such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) This Agreement and the rights of the parties hereunder may not be assigned without the prior written consent of the parties hereto; PROVIDED, HOWEVER, Carlyle may assign or transfer its duties or interests hereunder to a Carlyle affiliate at the sole discretion of Carlyle. (c) Any and all notices hereunder shall, in the absence of receipted hand delivery, be deemed duly given when mailed, if the same shall be sent by registered or certified mail, return receipt requested, and the mailing date shall be deemed the date from which all time periods pertaining to a date of notice shall run. Notices shall be addressed to the parties at the following addresses: If to Carlyle: TC Group Management, L.L.C. c/o The Carlyle Group 1001 Pennsylvania Avenue, N.W. Suite 220 South Washington, D.C. 20004 Attention: Allan M. Holt If to UDI: United Defense Industries, Inc. c/o The Carlyle Group 1001 Pennsylvania Avenue, N.W. Suite 220 South Washington, D.C. 20004 Attention: Allan M. Holt If to UDLP United Defense, L.P. 1525 Wilson Boulevard Suite 700 Arlington, VA 22209 Attention: Thomas Rabaut (d) This Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof, and shall supersede all previous oral and written (and all contemporaneous oral) negotiations, commitments, agreements and understandings relating hereto. (e) This Agreement shall be governed by, and enforced in accordance with, the laws of the State of Delaware (excluding the choice of law principles thereof). The parties to this Agreement hereby agree to submit to the non-exclusive jurisdiction of the federal and state courts located in the state of Delaware in any action or proceeding arising out of or relating to this Agreement. This Agreement shall inure to the benefit of, and be binding upon, Carlyle, UDI and the Company (including any present or future subsidiaries of the Company and UDI that are not signatories hereto), and their respective successors and assigns. (f) This Agreement may be executed in two or more counterparts, and by different parties on separate counterparts. Each set of counterparts showing execution by all parties shall be deemed an original, and shall constitute one and the same instrument. (g) The waiver by any party of any breach of this Agreement shall not operate as or be construed to be a waiver by such party of any subsequent breach. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers or agents as set forth below. TC GROUP MANAGEMENT, L.L.C. By: TCG Holdings, L.L.C. Its: Managing Member By: /s/ Allan M. Holt Name: Allan M. Holt Title: Managing Director UNITED DEFENSE INDUSTRIES, INC. By: /s/ Allan M. Holt Name: Allan M. Holt Title: President UNITED DEFENSE, L.P. By: UDLP Holdings Corp. Its: General Partner By: /s/ Allan M. Holt Name: Allan M. Holt Title: President EX-12.1 24 STMT REGARDING COMPUTATION OF EARNINGS EXHIBIT 12.1 RATIO OF EARNINGS TO FIXED CHARGES UNITED DEFENSE L.P. ($ IN MILLIONS)
YEAR ENDED NINE MONTHS ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- FIXED CHARGES: (1/3) of rent expense.................................................. $ 3.6 $ 4.3 $ 4.3 $ 3.3 $ 3.9 Interest expense....................................................... -- -- -- -- -- --------- --------- --------- --------- --------- Total Fixed Charges.................................................. $ 3.6 $ 4.3 $ 4.3 $ 3.3 $ 3.9 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ADJUSTED EARNINGS: Equity earnings--foreign subsidiaries.................................. $ 12.4 $ 21.4 $ 31.9 $ 31.3 $ 13.5 Dividends received from foreign subsidiaries........................... 12.5 21.4 28.1 32.4 13.9 --------- --------- --------- --------- --------- Equity earnings adjustment (a)......................................... 0.1 0.0 (3.8) 1.1 0.4 Net income before taxes (b)............................................ 133.4 109.1 101.0 84.5 70.4 Fixed charges (from above) (c)......................................... 3.6 4.3 4.3 3.3 3.9 NUMERATOR: SUM OF (A), (B), & (C) Adjusted Income & Fixed Charges........................................ 137.1 113.4 101.5 88.9 74.7 --------- --------- --------- --------- --------- DENOMINATOR: Fixed charges.......................................................... 3.6 4.3 4.3 3.3 3.9 --------- --------- --------- --------- --------- RATIO OF EARNINGS TO FIXED CHARGES..................................... 38.1 26.4 23.6 26.9 19.2 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
EX-12.2 25 STMT REGARDING COMPUTATION OF PRO FORMA EXHIBIT 12.2 PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES UNITED DEFENSE INDUSTRIES, INC. ($ IN MILLIONS)
YEAR ENDED 9-MONTHS 1996 SEPT. 1997 --------- ----------- FIXED CHARGES: (1/3) of rent expense......................................................................... $ 4.3 $ 3.9 Interest expense.............................................................................. 66.1 49.6 --------- ----- Total Fixed Charges......................................................................... $ 70.4 $ 53.5 --------- ----- --------- ----- ADJUSTED EARNINGS: Equity earnings--foreign subsidiaries......................................................... $ 31.9 $ 13.5 Dividends received from foreign subsidiaries.................................................. 28.1 13.9 --------- ----- Equity earnings adjustment (a)................................................................ (3.8) 0.4 Net income before taxes (b)................................................................... (2.5) (3.2) Fixed charges (from above) (c)................................................................ 70.4 53.5 NUMERATOR: SUM OF (A), (B), & (C) --------- ----- Adjusted Income & Fixed Charges............................................................... 69.1 50.7 --------- ----- DENOMINATOR: Fixed charges................................................................................. 70.4 53.5 --------- ----- RATIO OF EARNINGS TO FIXED CHARGES............................................................ 1.0 0.9 --------- ----- --------- ----- DEFICIT OF EARNINGS TO COVER FIXED CHARGES.................................................... (1.3) (2.8) --------- ----- --------- -----
EX-21.1 26 EXHIBIT 21.1 SUBSIDIARIES OF UNITED DEFENSE EXHIBIT 21.1 SUBSIDIARIES OF UNITED DEFENSE INDUSTRIES, INC. UDLP HOLDINGS CORP., a Delaware corporation UNITED DEFENSE, L.P., a Delaware limited partnership EX-23.2 27 EXHIBIT 23.2 CONSENT OF ERNST & YOUNG EXHIBIT 23.2 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Selected Historical Financial Data" and "Experts" in the Registration Statement on Form S-4 and related Prospectus of United Defense Industries, Inc. to be filed on or about December 29, 1997 for the offer to exchange 8 3/4% Senior Subordinated Notes due 2007 for all outstanding 8 3/4% Senior Subordinated Notes due 2007 and to our report dated January 15, 1997 with respect to the consolidated financial statements of United Defense, L.P., and to our report dated September 9, 1997 with respect to the balance sheet of United Defense Industries, Inc. (a wholly- owned subsidiary of Iron Horse Investors, L.L.C.). ERNST & YOUNG LLP Washington, DC December 29, 1997 EX-27.1 28 EXHIBIT 27.1
5 12-MOS 9-MOS DEC-31-1996 DEC-31-1997 DEC-31-1996 SEP-30-1997 23 11,107 0 0 85,483 77,883 0 0 345,738 330,192 454,762 423,958 466,493 460,776 359,163 359,590 644,979 612,138 408,207 420,821 0 0 0 0 0 0 0 0 179,638 131,002 644,979 612,138 1,029,333 913,925 1,029,333 913,925 820,845 754,977 962,153 858,486 0 0 0 0 0 0 101,029 70,416 2,859 1,523 98,170 68,893 0 0 0 0 0 0 98,170 68,893 0 0 0 0
EX-99.1 29 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL To Tender for Exchange 8 3/4% Senior Subordinated Notes Due 2007 UNITED DEFENSE INDUSTRIES, INC. Pursuant to the Prospectus dated ___,1998 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________ ___, 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION, IN WHICH CASE THE TERM "EXPIRATION DATE" SHALL MEAN THE LATEST DATE AND TIME TO WHICH THE EXCHANGE OFFER IS EXTENDED, TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. THE EXCHANGE AGENT IS: Norwest Bank Minnesota, National Association BY REGISTERED OR CERTIFIED MAIL: IN PERSON: Norwest Bank Minnesota, Northstar East Bldg. National Association 608 2nd Ave S. Corporate Trust Operations 12th Floor P.O. Box 1517 Corporate Trust Ser. Minneapolis, MN 55480-1517 Minneapolis, MN BY HAND OR OVERNIGHT COURIER: BY FACSIMILE (FOR ELIGIBLE INSTITUTIONS ONLY: Norwest Bank Minnesota, (612) 667-4927 National Association Corporate Trust Operations CONFIRM RECEIPT OF NOTICE OF Norwest Center GUARANTEED DELIVERY BY TELEPHONE: Sixth and Marquette (612) 667-9764 Minneapolis, MN 55479-0113 (612) 667-9764 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned acknowledges receipt of the Prospectus dated ___, 1998 (the "Prospectus"), of United Defense Industries, Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together with the Prospectus constitutes the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 8 3/4% Senior Subordinated Notes due 2007 (the "Exchange Notes") for each $1,000 principal amount of its outstanding 8 3/4% Senior Subordinated Notes due 2007 (the "Private Notes"). Recipients of the Prospectus should read the requirements described in such Prospectus with respect to eligibility to participate in the Exchange Offer. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. The undersigned hereby tenders the Private Notes described in the box entitled "Description of Private Notes" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered owner of all the Private Notes and the undersigned represents that it has received from each beneficial owner of Private Notes ("Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. This Letter of Transmittal is to be used by a holder of Private Notes (i) if certificates representing Private Notes are to be forwarded herewith, (ii) if delivery of Private Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in the section of the Prospectus entitled "The Exchange Offer--Procedures for Tendering," or (iii) if a tender is made pursuant to the guaranteed delivery procedures in the section of the Prospectus entitled "The Exchange Offer--Guaranteed Delivery Procedures." The undersigned hereby represents and warrants that the information received from the beneficial owners is accurately reflected in the boxes entitled "Beneficial Owner(s)--Purchaser Status" and "Beneficial Owner(s)-- Residence." Any beneficial owner whose Private Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder of Private Notes promptly and instruct such registered holder of Private Notes to tender on behalf of the beneficial owner. If such beneficial owner wishes to tender on its own behalf, such beneficial owner must, prior to completing and executing this Letter of Transmittal and delivering its Private Notes, either make appropriate arrangements to register ownership of the Private Notes in such beneficial owner's name or obtain a properly completed bond power from the registered holder of Private Notes. The transfer of record ownership may take considerable time. In order to properly complete this Letter of Transmittal, a holder of Private Notes must (i) complete the box entitled "Description of Private Notes," (ii) complete the boxes entitled "Beneficial Owner(s)--Purchaser Status" and "Beneficial Owner(s)--Residence", (iii) if appropriate, check and complete the boxes relating to book-entry transfer, guaranteed delivery, 2 Special Issuance Instructions and Special Delivery Instructions, (iv) sign the Letter of Transmittal by completing the box entitled "Sign Here" and (v) complete the Substitute Form W-9. Each holder of Private Notes should carefully read the detailed instructions below prior to completing the Letter of Transmittal. Holders of Private Notes who desire to tender their Private Notes for exchange and (i) whose Private Notes are not immediately available or (ii) who cannot deliver their Private Notes, this Letter of Transmittal and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date, must tender the Private Notes pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2. Holders of Private Notes who wish to tender their Private Notes for exchange must complete columns (1) through (3) in the box below entitled "Description of Private Notes," complete the boxes entitled and sign the box below entitled "Sign Here." If only those columns are completed, such holder of Private Notes will have tendered for exchange all Private Notes listed in column (3) below. If the holder of Private Notes wishes to tender for exchange less than all of such Private Notes, column (4) must be completed in full. In such case, such holder of Private Notes should refer to Instruction 5. 3 DESCRIPTION OF PRIVATE NOTES (1) (2) (3) (4) Name(s) and Address(es) of Principal Registered Private Note Aggregate Amount Holder(s) of Private Note(s), Number(s) Principal Tendered For exactly as name(s) appear(s) on (Attach Amount Exchange Private Note Certificate(s) signed List Represented (must be in (Please fill in, if blank) if necessary) by integral Certificate(s)(1) multiples of $1,000)(2) 1. Unless indicated in the column "Principal Amount Tendered For Exchange," any tendering Holder of 8 3/4% Senior Subordinated Notes due 2007 will be deemed to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate Principal Amount Represented by Certificate(s)." 2. The minimum permitted tender is $1,000 in principal amount of 8 3/4% Senior Subordinated Notes due 2007. All other tenders must be in integral multiples of $1,000. 4 / / CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH. / / CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER DEFINED) ONLY): Name of Tendering Institution: ___________________________________________ Account Number: __________________________________________________________ Transaction Code Number: _________________________________________________ / / CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name of Registered Holder of Private Note(s): ____________________________ Date of Execution of Notice of Guaranteed Delivery: ______________________ Window Ticket Number (if available): _____________________________________ Name of Institution which Guaranteed Delivery: ___________________________ Account Number (if delivered by book-entry transfer): ____________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:____________________________________________________________________ Address: ________________________________________________________________ ____________________________________________________________________ 5 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY (i) if the Exchange Notes issued in exchange for Private Notes, certificates for Private Notes in a principal amount not exchanged for Exchange Notes, or Private Notes (if any) not tendered for exchange, are to be issued in the name of someone other than the undersigned or (ii) if Private Notes tendered by book-entry transfer which are not exchanged are to be returned by credit to an account maintained at DTC. Issue to: Name: ____________________________ (Please print) Address ___________________________ ___________________________________ ___________________________________ (Include Zip Code) ______________________________________________ (Tax Identification or Social Security No.) Credit Private Notes not exchanged and delivered by book-entry transfer to DTC account set forth below: ______________________________________________ (Account Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY if the Exchange Notes issued in exchange for Private Notes, certificates for Private Notes in a principal amount not exchanged for Exchange Notes, or Private Notes (if any) not tendered for exchange, are to be mailed or delivered (i) to someone other than the undersigned or (ii) to the undersigned at an address other than the address shown below the undersigned's signature. Mail or delivered to: Name: ____________________________ (Please print) Address __________________________ __________________________________ __________________________________ (Include Zip Code) ______________________________________________ (Tax Identification or Social Security No.) 6 - -------------------------------------------------------------------------------- BENEFICIAL OWNER(S)--RESIDENCE - -------------------------------------------------------------------------------- STATE OF DOMICILE/PRINCIPAL PLACE OF PRINCIPAL AMOUNT OF PRIVATE NOTES BUSINESS OF EACH BENEFICIAL OWNER OF HELD FOR ACCOUNT OF BENEFICIAL OWNER(S) PRIVATE NOTES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BENEFICIAL OWNER(S)--PURCHASER STATUS The beneficial owner of each of the Private Notes described herein is (check the box that applies): / / A "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act) / / An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) / / A non "U.S. person" (as defined in Regulation S of the Securities Act) that purchased the Private Notes outside the United States in accordance with Rule 904 of the Securities Act / / Other (describe) --------------------------------------------------------- ------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7 SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY LADIES AND GENTLEMEN: Pursuant to the offer by United Defense Industries, Inc., a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Prospectus dated ___, 1998 (the "Prospectus") and this Letter of Transmittal (the "Letter of Transmittal"), which together with the Prospectus constitutes the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 8 3/4% Senior Subordinated Notes due 2007 (the "Exchange Notes") for each $1,000 principal amount of its outstanding 8 3/4% Senior Subordinated Notes due 2007 (the "Private Notes"), the undersigned hereby tenders to the Company for exchange the Private Notes indicated above. By executing this Letter of Transmittal and subject to and effective upon acceptance for exchange of the Private Notes tendered for exchange herewith, the undersigned will have irrevocably sold, assigned, transferred and exchanged, to the Company, all right, title and interest in, to and under all of the Private Notes tendered for exchange hereby, and hereby will have appointed the Exchange Agent as the true and lawful agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as agent of the Company) of such holder of Private Notes with respect to such Private Notes, with full power of substitution to (i) deliver certificates representing such Private Notes, or transfer ownership of such Private Notes on the account books maintained by DTC (together, in any such case, with all accompanying evidences of transfer and authenticity), to the Company, (ii) present and deliver such Private Notes for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights and incidents of beneficial ownership with respect to such Private Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. The undersigned hereby represents and warrants that (i) the undersigned is the owner; (ii) has a net long position within the meaning of Rule 14e-4 under the Securities Exchange Act as amended ("Rule 14e-4") equal to or greater than the principal amount of Private Notes tendered hereby; (iii) the tender of such Private Notes complies with Rule 14e-4 (to the extent that Rule 14e-4 is applicable to such exchange); (iv) the undersigned has full power and authority to tender, exchange, assign and transfer the Private Notes and (v) that when such Private Notes are accepted for exchange by the Company, the Company will acquire good and marketable title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned will, upon receipt, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Private Notes tendered for exchange hereby. 8 By tendering, the undersigned hereby further represents to the Company that (i) the Exchange Notes to be acquired by the undersigned in exchange for the Private Notes tendered hereby and any beneficial owner(s) of such Private Notes in connection with the Exchange Offer will be acquired by the undersigned and such beneficial owner(s) in the ordinary course of business of the undersigned, (ii) the undersigned have no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iii) the undersigned and each beneficial owner acknowledge and agree that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters, (iv) the undersigned and each beneficial owner understand that a secondary resale transaction described in clause (iii) above and any resales of Exchange Notes obtained by the undersigned in exchange for the Private Notes acquired by the undersigned directly from the Company should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (vi) neither the undersigned nor any beneficial owner is an "affiliate," as defined under Rule 405 under the Securities Act, of the Company. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For purposes of the Exchange Offer, the Company will be deemed to have accepted for exchange, and to have exchanged, validly tendered Private Notes, if, as and when the Company gives oral or written notice thereof to the Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer--Withdrawal of Tenders" in the Prospectus. Any Private Notes tendered by the undersigned and not accepted for exchange will be returned to the undersigned at the address set forth above unless otherwise indicated in the box above entitled "Special Delivery Instructions" as promptly as practicable after the Expiration Date. The undersigned acknowledges that the Company's acceptance of Private Notes validly tendered for exchange pursuant to any one of the procedures described in the section of the Prospectus entitled "The Exchange Offer" and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated in the box entitled "Special Issuance Instructions," please return any Private Notes not tendered for exchange in the name(s) of the undersigned. Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail any 9 certificates for Private Notes not tendered or exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Private Notes accepted for exchange in the name(s) of, and return any Private Notes not tendered for exchange or not exchanged to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Private Notes from the name of the holder of Private Note(s) thereof if the Company does not accept for exchange any of the Private Notes so tendered for exchange or if such transfer would not be in compliance with any transfer restrictions applicable to such Private Note(s). IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL. Except as stated in the Prospectus, all authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as otherwise stated in the Prospectus, this tender for exchange of Private Notes is irrevocable. 10 - -------------------------------------------------------------------------------- SIGN HERE - -------------------------------------------------------------------------------- (Signature(s) of Owner(s)) Date: , 1998 Must be signed by the registered holder(s) of Private Notes exactly as name(s) appear(s) on certificate(s) representing the Private Notes or on a security position listing or by person(s) authorized to become registered Private Note holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. (See Instruction 6). Name(s): ---------------------------------------------------------------------- - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Please Print) Capacity (full title): -------------------------------------------------------- - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Address: ---------------------------------------------------------------------- - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Include Zip Code) Principle place of business (if different from address listed above): --------- - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (Include Zip Code) Area Code and Telephone No.:( ) ---------------------------------------------- Tax Identification or Social Security Nos. ------------------------------------ Please complete Substitute Form W-9 GUARANTEE OF SIGNATURE(S) (Signature(s) must be guaranteed if required by Instruction 1) Authorized Signature: --------------------------------------------------------- Date: ------------------------------------------------------------------------- Named and Title: -------------------------------------------------------------- (Please Print) Name of Firm: ----------------------------------------------------------------- - -------------------------------------------------------------------------------- 11 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by an institution which is (1) a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., (2) a commercial bank or trust company having an office or correspondent in the Unites States, or (3) an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934 which is a member of one of the following recognized Signature Guarantee Programs (an "Eligible Institution"): a The Securities Transfer Agents Medallion Program (STAMP) b The New York Stock Exchange Medallion Signature Program (MSP) c. The Stock Exchange Medallion Program (SEMP) Signatures on this Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal is signed by the registered holder(s) of the Private Notes tendered herewith and such registered holder(s) have not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (ii) if such Private Notes are tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. 2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by holders of Private Notes (i) if certificates are to be forwarded herewith or (ii) if tenders are to be made pursuant to the procedures for tender by book-entry transfer or guaranteed delivery set forth in the section of the Prospectus entitled "The Exchange Offer." Certificates for all physically tendered Private Notes or any timely confirmation of a book-entry transfer (a "Book-Entry Confirmation"), as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile hereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m., New York City time, on the Expiration Date. Holders of Private Notes who elect to tender Private Notes and (i) whose Private Notes are not immediately available or (ii) who cannot deliver the Private Notes, this Letter of Transmittal or other required documents to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date, must tender their Private Notes according to the guaranteed delivery procedures set forth in the Prospectus. Holders may have such tender effected if: (a) such tender is made through an Eligible Institution; (b) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent has received from such 12 Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, setting forth the name and address of the holder of such Private Notes, the certificate numbers(s) of such Private Notes and the principal amount of Private Notes tendered for exchange, stating that tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or a facsimile thereof), together with the certificate(s) representing such Private Notes (or a Book-Entry Confirmation), in proper form for transfer, and any other documents required by this Letter of Transmittal, will be deposited by such Eligible Institution with the Exchange Agent; and (c) a properly executed Letter of Transmittal (or a facsimile hereof), as well as the certificate(s) for all tendered Private Notes in proper form for transfer or a Book-Entry Confirmation, together with any other documents required by this Letter of Transmittal, are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. No alternative, conditional or contingent tenders will be accepted. All tendering holders of Private Notes, by execution of this Letter of Transmittal (or facsimile hereof, if applicable), waive any right to receive notice of the acceptance of their Private Notes for exchange. 3. INADEQUATE SPACE. If the space provided in the box entitled "Description of Private Notes" above is inadequate, the certificate numbers and principal amounts of the Private Notes being tendered should be listed on a separate signed schedule affixed hereto. 4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date by delivery of written or facsimile notice of withdrawal to the Exchange Agent at the address set forth on the cover of this Letter of Transmittal. To be effective, a notice of withdrawal of Private Notes must (i) specify the name of the person who tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and aggregate principal amount of such Private Notes), and (iii) be signed by the holder of Private Notes in the same manner as the original signature on the Letter of Transmittal by which such Private Notes 13 were tendered (including any required signature guarantees). All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, whose determination shall be final and binding on all parties. Any Private Notes so withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Private Notes so withdrawn are validly retendered. Properly withdrawn Private Notes may be retendered by following one of the procedures described in the section of the Prospectus entitled "The Exchange Offer--Procedures for Tendering" at any time prior to 5:00 p.m., New York City time, on the Expiration Date. 5. PARTIAL TENDERS Tenders of Private Notes will be accepted only in integral multiples of $1,000 principal amount. If a tender for exchange is to be made with respect to less than the entire principal amount of any Private Notes, fill in the principal amount of Private Notes which are tendered for exchange in column (4) of the box entitled "Description of Private Notes," as more fully described in the footnotes thereto. In case of a partial tender for exchange, a new certificate, in fully registered form, for the remainder of the principal amount of the Private Notes, will be sent to the holders of Private Notes unless otherwise indicated in the appropriate box on this Letter of Transmittal as promptly as practicable after the expiration or termination of the Exchange Offer. 6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, ASSIGNMENT AND ENDORSEMENTS. (a) The signature(s) of the holder of Private Notes on this Letter of Transmittal must correspond with the name(s) as written on the face of the Private Notes without alternation, enlargement or any change whatsoever. (b) If tendered Private Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. (c) If any tendered Private Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary or required documents as there are different registrations or certificates. (d) When this Letter of Transmittal is signed by the holder of the Private Notes listed and transmitted hereby, no endorsements of Private Notes or bond powers are required. If, however, Private Notes not tendered or not accepted, are to be issued or returned in the name of a person other than the holder of Private Notes, then the Private Notes transmitted hereby must be endorsed or accompanied by a properly completed bond power, in a form satisfactory to the Company, in either case signed exactly as the name(s) of the holder of Private Notes appear(s) on the Private Notes. Signatures on such Private Notes or bond powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 14 (e) If this Letter of Transmittal or Private Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal. (f) If this Letter of Transmittal is signed by a person other than the registered holder of Private Notes listed, the Private Notes must be endorsed or accompanied by a properly completed bond power, in either case signed by such registered holder exactly as the name(s) of the registered holder of Private Notes appear(s) on the certificates. Signatures on such Private Notes or bond powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company will pay all transfer taxes, if any, applicable to the exchange of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of the Private Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemptions therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to be issued, or if any Private Notes not tendered for exchange are to be issued or sent to someone other than the holder of Private Notes or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Holders of Private Notes tendering Private Notes by book-entry transfer may request that Private Notes not accepted be credited to such account maintained at DTC as such holder of Private Notes may designate. 9. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), compliance with conditions, acceptance and withdrawal of tendered Private Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Private Notes not properly tendered or any Private Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Private Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Private Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Private Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Private Notes will not be deemed to have been made until such defects or irregularities have been 15 cured or waived. Any Private Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, amend or modify certain of the specified conditions as described under "The Exchange Offer--Conditions" in the Prospectus in the case of any Private Notes tendered (except as otherwise provided in the Prospectus). 11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES Any tendering Holder whose Private Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address listed below for further instructions: Norwest Bank Minnesota, National Association Corporate Trust Operations Norwest Center Sixth and Marquette Minneapolis, MN 55479-0113 (612) 667-9764 12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information or for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent at the address or telephone number set forth on the cover of this Letter of Transmittal. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. 16 IMPORTANT TAX INFORMATION Under current federal income tax law, a holder of Private Notes whose tendered Private Notes are accepted for exchange may be subject to backup withholding unless the holder provides the Company (as payor), through the Exchange Agent, with either (i) such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or that such holder of Private Notes is awaiting a TIN) and that (A) the holder of Private Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified the holder of Private Notes that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption from backup withholding. If such holder of Private Notes is an individual, the TIN is such holder's social security number. If the Exchange Agent is not provided with the correct taxpayer identification number, the holder of Private Notes may be subject to certain penalties imposed by the Internal Revenue Service. Certain holders of Private Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt holders of Private Notes should indicate their exempt status on Substitute Form W-9. A foreign individual may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the holder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for additional instructions. If backup withholding applies, the Company is required to withhold 31% of any payment made to the holder of Private Notes or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The holder of Private Notes is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Private Notes. If the Private Notes are held in more than one name or are not held in the name of the actual owner, consult the enclosed Guidelines for additional guidance regarding which number to report. 17 INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 OF UNITED DEFENSE INDUSTRIES, INC. The undersigned hereby acknowledges receipt of the Prospectus dated ___, 1998 (the "Prospectus") of United Defense Industries, Inc., a Delaware corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder, as to the action to be taken by you relating to the Exchange Offer with respect to the 8 3/4% Senior Subordinated Notes b 2007 (the "Private Notes") held by you for the account of the undersigned. The aggregate face amount of the Private Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $ of the Private Notes. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): / / To TENDER the following Private Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF PRIVATE NOTES TO BE TENDERED, IF ANY): $ of the Private Notes. / / NOT to TENDER any Private Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Private Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner of the Private Notes, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (FILL IN STATE) , (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned has no arrangement or understanding with any person to participate in the distribution of Exchange Notes, (iv) the undersigned acknowledges that any person who is a broker-dealer registered under the Exchange Act or is participating in 18 the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended, in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in certain no-action letters (See the section of the Prospectus entitled "The Exchange Offer--Resale of the Exchange Notes"), (v) the undersigned understands that a secondary resale transaction described in clause (iv) above and any resales of Exchange Notes obtained by the undersigned in exchange for the Private Notes acquired by the undersigned directly from the Company should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, and (vii) if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any sale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of Private Notes. 19 The purchaser status of the undersigned is (check the box that applies): / / A "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act) / / An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) / / A non "U.S. person" (as defined in Regulation S of the Securities Act) that purchased the Private Notes outside the United States in accordance with Rule 904 of the Securities Act / / Other (describe) ---------------------------------------------------- - ------------------------------------------------------------------------------- SIGN HERE Name of Beneficial Owner(s): ---------------------------------------------------- - ------------------------------------------------------------------------------- Signature(s): ------------------------------------------------------------------ - ------------------------------------------------------------------------------- Name(s) (PLEASE PRINT): -------------------------------------------------------- - ------------------------------------------------------------------------------- Address: ---------------------------------------------------------------------- Principal place of business (if different from address listed above) ----------- - ------------------------------------------------------------------------------- Telephone Number(s): ---------------------------------------------------------- - ------------------------------------------------------------------------------- Taxpayer Identification of Social Security Number(s): -------------------------- - ------------------------------------------------------------------------------- Date: ------------------------------------------------------------------------- 20 PAYER'S NAME:
- ---------------------------------------------------------------------------------- PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT ---------------------- SUBSTITUTE RIGHT AND CERTIFY BY Social Security Number SIGNING AND DATING BELOW OR ---------------------- Employer Identification FORM W-9 Number ------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 - CERTIFICATION - Under PART 3 - Penalties of Perjury, I certify that: INTERNAL REVENUE SERVICE (1) The number shown on this form is my current taxpayer Awaiting PAYER'S REQUEST FOR identification number (or I am TIN / / TAXPAYER IDENTIFICATION waiting for a number to be issued NUMBER (TIN) to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------ CERTIFICATION INSTRUCTIONS - You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you receive another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE DATE ----------------------- --------------- NAME ------------------------------------------------- ADDRESS ---------------------------------------------- CITY STATE ZIP CODE ---------------- -------- ------- - ----------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 21 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 - ------------------------------------------------------------------------------ PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION - ------------------------------------------------------------------------------ CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver such an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide such a number. - -------------------------------------------------------- ------------------- Signature Date - ------------------------------------------------------------------------------ 22 EX-99.2 30 EXHIBIT 99.2 NOTICE OF GTY DELIVERY NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY HOLDER OF 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007 (THE "PRIVATE NOTES") OF UNITED DEFENSE INDUSTRIES, INC., A DELAWARE CORPORATION (THE "COMPANY"), WHO WISHES TO TENDER PRIVATE NOTES PURSUANT TO THE COMPANY'S EXCHANGE OFFER, AS DEFINED IN THE PROSPECTUS DATED ___, 1998 (THE "PROSPECTUS") AND (i) WHOSE PRIVATE NOTES ARE NOT IMMEDIATELY AVAILABLE OR (ii) WHO CANNOT DELIVER SUCH PRIVATE NOTES OR ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL ON OR BEFORE THE EXPIRATION DATE (AS DEFINED IN THE PROSPECTUS) OR (iii) WHO CANNOT COMPLY WITH THE BOOK-ENTRY TRANSFER PROCEDURE ON A TIMELY BASIS. SUCH FORM MAY BE DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR HAND DELIVERY TO THE EXCHANGE AGENT. SEE "THE EXCHANGE OFFER--GUARANTEED DELIVERY PROCEDURES" IN THE PROSPECTUS. UNITED DEFENSE INDUSTRIES, INC. NOTICE OF GUARANTEED DELIVERY To: Norwest Bank Minnesota, National Association, the Exchange Agent BY REGISTERED OR CERTIFIED MAIL: IN PERSON: Norwest Bank Minnesota, Northstar East Bldg. National Association 608 2nd Ave S. Corporate Trust Operations 12th Floor P.O. Box 1517 Corporate Trust Ser. Minneapolis, MN 55480-1517 Minneapolis, MN BY HAND OR OVERNIGHT COURIER: BY FACSIMILE (FOR ELIGIBLE INSTITUTIONS ONLY): Norwest Bank Minnesota, (612) 667-4927 National Association Corporate Trust Operations CONFIRM RECEIPT OF NOTICE OF Norwest Center GUARANTEED DELIVERY BY TELEPHONE: Sixth and Marquette (612) 667-9764 Minneapolis, MN 55479-0113 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. 2 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen The undersigned hereby tenders to the Company upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Private Notes specified below pursuant to the guaranteed delivery procedures set forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. By so tendering, the undersigned does hereby make, at and as of the date hereof, the representations and warranties of a tendering Holder of Private Notes set forth in the Letter or Transmittal. The undersigned hereby tenders the Private Notes listed below: - -------------------------------------------------------------------------------- CERTIFICATE NUMBERS (IF AVAILABLE) PRINCIPAL AMOUNT TENDERED - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- All authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. If Private Notes will be tendered SIGN HERE by book-entry transfer ----------------------------- Signature(s) Name of Tendering Institution: ----------------------------- - ---------------------------------- ----------------------------- Name(s) (Please Print) The Depository Trust Company Account No.: --------------------- ----------------------------- ----------------------------- Address ----------------------------- Zip Code ----------------------------- Area Code and Telephone No. Date: ----------------------- 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in a Recognized Signature Guarantee Medallion Program, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Private Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Private Notes into the Exchange Agent's account at the Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, and any other required documents, all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange trading day following the Expiration Date (as defined in the Prospectus). SIGN HERE -------------------------------- Name of Firm -------------------------------- Authorized Signature -------------------------------- Name (Please print) -------------------------------- -------------------------------- Address -------------------------------- Zip Code -------------------------------- Area Code and Telephone No. Date: ---------------------------- DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. 4 INSTRUCTIONS 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at one of its addresses set forth on the cover hereof prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and all other required documents to the Exchange Agent is at the election and risk of the Holder but, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service, properly insured. If such delivery is by mail, it is recommended that the Holder use properly insured, registered mail with return receipt requested. For a full description of the guaranteed delivery procedures, see the Prospectus under the caption "The Exchange Offer --Guaranteed Delivery Procedures." In all cases, sufficient time should be allowed to assure timely delivery. No Notice of Guaranteed Delivery should be sent to the Company. 2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered Holder(s) of the Private Notes referred to herein, then the signature must correspond with the name(s) as written on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a person other than the registered Holder(s) of any Private Notes listed, this Notice of Guaranteed Delivery must be accompanied by a properly completed bond power signed as the name of the registered Holder(s) appear(s) on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the Exchange Offer or the procedure for consenting and tendering as well as requests for assistance or for additional copies of the Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery, may be directed to the Exchange Agent at the address set forth on the cover hereof or to your broker, dealer, commercial bank or trust company. 5 EX-99.3 31 EXHIBIT 99.3 EXHIBIT 99.3 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER NAME AND IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the name and identification number to give the payer.
- ----------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF-- - ----------------------------------------------------- 1. An individual's The individual account 2. Two or more The actual owner of individuals (joint the account or, if account) combined funds, any one of the individuals(1) 3. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 4. a. The usual The revocable savings grantor-trustee(1) trust account (grantor is also trustee) b. So-called trust account that is not The actual owner(1) a legal or valid trust under State law 5. Sole proprietorship The owner(3) account - ----------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF-- - ----------------------------------------------------- 6. A valid trust, The legal entity. estate, or pension (Do not furnish the trust identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) 7. Corporate The corporation 8. Religious, The organization charitable, or educational organization account 9. Partnership The partnership 10. Association, club, The organization or other tax-exempt organization 11. A broker or The broker or registered nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- --------------------------------------------------------- - --------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show individual name, but may also enter the business or "doing business as" name. Use either individual's social security number or employer identification number. (4) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under Section 501(a), or an individual retirement plan, or a custodial account under Section 403(b)(7). - The United States or any agency or instrumentality thereof. - A state, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A dealer in securities or commodities required to register in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - A trust exempt from tax under Section 664 or described in Section 4947. - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A foreign central bank of issue. - A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc. Nominee List. - A futures commission merchant registered with the Commodity Futures Trading Commission. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid by you. Exempt payees described above should file Substitute Form W-9 to avoid possible erroneous backup withholding. FILE SUBSTITUTE FORM W-9 WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. If you are a nonresident alien not subject to backup withholding, submit a completed Form W-8, Certificate of Foreign Status. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see Sections 6041, 6041(A)(a), 6042, 6044, 6045, 6049, 6050A and 6050N, and the regulations thereunder. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of certain taxable payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1 PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) MISUSE OF TINS.--If the requester discloses or uses the TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE -----END PRIVACY-ENHANCED MESSAGE-----