-----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, FbKkjJnW0M6eXjBsipHg96+SYGYgcDHH1Bmh8mknU1350ANxazKnWUIr7ZwZs93x IL7Cbmc9T6vkurh74ayiig== 0000950136-02-000724.txt : 20020415 0000950136-02-000724.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950136-02-000724 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020319 FILER: COMPANY DATA: COMPANY CONFORMED NAME: L 3 COMMUNICATIONS HOLDINGS INC CENTRAL INDEX KEY: 0001056239 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 133937434 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14141 FILM NUMBER: 02578189 BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971111 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 FILER: COMPANY DATA: COMPANY CONFORMED NAME: L 3 COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001039101 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 133937436 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-46983 FILM NUMBER: 02578190 BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 1216971111 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 10-K 1 file001.txt FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file numbers 001-14141 and 333-46983 L-3 COMMUNICATIONS HOLDINGS, INC. L-3 COMMUNICATIONS CORPORATION (Exact names of registrants as specified in their charters) DELAWARE 13-3937434 AND 13-3937436 (State or other jurisdiction of (I.R.S. Employer Identification Nos.) incorporation or organization) 600 THIRD AVENUE, NEW YORK, NEW YORK 10016 (Address of principal executive offices) (Zip Code) (212) 697-1111 (Telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS L-3 Communications Holdings, Inc. common stock, par value $0.01 per share NAME OF EACH EXCHANGE ON WHICH REGISTERED: New York Stock Exchange Securities registered pursuant to section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] There were 39,600,795 shares of L-3 Communications Holdings, Inc. common stock with a par value of $0.01 outstanding as of the close of business on March 12, 2002. The aggregate market value of the L-3 Communications Holdings, Inc. voting stock held by non-affiliates of the registrant as of March 12, 2002 was approximately $4,394.5 million. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement to be filed with Securities and Exchange Commission ("SEC") pursuant to Regulation 14A relating to the registrant's Annual Meeting of Shareholders, to be held on April 23, 2002, will be incorporated by reference in Part III of this Form 10-K. Such proxy statement will be filed with the SEC not later than 120 days after the registrant's fiscal year ended December 31, 2001. ================================================================================ L-3 COMMUNICATIONS HOLDINGS, INC. L-3 COMMUNICATIONS CORPORATION INDEX TO ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001
PAGE ----- PART I Item 1: Business ................................................................. 1 Item 2: Properties ............................................................... 22 Item 3: Legal Proceedings ........................................................ 22 Item 4: Submission of Matters to a Vote of Security Holders ...................... 22 PART II Item 5: Market for Registrant's Common Equity and Related Stockholder Matters ................................................................. 23 Item 6: Selected Financial Data .................................................. 24 Item 7: Management's Discussion and Analysis of Results of Operations and Financial Condition ..................................................... 25 Item 7A: Quantitative and Qualitative Disclosures about Market Risk ............... 41 Item 8: Financial Statements and Supplementary Data .............................. 41 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................................... 41 PART III Item 10: Directors and Executive Officers of the Registrant ....................... 42 Item 11: Executive Compensation ................................................... 42 Item 12: Security Ownership of Certain Beneficial Owners and Management ........... 42 Item 13: Certain Relationships and Related Transactions ........................... 42 PART IV Item 14: Exhibits, Financial Statement Schedules and reports on Form 8-K .......... 43 Signatures ....................................................................... 46
[THIS PAGE INTENTIONALLY LEFT BLANK] PART I For convenience purposes in this Annual Report on Form 10-K, "L-3 Holdings" refers to L-3 Communications Holdings, Inc., and "L-3 Communications" refers to L-3 Communications Corporation, a wholly-owned operating subsidiary of L-3 Holdings. "L-3", "we", "us" and "our" refer to L-3 Holdings and its subsidiaries, including L-3 Communications. The predecessor company refers to the ten initial business units we purchased from Lockheed Martin Corporation in April 1997. ITEM 1. BUSINESS L-3 Holdings, a Delaware corporation organized in 1997, derives all of its operating income and cash flow from its wholly-owned subsidiary L-3 Communications. L-3 Communications, a Delaware corporation, was organized in 1997 to acquire the predecessor company. The only indebtedness of L-3 Holdings are its 5.25% Convertible Senior Subordinated Notes due 2009 and its 4.00% Senior Subordinated Convertible Contingent Debt Securities due 2011 which are jointly and severally guaranteed by substantially all of its direct and indirect domestic subsidiaries including L-3 Communications. L-3 Holdings also has guaranteed the indebtedness under the bank credit facilities of L-3 Communications. L-3 Holdings relies on dividends and other payments from its subsidiaries or must raise funds in public or private equity or debt offerings to generate the funds necessary to pay principal and interest on its indebtedness. OVERVIEW We are a leading merchant supplier of sophisticated secure communication systems and specialized products. We produce secure, high data rate communication systems, training and simulation systems, engineering development and integration support, avionics and ocean products, fuzing products, telemetry, instrumentation, space and guidance products and microwave components. These systems and products are critical elements of virtually all major communication, command and control, intelligence gathering and space systems. Our systems and specialized products are used to connect a variety of airborne, space, ground-and sea-based communication systems and are used in the transmission, processing, recording, monitoring and dissemination functions of these communication systems. Our customers include the U.S. Department of Defense ("DoD"), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign governments, commercial customers and certain other U.S. federal, state and local government agencies. For the year ended December 31, 2001, direct and indirect sales to the DoD provided 64.7% of our sales, and sales to commercial customers, foreign governments and U.S. federal, state and local government agencies other than the DoD provided 35.3% of our sales. Our business areas employ proprietary technologies and capabilities and have leading positions in their respective primary markets. For the year ended December 31, 2001, we had sales of $2,347.4 million and operating income of $275.3 million. We have two reportable segments: Secure Communication Systems and Specialized Products. Information on our reportable segments is included in Note 16 of our consolidated financial statements included elsewhere herein. SECURE COMMUNICATION SYSTEMS We are an established leader in secure, high data rate communication systems for military and other U.S. Government reconnaissance and surveillance applications and we believe that we have developed virtually every high bandwidth data link that is currently used by the DoD for surveillance and reconnaissance. Our major secure communication programs and systems include: o secure data links for airborne, satellite, ground and sea-based remote platforms for real time information collection and dissemination to users; o strategic and tactical signal intelligence systems that detect, collect, identify, analyze and disseminate information; o secure telephone and network equipment and encryption management; o communication software support services; 1 o communication systems for surface and undersea vessels and manned space flights; and o wide-area security systems. Our Secure Communication Systems segment includes our training and simulation businesses. We design, develop and manufacture advanced simulation and training products with high-fidelity representations of cockpits and operator stations for aircraft and vehicle system simulation. We also provide a wide range of engineering development and integration support to the DoD and other government agencies, a full range of teaching, training, logistic and training device support services to domestic and international military customers, and custom ballistic targets for the DoD. Our Secure Communication Systems segment provided $1,241.6 million or 52.9% of our total sales for the year ended December 31, 2001. SPECIALIZED PRODUCTS We are a leading merchant supplier of products to military and commercial customers. We focus on niche markets in which we believe we can achieve a market leadership position. This reportable segment includes three product categories: o Avionics and Ocean Products; o Telemetry, Instrumentation and Space Products; and o Microwave Components. Avionics and Ocean Products. This business area includes our aviation and maritime recorders, airborne collision avoidance products, displays, antennas, acoustic undersea warfare products, naval power distribution, conditioning, switching and protection equipment, premium fuzing products and aircraft modernization services. We believe we are the leading manufacturer of commercial cockpit voice and flight data recorders (known as "black boxes") and a leading supplier of acoustic undersea warfare products and airborne dipping sonars to the U.S. Navy and over 20 foreign navies. These products represented 60.8% of our Specialized Products segment sales for the year ended December 31, 2001. Telemetry, Instrumentation and Space Products. We develop and manufacture commercial off-the-shelf, real-time data collection and transmission products and components for missile, aircraft and space-based electronic systems. These products are used to gather flight data and other critical information and transmit it from air or space to the ground. We are a leader in digital Global Positioning System receiver technology for high performance military applications. We are also a leading global satellite communications systems provider offering systems and services used in the satellite transmission of voice, video and data through earth stations for uplink and downlink terminals. We provide commercial, off-the-shelf satellite control software, telemetry, tracking and control, mission processors and software engineering services to foreign governments and commercial satellite markets. We are a leading producer of navigation products, gyroscopes, controlled momentum devices and star sensors for commercial, military and other applications. These products represented 29.1% of our Specialized Products segment sales for the year ended December 31, 2001. Microwave Products. We are a premier worldwide supplier of commercial off-the-shelf, high-performance microwave components, base station antenna monitoring equipment, and RF radiation measurement instrumentation. Our microwave components are sold under the industry-recognized Narda brand name using an extensive catalog, which are distributed to the wireless, industrial and military communication markets. We also provide state-of-the-art, space-qualified communication components including channel amplifiers and frequency filters for the commercial communications satellite market. Narda also supplies filters to the cellular & PCS market worldwide. These products represented 10.1% of our Specialized Products segment sales for the year ended December 31, 2001. Our Specialized Products segment provided $1,105.8 million or 47.1% of our total sales for the year ended December 31, 2001. 2 DEVELOPING COMMERCIAL OPPORTUNITIES An integral part of our growth strategy is to identify and exploit commercial applications for select products and technologies currently sold to defense customers. We have currently identified two vertical markets where we believe there are significant opportunities to expand our existing commercial sales: Transportation Products and Broadband Wireless Communications Products. We believe that these vertical markets, together with our existing commercial products, provide us with the opportunity for substantial commercial growth in future years. Within the transportation market, we have developed and are offering an explosive detection system for checked baggage at airports, cruise ship voyage recorders, power propulsion systems and power switches and displays for rail transportation and internet service providers. We are developing additional products, including an enhanced collision avoidance product that incorporates ground proximity warning. Within the communications product market, we are offering local fixed wireless access equipment for voice, DSL and internet access, transceivers for LMDS (Local Multipoint Distribution Service) and a broad range of commercial components and digital test equipment for broadband communications providers. We have developed the majority of our commercial products employing technology funded by and used in our defense electronics businesses, thereby minimizing any required incremental development expenses. Sales generated from our developing commercial opportunities have not yet been material to us. INDUSTRY OVERVIEW The U.S. defense industry has undergone significant changes precipitated by ongoing U.S. federal budget pressures and adjustments in political roles and missions to reflect changing strategic and tactical threats. From the mid-1980s to the late 1990s, the U.S. defense budget experienced a decline in real dollars. This trend was reversed by an increase in defense spending in 1999, followed by current dollar increases in fiscal 2000, 2001 and 2002 with an anticipated increase in fiscal 2003 to $379.0 billion. In addition, the DoD philosophy has focused on its transformation strategy that balances modernization and recapitalization (or upgrading existing platforms) while enhancing readiness and joint operations which include digital command and control communications capabilities by incorporating advanced electronics to improve performance, reduce operating costs, and extend the life expectancy of its existing and future platforms. As a result, defense budget program allocations continue to favor advanced information technologies related to command and control, communications, computers (C4), intelligence, surveillance and reconnaissance (ISR). In addition, the DoD's emphasis on system interoperability, force multipliers and providing battlefield commanders with real-time data is increasing the electronic content of nearly all major military procurement and research programs. As a result, it is expected that the DoD's budget for communications and defense electronics will continue to grow. The U.S. defense industry has also undergone dramatic consolidation resulting in the emergence of five dominant prime system contractors: The Boeing Company, Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Company and General Dynamics Corporation. We believe that one outcome of this consolidation is that the DoD wants to ensure that continued vertical integration does not further diminish the fragmented, yet critical DoD vendor base. Additionally, we believe it has become uneconomical for the prime contractors to design, develop and manufacture numerous essential products, components and subsystems for their own use. We believe this situation has and will continue to create opportunities for merchant suppliers such as L-3. As the prime contractors continue to evaluate their core competencies and competitive positions, focusing their resources on larger programs and platforms, we expect the prime contractors to continue to exit non-strategic business areas and procure these needed elements on more favorable terms from independent, commercially oriented merchant suppliers. Examples of this trend include recent divestitures of certain non-core defense-related businesses by several of the prime contractors. The focus on cost reduction by the prime contractors and DoD is also driving increased use of commercial off-the-shelf products for upgrades of existing systems and in new systems. We believe the 3 prime contractors will continue to be under pressure to reduce their costs and will increasingly seek to focus their resources and capabilities on major platforms and systems, turning to commercially oriented "best of breed" merchant suppliers to produce subsystems, components and products. We believe successful merchant suppliers will continue to use their resources to complement and support, rather than compete with, the prime contractors. We anticipate that the relationships between the major prime contractors and their primary suppliers will continue to evolve in a fashion similar to those employed in the automotive and commercial aircraft industries. We expect that these relationships will be defined by critical partnerships encompassing increasingly greater outsourcing of non-core products and systems by the prime contractors to their key merchant suppliers and increasing supplier participation in the development of future programs. We believe early involvement in the upgrading of existing systems and the design and engineering of new systems incorporating these outsourced products will provide merchant suppliers, including us, with a competitive advantage in securing new business and provide the prime contractors with significant cost reduction opportunities through coordination of the design, development and manufacturing processes. BUSINESS STRATEGY We intend to grow our sales, enhance our profitability and build on our position as a leading merchant supplier of communication systems and products to the major contractors in the aerospace and defense industry as well as the U.S. Government. We also intend to leverage our expertise and products into selected new commercial business areas where we can adapt our existing products and technologies. Our strategy to achieve our objectives includes: EXPAND MERCHANT SUPPLIER RELATIONSHIPS. We have developed strong relationships with the DoD, several other U.S. Government agencies and all of the major U.S. defense prime contractors, enabling us to identify new business opportunities and anticipate customer needs. As an independent merchant supplier, we anticipate that our growth will be driven by expanding our share of existing programs and by participating in new programs. We identify opportunities where we are able to use our strong relationships to increase our business presence and allow customers to reduce their costs. We also expect to benefit from increased outsourcing by prime contractors who in the past may have limited their purchases to captive suppliers and who are now expected to view our capabilities on a more favorable basis due to our status as an independent company, which positions us to be a merchant supplier to multiple bidders on prime contract bids. SUPPORT CUSTOMER REQUIREMENTS. A significant portion of our sales is derived from strategic, long-term programs and from programs for which we have been the incumbent supplier, and in many cases acted as the sole provider over many years. Our customer satisfaction and excellent performance record are evidenced by our performance-based award fees exceeding an average of 90% of the available award fees since our inception in April 1997. We believe that prime contractors will increasingly award long-term, outsourcing contracts to the best-of-breed merchant suppliers they believe to be most capable on the basis of quality, responsiveness, design, engineering and program management support as well as cost. We intend to continue to align our research and development, manufacturing and new business efforts to complement our customers' requirements and provide state-of-the-art products. ENHANCE OPERATING MARGINS. We have a history of improving the operating performance of the businesses we acquire through the reduction of corporate administrative expenses and facilities costs, increasing sales, improving contract bidding controls and practices and increasing competitive contract award win rates. We have a tradition of enhancing operating margins, primarily due to efficient management and elimination of significant corporate expense allocations. We intend to continue to enhance our operating performance by reducing overhead expenses, continuing consolidation and increasing productivity. LEVERAGE TECHNICAL AND MARKET LEADERSHIP POSITIONS. We have developed strong, proprietary technical capabilities that have enabled us to capture the number one or number two market position in most of our key business areas, including secure, high data rate communications systems, solid state aviation recorders, telemetry, instrumentation and space products, advanced antenna products and high performance microwave components. We continue to invest in company-sponsored independent research 4 and development, including bid and proposal costs, in addition to making substantial investments in our technical and manufacturing resources. Further, we have a highly skilled workforce, including approximately 7,600 engineers. We are applying our technical expertise and capabilities to several closely aligned commercial business markets and applications such as transportation and broadband wireless communications and we expect to continue to explore other similar commercial opportunities. MAINTAIN DIVERSIFIED BUSINESS MIX. We have a diverse and broad business mix with limited reliance on any particular program, a balance of cost-reimbursable and fixed-price contracts, a significant follow-on business and an attractive customer profile. Our largest program represented 3.9% of our sales for the year ended December 31, 2001 and is a long term, firm-fixed price contract for intelligence agencies and the DoD. No other program represented more than 3.2% of sales for the year ended December 31, 2001. Furthermore, 31.7% of our sales for the same period were from cost-reimbursable contracts, and 68.3% were from fixed-price contracts, providing us with a mix of predictable profitability (cost-reimbursable) and higher margin (fixed-price) business. We also enjoy a mix of defense and non-defense business, with direct and indirect sales to the DoD accounting for 64.7%, and sales to commercial customers, foreign governments and U.S. federal, state and local government agencies other than the DoD accounting for 35.3% of our sales for the year ended December 31, 2001. We intend to leverage this business profile to expand our merchant supplier business base. CAPITALIZE ON STRATEGIC ACQUISITION OPPORTUNITIES. Recent U.S. defense industry consolidation has dramatically reduced the number of traditional middle-tier aerospace and defense companies, which are smaller than the five dominant prime system contractors and larger than the many smaller publicly and privately owned companies, as well as non-core aerospace and defense businesses of the prime contractors. We intend to enhance our existing product base through internal research and development efforts and selective acquisitions that will add new products in areas that complement our present technologies. We intend to continue acquiring potential targets with the following criteria: o significant market position(s) in their business area(s); o product offerings which complement and/or extend our product offerings; and o positive future growth and earnings prospects. 5 Since January 1, 2001, we acquired thirteen businesses for an aggregate adjusted purchase price of $1,636.0 million, of which twelve businesses were acquired for an aggregate adjusted purchase price of $506.0 million during 2001. For certain of these acquisitions, the purchase price may be subject to further adjustment based on actual closing date net assets or net working capital of the acquired business and the post-acquisition financial performance of the acquired business. The table below summarizes our primary acquisitions completed since January 1, 2001. SELECTED RECENT ACQUISITIONS
PRICE BUSINESS NAME DATE ACQUIRED ACQUIRED FROM ($ MM) BUSINESS DESCRIPTION - ----------------------- ------------------- --------------------- ------------- ----------------------------------- Aircraft Integration March 8, 2002 Raytheon Company $ 1,130.0 Provides products and services for the Systems global Intelligence, Surveillance and Reconnaissance (ISR) market, specializing in signals intelligence (SIGINT) and communications intelligence (COMINT) systems, which provide the unique ability to collect, decode and analyze electronic signals from command centers, communication nodes and air defense for real-time communication and response to the warfighter. SY Technology December 31, 2001 SY Technology, Inc. 48.0 Specializes in air warfare simulation; command, control, communications, computers and intelligence architectures; and missile defense and space systems technologies. BT Fuze Products December 19, 2001 Bulova Technologies 49.5 Produces military fuzes that prevent the inadvertent firing and detonation of weapons during handling. Government Services November 30, 2001 Emergent 39.8 Provides high-end engineering Group (renamed L-3 Technologies and information services to the Communications U.S. Air Force, Army, Navy and Analytics) intelligence agencies. Spar Aerospace November 23, 2001 Spar Stockholders 146.8 Provides turnkey aviation life Limited cycle management services for wide body and rotary wing aircraft. Also providing value-added engineering and modernization for selected military and commercial aviation programs. EER Systems May 31, 2001 EER Systems 119.4 Provides a wide range of Stockholders engineering development and integration support to the DoD, Federal civilian agencies, state and local governments and commercial customers. KDI Precision May 4, 2001 KDI Precision 78.9 Produces military fuzes that Products Stockholders prevent the inadvertent firing and detonation of weapons during handling.
6 PRODUCTS AND SERVICES The systems, products and services, selected applications and selected platforms or end users of our Secure Communication Systems segment as of December 31, 2001 are summarized in the table below. SECURE COMMUNICATION SYSTEMS
SYSTEMS/PRODUCTS/SERVICES SELECTED APPLICATIONS SELECTED PLATFORMS/END USERS - ---------------------------------------- -------------------------------------- -------------------------------------- HIGH DATA RATE COMMUNICATIONS o Wideband data links and ground o High performance, wideband o Manned and unmanned aircraft, terminals secure communication links for naval ships, terminals and relaying of intelligence and satellites reconnaissance information SATELLITE COMMUNICATION TERMINALS o Ground-based satellite o Interoperable, transportable o Remote personnel provided with communication terminals and ground terminals communication links to distant payloads forces SPACE COMMUNICATION AND SATELLITE CONTROL o Satellite communication and o On-board satellite external o International Space Station, tracking system communications, video systems, Space Shuttle and various solid state recorders and ground satellites support equipment o Satellite command and control o Software integration, test and o U.S. Air Force Satellite Control sustainment and support maintenance support satellite Network and rocket launch control network and engineering system support for satellite launch system MILITARY COMMUNICATIONS o Shipboard communications o Internal and external o Naval vessels systems communications (radio room) o Communication software o Value-added, critical software o DoD support services support for C3I (Command, Control, Communication and Intelligence) INFORMATION SECURITY SYSTEMS o STE (Secure Terminal o Secure and non-secure voice, o U.S. Armed services, intelligence Equipment) data and video communication and security agencies for office and battlefield utilizing ISDN and ATM commercial network technologies TRAINING AND SIMULATION o Military Aircraft Flight o Training for pilots, navigators, o Military fixed and rotary winged Simulators flight engineers, gunners and aircraft and ground vehicles operators o Battlefield and Weapon o Missile system modeling and o U.S. Army Missile Command Simulation simulation o Design and manufacture ballistic o U.S. Army Missile Command missile ground launched and air launched for threat replication targets o Training o Training for soldiers on complex o DoD command and control systems o Training and logistics services o DoD and foreign governments and training device support o Human Patient Simulators o Medical training o Medical schools, nursing schools, and DoD
7 SECURE COMMUNICATION SYSTEMS (CONT.)
SYSTEMS/PRODUCTS/SERVICES SELECTED APPLICATIONS SELECTED PLATFORMS/END USERS - ----------------------------- -------------------------------- -------------------------------------- ENGINEERING DEVELOPMENT AND INTEGRATION SUPPORT o System Support o C4ISR (Command, Control, o U.S. Armed services, intelligence Communications, Computers, and security agencies, Ballistic Intelligence, Surveillance and Missile Defense Organization Reconnaissance), modeling and and NASA simulation
SECURE COMMUNICATION SYSTEMS We are an established leader in the development, construction and installation of communication systems for high performance intelligence collection, imagery processing and ground, air, sea and satellite communications for the DoD and other U.S. Government agencies. We provide secure, high data rate, real-time communication systems for surveillance, reconnaissance and other intelligence collection systems. We also design, develop, produce and integrate communication systems and support equipment for space, ground and naval applications, as well as provide communication software support services to military and related government intelligence markets. Product lines of the Secure Communication Systems business include high data rate communications links, satellite communications terminals, naval vessel communication systems, space communications and satellite control systems, signal intelligence information processing systems, information security systems, tactical battlefield sensor systems and commercial communication systems. High Data Rate Communications We are a technology leader in high data rate, covert, jam-resistant microwave communications used in military and other national agency reconnaissance and surveillance applications. Our product line covers a full range of tactical and strategic secure point-to-point and relay data transmission systems, products and support services that conform to military and intelligence specifications. Our systems and products are capable of providing battlefield commanders with real-time, secure surveillance and targeting information and were used extensively by U.S. armed forces in the Persian Gulf War and during operations in Bosnia, Kosovo and Afghanistan. Our current family of strategic and tactical data links or CDL (Common Data Link) systems are considered DoD standards for data link hardware. Our primary focus is spread spectrum secure communication links technology, which involves transmitting a data signal with a high-rate noise signal making it difficult to detect by others, and then re-capturing the signal and removing the noise. Our data links are capable of providing information at over 300 megabytes per second and use point-to-point and point-to-multipoint architectures. We provide these secure high bandwidth products to the U.S. Air Force, the U.S. Navy, the U.S. Army and various U.S. Government agencies, many through long-term programs. The scope of these programs include air-to-ground, air-to-air, ground-to-air and satellite communications such as the U-2 Support Program, GUARDRAIL, ASTOR and major UAV (unmanned aerial vehicle) programs, such as Predator, Global Hawk and Fire Scout. We remain the industry leader in the mobile airborne satellite terminal product market, delivering mobile satellite communication services to many airborne platforms. These services provide real time connectivity between the battlefield and non-local exploiters of ISR data. Satellite Communication Terminals We provide ground-to-satellite, high availability, real-time global communications capability through a family of transportable field terminals used to communicate with commercial, military and international satellites. These terminals provide remote personnel with constant and effective communication 8 capability and provide communications links to distant forces. Our TSS (TriBand SATCOM Subsystem) employs a 6.25 meter tactical dish with a single point feed that provides C, Ku and X band communication to support the U.S. Army. We also offer an 11.3 meter antenna satellite terminal which is transportable on two C-130 aircraft. The SHF PTS (Portable Terminal System) is a lightweight (28 pounds), portable terminal, which communicates through DSCS, NATO or SKYNET satellites and brings connectivity to small military tactical units and mobile command posts. We provide System Engineering and Software/Life-cycle support to the Air Force Satellite control network as well as the Eastern and Western Test Rangers. These contracts were recently won and last well beyond 2010. Space Communications and Satellite Control We produced and are delivering three communication subsystems for the ISS (International Space Station). These systems will control all ISS radio frequency communications and external video activities. We also provide solid-state recorders and memory units for data capture, storage, transfer and retrieval for space applications. Our standard NASA tape recorder has completed over five million hours of service without a mission failure. Our recorders are on National Oceanic & Atmospheric Administration weather satellites, the Earth Observing Satellite, AM spacecraft and Landsat-7 Earth-monitoring spacecraft. We have extended this technology to our Strategic Tactical Airborne Recorder (S/TAR (Trade Mark) ) which was selected for the New Shared Reconnaissance Port (SHARD) Program. We also provide space and satellite system simulation, satellite operations and computer system training, depot support, network engineering, resource scheduling, launch system engineering, support, software integration and test through cost-plus contracts with the U.S. Air Force. Military Communications We provide integrated, computer controlled switching systems for the interior and exterior voice and data needs of naval vessels. Our products include the MarCom Integrated Voice Communication Systems for Aegis class destroyers and for the LPD amphibious ship class. We produced the MarCom Baseband Switch for Los Angeles class submarines. Our MarCom secure digital switching system provides an integrated approach to the specialized voice and data communications needs of shipboard environment for internal and external communications, command and control and air traffic control. Along with the Keyswitch Integrated Terminals, MarCom provides automated switching of radio/cryptocircuits, which results in significant timesavings. We also offer on-board, high data rate communications systems, which provide a data link for carrier battle groups, which are interoperable with the U.S. Air Force's Surveillance/reconnaissance terminals. We supply the "communications on the move" capability needed for the digital battlefield by packaging advanced communications into the U.S. Army's Interim Brigade Combat Team Commander's Vehicle. Our Ilex Systems business provides systems and software engineering products and services for military applications. We specialize in the innovative application of state-of-the-art software technology and software development methodologies to produce comprehensive real-time solutions satisfying our customers' systems and software needs. We specialize in providing engineering services to the U.S. Army military intelligence community including the Communications-Electronics Command (CECOM) Software Engineering Center, for the development and maintenance of Intelligence, Electronic Warfare, Fusion and Sensor systems and software. Information Security Systems We believe we are a leader in the development of secure communications equipment for both military and commercial applications. We are producing the next generation digital, ISDN-compatible STE (secure telephone equipment). STE provides clearer voice and thirteen-times faster data/fax transmission capabilities than the previous generation secure telecommunications equipment. STE also supports secure conference calls and secure video teleconferencing. STE uses a CryptoCard security system which consists of a small, portable, cryptographic module holding the algorithms, keys and 9 personalized credentials to identify its user for secure communications access. We also provide the workstation component of the U.S. Government's EKMS (Electronic Key Management System), the next generation of information security systems. EKMS is the government's system to replace current "paper" encryption keys used to secure government communications with "electronic" encryption keys. The component we provide produces and distributes the electronic keys. We also develop specialized strategic and tactical signal intelligence systems to detect, acquire, collect, and process information derived from electronic sources. These systems are used by classified customers for intelligence gathering and require high-speed digital signal processing and high-density custom hardware designs. Training and Simulation We believe we are a leading provider of fully-integrated simulation training systems and related support services to the U.S. and foreign military agencies. Our training devices business designs, develops and manufacturers advanced reality simulation and training products for training air crews with high-fidelity representations of cockpits and operator stations for aircraft and vehicle simulation. We have developed flight simulators for most of the U.S. military aircraft in active operation. We have numerous proprietary technologies and fully-developed systems integration capabilities that provide competitive advantages. Our proprietary software is used for visual display systems, high-fidelity system models, database production, digital radar land mass image simulation and creation of synthetic environments. We are also a leader in developing training systems which allow multiple trainees at multiple sites to engage in networked group, unit and task force training and combat simulations. In addition we are developing, demonstrating, evaluating and transitioning training technologies and methods for use by warfighters at the US Air Force's Fighter Training Research Division. Our products and services are designed to meet customer training requirements for pilots, navigators, flight engineers, gunners, operators and maintenance technicians for virtually any platform, including military fixed and rotary wing aircraft, air vehicles and various ground vehicles. As one of the leading suppliers of both simulator systems and training services, we believe we are able to leverage our unique full-service capabilities to develop fully-integrated, innovative solutions for training systems, propose and provide program upgrades and modifications, as well as provide hands-on, best-in-class training operations in accordance with virtually any customer requirement in a timely manner. We also design and develop prototypes of ballistic missile targets for present and future threat scenarios. We provide high-fidelity custom targets to the DoD that are complementary to the U.S. Government's growing focus and priority on national missile defense and space programs. We are the only provider of Ballistic Missile targets that have successfully launched a Ballistic Missile Target from an Air Force Cargo Aircraft. We also develop and manage extensive programs in the United States and internationally focusing on training and education, strategic planning, organizational design, democracy transition and leadership development. To provide these services, we utilize a pool of experienced former armed service, law enforcement and other national security professionals. In the United States, our personnel are instructors in the U.S. Army's Force Management School and other schools and courses and are also involved in recruiting for the U.S. Army. In addition, we own a one-third interest in Medical Education Technologies, Inc., which has developed and is producing human patient simulators for sale to medical teaching and training institutions and the DoD. Engineering Development and Integration Support We are a premier provider of numerous air campaign modeling and simulation tools for applications, such as Thunder, Storm and Brawler, for the U.S. Air Force Studies and Analysis Agency and of space science research for NASA. We also provide high-end systems support for the HAWK and PATRIOT missile systems, Unmanned Aerial Vehicles (UAVs), the Cooperative Engagement Capacity (CEC) Program, and the F/A-18. 10 Our products and services specialize in communication systems, training and simulation equipment and a broad range of hardware and software for the U.S. Army, Air Force and Navy, the Federal Aviation Administration and the Ballistic Missile Defense Organization (BMDO). As one of the leading suppliers of high-end engineering and information support, we believe we are able to provide value-added C4ISR engineering support, wargames simulation and modeling of battlefield communications. The products and services, selected applications and selected platforms or end users of our Specialized Communication Products segment as of December 31, 2001, are summarized in the table below. SPECIALIZED PRODUCTS
PRODUCTS/SERVICES SELECTED APPLICATIONS SELECTED PLATFORMS/END USERS - ------------------------------------------ -------------------------------------- ------------------------------------- AVIONICS AND OCEAN PRODUCTS Aviation Products o Solid state crash protected o Voice recorders continuously o Business and commercial aircraft cockpit voice and flight data record most recent 30-120 and certain military transport recorders minutes of voice and sounds aircraft; sold to both aircraft from cockpit and aircraft manufacturers and airlines under intercommunications. Flight data the Fairchild brand name recorders record the last 25 hours of flight parameters o TCAS (Traffic Alert and o Reduce the potential for midair o Commercial, business, regional Collision Avoidance System) aircraft collisions by providing and military transport aircraft visual and audible warnings and maneuvering instructions to pilots Antenna Products o Ultra-wide frequency and o Surveillance and radar detection o Military aircraft including advanced radar antennas and surveillance, fighters and rotary joints bombers, attack helicopters and transport o Precision antennas serving major o Antennas for high frequency, o Various military and commercial military and commercial millimeter satellite customers including scientific frequencies, including Ka band communications astronomers Display Products o Cockpit and mission displays o High performance, ruggedized o Military aircraft including and controls flat panel and cathode ray tube surveillance, fighters and displays and processors bombers, attack helicopters, transport aircraft and land vehicles Aircraft Modernization o High end aviation product o Turnkey aviation life cycle o Various military and commercial modernization services management services wide body and rotary wing aircraft Ocean Products o Airborne dipping sonars o Submarine detection and o Various military helicopters localization o Submarine and surface ship o Submarine and surface ship o U.S. Navy and foreign navies towed arrays detection and localization o Naval and commercial power o Switching, distribution and o All naval combatants: delivery and switching products protection, as well as frequency submarines, surface ships and and voltage conversion aircraft carriers
11 SPECIALIZED PRODUCTS (CONT.)
PRODUCTS/SERVICES SELECTED APPLICATIONS SELECTED PLATFORMS/END USERS - ----------------------------------------- -------------------------------------- -------------------------------------- o Commercial transfer switches, o Production and maintenance of o Federal Aviation uninterruptible power supplies systems and high-speed switches Administration, internet service and power products for power interruption providers, financial institutions prevention and rail transportation Premium Fuzing Products o Fuzing products o Munitions and electronic and o Various DoD and foreign electro-mechanical safety and military customers arming devices (ESADs) TELEMETRY, INSTRUMENTATION AND SPACE PRODUCTS Airborne, Ground and Space Telemetry o Aircraft, missile and satellite o Real-time data acquisition, o Aircraft, missiles and satellites telemetry and instrumentation measurement, processing, systems simulation, distribution, display and storage for flight testing o GPS (Global Positioning o Location tracking o Guided projectiles Systems) receivers o Navigation systems and o Space navigation o Hubble Space Telescope, subsystems, gyroscopes, reaction Delta IV launch vehicle and wheels, star sensor satellites Space Products o Global satellite communications o Satellite transmission of voice, o Rural telephony or private systems video and data networks, direct to home uplinks, satellite news gathering and wideband applications MICROWAVE COMPONENTS o Passive components, switches o Radio transmission, switching o DoD, telephony service and wireless assemblies and conditioning, antenna and providers and original base station testing and equipment manufacturers monitoring, broad-band and narrow-band applications (PCS, cellular, SMR and paging infrastructure) o Safety products o Radio frequency monitoring and o Monitor cellular base station and measurement for safety industrial radio frequency emissions o Satellite and wireless o Satellite transponder control, o Communications satellites and components (channel amplifiers, channel and frequency wireless communications transceivers, converters, filters separation equipment and multiplexers) o Amplifiers and amplifier based o Automated test equipment, o DoD and commercial satellite components (amplifiers, up/down military electronic warfare, operators converters and Ka assemblies) ground and space communications
SPECIALIZED PRODUCTS Avionics and Ocean Products Aviation and Maritime Recorders. We manufacture commercial, solid-state, crash-protected recorders, commonly known as black boxes, under the Fairchild brand name for the aviation and maritime industries, and have delivered nearly 55,000 flight recorders to aircraft manufacturers and airlines around the world. We believe we are the leading manufacturer of commercial cockpit voice recorders and flight data recorders. The hardened voyage recorder, launched from our state-of-the-art aviation technology, 12 and expanded to include cutting edge internet communication protocols, has taken an early leadership position within the maritime industry. We offer three types of recorders: o the cockpit voice recorder, which records the last 30 to 120 minutes of crew conversation and ambient sounds from the cockpit; o the flight data recorder, which records the last 25 hours of aircraft flight parameters such as speed, altitude, acceleration and thrust from each engine and direction of the flight in its final moments; and o the hardened voyage recorder, which stores and protects 12 hours of voice, radar, radio and shipboard performance data on solid state memory. Recorders are highly ruggedized instruments, designed to absorb the shock equivalent to that of an object traveling at 268 knots stopping in 18 inches, fire resistant to 1,100 degrees centigrade and pressure resistant to 20,000 feet undersea for 30 days. Our recorders are mandated and regulated by various worldwide agencies for use in commercial airlines and a large portion of business aviation aircraft. In addition, our aviation recorders are certified and approved for installation at the world's leading aircraft original equipment manufacturers ("OEM's"), while our maritime recorders are an integral component to a mandated recording system for numerous vessels that travel on international waters. The U.S. military has recently required the installation of black boxes in military transport aircraft. We believe this development will provide us with new opportunities for expansion into the military market. We have completed development of a combined voice and data recorder and are developing an enhanced recorder that monitors engine and other aircraft parameters for use in maintenance and safety applications. Traffic Alert and Collision Avoidance Systems (TCAS). TCAS is an avionics safety system that was developed to reduce the potential for mid-air collisions. The system is designed to operate independently from the air traffic control ("ATC") system to provide a complementary supplement to the existing ATC system. TCAS operates by transmitting interrogations that elicit replies from transponders in nearby aircraft. The system tracks aircraft within certain range and altitude bands to determine whether they have the potential to become a collision threat. There are two levels of TCAS protection currently in operation: TCAS I and TCAS II. In the United States, passenger aircraft with 10 to 30 seats must be equipped with a TCAS I system. The TCAS II system is required for passenger aircraft with more than 30 seats. These aircraft, as well as aircraft used in all-cargo operations, must also be equipped with transponders, either Mode S or Mode C. The transponder provides altitude and airplane identification to TCAS-equipped aircraft as well as to the ATC system. If the TCAS I system calculates that an aircraft may be a threat, it provides the pilot with a visual and audible traffic advisory. The advisory information provides the intruder aircraft's range and relative altitude/bearing. In addition to traffic advisories, a TCAS II system will provide the pilot a resolution advisory ("RA"). This resolution advisory recommends a vertical maneuver to provide separation from the intruder aircraft. TCAS systems have proven to be very effective, with many documented successful RA's. TCAS II has been in worldwide operation in many aircraft types since 1990. Today, over 16,000 airline, corporate and military aircraft are equipped with TCAS II-type systems, logging over 100 million hours of operation. The number of reported near mid-air collisions in the U.S. has decreased significantly since 1989, a period during which both passenger and cargo air traffic has increased substantially. Antenna Products. We produce high performance antennas under the Randtron brand name which are designed for: o surveillance of high-resolution, ultra-wide frequency bands; o detection of low radar cross-section targets and low radar cross-section installations; 13 o severe environmental applications; and o polarization diversity. Our primary product is a sophisticated 24-foot diameter antenna used on all E-2C surveillance aircraft. This airborne antenna is a rotating aerodynamic radome containing a UHF surveillance radar antenna, an IFF antenna, and forward and aft auxiliary antennas. Production is planned beyond 2001 for the E-2C, P-3 and C-130 AEW aircraft. We have been funded to begin the development of the next generation for this antenna. We also produce broadband antennas for a variety of tactical aircraft, as well as rotary joints for the AWAC antenna. We have delivered over 2,000 sets of antennas for aircraft and have a backlog of orders through 2004. We are a leading supplier of ground based radomes used for air traffic control, weather radar, defense and scientific purposes. These radomes enclose an antenna system as a protective shield against the environment and are intended to enhance the performance of an antenna system. Display Products. We design, develop and manufacture ruggedized displays for military and high-end commercial applications. Our current product line includes a family of high performance display processing systems, which use either a cathode ray tube or active matrix liquid crystal display. Our displays are used in numerous airborne, ship-board and ground based platforms and are designed to survive in military and harsh environments. Aircraft Modernization. We are a leading global provider of turnkey aviation life cycle management services, providing value-added engineering and upgrades for selected military and commercial aviation programs, component repair and overhaul and support services. Our major programs include high-end aviation product modernization and services on the C-130 for a number of military organizations around the world, including the Canadian Department of National Defense, U.S. Coast Guard, Mexican Air Force, Royal Malaysian Air Force and Royal Australian Air Force. We also provide avionics maintenance, repair and overhaul for the Sikorsky S-61/H-3 Sea King helicopter for a number of military organizations including the Canadian military, the U.S. Navy and the Brazilian Air Force. We are also a full service provider for the Boeing 727 and 737 to a number of airlines, including Canada's WestJet. Ocean Products. We are one of the world's leading suppliers of acoustic undersea warfare systems. Our experience spans a wide range of platforms, including helicopters, submarines and surface ships. Our products include towed array sonar, hull mounted sonar, airborne dipping sonar and ocean mapping sonar for navies around the world. We are also a leading provider of state-of-the-art power electronics systems and electrical power delivery systems and subsystems. We provide communications and control systems for the military and commercial customers. We offer the following: o military power propulsion, distribution and conversion equipment and components which focus on motor drives switching, distribution and protection, providing engineering design and development, manufacturing and overhaul and repair services; and o ship control and interior communications equipment. We have been able to apply our static transfer switch technology, which we developed for the U.S. military, to commercial applications. Our commercial customers for static transfer switches are primarily financial institutions and internet service providers, including American Express, AOL-Time Warner, AT&T, Charles Schwab and the Federal Aviation Administration. In addition, we provide electrical products for rail transportation and utilities businesses. Premium Fuzing Products. We are a leading provider of premium fuzing products, including proximity fuzes, electronic and electro-mechanical safety and arming devices (ESADs) and self-destruct/ sub-munition grenade fuzes. ESADs prevent the inadvertent firing and detonation of guided missiles during handling, flight operations and the initial phases of launch. Our proximity fuzes are used in smart munitions. All are considered to be critical safety and arming products. Additionally, during missile flight the ESAD independently analyzes flight conditions and determines safe separation distance after a missile launch. 14 Telemetry, Instrumentation and Space Products We are a leader in the development and marketing of component products and systems used in telemetry and instrumentation for airborne applications such as satellites, aircraft, UAVs, launch vehicles, guided missiles, projectiles and targets. Telemetry involves the collection of data for various equipment performance parameters and is required when the object under test is moving too quickly or is of too great a distance to use a direct connection. Telemetry products measure, process, receive and collect thousands of parameters of a platform's operation including heat, vibration, stress and operational performance and transmits this data to the ground. Additionally, our satellite telemetry equipment transmits data necessary for ground processing. These applications demand high reliability of components because of the high cost of satellite repair and the need for uninterrupted service. Telemetry products also provide the data used to terminate the flight of missiles and rockets under errant conditions and/or at the end of a mission. These telemetry and command/control products are currently used for a variety of missile and satellite programs. Airborne, Ground and Space Telemetry. We provide airborne equipment and data link systems that gather critical information and then process, format and transmit the data to the ground from communications satellites, spacecraft, aircraft and missiles. These products are available in both commercial off-the-shelf and custom configurations and include software and software engineering services. Primary customers include many of the major defense contractors who manufacture aircraft, missiles, warheads, launch vehicles and munitions. Our ground station instrumentation receives, encrypts and/or decrypts the serial stream of combined data in real-time as it is received from the airborne platform. We are a leader in digital GPS (Global Positioning System) receiver technology for high performance military applications. These GPS receivers are currently in use on aircraft, cruise missiles and precision guided bombs and provide highly accurate positioning and navigational information. Additionally, we provide navigation systems for high performance weapon pointing and positioning systems for programs such as MLRS (Multiple Launch Rocket System) and MFCS (Mortar Fire Control System). Space Products. We offer value-added solutions that provide our customers with complex product integration and comprehensive support. We focus on the following niches within the satellite ground segment equipment market: telephony, video broadcasting and multimedia. Our customers include foreign communications companies, domestic and international prime communications infrastructure contractors, telecommunications or satellite service providers, broadcasters and media-related companies. We also provide space products for advanced guidance and control systems including gyroscopes, controlled momentum devices and star sensors. These products are used on satellites, launch vehicles, the Hubble Telescope, the Space Shuttle and the International Space Station. Microwave Components We are premier worldwide supplier of commercial off-the-shelf and custom, high performance RF (radio frequency) microwave components, assemblies and instruments supplying the wireless communications, industrial and military markets. We are also a leading provider of state-of-the-art space-qualified commercial satellite and strategic military RF products and millimeter amplifier based products. We sell many of these components under the well-recognized Narda brand name through a comprehensive catalog of standard, stocked hardware. We also sell our products through a direct sales force and an extensive network of market representatives. Specific catalog offerings include wireless products, Electro-mechanical switches, power dividers and hybrids, couplers/detectors, attenuators, terminations and phase shifters, isolators and circulators, adapters, control products, sources, mixers, waveguide components, RF safety products, power meters/monitors and custom passive products. Passive components are generally purchased in both narrow and broadband frequency configurations by wireless equipment manufacturers, wireless service providers and military equipment suppliers. Commercial applications include cellular and PCS base station automated test equipment, and equipment for the paging industry. Military applications include electronic surveillance and countermeasure systems. 15 Our space-qualified and wireless components separate various signals and direct them to sections of the satellites' payload. Our main satellite products are channel amplifiers and linearizers, payload products, transponders and antennas. Channel amplifiers amplify the weak signals received from earth stations, and then drive the power amplifier tubes that broadcast the signal back to earth. Linearizers, used either in conjunction with a channel amplifier or by themselves, pre-distort a signal to be transmitted back to earth before it enters a traveling wave tube for amplification. This pre-distortion is exactly the opposite of the distortion created at peak power by the traveling wave tube and, consequently, has a cancellation effect that keeps the signal linear over a much larger power band of the tube. The traveling wave tube and area covered by the satellite is significantly increased. Narda is the world's largest supplier of non-ionizing radiation safety detection equipment. These devices are used to quantify and alarm of exposure to excessive RF radiation. This equipment is used by wireless tower operators and the military to protect personnel, and insure compliance to various published standards. We design and manufacture both broad and narrow band amplifiers and amplifier-based products in the microwave and millimeter wave frequencies. We use these amplifiers in defense and communications applications. These devices can be narrow band for communication needs or broadband for electronic warfare. We offer standard packaged amplifiers for use in various test equipment and system applications. We design and manufacture millimeter range (at least 20 to 38GHz) amplifier products for use in emerging communication applications such as back haul radios, LMDS (Local Multipoint Distribution Service) and ground terminals for LEO satellites. Narda filters are sold to some of the world's leading service providers and base station OEM's. Robust demand continues for Narda filters due to ongoing system upgrades by service providers for 2.5G and 3.0G applications geared toward providing higher data rate capabilities for the commercial cellular and PCS marketplace. We also design, manufacture and market solid state, broadband wireless communications infrastructure equipment, subsystems and modules used to provide point-to-Multipoint ("PMP") and point-to-point ("PTP") terrestrial and satellite-based distribution services in frequency bands from 24 to 38 Gigahertz. Our products include solid-state power amplifiers, hub transmitters, active repeaters, cell-to-cell relays, Internet access systems and other millimeter wave-based modules and subsystems. These products are used in various applications, such as broadband communications, local loop services and Ka-band satellite communications. DEVELOPING COMMERCIAL OPPORTUNITIES Part of our growth strategy is to identify commercial applications for select products and technologies currently sold to defense customers. We have initially identified two vertical markets where we believe there are significant opportunities to expand our products: transportation and broadband wireless communications. Transportation. Our products, designed to meet strict government quality and reliability standards, are easily adapted to the commercial transportation marketplace. Our aircraft voice recorders, designed to meet FAA requirements, have been successfully marketed to the cruise ship, marine shipping and railroad industries. Similarly, our state-of-the-art power propulsion products, originally designed for the U.S. Navy, meet the needs of commuter railroads, including Philadelphia's regional rail system and New York City's Metropolitan Transportation Authority. Our explosive detection system, the eXaminer 3DXTM 6000, enables the rapid scanning of passenger checked baggage at airports using state-of-the-art technology. The new Transportation Security Administration (TSA), of the Department of Transportation, created as a result of the Aviation and Transportation Security Act enacted by Congress on January 3, 2002, has expressed requirements for as many as 500 examiner units. Communications. The wireless communications technology we developed for our military customers also meets the needs of a growing commercial marketplace for technologically advanced communications products. Some of the products we have developed or are developing to exploit this market include wireless loop products, transceivers, LMDS, compression products, remote sensing internet 16 networks, microwave links and products for microwave base stations. Our Prime Wave fixed wireless loop products are an example of our expanding involvement in the commercial communications industry. Using synchronous CDMA technology that supports terrestrial, space, fixed and mobile communications, we produce wireless loop equipment for use in areas that do not have an adequate telecommunications infrastructure, including emerging market countries and customers in rural areas. In the expanding broadband wireless commercial communications market, we also have developed a broad assortment of other products including transponders, payloads, uplinks- downlinks, fly-away SATCOM terminals, telemetry tracking and control and test equipment and waveform generators. These new commercial products are subject to certain risks and may require us to: o develop and maintain marketing, sales and customer support capabilities; o secure sales and customer support capabilities; o obtain customer and/or regulatory certification; o respond to rapidly changing technologies including those developed by others that may render our products and systems obsolete or non-competitive; and o obtain customer acceptance of these products and product performance. Our efforts to expand our presence in commercial markets require significant resources, including additional working capital and capital expenditures, as well as the use of our management's time. Our ability to sell certain commercial products, particularly our broadband wireless communications products, depends to a significant degree on the efforts of independent distributors or communications service providers and on the financial viability of our existing and target customers for the commercial products. Certain of our existing and target customers are agencies or affiliates of governments of emerging and under-developed countries or private business enterprises operating in those countries. In addition, we have made equity investments in entities that plan to commence operations as communications service providers using some of our commercial products. We can give no assurance that these distributors or service providers will be able to market our products or their services successfully or that we will be able to realize a return of investment in them. We also cannot assure you that we will be successful in addressing these risks or in developing these commercial business opportunities. BACKLOG AND ORDERS We define funded backlog as the value of contract awards received from the U.S. Government, which the U.S. Government has appropriated funds, plus the value of contract awards and orders received from customers other than the U.S. Government, which have yet to be recognized as sales. Our funded backlog as of December 31, 2001 was $1,719.3 million and as of December 31, 2000 was $1,354.0 million. We expect to record as sales approximately 69.7% of our funded backlog as of December 31, 2001 during 2002. However, there can be no assurance that our funded backlog will become sales in any particular period, if at all. Our funded orders for the year ended December 31, 2001 was $2,456.1, for the year ended December 31, 2000 was $2,013.7 million and for the year ended December 31, 1999 was $1,423.1 million. Our funded backlog does not include the full value of our contract awards including those pertaining to multi-year, cost-reimbursable contracts, which are generally funded on an annual basis. Funded backlog also excludes the sales value of unexercised contract options that may be exercised by customers under existing contracts and the sales value of purchase orders that may be issued under indefinite quantity contracts or basic ordering agreements. MAJOR CUSTOMERS For the year ended December 31, 2001, direct and indirect sales to the DoD provided 64.7% of our sales, and sales to commercial, foreign governments and U.S. federal, state and local government agencies other than the DoD provided 35.3% of our sales. Our U.S. Government sales are predominantly derived from contracts with agencies of, and prime contractors to, the U.S. Government. Various U.S. Government agencies and contracting entities exercise 17 independent and individual purchasing decisions, subject to annual appropriations by the U.S. Congress. As of December 31, 2001, we had approximately 575 contracts each with a value exceeding $1.0 million. For the year ended December 31, 2001, sales of our five largest programs amounted to $249.7 million or 10.6% of our sales. RESEARCH AND DEVELOPMENT We conduct research and development activities that consist of projects involving basic research, applied research, development, and systems and other concept studies. We employ scientific, engineering and other personnel to improve our existing product lines and develop new products and technologies. As of December 31, 2001, we employed approximately 7,600 engineers, a substantial portion of whom hold advanced degrees. For the year ended December 31, 2001, we incurred $319.4 million on research and development costs for customer-funded contracts and spent $107.5 million on company-sponsored research and development projects, including bid and proposal costs. COMPETITION We encounter intense competition in all of our businesses. We believe that we are a significant supplier of many of the products that we manufacture and services we provide in our defense and government businesses, as well as in our commercial businesses. Defense and Government Business Our ability to compete for defense contracts depends on a variety of factors, including: o the effectiveness and innovation of our research and development programs; o our ability to offer better program performance than our competitors at a lower cost; and o the availability of our facilities, equipment and personnel to undertake the programs for which we compete. In some instances, we are the incumbent supplier or have been the sole provider for many years for certain programs. We refer to such contracts as "sole-source" contracts. In such cases, 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 customer chooses to reopen the particular program to competition. Sole-source contracts accounted for approximately 62.4% and competitive contracts accounted for approximately 37.6% of our total sales for the year ended December 31, 2001. The majority of our sales are derived from contracts with the U.S. Government and its prime contractors, which are principally awarded on the basis of negotiations or competitive bids. We believe that we will continue to be a successful participant in the business areas in which we compete, based upon the quality and cost competitiveness of our products and services. Commercial Activities Our commercial activities have become an increasingly significant portion of our business mix, and comprised 22.6% of our total sales for the year ended December 31, 2001. Our ability to compete for commercial business depends on a variety of factors, including:
o Pricing; o Customer relationships, service and support; and o Product features and performance; o Brand recognition. o Reliability, scalability and compatibility;
18 In these markets, we compete with various companies, several of which are listed below. o Agilent Technologies, Inc.; o Honeywell Inc.; o Globecomm Systems, Inc.; o Smiths Industries; and o ViaSat, Inc.; o Airspan Networks, Inc. We believe that our sales in these business areas will continue to grow as a percentage of our total sales, even though several of our competitors may have greater resources and technologies than we have available to us. PATENTS AND LICENSES Although we own some patents and have filed applications for additional patents, we do not believe that our operations depend upon our ownership of patents. In addition, our U.S. Government contracts generally permit us to use patents owned by others. Similar provisions in U.S. Government contracts awarded to other companies make it impossible for us to prevent the use of our patents in most domestic work performed by other companies for the U.S. Government. CONTRACTS A significant portion of our sales are derived from strategic, long-term programs and from sole-source contracts. Approximately 62.4% of our sales for the year ended December 31, 2001 were generated from sole-source contracts. Our customer satisfaction and performance record are evidenced by our receipt of performance-based award fees exceeding 91% of the available award fees on average during the year ended December 31, 2001. We believe that our customers will award long-term, sole-source, outsourcing contracts to the most capable merchant supplier in terms of quality, responsiveness, design, engineering and program management support as well as cost. As a consequence of our strong competitive position, for the year ended December 31, 2001, we won contract awards in excess of 50% on new competitive contracts that we bid on, and in excess of 90% on the contracts we rebid for which we were the incumbent supplier. We have a diverse business mix with limited reliance on any single program, a balance of cost-plus and fixed price contracts, a significant sole-source follow-on business and an attractive customer profile. For the year ended December 31, 2001, 31.7% of our sales were generated from cost-reimbursable contracts and 68.3% from fixed-price contracts, providing us with a sales mix of predictable profitability (cost-reimbursable) and higher profit margin (fixed-price) business. Generally, contracts are either fixed-price or cost-reimbursable. Under a fixed-price contract we agree to perform the scope of work required by the contract for a predetermined contract price. Although a fixed-price contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract. Conversely, on a cost-reimbursable contract we are paid up to predetermined funding levels determined by our customers, our allowable incurred costs and generally a fee representing a profit on those costs, which can be fixed or variable depending on the contract's pricing arrangement. Therefore, on a cost-reimbursable contract we do not bear the risks of unexpected cost overruns. Generally, a fixed-price contract offers higher profit margins than a cost-reimbursable contract which is commensurate with the greater levels of risk assumed on a fixed-price contract. Most of our U.S. Government business is subject to unique procurement and administrative rules based on both laws and regulations, including various profit and cost controls, allocations of costs to contracts and non-reimbursement of unallowable costs such as lobbying expenses and interest expenses. Our contract administration and cost accounting policies and practices are subject to oversight by government inspectors, technical specialists and auditors. Certain of our sales are under foreign military sales agreements directly between the U.S. Government and foreign governments. In such cases, because we serve only as the supplier, we do not have unilateral control over the terms of the agreements. These contracts are subject to extensive legal 19 and regulatory requirements and, from time to time, agencies of the U.S. Government investigate whether our operations are being conducted in accordance with these laws and regulations. Investigations could result in administrative, civil, or criminal liabilities, including repayments, disallowance of certain costs, or fines and penalties. Certain of our sales are direct commercial sales to foreign governments. These sales are subject to U.S. Government approval and licensing under the Arms Export Control Act. Legal restrictions on sales of sensitive U.S. technology also limit the extent to which we can sell our products to foreign governments or private parties. 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 if the contractor fails to perform the contracts' scope of work. Upon termination other than for a contractor's default, the contractor will normally be entitled to reimbursement for allowable costs and an allowance for profit. Foreign defense contracts generally contain comparable provisions permitting termination at the convenience of the government. To date, none of our significant fixed price contracts have been terminated. Companies supplying defense-related equipment to the U.S Government are subject to certain additional business risks peculiar to the U.S. defense industry. Among these risks are the ability of the U.S. Government to unilaterally suspend a company from new contracts pending resolution of alleged violations of procurement laws or regulations. In addition, 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 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. As is common in the U.S. defense industry, we are subject to business risks, including changes in the U.S. Government's procurement policies (such as greater emphasis on competitive procurement), governmental appropriations, national defense policies or regulations, service modernization plans, and availability of funds. A reduction in expenditures by the U.S. Government for products and services of the type we manufacture and provide, lower margins resulting from increasingly competitive procurement policies, a reduction in the volume of contracts or subcontracts awarded to us or if we incur substantial contract cost overruns could materially adversely affect our business. ENVIRONMENTAL MATTERS Our operations are subject to various federal, state and local environmental laws and regulations relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes used in our operations. We continually assess our obligations and compliance with respect to these requirements. We have also assessed the risk of environmental contamination on various manufacturing facilities of our acquired businesses and, where appropriate, have obtained indemnification, either from the sellers of those acquired businesses or through pollution liability insurance. Management believes that our current operations are in substantial compliance with all existing applicable environmental laws and permits. We believe our current expenditures will allow us to continue to be in compliance with applicable environmental laws and regulations. While it is difficult to determine the timing and ultimate cost to be incurred in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, individually or in the aggregate, would be material to our consolidated results of operations. Despite our current level of compliance, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements may require us to incur costs in the future that could have a negative effect on our financial condition or results of operations. 20 PENSION PLANS In connection with our acquisition of the predecessor company, we assumed certain liabilities relating to defined benefit pension plans for present and former employees and retirees of certain businesses which were transferred from Lockheed Martin to us. Prior to the consummation of our acquisition of the predecessor company, Lockheed Martin received a letter from the Pension Benefit Guaranty Corporation (the "PBGC") which requested information regarding the transfer of such pension plans and indicated that the PBGC believed certain of such pension plans were underfunded using the PBGC's actuarial assumptions. The PBGC assumptions result in a larger liability for accrued benefits than the assumptions used for financial reporting under Statement of Financial Accounting Standards No. 87. The PBGC underfunding is related to the Communication Systems - -- West and Aviation Recorders pension plans (the "Subject Plans"). With respect to the Subject Plans, Lockheed Martin entered into an agreement (the "Lockheed Martin Commitment") among Lockheed Martin, L-3 Communications and the PBGC dated as of April 30, 1997. The material terms and conditions of the Lockheed Martin Commitment include a commitment by Lockheed Martin to the PBGC to, under certain circumstances, assume sponsorship of the Subject Plans or provide another form of financial support for the Subject Plans. The Lockheed Martin Commitment will continue with respect to any Subject Plan until such time as such Subject Plan is no longer underfunded on a PBGC basis for two consecutive years or, at any time after May 31, 2002, if we achieve investment grade credit ratings. Pursuant to the Lockheed Martin Commitment, the PBGC agreed that it would take no further action in connection with our acquisition of the predecessor company. Upon the occurrence of certain events, Lockheed Martin, at its option, has the right to decide whether to cause us to transfer sponsorship of any or all of the Subject Plans to Lockheed Martin, even if the PBGC has not sought to terminate the Subject Plans. Such a triggering event occurred in 1998, but reversed in 1999, relating to a decrease in the PBGC-mandated discount rate in 1998 that had resulted in an increase in the underlying liability. We notified Lockheed Martin of the 1998 triggering event, and in February 1999, Lockheed Martin informed us that it had no present intention to exercise its right to cause us to transfer sponsorship of the Subject Plans. If Lockheed Martin did assume sponsorship of these plans, it would be primarily liable for the costs associated with funding the Subject Plans or any costs associated with the termination of the Subject Plans, but we would be required to reimburse Lockheed Martin for these costs. To date, the impact on pension expense and funding requirements resulting from this arrangement has not been significant. However, should Lockheed Martin assume sponsorship of the Subject Plans or if these plans were terminated, the impact of any increased pension expenses or funding requirements could be material to us. We have performed our obligations under the letter agreement with Lockheed Martin and the Lockheed Martin Commitment and have not received any communications from the PBGC concerning actions which the PBGC contemplates taking in respect of the Subject Plans. EMPLOYEES As of December 31, 2001, we employed approximately 18,000 full-time and part-time employees, the majority of whom are located in the United States. Of these employees, approximately 11.1% are covered by 35 separate collective bargaining agreements with various labor unions. We have a continuing need for skilled and professional personnel to meet contract schedules and obtain new and ongoing orders for our products. We believe that relations with our employees are good. 21 ITEM 2. PROPERTIES The table below sets forth information with respect to our significant facilities and properties as of December 31, 2001.
LOCATION OWNED LEASED - -------------------------------------------------- --------- --------- (thousands of square feet) L-3 Corporate Offices, New York, NY .............. -- 35.4 L-3 Washington Operations, Arlington, VA ......... -- 6.3 SECURE COMMUNICATION SYSTEMS: Camden, NJ ...................................... -- 575.0 Binghamton, NY .................................. -- 428.0 Arlington, TX ................................... 82.0 182.6 Grand Prairie, TX ............................... -- 125.0 Salt Lake City, UT .............................. -- 487.5 Orlando, FL ..................................... -- 193.6 SPECIALIZED PRODUCTS: Phoenix, AZ ..................................... -- 90.0 Anaheim, CA ..................................... -- 474.2 Folsom, CA ...................................... -- 59.4 Menlo Park, CA .................................. -- 97.5 San Diego, CA ................................... 196.0 87.1 Sylmar, CA ...................................... -- 253.0 Ocala, FL ....................................... 111.7 -- Sarasota, FL .................................... -- 143.7 Alpharetta, GA .................................. 93.0 -- Concord, MA ..................................... -- 60.0 Newburyport, MA ................................. -- 82.5 Teterboro, NJ ................................... -- 250.0 Hauppauge, NY ................................... 90.0 150.0 Cincinnati, OH .................................. 222.6 -- Lancaster, PA ................................... -- 146.8 Newton, PA ...................................... 80.0 -- Philadelphia, PA ................................ -- 231.9 Alberta, Canada ................................. 163.0 107.9 Ontario, Canada ................................. -- 73.8 Quebec, Canada .................................. 165.2 54.9 Kiel, Germany ................................... -- 67.2 Leer, Germany ................................... 32.2 33.2
In total, at December 31, 2001, we owned approximately 1.4 million square feet and leased approximately 5.7 million square feet of manufacturing facilities and properties. ITEM 3. LEGAL PROCEEDINGS From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe we are adequately reserved for these liabilities and that there is no litigation pending that could have a material adverse effect on our consolidated results of operations, financial condition or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 22 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK The common stock of L-3 Holdings is traded on the New York Stock Exchange (the "NYSE") under the symbol "LLL". The following table sets forth, for each of the quarterly periods indicated, the high and low closing price of the common stock as reported on the NYSE.
PRICE RANGE OF COMMON STOCK ------------------------- HIGH LOW ----------- ----------- FISCAL YEAR ENDED DECEMBER 31, 2000: Quarter Ended: March 31, 2000 .................. $ 51.94 $ 35.69 June 30, 2000 ................... 58.63 45.25 September 30, 2000 .............. 63.75 52.56 December 31, 2000 ............... 77.56 57.19 FISCAL YEAR ENDED DECEMBER 31, 2001: Quarter Ended: March 31, 2001 .................. $ 90.00 $ 65.00 June 30, 2001 ................... 88.90 76.08 September 30, 2001 .............. 87.45 62.48 December 31, 2001 ............... 96.47 79.39
On March 12, 2002, the closing price of L-3 Holdings common stock, as reported by the NYSE, was $110.97 per share. As of March 12, 2002, there were 144 stockholders of record of L-3 Holdings' common stock, not including the stockholders for whom shares are held in a "nominee" or "street" name. L-3 Communications is a wholly owned subsidiary of L-3 Holdings. DIVIDEND POLICY L-3 Holdings currently intends to retain its earnings to finance future growth and, therefore, does not anticipate paying any cash dividends on its common stock in the foreseeable future. Since its formation, L-3 Holdings has not paid any cash dividends to its stockholders. Any determination as to the payment of dividends will depend upon the future results of operations, capital requirements and financial condition of L-3 Holdings and its subsidiaries and such other facts as the Board of Directors of L-3 Holdings may consider, including any contractual or statutory restrictions on L-3 Holdings' ability to pay dividends. Moreover, L-3 Holdings is a holding company and its ability to pay dividends is dependent upon receipt of dividends, distributions, advances, loans or other cash transfers from L-3 Communications. Certain outstanding debt instruments of L-3 Communications limit its ability to pay dividends or other distributions on its common stock or to make advances, loans or other cash transfers to L-3 Holdings. 23 ITEM 6. SELECTED FINANCIAL DATA We derived the selected financial data presented below as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001 from our audited consolidated financial statements included elsewhere herein. We derived the selected financial data presented below as of December 31, 1999, 1998 and 1997 and for the nine months ended December 31, 1997 from our audited consolidated financial statements not included herein. We derived the selected financial data presented below for the three months ended March 31, 1997 from the audited combined financial statements of our predecessor company not included herein. You should read the selected financial data together with our "Management's Discussion and Analysis of Results of Operations and Financial Condition" and our audited consolidated financial statements.
PREDECESSOR L-3 COMPANY ------------------------------------------------------------------------ ------------ THREE YEAR ENDED NINE MONTHS MONTHS DECEMBER 31, ENDED ENDED ------------------------------------------------------- DECEMBER 31, MARCH 31, 2001(1) 2000(1) 1999(1) 1998(1) 1997(2) 1997 ------------- ------------- ------------- ------------- ---------------- ------------ (in millions, except per share data) STATEMENT OF OPERATIONS DATA: Sales ...................................... $ 2,347.4 $ 1,910.1 $ 1,405.5 $ 1,037.0 $ 546.5 $ 158.9 Operating income ........................... 275.3 222.7 150.5 100.3 51.5 (3) 7.9 Interest expense, net of interest and other income .............................. 84.5 88.6 55.1 46.9 28.5 8.4 Provision (benefit) for income taxes ....... 70.8 51.4 36.7 20.9 10.7 (0.2) Minority interest .......................... 4.5 -- -- -- -- -- Net income (loss) .......................... 115.5 82.7 58.7 32.6 12.3 (3) (0.3) Earnings per common share: -- Basic ..................................... $ 3.08 $ 2.48 $ 1.83 $ 1.32 $ 0.62(3) -- Diluted ................................... $ 2.95 $ 2.37 $ 1.75 $ 1.26 $ 0.61(3) -- Weighted average common shares outstanding: Basic ..................................... 37.4 33.4 32.1 24.7 20.0 -- Diluted ................................... 42.7 35.0 33.5 25.9 20.0 -- BALANCE SHEET DATA (AT PERIOD END): Working capital ............................ $ 714.3 $ 360.9 $ 255.5 $ 157.8 $ 143.2 -- Total assets ............................... 3,335.4 2,463.5 1,628.7 1,285.4 697.0 -- Long-term debt ............................. 1,315.3 1,095.0 605.0 605.0 392.0 -- Shareholders' equity ....................... 1,213.9 692.6 583.2 300.0 113.7 --
- ---------- (1) The results of operations are impacted significantly by our acquisitions described elsewhere herein. (2) Reflects the acquisition of our predecessor company and the commencement of our operations effective April 1, 1997. (3) Includes a nonrecurring, noncash compensation charge of $4.4 million ($0.22 per share) related to our initial capitalization, which we recorded effective April 1, 1997. 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW We are a leading merchant supplier of sophisticated secure communication systems and specialized products. These systems and products are critical elements of virtually all major communication, command and control, intelligence gathering and space systems. Our customers include the U.S. Department of Defense ("DoD"), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign governments, commercial customers and certain other government agencies. We have two reportable segments: Secure Communication Systems and Specialized Products. Our Secure Communication Systems segment provides secure, high data rate communication systems for military and other U.S. Government reconnaissance and surveillance applications. The Secure Communication Systems segment also produces advanced simulation and training products, and provides a wide range of engineering development and integration support to the DoD and other U.S. federal, state and local government agencies, communication software support services and a full range of teaching, training, logistic and training device support services to domestic and international military customers, and custom ballistic targets for the DoD. Our Specialized Products segment includes three product categories: avionics and ocean products, telemetry, instrumentation and space products and microwave components. All of our domestic government contracts and subcontracts are subject to audit and various cost controls, and include standard provisions for termination for the convenience of the U.S. Government. Multiyear U.S. Government contracts and related orders are subject to cancellation if funds for contract performance for any subsequent year become unavailable. Foreign government contracts generally include comparable provisions relating to termination for the convenience of the relevant foreign government. 25 ACQUISITIONS AND DIVESTITURES The table below summarizes the material acquisitions that we have completed during the three years ended December 31, 2001.
PURCHASE ACQUIRED COMPANY DATE ACQUIRED PRICE (1) - ------------------------------------------------- ------------------- ------------------ Microdyne Corporation January 8, 1999 $ 91.1 Aydin Corporation April 16, 1999 $ 70.5 Interstate Electronics Corporation June 30, 1999 $ 40.0 Space and Navigation Systems December 31, 1999 $ 55.2 TDTS business of Raytheon Company ("TDTS") February 10, 2000 $ 158.1 (2) Trex Communications Corporation February 14, 2000 $ 49.3 Traffic Alert and Collision Avoidance Systems ("TCAS") April 28, 2000 $ 239.2 MPRI, Inc. ("MPRI") June 30, 2000 $ 39.6 (3) Coleman Research Corporation ("Coleman") December 29, 2000 $ 60.0 (4) KDI Precision Products May 4, 2001 $ 78.9 EER Systems ("EER") May 31, 2001 $ 119.4 (5) Spar Aerospace Limited ("Spar") November 23, 2001 $ 146.8 (6) Emergent Government Services Group November 30, 2001 $ 39.8 (7)(8) BT Fuze Products December 19, 2001 $ 49.5 (7) SY Technology ("SY") December 31, 2001 $ 48.0 (7)(9)
---------- (1) Purchase price represents the contractual consideration for the acquired business excluding adjustments for net cash acquired and acquisition costs. (2) Following the acquisition we changed TDTS's name to L-3 Communications Link Simulation and Training. (3) Includes $4.0 million of additional purchase price that was based on the financial performance of MPRI for the year ended June 30, 2001. (4) Excludes additional purchase price, not to exceed $5.0 million, which is contingent upon the financial performance of Coleman for the year ended December 31, 2001. (5) Excludes additional purchase price, not to exceed $10.0 million, which is contingent upon the financial performance of EER for the year ended December 31, 2001 and the year ending December 31, 2002. (6) Includes $43.6 million for the remaining 29.7% of the outstanding common stock of Spar at December 31, 2001 that we acquired and paid for in January 2002. (7) Purchase price is subject to adjustment based on actual closing date net assets or net working capital of the acquired business. (8) Following the acquisition we changed Emergent Government Services Group's name to L-3 Communications Analytics. (9) Excludes additional purchase price, not to exceed $4.8 million, which is contingent upon the financial performance of SY for the year ended December 31, 2001 and the years ending December 31, 2002 and 2003. 26 On January 14, 2002, we agreed to acquire Aircraft Integration Systems ("AIS"), a division of Raytheon Company, for $1.13 billion in cash. The acquisition was completed on March 8, 2002, and was financed using cash on hand, borrowings under our senior credit facilities and a $500.0 million senior subordinated bridge loan. We expect to offer and sell approximately $1.0 billion of debt and equity securities during the first half of 2002, depending on capital market conditions, and use the proceeds from those offerings to repay the $500.0 million senior subordinated bridge loan and the borrowings made under the senior credit facilities. On January 2, 2002, we agreed to acquire the detection systems business of PerkinElmer for $100.0 million in cash. The acquisition is subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act. We expect to complete this acquisition during the second quarter of 2002. Additionally, we purchased other businesses during 1999, 2000 and 2001, which individually and in the aggregate were not material to our consolidated results of operations, financial position or cash flows in the year acquired. All of our acquisitions have been accounted for as purchase business combinations and are included in our consolidated results of operations from their respective effective dates. On May 31, 2001, we sold a 30% interest in Aviation Communications and Surveillance Systems LLC ("ACSS") which comprises our TCAS business to Thales Avionics, a wholly owned subsidiary of Thales (formerly Thomson-CSF), for $75.2 million of cash. We continue to consolidate the financial statements of ACSS. We regularly evaluate potential acquisitions and joint venture transactions, but we have not entered into any other agreements with respect to any material transactions at this time. CRITICAL ACCOUNTING POLICIES Our significant accounting policies are described in Note 2 to the consolidated financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs and expenses during the reporting period. The most significant of these estimates and assumptions relate to contract estimates of sales and estimated costs to complete contracts in process, estimates of market values for inventories reported at lower of cost or market, estimates of pension and postretirement benefit obligations, recoverability of recorded amounts of fixed assets and goodwill, income taxes, including the valuations of deferred tax assets, litigation and environmental obligations. Actual results could differ from these estimates. We believe the following critical accounting policies contain the more significant judgements and estimates used in the preparation of our financial statements. Revenue Recognition on Contracts and Contract Estimates. The substantial majority of our direct and indirect sales to the U.S. Government and certain of our sales to foreign governments and commercial customers are made pursuant to written contractual arrangements or "contracts" to design, develop, manufacture and or modify complex products, and to the specifications of the buyers (customers) or to provide services related to the performance of such contracts. These contracts are within the scope of the American Institute of Certified Public Accountants Statement of Position 81-1 Accounting for Performance of Construction-Type and Certain Production-Type Contracts ("SOP 81-1"), and sales and profits on them are recognized using percentage-of-completion methods of accounting. Sales and profits on fixed-price production contracts whose units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their selling prices (the "units-of-delivery" method). Sales and profits on other fixed-price contracts are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract (the "cost-to-cost method"). Sales and fees on cost-reimbursable contracts are recognized as costs are incurred. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. Under the percentage-of-completion methods of accounting, a single estimated total 27 profit margin is used to recognize profit for each contract over its entire period of performance which can exceed one year. The impact of revisions in profit estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period in which they become evident. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, as well as our valuations of Contracts in Process. Accounting for the profit on a contract requires estimates of (1) the contract value or total contract revenue, (2) the total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract's scope of work and (3) the measurement of progress towards completion. The estimated profit or loss on a contract is equal to the difference between the contract value and the estimated total cost at completion. Adjustments to original estimates are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications occur. Valuation of Deferred Tax Assets and Liabilities. At December 31, 2001, we had net deferred tax assets of $160.8 million, including $32.5 million for net operating loss carryforwards and $31.9 million for tax credit carryforwards which are subject to various limitations and will expire if unused within their respective carryforward periods. Deferred taxes are determined separately for each of our tax-paying entities in each tax jurisdiction. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback and carryforward periods available under the tax law. Based on our estimates of the amounts and timing of future taxable income, we believe that we will realize our recorded deferred tax assets. A change in the ability of our operations to continue to generate future taxable income could affect our ability to realize the future tax deductions underlying our net deferred tax assets, and require us to provide a valuation allowance against our net deferred tax assets. Such changes, if significant, could have a material impact in our effective tax rate, results of operations and financial position in any given period. 28 RESULTS OF OPERATIONS The following information should be read in conjunction with our consolidated financial statements. Our results of operations for the periods presented are impacted significantly by our acquisitions. (See Note 3 to the consolidated financial statements for a discussion of our acquisitions.) The tables below provide our selected income statement data for the years ended December 31, 2001, 2000 and 1999. SEGMENT OPERATING DATA
YEAR ENDED DECEMBER 31, ------------------------------------------ 2001 2000 1999 ------------- ------------ ----------- (in millions) Sales(1): Secure Communication Systems .................... $ 1,241.6 $ 847.1 $ 542.9 Specialized Products ............................ 1,105.8 1,063.0 862.6 ---------- --------- --------- Total ........................................ $ 2,347.4 $ 1,910.1 $ 1,405.5 ========== ========= ========= Operating income: Secure Communication Systems .................... $ 146.2 $ 91.3 $ 47.0 Specialized Products ............................ 129.1 131.4 103.5 ---------- --------- --------- Operating income ............................. $ 275.3 $ 222.7 $ 150.5 ========== ========= ========= Depreciation and amortization expenses included in operating income: Secure Communication Systems .................... $ 33.7 $ 26.4 $ 18.4 Specialized Products ............................ 53.3 47.9 35.3 ---------- --------- --------- Total ........................................ $ 87.0 $ 74.3 $ 53.7 ========== ========= ========= EBITDA(2) Secure Communication Systems .................... $ 179.9 $ 117.7 $ 65.4 Specialized Products ............................ 182.4 179.3 138.8 ---------- --------- --------- Total ........................................ $ 362.3 $ 297.0 $ 204.2 ========== ========= =========
- ---------- (1) Sales are after intersegment eliminations. See Note 16 to the consolidated financial statements. (2) EBITDA is defined as operating income plus depreciation expense and amortization expense (excluding the amortization of debt issuance costs). EBITDA is not a substitute for operating income, net income or cash flows from operating activities as determined in accordance with accounting principles generally accepted in the United States as a measure of profitability or liquidity. EBITDA is presented as additional information because we believe it to be a useful indicator of our ability to meet debt service and capital expenditure requirements. EBITDA as we defined it may differ from similarly named measures used by other entities. YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000 Sales increased $437.3 million to $2,347.4 million in 2001 compared with 2000. Sales grew $394.5 million in the Secure Communication Systems segment and $42.8 million in the Specialized Products segment. Operating income increased $52.6 million to $275.3 million in 2001 compared with 2000. Operating income as a percentage of sales ("operating margin") remained unchanged at 11.7%. Depreciation and amortization expenses increased $12.7 million to $87.0 million in 2001, reflecting increased goodwill amortization associated with our acquisitions and additional depreciation related to our capital expenditures and acquired businesses. Our EBITDA for 2001 increased $65.3 million to $362.3 million. EBITDA as a percentage of sales ("EBITDA margin") was 15.4% in 2001 compared with 15.5% in 2000. Basic earnings per share ("EPS") grew 24.2% to $3.08 in 2001 and diluted EPS grew 24.5% to $2.95 in 2001. Diluted weighted-average common shares outstanding increased 22.2% in 2001, primarily because of the sale of our common stock in April 2001, and the dilutive effect of our Convertible Notes we sold in the fourth quarter of 2000 (see Liquidity and Capital Resources section below). Sales within our Secure Communication Systems segment increased $394.5 million or 46.6% to $1,241.6 million in 2001 compared with 2000. Operating income increased $54.9 million to $146.2 million in 2001. Operating margin improved to 11.8% from 10.8%. The increase in sales was principally attributed to the Coleman Research, MPRI and EER acquired businesses and internal growth in our secure secure data links, secure telephone equipment, airport security systems, Prime Wave fixed wireless access products and training, teaching and logistic services. The increase in operating margin was principally attributable 29 to benefits from increased volumes, cost reductions and improved operating efficiencies on sales of secure telephone equipment and airport security systems. Additionally, the operating margins for our training and simulation businesses continued to improve because of reductions in overhead costs, as well as other contract costs related to favorable performance on the AVCATT contract, arising from engineering design changes, material sourcing changes and unit price reductions on several parts in the contract bill of materials that occurred during 2001. These operating margin improvements were substantially offset by negative margins and increased expenditures associated with our Prime Wave business. EBITDA increased $62.2 million to $179.9 million in 2001 and EBITDA margin improved to 14.5% from 13.9% in 2000. Sales within our Specialized Products segment increased $42.8 million or 4.0% to $1,105.8 million in 2001 compared with 2000. Operating income decreased $2.3 million in 2001 to $129.1 million. Operating margin decreased to 11.7% from 12.4%. The increase in sales was principally attributable to internal growth in aviation products, microwave components and acoustic undersea warfare products and to the KDI acquired business. These increases in sales were partially offset by decreases in sales of telemetry and space products, naval power equipment and displays. We expect sales of our telemetry and space products for 2002 to remain essentially unchanged as compared to 2001, due to continued softness in the space and broadband commercial communications market. The decline in operating margin was principally attributable to increased costs related to unfavorable performance on certain contracts and lower production and shipment levels for naval power equipment and lower operating margins on telemetry and space products arising from reduced sales volumes. We had higher operating margins on aviation products and microwave components related to increased sales volumes. EBITDA increased $3.1 million to $182.4 million in 2001 and EBITDA margin decreased to 16.5% from 16.9% in 2000. Interest expense decreased $6.6 million to $86.4 million in 2001 because of lower interest rates, changes in the components and levels of our debt, and savings of $4.1 million from the interest rate swap agreements we entered into in July 2001 and November 2001. The interest rate swap agreements exchange the fixed interest rate of 8% on our $200.0 million Senior Subordinated Notes due 2008 and the fixed interest rate of 8 1/2% on our $180.0 million Senior Subordinated Notes due 2008 to variable interest rates determined using the six month LIBOR rate (see Liquidity and Capital Resources section below). Interest and other income decreased $2.6 million to $1.8 million. Interest and other income for 2001 includes a net pre-tax gain of $0.6 million ($0.01 per diluted share), consisting of an after-tax gain of $4.3 million from the sale of a 30% interest in ACSS to Thales Avionics and an after-tax charge of $3.9 million on the write-down in the carrying amount of an investment in common stock. Also included in interest and other income for 2001 is a pre-tax charge of $0.5 million to account for the increase, in accordance with the Financial Accounting Standards Board's ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, in the fair value assigned to the embedded derivatives in our $420.0 million 4% Senior Subordinated Convertible Contingent Debt Securities due 2011 ("CODES"), we sold in the fourth quarter of 2001 (see Liquidity and Capital Resources section below), and a pre-tax loss of $0.8 million from an equity method investment. Interest and other income for 2000 includes a net pre-tax gain of $2.5 million ($0.04 per diluted share), consisting of an after-tax gain of $9.2 million from the sale of our interests in certain businesses and an after-tax charge of $7.6 million on the write-down in the carrying value of certain investments and intangible assets. Excluding these net gains from both 2001 and 2000, diluted EPS increased 26.2% to $2.94 in 2001 from $2.33 in 2000. The income tax provision for 2001 is based on an effective income tax rate for 2001 of 38.0% which declined slightly from the effective tax rate of 38.3% for 2000. YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999 Sales increased $504.6 million to $1,910.1 million in 2000 compared with 1999. Sales grew $304.2 million in the Secure Communication Systems segment and $200.4 million in the Specialized Products segment. Operating income increased $72.2 million to $222.7 million in 2000. Operating margin improved to 11.7% from 10.7%. Depreciation and amortization expenses increased $20.6 million to $74.3 million in 2000, reflecting increased goodwill amortization associated with our acquisitions and 30 additional depreciation related to our capital expenditures and acquired businesses. Our EBITDA for 2000 increased $92.8 million to $297.0 million. EBITDA margin increased to 15.5% in 2000 from 14.5% in 1999. EPS grew 35.5% to $2.48 in 2000 and diluted EPS grew 35.4% to $2.37 in 2000. Basic weighted-average common shares outstanding increased 3.9% in 2000, and diluted weighted-average common shares outstanding increased 4.3% in 2000, primarily because of common stock issued for exercises of employee stock options. Sales within our Secure Communication Systems segment increased $304.2 million to $847.1 million in 2000 compared with 1999. Operating income increased $44.3 million to $91.3 million in 2000. Operating margin improved to 10.8% from 8.7%. We attribute the increase in sales principally to the acquisitions of Link Training and Simulation and MPRI and increased sales of secure telephone equipment, wideband secure data link programs, communication software support services and airport security systems. The increase in operating margin was principally attributable to improved margins on military communication systems and high data rate communication systems. These margin improvements arose from cost reductions and improved operating efficiencies. Additionally, during 2000 a larger percentage of our sales were generated from fixed-price contracts which generally have higher margins than sales generated from cost-reimbursable contracts. EBITDA increased $52.3 million to $117.7 million in 2000 and EBITDA margin improved to 13.9% from 12.0% in 1999. Sales within our Specialized Products segment increased $200.4 million to $1,063.0 million in 2000 compared with 1999. Operating income increased $27.9 million to $131.4 million in 2000. Operating margin improved to 12.4% from 12.0%. We attribute this increase in sales principally to the acquisitions of TCAS and Space and Navigation Systems and volume increases on acoustic undersea warfare products, aviation recorders, and display products. These increases in sales were partially offset by decreased shipments of naval power equipment in 2000 compared with 1999 principally due to the slippage of certain sales into 2001 which were previously anticipated to occur in 2000. Sales of our telemetry products were essentially unchanged in 2000 compared with 1999 due to continued softness in the space and broadband commercial communications markets. We attribute our increase in operating margin principally to improved margins on avionics and ocean products. These margin improvements arose from sales volume increases, cost reductions and the higher margins from the TCAS business. Lower margins on our naval power equipment due to less shipments and on our telemetry products and microwave components due to changes in product sales mix partially offset these operating margin improvements. EBITDA increased $40.5 million to $179.3 million in 2000 and EBITDA margin improved to 16.9% from 16.1% in 1999. Interest expense increased $32.4 million to $93.0 million in 2000 principally because of the higher average outstanding debt during 2000. Interest and other income decreased $1.1 million to $4.4 million. Interest and other income for 2000 includes a net pre-tax gain of $2.5 million ($0.04 per diluted share), consisting of an after-tax gain of $9.2 million from the sale of our interests in certain businesses and an after-tax charge of $7.6 million on the write-down in the carrying value of certain investments and intangible assets. Excluding the net gain, diluted EPS was $2.33, an increase of 33.1% in 2000 compared with 1999. The income tax provision for 2000 is based on an effective income tax rate for 2000 of 38.3% which declined slightly from the effective tax rate of 38.5% for 1999. LIQUIDITY AND CAPITAL RESOURCES BALANCE SHEET During 2001, contracts in process increased $101.7 million to $801.8 million at December 31, 2001. The increase included $61.0 million related to acquired businesses and $40.7 million principally from: o increases of $56.2 million in unbilled contract receivables principally arising from an increase in programs in production phases, during which unbilled costs and profits generally exceed progress payments and advances received from the customers until contract shipments are completed; o increases of $31.9 million in inventories, including inventories of our Prime Wave business, naval power equipment products and on certain other programs and products; and 31 o decreases of $47.4 million in billed receivables due to improved collections on certain programs, partially offset by increases at our Prime Wave business. Included in contracts in process at December 31, 2001, are billed receivables of $15.8 million and inventories of $30.2 million related to our Prime Wave business. At December 31, 2000, we had $6.4 million of billed receivables and $17.4 million of inventories related to our Prime Wave business. The increases in property, plant and equipment, intangibles, and accrued employment costs during 2001 were principally related to acquired businesses. The decreases in accounts payable and accrued expenses were principally related to the timing of payments to vendors partially offset by balances of acquired businesses. The increase in other current liabilities is primarily attributable to balances of acquired businesses and an accrual of $43.6 million related to the remaining outstanding common stock of Spar at December 31, 2001, that we acquired and paid for in January 2002, and was partially offset by a decline in estimated contract costs in excess of billings to complete contracts in process. The decrease in other liabilities is in part related to the issuance of common stock in April 2001 to satisfy our $17.7 million obligation for the additional purchase price for the ILEX acquisition completed in 1998. The decrease is also related to a reclassification of the current portion of estimated costs in excess of billings to complete contracts in process to other current liabilities. The decrease in accrued interest was due to the effect of lower interest rates, as well as interest savings of $4.1 million from the interest rate swap agreements we entered into in July 2001 and November 2001, partially offset by an increase in accrued interest due to higher outstanding debt balances at December 31, 2001, attributable to our sale of the CODES in the fourth quarter of 2001. The quarterly cash interest payments on our Senior Subordinated Notes and Convertible Notes in 2001 were $8.0 million in the first quarter and third quarter, $27.6 million in the second quarter and $27.2 million in the fourth quarter. Our cash interest payments may be adjusted in future years due to the interest rate swap agreements we entered into on our $200.0 million 8% Senior Subordinated Notes due 2008 and our $180.0 million 8 1/2% Senior Subordinated Notes due 2008 and changes in the amount of our outstanding debt. STATEMENT OF CASH FLOWS The table below provides our cash flow statement data for the years presented.
YEAR ENDED DECEMBER 31, ---------------------------------------- 2001 2000 1999 ----------- ----------- ------------ (in millions) Net cash from operating activities ............ $ 173.0 $ 113.8 $ 99.0 Net cash (used in) investing activities ....... $ (424.9) $ (608.2) $ (284.8) Net cash from financing activities ............ $ 580.3 $ 484.3 $ 202.4
OPERATING ACTIVITIES During 2001, we generated $173.0 million of cash from our operating activities, an increase of $59.2 million from the $113.8 million generated during 2000. Earnings adjusted for non-cash items and deferred income taxes increased $83.2 million to $283.5 million in 2001 from $200.3 million in 2000. During 2001, our working capital and operating assets and liabilities increased $110.5 million compared with an increase of $86.5 million in 2000. In 2001, we used cash for increases in inventories, receivables and negative operating margins related to our Prime Wave business and naval power equipment products, as well as for incurred contract costs in excess of billings for the continued effort on the AVCATT contract. These uses of cash were partially offset by a settlement of certain items related to a services agreement and lower income tax payments related to an increase in tax deductions for temporary differences between the tax basis and financial 32 reporting amounts for inventoried costs, income recognition on contracts in process, and long-lived assets including goodwill and other intangibles. We expect the amount of our deferred income tax provision for 2002, excluding any additional income tax benefits arising from the acquisition of AIS, to be consistent with that for 2001. During 2000, we generated $113.8 million of cash from our operating activities, an increase of $14.8 million from the $99.0 million generated during 1999. Earnings adjusted for non-cash items and deferred taxes increased $48.5 million to $200.3 million in 2000 from $151.8 million in 1999. During 2000, our working capital and operating assets and liabilities increased $86.5 million compared with an increase of $52.8 million in 1999. Our cash flows from operating activities during 2000 include uses of cash relating to performance on certain contracts in process including the AVCATT contract that were assumed in the TDTS acquisition for which the estimated costs exceed the estimated billings to complete these contracts. INVESTING ACTIVITIES In 2001, we invested $446.9 million to acquire businesses, compared with $599.6 million in 2000 and $272.2 million in 1999. We make capital expenditures for the improvement of manufacturing facilities and equipment. We expect that our capital expenditures for the year ending December 31, 2002 will be between $75 million and $80 million, including Aircraft Integration Systems, compared with $48.1 million for the year ended December 31, 2001. The anticipated increase is principally due to capital expenditures for our acquired businesses. Dispositions of property, plant and equipment for 2000 includes net proceeds of $13.3 million related to a facility located in Hauppauge, NY which we sold and leased back in December 2000. On May 31, 2001, we sold a 30% interest in ACSS to Thales Avionics for $75.2 million in cash. In 2000, we sold our interests in two businesses for net cash proceeds of $19.6 million, which are included in other investing activities. On January 14, 2002, we agreed to acquire AIS for $1.13 billion in cash plus acquisition costs. The acquisition was completed on March 8, 2002. The acquisition was financed using cash on hand, borrowings under our senior credit facilities and a $500.0 million senior subordinated bridge loan. We expect to offer and sell approximately $1.0 billion of debt and equity securities during the first half of 2002, depending on capital market conditions, and use the proceeds from those offerings to repay the $500.0 million senior subordinated bridge loan and the borrowings made under the senior credit facilities. FINANCING ACTIVITIES DEBT. In May 2001, we restructured our senior credit facilities. At December 31, 2001, the senior credit facilities were comprised of a $400.0 million five year revolving credit facility maturing on May 15, 2006 and a $200.0 million 364-day revolving facility maturing on May 15, 2002 under which at the maturity date we may, (1) at our request and subject to approval of the lenders, extend the maturity date, in whole or in part, for an additional 364-day period, or (2) at our election, convert the outstanding principal amount thereunder into a term loan which would be repayable in a single payment two years from the conversion date. Additionally, the senior credit facilities provided us the ability to increase, on an uncommitted basis, the amount of either the five year revolving credit facility or the 364-day revolving credit facility up to an additional $150.0 million in the aggregate. At December 31, 2001, available borrowings under our senior credit facilities were $497.6 million, after reductions for outstanding letters of credit of $102.4 million. There were no outstanding borrowings under our senior credit facilities at December 31, 2001. On February 26, 2002, the lenders approved a $150.0 million increase in the amount of our senior credit facilities. The five year revolving credit facility increased by $100.0 million to $500.0 million. The 364-day revolving credit facility increased by $50.0 million to $250.0 million. Additionally, the maturity date of the $200.0 million 364-day revolving credit facility was extended to February 26, 2003. On March 8, 2002, we borrowed $500.0 million under a senior subordinated bridge loan facility ("Bridge Loan Facility") to finance a portion of the purchase price of AIS and related expenses as 33 discussed above. The Bridge Loan Facility is subordinated in right of payment to all of L-3 Communications' existing and future senior debt and ranks pari passu with our other senior subordinated indebtedness and related guarantees discussed below. Borrowings under the Bridge Loan Facility bear interest through March 8, 2003, at our option, at either the one-month or three-month LIBOR rate plus a spread equal to 350 basis points. The Bridge Loan Facility matures on May 15, 2009, but if the loans under the facility are not repaid by March 8, 2003, each lender's loan will be automatically converted into an exchange note with terms substantially similar to those of our other senior subordinated indebtedness discussed below, and will bear interest at a fixed rate equal to the yield to maturity on our highest yielding existing subordinated indebtedness at the time of exchange plus 100 basis points. Subject to the exceptions set forth in the Bridge Loan Facility, we are required to prepay the Bridge Loan Facility with the net cash proceeds from: o any debt offerings by L-3 Holdings or its subsidiaries, including L-3 Communications; o issuance of any equity interests in L-3 Holdings or L-3 Communications; o incurrence of any other indebtedness of L-3 Holdings or any of its subsidiaries, including L-3 Communications (other than under the senior credit facilities and certain permitted indebtedness); and o any sale of assets or stock of any subsidiaries of L-3 Communications. In the fourth quarter of 2001, L-3 Holdings sold $420.0 million of 4% Senior Subordinated Convertible Contingent Debt Securities due 2011 ("CODES"). The net proceeds from this offering amounted to approximately $407.5 million after underwriting discounts and commissions and other offering expenses. Interest is payable semi-annually on March 15 and September 15 of each year commencing March 15, 2002. The CODES are convertible into L-3 Holdings' common stock at a conversion price of $107.625 per share (3,902,439 shares) under any of the following circumstances: (1) during any Conversion Period (defined below) if the closing sales price of the common stock of L-3 Holdings is more than 120% of the conversion price ($129.15) for at least 20 trading days in the 30 consecutive trading-day period ending on the first day of the respective Conversion Period, (2) during the five business day period following any 10 consecutive trading-day period in which the average of the trading prices for the CODES was less than 105% of the conversion value, (3) if the credit ratings assigned to the CODES by either Moody's or Standard & Poor's are below certain specified ratings, (4) if they have been called for redemption by us, or (5) upon the occurrence of certain specified corporate transactions. A Conversion Period is the period from and including the thirtieth trading day in a fiscal quarter to, but not including, the thirtieth trading day of the immediately following fiscal quarter. There are four Conversion Periods in each fiscal year. Additionally, holders of the CODES have a right to receive contingent interest payments, not to exceed a per annum rate of 0.5% of the outstanding principal amount of the CODES, which will be paid on the CODES during any six-month period following a six-month period in which the average trading price of the CODES is above 120% of the principal amount of the CODES. The contingent interest payment provision as well as the ability of the holders of the CODES to exercise the conversion features as a result of changes in the credit ratings assigned to the CODES have been accounted for as embedded derivatives. In the fourth quarter of 2000, L-3 Holdings sold $300.0 million of 5 1/4% Convertible Senior Subordinated Notes due 2009 (the "Convertible Notes"). The net proceeds from this offering amounted to $290.5 million after underwriting discounts and commissions and other offering expenses, and were used to repay revolver borrowings outstanding under our senior credit facilities. The Convertible Notes may be converted at any time into L-3 Holdings common stock at a conversion price of $81.50 per share (3,680,982 shares). In April 1997, May 1998 and December 1998, L-3 Communications sold $225.0 million of 10 3/8% Senior Subordinated Notes due 2007, $180.0 million of 8 1/2% Senior Subordinated Notes due 2008, and $200.0 million of 8% Senior Subordinated Notes due 2008 (collectively, the "Senior Subordinated Notes"), whose aggregate net proceeds amounted to $576.0 million after underwriting discounts and commissions and other offering expenses. 34 In November 2001, we entered into interest rate swap agreements on our $180.0 million of 8 1/2% Senior Subordinated Notes due 2008. These swap agreements exchange our fixed interest rate for a variable interest rate on the entire principal amount. Under these swap agreements, we will pay or receive the difference between the fixed interest rate of 8 1/2% on the senior subordinated notes and a variable interest rate, set in arrears, determined two business days prior to the interest payment date of the related senior subordinated notes equal to (1) the six month LIBOR rate plus (2) an average of 350.8 basis points. In July 2001, we entered into interest rate swap agreements on our $200.0 million of 8% Senior Subordinated Notes due 2008. These swap agreements exchange our fixed interest rate for a variable interest rate on the entire principal amount. Under these swap agreements, we will pay or receive the difference between the fixed interest rate of 8% on the senior subordinated notes and a variable interest rate, set in arrears, determined two business days prior to the interest payment date of the related senior subordinated notes equal to (1) the six month LIBOR rate plus (2) an average of 192 basis points. The difference to be paid or received on these swap agreements is recorded as an adjustment to interest expense. The swap agreements are accounted for as fair value hedges. The senior credit facilities, Bridge Loan Facility, Senior Subordinated Notes, Convertible Notes and CODES agreements contain financial covenants and other restrictive covenants which remain in effect so long as we owe any amount or any commitment to lend exists thereunder. As of December 31, 2001, we were in compliance with those covenants at all times. The borrowings under the senior credit facilities are guaranteed by L-3 Holdings and by substantially all of the domestic subsidiaries of L-3 Communications on a senior basis. The payments of principal and premium, if any, and interest on the Senior Subordinated Notes and Bridge Loan Facility are unconditionally guaranteed, on an unsecured senior subordinated basis, jointly and severally, by all of L-3 Communications' restricted subsidiaries other than its foreign subsidiaries. The guarantees of the Senior Subordinated Notes and Bridge Loan Facility are junior to the guarantees of the senior credit facilities and rank pari passu with each other and the guarantees of the Convertible Notes and the CODES. The Convertible Notes and CODES are unconditionally guaranteed, on an unsecured senior subordinated basis, jointly and severally, by L-3 Communications and substantially all of its direct and indirect domestic subsidiaries. These guarantees rank junior to the guarantees of the senior credit facilities and rank pari passu with each other and the guarantees of the Senior Subordinated Notes and Bridge Loan Facility. See Note 7 to our consolidated financial statements for a description of our debt and related financial covenants at December 31, 2001. 35 The tables below present our contractual obligations and contingent commitments as of December 31, 2001.
YEARS ENDING DECEMBER 31, ------------------------------------------------- 2005 AND CONTRACTUAL OBLIGATIONS: TOTAL 2002 2003 2004 THEREAFTER - -------------------------------------------- ------------- --------- --------- --------- ------------- (IN MILLIONS) Principal amount of long-term debt ......... $ 1,325.0 $ -- $ -- $ -- $ 1,325.0 Non-cancelable operating leases ............ 350.5 61.9 49.3 33.1 206.2 Capital leases ............................. 4.7 1.7 1.4 0.9 0.7 ---------- ----- ----- ----- ---------- Total ..................................... $ 1,680.2 $ 63.6 $ 50.7 $ 34.0 $ 1,531.9 ========== ====== ====== ====== ==========
YEARS ENDING DECEMBER 31, ------------------------------------------------- 2005 AND CONTINGENT COMMITMENTS: TOTAL 2002 2003 2004 THEREAFTER - ----------------------------------------------------- ----------- ---------- ---------- --------- ----------- (IN MILLIONS) Outstanding letters of credit under our senior credit facilities ......................................... $ 102.4 $ 86.5 $ 10.6 $ 3.6 $ 1.7 Other outstanding letters of credit ................. 20.0 12.5 7.3 -- 0.2 Construction agency agreement ....................... 43.5 43.5 -- -- -- Simulator systems operating leases .................. 89.2 -- 4.2 5.2 79.8 Guarantees of affiliate debt ........................ 1.0 1.0 -- -- -- Capital contributions for limited partnership investments ........................................ 5.0 5.0 -- -- -- -------- ------- ------- ------ ------ Total .............................................. $ 261.1 $ 148.5 $ 22.1 $ 8.8 $ 81.7 ======== ======= ======= ====== ======
EQUITY. On May 2, 2001, we sold 4.6 million shares of L-3 Holdings common stock in a public offering for $80.00 per share. In addition, as part of the transaction, other selling stockholders including affiliates of Lehman Brothers Inc. sold 2.3 million secondary shares. Upon closing, we received net proceeds of $353.6 million, which we used to repay borrowings outstanding under our senior credit facilities, pay for the KDI and EER acquisitions and to increase cash and cash equivalents. On February 4, 1999, we sold 5.0 million shares of L-3 Holdings common stock in a public offering for $42.00 per share which generated net proceeds of $201.6 million. In addition, as part of the same transaction, 6.5 million shares of L-3 Holdings common stock were sold by Lehman Brothers Capital Partners III, L.P. and its affiliates ("the Lehman Partnership") and Lockheed Martin in a secondary public offering. In October 1999, Lockheed Martin sold its remaining L-3 Holdings common stock. In December 1999, the Lehman Partnership distributed approximately 3.8 million shares of its shares of common stock of L-3 Holdings to its partners. On December 31, 2001, the Lehman Partnership owned approximately 4.4% of the outstanding common stock of L-3 Holdings. Based upon our current level of operations, we believe that our cash from operating activities, together with available borrowings under the senior credit facilities, will be adequate to meet our anticipated requirements for working capital, capital expenditures, commitments, research and development expenditures, contingent purchase prices, program and other discretionary investments, and interest payments for the foreseeable future. There can be no assurance, however, that our business will continue to generate cash flow at current levels, or that currently anticipated improvements will be achieved. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing. Our ability to make scheduled principal payments or to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the defense industry and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control. There can be no assurance that sufficient funds will be available to enable us to service our indebtedness, to make necessary capital expenditures and to make discretionary investments. 36 DERIVATIVE FINANCIAL INSTRUMENTS Included in our derivative financial instruments are interest rate swap agreements, caps, floors, foreign currency forward contracts and the embedded derivatives related to the issuance of our CODES. All of our derivative financial instruments that are sensitive to market risk are entered into for purposes other than trading. EMBEDDED DERIVATIVES. The contingent interest payment and contingent conversion features of the CODES are embedded derivatives which were bifurcated from the CODES, and a portion of the net proceeds received from the CODES equal to their aggregate fair value of $2.5 million, which was ascribed to the embedded derivatives as required by SFAS No. 133. The subsequent changes in the fair values of the embedded derivatives are recorded in the statement of operations. Their fair values at December 31, 2001 were $3.1 million. INTEREST RATE RISK. Our financial instruments that are sensitive to changes in interest rates include borrowings under the senior credit facilities and our purchased interest rate cap contracts, written interest rate floor contracts and interest rate swap agreements, all of which are denominated in U.S. dollars. The interest rates on the Senior Subordinated Notes, Convertible Notes and CODES are fixed-rate and are not affected by changes in interest rates. To mitigate risks associated with changing interest rates on borrowings under the senior credit facilities that bear interest at variable rates we entered into interest rate cap and floor contracts. The interest rate cap contract provides protection against increases in interest rates on borrowings to the extent: o those borrowings are less than or equal to the notional amount of the cap contract; and o the interest rate paid on the borrowings rises above the sum of the cap reference rate plus our applicable borrowing spread. However, the written interest rate floor limits our ability to enjoy decreases in interest rates on our borrowings to the extent: o those borrowings are less than or equal to the notional amount of the floor contract; and o the interest rate paid on those borrowings falls below the sum of the floor reference rate plus our applicable borrowing spread. In 2001, we entered into interest rate swap agreements on $380.0 million of our senior subordinated notes to convert their fixed interest rates to variable rates and to take advantage of the current low interest rate environment. These swap agreements are described above. For every basis point (0.01%) that the six month LIBOR interest rate is greater than 4.99%, we will incur an additional $18,000 of interest expense above the fixed interest rate on $180.0 million of senior subordinated notes calculated on a per annum basis until maturity. For every basis point that the six month LIBOR interest rate is greater than 6.08%, we will incur an additional $20,000 of interest expense above the fixed interest rate on $200.0 million of senior subordinated notes calculated on a per annum basis until maturity. Conversely, for every basis point that the six month LIBOR interest rate is less than 4.99%, we will recognize $18,000 of interest income on $180.0 million of senior subordinated notes calculated on a per annum basis until maturity. For every basis point that the six month LIBOR interest rate is less than 6.08%, we will recognize $20,000 of interest income on $200.0 million of senior subordinated notes calculated on a per annum basis until maturity. The six month LIBOR rate at December 31, 2001 was 1.96%. We attempt to manage exposure to counterparty credit risk by entering into interest rate agreements only with major financial institutions that are expected to perform fully under the terms of such agreements. Cash payments between us and the counterparties are made at the end of each quarter on the caps and floors and on the interest payment dates of the senior subordinated notes on the interest rate swap agreements. Such payments are recorded as adjustments to interest expense. Additional data on our debt obligations, our applicable borrowing spreads included in the interest rates we pay on borrowings under the senior credit facilities and interest rate agreements are provided in Notes 7 and 8 to our consolidated financial statements. 37 The table below presents significant contract terms and fair values as of December 31, 2001 for our interest rate agreements.
CAPS FLOORS INTEREST RATE SWAP AGREEMENTS ------------------ ------------------ -------------------------------------- (in millions) Notional amount ............. $ 100.0 $ 50.0 $ 200.0 $ 180.0 Interest rate ............... 7.5% 5.5% 8.0% 8.5% Reference rate .............. 3 month LIBOR 3 month LIBOR 6 month LIBOR 6 month LIBOR Designated maturity ......... Quarterly Quarterly Semi-Annual Semi-Annual Expiration date ............. March 28, 2002 March 28, 2002 August 1, 2008 May 15, 2008 Fair value .................. $ -- $ (0.4) $ 2.4 $ (9.6)
FOREIGN CURRENCY EXCHANGE RISK. We conduct some of our operations outside the U.S. in functional currencies other than the U.S. dollar. Additionally, some of our U.S. operations have contracts with foreign customers denominated in foreign currencies. To mitigate the risk associated with certain of these contracts denominated in foreign currency we have entered into foreign currency forward contracts. At December 31, 2001, the notional value of foreign currency forward contracts was $7.1 million and the fair value of these contracts was $0.3 million. We account for these contracts as cash flow hedges. EQUITY PRICE RISK. Our investments in common equities are subject to equity price risk. The fair values of the Company's investments are based on quoted market prices, as available, and on historical cost for investments which it is not practicable to estimate fair value. Both the carrying values and estimated fair values of such instruments amounted to $16.5 million at the end of 2001. BACKLOG AND ORDERS We define funded backlog as the value of contract awards received from the U.S. Government, which the U.S. Government has appropriated funds, plus the value of contract awards and orders received from customers other than the U.S. Government which have yet to be recognized as sales. Our funded backlog as of December 31, 2001 was $1,719.3 million and as of December 31, 2000 was $1,354.0 million. We expect to record as sales approximately 69.7% of our December 31, 2001 funded backlog during 2002. However, there can be no assurance that our funded backlog will become sales in any particular period, if at all. Our funded orders were $2,456.1 million for 2001, $2,013.7 million for 2000 and $1,423.1 million for 1999. Our funded backlog does not include the full value of our contract awards including those pertaining to multi-year, cost-plus reimbursable contracts, which are generally funded on an annual basis. Funded backlog also excludes the sales value of unexercised contract options that may be exercised by customers under existing contracts and the sales value of purchase orders that may be issued under indefinite quantity contracts or basic ordering agreements. RESEARCH AND DEVELOPMENT Company-sponsored research and development costs including bid and proposal costs were $107.5 million for 2001, $101.9 million for 2000 and $76.1 million for 1999. Customer-funded research and development costs were $319.4 million for 2001, $299.3 million for 2000 and $226.3 million for 1999. CONTINGENCIES We are engaged in providing products and services under contracts with the U.S. Government and to a lesser degree, under foreign government contracts, some of which are funded by the U.S. Government. All such contracts are subject to extensive legal and regulatory requirements, and, periodically, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. Under government procurement regulations, an indictment by a federal grand jury could result in the suspension for a period of time from eligibility for awards of new government contracts. A conviction could result in debarment from contracting with the federal government for a specified term. Additionally, in the event that U.S. Government expenditures for products and services of the type we manufacture and provide are reduced, and not offset by greater commercial sales or other new programs or products, or acquisitions, there may be a reduction in the volume of contracts or subcontracts awarded to us. 38 We continually assess our obligations with respect to applicable environmental protection laws. While it is difficult to determine the timing and ultimate cost to be incurred in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, individually or in the aggregate, would be material to our consolidated financial position, results of operations or cash flows. Also, we have been periodically subject to litigation, claims or assessments and various contingent liabilities incidental to our business. We accrue for these contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to those investigative actions, items of litigation, claims or assessments of which we are aware, we are of the opinion that the probability is remote that, after taking into account certain provisions that have been made with respect to these matters, the ultimate resolution of any such investigative actions, items of litigation, claims or assessments will have a material adverse effect on our consolidated financial position, results of operations or cash flows. RECENTLY ISSUED AND PROPOSED ACCOUNTING STANDARDS In July 2001, the FASB issued SFAS No. 141, Business Combinations, which supersedes Accounting Principles Board Opinion ("APB") No. 16, Business Combinations. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for the recognition of intangible assets separately from goodwill. In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible Assets, which supersedes APB No. 17, Intangible Assets. SFAS No. 142 revises the standards for accounting for goodwill and intangible assets. SFAS No. 142 requires that goodwill and indefinite lived identifiable intangible assets shall no longer be amortized, but be tested for impairment at least annually. SFAS No. 142 also requires that the amortization period of identifiable intangible assets with finite lives be no longer limited to forty years. The provisions of SFAS No. 142 are effective beginning January 1, 2002, with full implementation of the impairment measurement provisions completed by December 31, 2002. Under SFAS No. 142, we will not amortize goodwill, but will be required to amortize identifiable intangibles with finite lives. Our goodwill amortization expense for the year ended December 31, 2001 was $42.6 million. Based on a preliminary internal assessment, we do not believe that the cumulative effect of the accounting change resulting from the adoption of the transitional impairment provisions of SFAS No. 142 will be material. In August of 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 applies to legal obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development or normal operation of a long-lived asset, except for certain obligations of lessees. This statement does not apply to obligations that arise solely from a plan to dispose of a long-lived asset. SFAS No. 143 requires that estimated asset retirement costs be measured at their fair values and recognized as assets and depreciated over the useful life of the related asset. Similarly, liabilities for the present value of asset retirement obligations are to be recognized and accreted as interest expense each year to their estimated future value until the asset is retired. These provisions will be applied to existing asset retirement obligations as of the adoption date as a cumulative-effect of a change in accounting policy. SFAS No. 143 is effective for our fiscal years beginning January 1, 2003. SFAS No. 143 will not have a material effect on our consolidated results of operations and financial position. In October of 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB No. 30), for the disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 expands the scope of accounting for disposals to include all components of an entity, including reportable segments and operating segments, reporting units, subsidiaries and certain asset groups. It requires the gain or loss on disposal to be measured as the 39 difference between (1) the fair value less the costs to sell and (2) the carrying value of the component, and such gain or loss cannot include the estimated future operating losses of the component, which were included in the gain or loss determination under APB No. 30. SFAS No. 144 also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of SFAS No. 144 are effective for our fiscal years beginning January 1, 2002, and interim periods within those fiscal years. SFAS No. 144 will not have a material effect on our consolidated results of operations and financial position. INFLATION The effect of inflation on our sales and earnings has not been significant. Although a majority of our 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. FORWARD-LOOKING STATEMENTS Certain of the matters discussed concerning our operations, cash flows, financial position, economic performance, and financial condition, including in particular, the likelihood of our success in developing and expanding our business and the realization of sales from backlog, include forward- looking statements within the meaning of section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are predictive in nature, that depend upon or refer to events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions are forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flow, research and development costs, working capital, capital expenditures and other projections, they are subject to several risks and uncertainties, and therefore, we can give no assurance that these statements will be achieved. Such statements will also be influenced by factors such as: o our dependence on the defense industry and the business risks peculiar to that industry including changing priorities or reductions in the U.S. Government defense budget; o our reliance on contracts with a limited number of agencies of, or contractors to, the U.S. Government and the possibility of termination of government contracts by unilateral government action or for failure to perform; o our ability to obtain future government contracts on a timely basis; o the availability of government funding and changes in customer requirements for our products and services; o our significant amount of debt and the restrictions contained in our debt agreements; o collective bargaining agreements and labor disputes; o economic conditions, competitive environment, international business and political conditions, timing of international awards and contracts; o our extensive use of fixed-price contracts as compared to cost-reimbursable contracts; o our ability to identify future acquisition candidates or to integrate acquired operations; o the rapid change of technology and high level of competition in the communication equipment industry; o our introduction of new products into commercial markets or our investments in commercial products or companies; o pension, environmental or legal matters or proceedings and various other market, competition and industry factors, many of which are beyond our control; and 40 o the fair values of the assets including goodwill and other intangibles of our businesses which can be impaired or reduced by the other factors discussed above. Readers of this document are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes or circumstances or changes in expectations or the occurrence of anticipated events. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Data regarding quantitative and qualitative disclosures related to our market risk sensitive financial instruments are presented in "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Liquidity and Capital Resources -- Derivative Financial Instruments" included herein under Item 7 and in Note 8 to the consolidated financial statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Financial Statements beginning on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 41 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table provides information concerning the directors and executive officers of the Registrants as of March 12, 2002.
NAME AGE POSITION - ----------------------------------- ----- ----------------------------------------------------- Frank C. Lanza .................... 70 Chairman, Chief Executive Officer and Director Robert V. LaPenta ................. 56 President, Chief Financial Officer and Director Michael T. Strianese .............. 46 Senior Vice President, Finance Christopher C. Cambria ............ 43 Senior Vice President, General Counsel and Secretary Jimmie V. Adams ................... 65 Vice President -- Washington D.C. Operations David T. Butler III ............... 45 Vice President -- Planning Ralph G. D'Ambrosio ............... 34 Vice President -- Controller Joseph S. Paresi .................. 46 Vice President -- Product Development Robert W. RisCassi ................ 66 Vice President -- Washington D.C. Operations Charles J. Schafer ................ 54 Vice President -- Business Operations Stephen M. Souza .................. 49 Vice President -- Treasurer Dr. Jill J. Wittels ............... 52 Vice President -- Business Development Thomas A. Corcoran(1) ............. 57 Director Robert B. Millard(2) .............. 51 Director John E. Montague(2) ............... 47 Director John M. Shalikashvili(1) .......... 65 Director Arthur L. Simon(1) ................ 70 Director Alan H. Washkowitz(2) ............. 61 Director
- ---------- (1) Member of the Audit Committee. (2) Member of the Compensation Committee. All Executive Officers serve at the discretion of the Board of Directors. The remaining information called for by Item 10 is incorporated herein by reference to the definitive proxy statement relating to Annual Meeting of Shareholders of L-3 Holdings, to be held on April 23, 2002. L-3 Holdings will file such definitive proxy statement with the Securities and Exchange Commission pursuant to regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information called for by Item 11 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by Item 12 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information called for by Item 13 is incorporated herein by reference to the definitive proxy statement referred to above in Item 10. 42 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A) 1. FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT:
PAGE NUMBER ------- Report of Independent Auditors ....................................................... F-2 Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000 ............ F-3 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 ................................................................................ F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 ....................................................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 ................................................................................ F-6 Notes to Consolidated Financial Statements ........................................... F-7
(A) 2. FINANCIAL STATEMENT SCHEDULES Not applicable (B) REPORTS FILED ON FORM 8-K. Report filed on October 20, 2001 announcing that L-3 Communications Holdings, Inc. has sold $350.0 million in 4% Senior Subordinated Convertible Contingent Debt Securities due 2011 in a private placement, and announced its third quarter 2001 results of operations. Report filed on December 19, 2001, designating certain domestic subsidiaries as additional guarantors of the debt of L-3 Communications, and regarding the financial statements for the year ended December 31, 2000 of EER Systems, Inc. (C) EXHIBITS Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference to such previous filings.
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ------------- ---------------------------------------------------------------------------------------- 3.1 Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement of Form S-1 No. 333-46975). 3.2 By laws of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 No. 333-46975) 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.3 Indenture dated as of April 30, 1997 ("1997 Indenture") between L-3 Communications Corporation and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to L-3 Communications Corporation's Registration Statement on Form S-4 No. 333-31649). 10.6 Employment Agreement dated April 30, 1997 between Frank C. Lanza and L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.7 Employment Agreement dated April 30, 1997 between Robert V. LaPenta and L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 10.51 to the Registrant Statement on Form S-1 No. 333-46975). 10.10 Form of Stock Option Agreement of Employee Options (incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1 No. 333-46975).
43
EXHIBIT NO. DESCRIPTION OF EXHIBIT - --------------------- ------------------------------------------------------------------------------------------ 10.11 1997 Stock Option Plan for Key Employees (incorporated by reference to Exhibit 10.11 to Registrant's Registration Statement on Form S-1, No. 333-70125). 10.12 Non-Qualified Stock Option Agreement dated as of April 30, 1997 by and between L-3 Communications Holdings, Inc. and Frank C. Lanza (incorporated by reference to Exhibit 10.12 to Registrant" Registration Statement on Form S-1, No. 333-70125). 10.13 Non-Qualified Stock Option Agreement dated as of April 30, 1997 by and between L-3 Communications Holdings, Inc. and Robert V. LaPenta (incorporated by reference to Exhibit 10.13 to Registrant's Registration Statement on Form S-1, No. 333-70125). 10.15 Option Plan for Non-Employee Directors of L-3 Communication's Holdings, Inc. (incorporated by reference to Exhibit 10.15 to Registrant's annual report on Form 10-K filed on March 31, 1999). 10.16 1999 Long Term Performance Plan dated as of April 27, 1999 (incorporated by reference to Exhibit 10.16 to the Registrant's annual report on Form 10-K filed on March 30, 2000). 10.20 L-3 Communications Corporation Pension Plan (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1 No. 333-46975). 10.25 L-3 Communications Corporation Employee Stock Purchase Plan (incorporated by reference to Appendix A of the Registrants' Definitive Proxy Statement filed April 2, 2001). 10.31 Indenture dated as of May 22, 1998 ("May 1998 Indenture") between L-3 Communications Corporation and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.6 to L-3 Communications Corporation's Registration Statement on Form S-4 No. 333-70199). 10.32 Indenture dated as of December 11, 1998 ("December 1998 Indenture") among L-3 Communications Corporation, the Guarantors named therein and The Bank of New York, as Trustee (incorporated by reference to Exhibit 10.32 to Registrant's Registration Statement on Form S-1, No. 333-70125). 10.33 Indenture dated as of November 21, 2000 ("2000 Indenture") among L-3 Communications Holdings, Inc., the Guarantors named therein and the Bank of New York, as Trustee (incorporated by reference to Exhibit 10.33 of the Registrants' Annual Report on Form 10-K for the year ended December 31, 2000). **10.40 Third Amended and Restated Credit Agreement dated as of May 16, 2001 among L-3 Communications Corporation, the lenders named therein and the other parties thereto. **10.41 Second Amended and Restated 364-Day Credit Agreement dated as of May 16, 2001 among L-3 Communications Corporation, the lenders named therein and the other parties thereto. **10.42 First Amendment to Third Amended and Restated Credit Agreement dated as of October 17, 2001 among L-3 Communications Corporation, the lenders named therein and the other parties thereto. **10.43 First Amendment to Second Amended and Restated 364-Day Credit Agreement dated as of October 17, 2001 among L-3 Communications Corporation, the lenders named therein and the other parties thereto. **10.44 Second Amendment to Third Amended and Restated Credit Agreement dated as of February 25, 2002 among L-3 Communications Corporation, the lenders named therein and the other parties thereto. **10.45 Consent and Second Amendment to Second Amended and Restated 364-Day Credit Agreement dated as of February 25, 2002 among L-3 Communications Corporation, the lenders named therein and the other parties thereto. **10.50 Bridge Loan Agreement dated as of March 8, 2002 among L-3 Communications Corporation, L-3 Communications Holdings, Inc., the lenders and guarantors named therein and the other parties thereto. **10.51 Indenture dated as of March 8, 2002 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
44
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------------------- ----------------------------------------------------------------------------------------- **10.52 Debt Registration Rights Agreement dated as of March 8, 2002 among L-3 Communications Corporation, Lehman Brothers Inc., Banc of America Bridge LLC, Banc of America Securities LLC, Credit Suisse First Boston Corporation, Credit Suisse First Boston, Caymen Islands branch, Lehman Commercial Paper Inc. and the guarantors named therein. 10.53 Indenture dated as of October 24, 2001 ("2001 Indenture") among L-3 Communications Holdings, Inc., the guarantors named therein and Lehman Brothers Inc., Bear, Stearns & Co., and Credit Suisse First Boston Corporation as initial purchasers (Incorporated by reference to Exhibit 4.f of our registration Statement on Form S-3, No. 333-75558). **10.54 Supplemental Indenture dated as of November 9, 2001 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the 1997 Indenture. **10.55 Supplemental Indenture dated as of November 9, 2001 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the May 1998 Indenture. **10.56 Supplemental Indenture dated as of November 9, 2001 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the December 1998 Indenture. **10.57 Supplemental Indenture dated as of November 9, 2001 among L-3 Communications Corporation, L-3 Holdings, Inc., The Bank of New York, as trustee, and the guarantors named therein to the 2000 Indenture. **10.58 Supplemental Indenture dated as of November 9, 2001 among L-3 Communications Corporation, L-3 Holdings, Inc., The Bank of New York, as trustee, and the guarantors named therein to the 2001 Indenture. **10.59 Asset Purchase Agreement dated as of January 11, 2002 among Raytheon Company, Raytheon Australia Pty Ltd. and L-3 Communications Corporation. **10.60 Amendment dated as of March 8, 2002 among Raytheon Company, Raytheon Australia Pty Ltd., L-3 Communications Corporation, L-3 Communications Integrated Systems L.P. and L-3 Communications Australia Pty Ltd to the Asset Purchase Agreement dated as of January 11, 2002. 10.91 Asset Purchase Agreement relating to the Honeywell TCAS Business by and among Honeywell Inc., L-3 Communications Corporation and, solely in respect of the Guaranty in Article XIV, Honeywell International Inc. dated as of February 10, 2000 (incorporated by reference to Exhibit 10.91 of the Registrants' Annual Report on Form 10-K for the year ended December 31, 2000). 10.92 Asset Purchase and Sale Agreement, dated January 7, 2000 by and between L-3 Communications Corporation and Raytheon Company (incorporated by reference to Exhibit 10.92 of the Registrants' Annual Report on Form 10-K for the year ended December 31, 2000). *11 L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Share. **12 Ratio of Earnings to Fixed Charges. **21 Subsidiaries of the Registrant. **23.1 Consent of PricewaterhouseCoopers LLP.
- ---------- * The information required in this exhibit is presented on Note 10 to the Consolidated Financial Statements as of December 31, 2001 in accordance with the provisions of SFAS No. 128, Earnings Per Share. ** Filed herewith 45 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized, on March 18, 2002. L-3 COMMUNICATIONS HOLDINGS, INC. L-3 COMMUNICATIONS CORPORATION By: /s/ Robert V. LaPenta ------------------------------------ Name: Robert V. LaPenta Title: President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrants on March 18, 2002 and in the capacities indicated.
SIGNATURE TITLE - ----------------------------------- -------------------------------------------------------- /s/ Frank C. Lanza Chairman, Chief Executive Officer (Principal - ----------------------------------- Executive Officer) and Director Frank C. Lanza /s/ Robert V. LaPenta President, Chief Financial Officer (Principal Financial - ----------------------------------- Officer) and Director Robert V. LaPenta /s/ Michael T. Strianese Senior Vice President, Finance (Principal Accounting - ----------------------------------- Officer) Michael T. Strianese /s/ Thomas A. Corcoran Director - ----------------------------------- Thomas A. Corcoran /s/ Robert B. Millard Director - ----------------------------------- Robert B. Millard /s/ John E. Montague Director - ----------------------------------- John E. Montague /s/ John M. Shalikashvili Director - ----------------------------------- John M. Shalikashvili /s/ Arthur L. Simon Director - ----------------------------------- Arthur L. Simon /s/ Alan H. Washkowitz Director - ----------------------------------- Alan H. Washkowitz
46 INDEX TO FINANCIAL STATEMENTS Consolidated Financial Statements as of December 31, 2001 and 2000 and for the years ended December 31, 2001, 2000 and 1999. Report of Independent Auditors ....................................................... F-2 Consolidated Balance Sheets as of December 31, 2001 and December 31, 2000 ............ F-3 Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999 ................................................................................ F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 ....................................................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 ................................................................................ F-6 Notes to Consolidated Financial Statements ........................................... F-7
F-1 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders of L-3 Communications Holdings, Inc. We have audited the accompanying consolidated balance sheets of L-3 Communications Holdings, Inc. ("L-3 Holdings") and L-3 Communications Corporation ("L-3 Communications") and subsidiaries (collectively, the "Company") as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of L-3 Holdings and L-3 Communications and subsidiaries as of December 31, 2001 and 2000 and their respective consolidated results of operations and cash flows for each of the three years ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York February 4, 2002 F-2 L-3 COMMUNICATIONS HOLDINGS , INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, ------------------------------ 2001 2000 ------------- -------------- ASSETS Current assets: Cash and cash equivalents ................................. $ 361,022 $ 32,680 Contracts in process ...................................... 801,824 700,133 Deferred income taxes ..................................... 62,965 89,732 Other current assets ...................................... 12,774 7,025 ---------- ---------- Total current assets .................................... 1,238,585 829,570 ---------- ---------- Property, plant and equipment, net ......................... 203,374 156,128 Intangibles, primarily goodwill ............................ 1,711,551 1,371,368 Deferred income taxes ...................................... 97,883 57,111 Deferred debt issue costs .................................. 40,190 29,907 Other assets ............................................... 43,850 19,460 ---------- ---------- Total assets ............................................ $3,335,433 $2,463,544 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, trade ................................... $ 129,538 $ 159,901 Accrued employment costs .................................. 126,981 102,606 Accrued expenses .......................................... 38,823 55,576 Customer advances ......................................... 74,060 55,203 Accrued interest .......................................... 13,288 16,335 Income taxes .............................................. 16,768 7,251 Other current liabilities ................................. 124,819 71,797 ---------- ---------- Total current liabilities ............................... 524,277 468,669 ---------- ---------- Pension and postretirement benefits ........................ 155,052 105,523 Other liabilities .......................................... 57,063 101,783 Long-term debt ............................................. 1,315,252 1,095,000 ---------- ---------- Total liabilities ....................................... 2,051,644 1,770,975 Minority interest .......................................... 69,897 -- Commitments and contingencies Shareholders' equity: L-3 Holdings' common stock; $.01 par value; authorized 100,000,000 shares, issued and outstanding 39,248,313 and 33,606,645 shares (L-3 Communications' common stock; $.01 par value, 100 shares authorized, issued and outstanding) ............................................ 939,037 515,926 Retained earnings ......................................... 301,730 186,272 Unearned compensation ..................................... (3,205) (2,457) Accumulated other comprehensive loss ...................... (23,670) (7,172) ---------- ---------- Total shareholders' equity ................................. 1,213,892 692,569 ---------- ---------- Total liabilities and shareholders' equity .............. $3,335,433 $2,463,544 ========== ==========
See notes to consolidated financial statements. F-3 L-3 COMMUNICATIONS HOLDINGS , INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, --------------------------------------------------- 2001 2000 1999 --------------- --------------- --------------- Sales ...................................... $ 2,347,422 $ 1,910,061 $ 1,405,462 Costs and expenses ......................... 2,072,092 1,687,343 1,254,976 ----------- ----------- ----------- Operating income ........................... 275,330 222,718 150,486 Interest and other income .................. 1,739 4,393 5,534 Interest expense ........................... 86,390 93,032 60,590 Minority interest .......................... 4,457 -- -- ----------- ----------- ----------- Income before income taxes ................. 186,222 134,079 95,430 Provision for income taxes ................. 70,764 51,352 36,741 ----------- ----------- ----------- Net income ................................. $ 115,458 $ 82,727 $ 58,689 =========== =========== =========== L-3 Holdings' earnings per common share: Basic ..................................... $ 3.08 $ 2.48 $ 1.83 =========== =========== =========== Diluted ................................... $ 2.95 $ 2.37 $ 1.75 =========== =========== =========== L-3 Holdings' weighted average common shares outstanding: Basic ..................................... 37,440 33,355 32,107 =========== =========== =========== Diluted ................................... 42,719 34,953 33,516 =========== =========== ===========
See notes to consolidated financial statements. F-4 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN THOUSANDS)
L-3 HOLDINGS' COMMON STOCK ADDITIONAL SHARES PAR PAID-IN RETAINED ISSUED VALUE CAPITAL EARNINGS -------- ------- ----------- ---------- Balance December 31, 1998 .................... 27,402 $274 $264,495 $ 44,856 Comprehensive income: Net income .................................. 58,689 Minimum pension liability adjustment ........ Unrealized loss on securities ............... Foreign currency translation adjustment Shares issued: Sale of common stock ........................ 5,000 50 201,763 Employee benefit plans ...................... 163 2 6,991 Acquisition consideration ................... 151 2 6,432 Exercise of stock options ................... 79 -- 1,764 Grant of restricted stock .................... 1,921 Amortization of unearned compensation ........ ------ ---- -------- -------- Balance December 31, 1999 .................... 32,795 328 483,366 103,545 Comprehensive income: Net income .................................. 82,727 Minimum pension liability adjustment, net of ($553) tax benefit................... Foreign currency translation adjustment Unrealized loss on securities, net of ($2,316) tax benefit........................ Shares issued: Employee benefit plans ...................... 235 2 12,640 Exercise of stock options ................... 577 6 18,056 Grant of restricted stock .................... 1,512 Amortization of unearned compensation ........ Other ........................................ 16 ------ ---- -------- -------- Balance December 31, 2000 .................... 33,607 336 515,590 186,272 Comprehensive income: Net income .................................. 115,458 Minimum pension liability adjustment, net of ($11,955) tax benefit................ Foreign currency translation adjustment, net of ($164) tax benefit ...... Unrealized loss on securities, net of $111 tax benefit ........................... Unrealized loss on securities reclassified into net income, net of $2,274 tax expense .................................... Unrealized losses on hedging instruments, net of ($100) tax benefit...... Shares issued: Sale of common stock ........................ 4,575 46 353,576 Employee benefit plans ...................... 208 2 16,866 Acquisition consideration ................... 294 3 17,354 Exercise of stock options ................... 564 6 28,258 Employee stock purchase plan contributions ............................... 4,861 Grant of restricted stock .................... 2,118 Amortization of unearned compensation......... Other ........................................ 21 ------ ---- -------- -------- Balance December 31, 2001 .................... 39,248 $393 $938,644 $301,730 ====== ==== ======== ======== ACCUMULATED OTHER UNEARNED COMPREHENSIVE COMPENSATION INCOME (LOSS) TOTAL -------------- -------------- -------------- Balance December 31, 1998 .................... $ - $ (9,651) $ 299,974 Comprehensive income: Net income .................................. 58,689 Minimum pension liability adjustment ........ 9,443 9,443 Unrealized loss on securities ............... (970) (970) Foreign currency translation adjustment (1,225) (1,225) ---------- 65,937 Shares issued: Sale of common stock ........................ 201,813 Employee benefit plans ...................... 6,993 Acquisition consideration ................... 6,434 Exercise of stock options ................... 1,764 Grant of restricted stock .................... (1,921) -- Amortization of unearned compensation ........ 260 260 -------- -------- ---------- Balance December 31, 1999 .................... (1,661) (2,403) 583,175 Comprehensive income: Net income .................................. 82,727 Minimum pension liability adjustment, net of ($553) tax benefit................... (819) (819) Foreign currency translation adjustment (1,222) (1,222) Unrealized loss on securities, net of ($2,316) tax benefit........................ (2,728) (2,728) ---------- 77,958 Shares issued: Employee benefit plans ...................... 12,642 Exercise of stock options ................... 18,062 Grant of restricted stock .................... (1,512) -- Amortization of unearned compensation ........ 716 716 Other ........................................ 16 -------- -------- ---------- Balance December 31, 2000 .................... (2,457) (7,172) 692,569 Comprehensive income: Net income .................................. 115,458 Minimum pension liability adjustment, net of ($11,955) tax benefit................ (19,519) (19,519) Foreign currency translation adjustment, net of ($164) tax benefit ...... (268) (268) Unrealized loss on securities, net of $111 tax benefit ........................... (180) (180) Unrealized loss on securities reclassified into net income, net of $2,274 tax expense .................................... 3,632 3,632 Unrealized losses on hedging instruments, net of ($100) tax benefit...... (163) (163) ---------- 98,960 Shares issued: Sale of common stock ........................ 353,622 Employee benefit plans ...................... 16,868 Acquisition consideration ................... 17,357 Exercise of stock options ................... 28,264 Employee stock purchase plan contributions ............................... 4,861 Grant of restricted stock .................... (2,118) -- Amortization of unearned compensation......... 1,370 1,370 Other ........................................ 21 -------- --------- ---------- Balance December 31, 2001 .................... $ (3,205) $ (23,670) $1,213,892 ======== ========= ==========
See notes to consolidated financial statements. F-5 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, -------------------------------------------- 2001 2000 1999 ------------- ------------ ------------- OPERATING ACTIVITIES: Net income ...................................................... $ 115,458 $ 82,727 $ 58,689 Goodwill amortization ........................................... 42,606 35,327 20,970 Depreciation and other amortization ............................. 44,345 38,927 32,748 Amortization of deferred debt issue costs ....................... 6,388 5,724 3,904 Minority interest ............................................... 4,457 -- -- Deferred income tax provision ................................... 52,638 25,103 28,831 Other noncash items ............................................. 17,576 12,517 6,617 Changes in operating assets and liabilities, net of amounts acquired: Contracts in process ........................................... (40,652) (66,402) (61,670) Other current assets ........................................... 1,643 (2,599) (70) Other assets ................................................... (12,033) (416) 552 Accounts payable ............................................... (43,165) 38,065 2,896 Accrued employment costs ....................................... 11,931 6,239 2,052 Accrued expenses ............................................... (20,300) 2,274 (6,280) Customer advances .............................................. 12,627 (17,087) 5,766 Accrued interest ............................................... (3,047) 3,637 5,985 Income taxes ................................................... 14,431 13,161 3,917 Other current liabilities ...................................... (37,555) (59,286) (13,554) Pension and postretirement benefits ............................ 4,550 (7,214) 1,788 Other liabilities .............................................. 1,423 1,959 7,102 All other operating activities ................................. (353) 1,149 (1,225) ---------- ---------- ---------- Net cash from operating activities .............................. 172,968 113,805 99,018 ---------- ---------- ---------- INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired ................. (446,911) (599,608) (272,195) Proceeds from sale of interest in subsidiary .................... 75,206 -- -- Capital expenditures ............................................ (48,121) (33,580) (23,456) Disposition of property, plant and equipment .................... 1,237 18,060 6,713 Other investing activities ...................................... (6,301) 6,905 4,136 ---------- ---------- ---------- Net cash (used in) investing activities ......................... (424,890) (608,223) (284,802) ---------- ---------- ---------- FINANCING ACTIVITIES: Borrowings under revolving credit facility ...................... 316,400 858,500 74,700 Repayment of borrowings under revolving credit facility ......... (506,400) (668,500) (74,700) Proceeds from sale of convertible senior subordinated notes 420,000 300,000 -- Proceeds from sale of L-3 Holdings' common stock, net ........... 353,622 -- 201,582 Debt issuance costs ............................................. (16,671) (12,916) (323) Proceeds from exercise of stock options ......................... 16,325 8,954 658 Employee stock purchase plan contributions ...................... 4,861 -- -- Distributions to minority interest .............................. (2,530) -- -- Other financing activities ...................................... (5,343) (1,728) 525 ---------- ---------- ---------- Net cash from financing activities .............................. 580,264 484,310 202,442 ---------- ---------- ---------- Net increase (decrease) in cash ................................. 328,342 (10,108) 16,658 Cash and cash equivalents, beginning of period .................. 32,680 42,788 26,130 ---------- ---------- ---------- Cash and cash equivalents, end of period ........................ $ 361,022 $ 32,680 $ 42,788 ========== ========== ==========
See notes to consolidated financial statements. F-6 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. DESCRIPTION OF BUSINESS L-3 Communications Holdings, Inc. derives all its operating income and cash flow from its wholly-owned subsidiary L-3 Communications Corporation ("L-3 Communications"). L-3 Communications Holdings, Inc. ("L-3 Holdings", and together with its subsidiaries, "L-3" or "the Company") is a merchant supplier of sophisticated secure communication systems and specialized products. The Company produces secure, high data rate communication systems, training and simulation systems, engineering development and integration support, avionics and ocean products, fuzing products, telemetry, instrumentation, space and guidance products and microwave components. These systems and products are critical elements of virtually all major communication, command and control, intelligence gathering and space systems. The Company's systems and specialized products are used to connect a variety of airborne, space, ground- and sea-based communication systems and are used in the transmission, processing, recording, monitoring and dissemination functions of these communication systems. The Company's customers include the U.S. Department of Defense ("DoD"), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign governments, commercial customers and certain other U.S. federal, state and local government agencies. The Company has two reportable segments, Secure Communication Systems and Specialized Products. Secure Communication Systems. This segment provides secure, high data rate communication systems for military and other U.S. Government reconnaissance and surveillance applications. The major secure communication programs and systems include: o secure data links for airborne, satellite, ground- and sea-based remote platforms for real time information collection and dissemination to users; o strategic and tactical signal intelligence systems that detect, collect, identify, analyze and disseminate information; o secure telephone and network equipment and encryption management; o communication software support services; o communication systems for surface and undersea vessels and manned space flights; and o wide-area security systems. The Secure Communication Systems segment includes the training and simulation business, which produces advanced simulation and training products, with high-fidelity representations of cockpits and operator stations for aircraft and vehicle system simulation. This segment also provides a wide range of engineering development and integration support to the DoD and other government agencies, a full range of teaching, training, logistic and training device support services to domestic and international military customers, and custom ballistic targets for the DoD. Specialized Products. This segment supplies products to military and commercial customers, and focuses on niche markets in which the Company believes it can achieve a market leadership position. This reportable segment includes three product categories: o avionics and ocean products including aviation and maritime recorders, airborne collision avoidance products, displays, antennas, acoustic undersea warfare products, naval power distribution, conditioning, switching and protection equipment, premium fuzing products and aircraft modernization; o telemetry, instrumentation and space products including commercial off-the-shelf, real-time data collection and transmission products and components for missile, aircraft and space-based electronic systems; and F-7 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) o microwave components including commercial off-the-shelf, high-performance microwave components and frequency monitoring equipment. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The accompanying financial statements comprise the consolidated financial statements of L-3 Holdings and L-3 Communications. L-3 Holdings' only asset is its investment in L-3 Communications. The only obligations of L-3 Holdings are the 5 1/4% Convertible Senior Subordinated Notes and the 4% Senior Subordinated Convertible Contingent Debt Securities. L-3 Holdings has also guaranteed the borrowings under the senior credit facilities of L-3 Communications. Because obligations of L-3 Holdings have been jointly, severally, fully and unconditionally guaranteed by L-3 Communications and certain of its domestic subsidiaries, such debt has been reflected as debt of L-3 Communications in its consolidated financial statements in accordance with the Securities and Exchange Commission's ("SEC") Staff Accounting Bulletin ("SAB") No. 54. In addition, all issuances of equity securities including grants of stock options and restricted stock by L-3 Holdings to employees of L-3 Communications have been reflected in the consolidated financial statements of L-3 Communications. As a result, the consolidated financial positions, results of operations and cash flows of L-3 Holdings and L-3 Communications are substantially the same. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements of the Company include all wholly-owned and significant majority-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Investments over which the Company has significant influence but does not have voting control are accounted for by the equity method. CASH AND CASH EQUIVALENTS: Cash equivalents consist of highly liquid investments with a maturity of three months or less at time of purchase. REVENUE RECOGNITION: The substantial majority of the Company's direct and indirect sales to the U.S. Government and certain of the Company's sales to foreign governments and commercial customers are made pursuant to written contractual arrangements or "contracts" to design, develop, manufacture and or modify complex products, and to the specifications of the buyers (customers) or to provide services related to the performance of such contracts. These contracts are within the scope of the American Institute of Certified Public Accountants Statement of Position 81-1 Accounting for Performance of Construction -- Type and Certain Production-Type Contracts ("SOP 81-1"), and sales and profits on them are recognized using percentage-of-completion methods of accounting. Sales and profits on fixed-price production contracts whose units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their selling prices (the "units-of-delivery" method). Sales and profits on other fixed-price contracts are recorded based on the ratio of total actual incurred costs to date to the total estimated costs for each contract (the "cost-to-cost method.") Sales and fees on cost-reimbursable contracts are recognized as costs are incurred. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. Losses on contracts are recognized in the period in which they are determined. The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made. Sales on arrangements that are not within the scope of SOP 81-1 are recognized in accordance with the SEC's SAB No. 101. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectibility is reasonably assured. F-8 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) CONTRACTS IN PROCESS: For the Company's contracts that are within the scope of SOP 81-1, accumulated costs incurred that are allowable under the terms of the contract and profits earned on contract sales are reported in Contracts in Process. Billed Receivables represent the uncollected portion of amounts recorded as sales and billed to customers, including those amounts for sales arrangements that are not within the scope of SOP 81-1. Unbilled Contract Receivables represent accumulated recoverable costs and earned profits or losses on contracts in process that have been recorded as sales, but have not yet been billed to customers. Inventoried Contract Costs represent recoverable incurred costs on contracts in process. Incurred contract costs include direct costs and overhead costs, and for U.S. Government contracts and contracts with prime contractors or subcontractors of the U.S. Government, general and administrative costs, independent research and development costs and bid and proposal costs. Contracts in Process also contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. Provisions for contracts in a loss position in excess of the amounts included in Contracts in Process represent the unrecoverable costs on the loss contracts that will be incurred in future periods and are reported in Estimated Costs in Excess of Billings to Complete Contracts in Process, which is a component of Other Current Liabilities and Other Liabilities. Under the contractual arrangements on certain contracts with the U.S. Government, the Company receives progress payments as it incurs costs. The U.S. Government has a security interest in the Unbilled Contract Receivables and Inventoried Contract Costs to which progress payments have been applied, and such progress payments are reflected as a reduction of the related Unbilled Contract Receivables and Inventoried Contract Costs. Customer Advances are classified as current liabilities. Inventories other than Inventoried Contract Costs are stated at the lower of cost or market primarily using the average cost method. DERIVATIVE FINANCIAL INSTRUMENTS: In connection with its risk management and financial derivatives, the Company has entered into interest rate swap agreements, interest rate cap and floor contracts and foreign currency forward contracts. The interest rate swap agreements are accounted for as fair value hedges. The foreign currency forward contracts are accounted for as cash flow hedges. The embedded derivatives related to the issuance of the Company's debt is recorded at fair value with changes reflected in the statement of operations. The differential to be paid or received as interest rates change on the interest rate swap agreements is recorded as an adjustment to interest expense. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Depreciation is computed by applying principally the straight-line method to the estimated useful lives of the related assets. Useful lives range substantially from 10 to 40 years for buildings and improvements and 3 to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. DEBT ISSUANCE COSTS: Costs incurred to issue debt are deferred and amortized as interest expense over the term of the related debt using a method that approximates the effective interest method. INTANGIBLES: Intangibles consist primarily of the excess of the purchase cost of acquired businesses over the fair value of identifiable net assets acquired ("goodwill"). Goodwill related to acquisitions consummated after June 30, 2001 is not amortized. Other intangibles are amortized on a straight-line basis over periods ranging from 5 to 15 years. Accumulated goodwill amortization was $117,975 at December 31, 2001 and $76,001 at December 31, 2000. The carrying amount of goodwill is evaluated on a recurring basis. Current and estimated future profitability and undiscounted cash flows excluding financing costs of the acquired businesses are the primary indicators used to assess the recoverability of goodwill. For the years ended December 31, 2001 and 2000, there were no material adjustments to the carrying amounts of goodwill resulting from these evaluations (see Recently Issued Accounting Standards below for a description of changes in accounting for goodwill). F-9 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME TAXES: The Company provides for income taxes using the liability method. Deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. RESEARCH AND DEVELOPMENT: Research and development costs sponsored by the Company include bid and proposal costs related to government products and services. These costs generally are allocated among all contracts in progress under U.S. Government contractual arrangements. Customer-funded research and development costs, including software development costs, incurred pursuant to contracts are accounted for as direct contract costs. Other software development costs incurred after establishing technological feasibility are capitalized and are amortized on a product by product basis using the amount that is the greater of the straight line method over the useful life or the ratio of current revenues to total estimated revenues. STOCK OPTIONS: Compensation expense for stock options is recognized in income based on the excess, if any, of L-3 Holdings' fair value of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock. When the exercise price for stock options granted to employees equals or exceeds the fair value of the L-3 Holdings common stock at the date of grant, the Company does not recognize compensation expense. See Note 12 for the fair value pro forma disclosure of stock-based compensation. USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs and expenses during the reporting period. The most significant of these estimates and assumptions relate to contract estimates of sales and estimated costs to complete contracts in process, estimates of market values for inventories reported at lower of cost or market, estimates of pension and postretirement benefit obligations, recoverability of recorded amounts of fixed assets and goodwill, income taxes, litigation and environmental obligations. Actual results could differ from these estimates. RECENTLY ISSUED ACCOUNTING STANDARDS: In July 2001, the FASB issued SFAS No. 141, Business Combinations, which supersedes Accounting Principles Board Opinion ("APB") No. 16, Business Combinations. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for the recognition of intangible assets separately from goodwill. In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible Assets, which supersedes APB No. 17, Intangible Assets. SFAS No. 142 revises the standards for accounting for goodwill and intangible assets. SFAS No. 142 requires that goodwill and indefinite lived identifiable intangible assets shall no longer be amortized, but be tested for impairment at least annually. SFAS No. 142 also requires that the amortization period of identifiable intangible assets with finite lives be no longer limited to forty years. The provisions of SFAS No. 142 are effective beginning January 1, 2002, with full implementation of the impairment measurement provisions completed by December 31, 2002. Effective January 1, 2002, the Company will not record goodwill amortization expense, but will be required to amortize identifiable intangibles with finite lives. Goodwill amortization expense for the year ended December 31, 2001 was $42,606. In August of 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 applies to legal obligations associated with the retirement of tangible long-lived assets that F-10 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) result from the acquisition, construction, development or normal operation of a long-lived asset, except for certain obligations of lessees. This statement does not apply to obligations that arise solely from a plan to dispose of a long-lived asset. SFAS No. 143 requires that estimated asset retirement costs be measured at their fair values and recognized as assets and depreciated over the useful life of the related asset. Similarly, liabilities for the present value of asset retirement obligations are to be recognized and accreted as interest expense each year to their estimated future value until the asset is retired. These provisions will be applied to existing asset retirement obligations as of the adoption date as a cumulative-effect of a change in accounting policy. SFAS No. 143 is effective for the Company's fiscal years beginning January 1, 2003. SFAS No. 143 will not have a material effect on the Company's consolidated results of operations and financial position. In October of 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (APB No. 30), for the disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 expands the scope of accounting for disposals to include all components of an entity, including reportable segments and operating segments, reporting units, subsidiaries and certain asset groups. It requires the gain or loss on disposal to be measured as the difference between (1) the fair value less the costs to sell and (2) the carrying value of the component, and such gain or loss cannot include the estimated future operating losses of the component, which were included in the gain or loss determination under APB No. 30. SFAS No. 144 also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of SFAS No. 144 are effective for the Company's fiscal years beginning January 1, 2002, and interim periods within those fiscal years. SFAS No. 144 will not have a material effect on the Company's consolidated results of operations and financial position. RECLASSIFICATIONS: Certain reclassifications have been made to conform prior-year amounts to the current-year presentation. 3. ACQUISITIONS, DIVESTITURES AND OTHER TRANSACTIONS On October 3, 2001, the Company announced that it had signed a definitive agreement with Spar Aerospace Limited ("Spar"), a leading provider of high-end aviation product modernization, pursuant to which L-3 offered to acquire all of the outstanding common stock of Spar for Cdn$15.50 per share or approximately Cdn$182,000, net of cash to be acquired of approximately Cdn$47,500. The acquisition of Spar provides the Company significant opportunity for pull-through sales of its avionics products. The acquisition also opens up the Canadian and worldwide high-end aviation product modernization marketplace to the Company. On November 23, 2001, the Company acquired 65.8% of the outstanding common stock of Spar for $97,223 in cash and acquired control of Spar and the ability to require the remaining stockholders to tender their shares. The Company acquired an additional 4.5% of the outstanding common stock of Spar for $7,855 in cash, during the remainder of 2001. Additional consideration of $43,641 for the remaining outstanding common stock of Spar at December 31, 2001, that the Company acquired and paid for in January 2002, has been recorded in other current liabilities in the consolidated balance sheet at December 31, 2001. During January 2002, the Company completed the acquisition and paid for the remaining outstanding common stock of Spar. F-11 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The table below presents a summary of the preliminary estimates of fair values of the assets acquired and liabilities assumed on the date the Company obtained a majority ownership interest in Spar. Cash ..................................................... $ 29,460 Other current assets ..................................... 33,108 Property, plant and equipment ............................ 12,565 Goodwill ................................................. 104,289 Other non-current assets ................................. 229 -------- Total assets acquired ................................... 179,651 -------- Current liabilities ...................................... 23,816 Long-term liabilities .................................... 7,116 -------- Total liabilities assumed ............................... 30,932 -------- Net assets acquired ..................................... $148,719 ======== The goodwill was assigned to the Specialized Products segment and is not deductible for tax purposes. During the fourth quarter of 2001, the Company acquired three other businesses for an aggregate purchase price of $137,290 in cash plus acquisition costs, subject to adjustment based on the closing date net assets or net working capital of the acquired business and, in one case, additional purchase price contingent upon the post-acquisition performance of the acquired company. The Company acquired: (1) the net assets of SY Technology, Inc. ("SY"), a provider of air warfare simulation services, on December 31, 2001. This acquisition is subject to additional purchase price not to exceed $4,800 which is contingent upon the financial performance of SY for the year ended December 31, 2001, and the years ending December 31, 2002 and 2003; (2) the net assets of Bulova Technologies, a producer of military fuzes that prevent the inadvertent firing and detonation of weapons during handling, on December 19, 2001. Bulova Technology was later renamed BT Fuze Products ("BT Fuze"); and, (3) the common stock of Emergent Government Services Group ("Emergent"), a provider of engineering and information services to the U.S. Air Force, Army, Navy and intelligence agencies, on November 30, 2001. Following the acquisition we changed Emergent Government Services Group's name to L-3 Communications Analytics. Based on the preliminary purchase price allocations, the goodwill recognized in the acquisitions of SY, BT Fuze and Emergent was $102,145, of which approximately $74,000 is expected to be fully deductible for tax purposes. Goodwill of $60,525 was assigned to the Secure Communication Systems segment and $41,620 was assigned to the Specialized Products segment. On May 4, 2001, the Company acquired all of the outstanding common stock of KDI Precision Products ("KDI") for $79,432 in cash including acquisition costs. On May 31, 2001, the Company acquired all of the outstanding common stock of EER Systems ("EER") for $119,533 in cash including acquisition costs, and additional purchase price not to exceed $10,000 which is contingent upon the financial performance of EER for the year ended December 31, 2001 and the year ending December 31, 2002. On February 10, 2000, the Company acquired the assets of the Training Devices and Training Services ("TDTS") business of Raytheon Company for $159,203 in cash including acquisition costs. Following the acquisition, the Company changed TDTS's name to L-3 Communications Link Simulation and Training ("Link Simulation and Training"). On February 14, 2000, the Company acquired the assets F-12 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) of Trex Communications Corporation ("TrexCom") for $50,069 in cash including acquisition costs. On April 28, 2000, the Company acquired the Traffic Alert and Collision Avoidance System ("TCAS") product line from Honeywell Inc. for a purchase price of $239,988 in cash including acquisition costs. On June 30, 2000, the Company acquired all the outstanding common stock of MPRI Inc. ("MPRI") for $39,725 in cash including acquisition costs and $4,000 of additional purchase price that was based on the financial performance of MPRI for the year ended June 30, 2001. On December 29, 2000, the Company acquired all of the outstanding common stock of Coleman Research Corporation ("Coleman"), a subsidiary of Thermo Electron Corporation, for $60,565 in cash including acquisition costs, and additional purchase price not to exceed $5,000 which is contingent upon the financial performance of Coleman for the year ended December 31, 2001. Additionally, during the years ended December 31, 2001, 2000 and 1999, the Company purchased other businesses, which individually and in the aggregate were not material to its consolidated results of operations, financial position or cash flows in the year acquired. All of the acquisitions were financed with cash on hand or borrowings on bank credit facilities. All of the Company's acquisitions have been accounted for as purchase business combinations and are included in the Company's results of operations from their respective effective dates. The assets and liabilities recorded in connection with the purchase price allocations for the acquisitions of KDI, EER, Spar, Emergent, BT Fuze and SY are based upon preliminary estimates of fair values for contracts in process, estimated costs in excess of billings to complete contracts in process, inventories, identifiable intangibles and deferred taxes. Actual adjustments will be based on the final purchase prices and final appraisals and other analyses of fair values which are in process. The Company has valued acquired contracts in process at contract price, less the estimated costs to complete and an allowance for the Company's normal profit on its effort to complete such contracts. The preliminary assets and liabilities recorded in connection with the acquisitions of KDI, EER, Emergent, BT Fuze and SY were $367,570 and $31,214. The Company does not expect the differences between the preliminary and final purchase price allocations for the acquisitions to be material. Goodwill is amortized on a straight-line basis over periods of 40 years for KDI and EER. In accordance with SFAS No. 142, goodwill is not amortized for Spar, Emergent, BT Fuze and SY. Had the acquisitions of KDI, EER, SY, BT Fuze, Emergent and Spar and the related financing transactions occurred on January 1, 2001, the unaudited pro forma sales, net income and diluted earnings per share for the year ended December 31, 2001 would have been $2,638,700, $121,300 and $2.98. Had the acquisitions of TDTS, TrexCom, TCAS, MPRI, Coleman, KDI, EER, SY, BT Fuze, Emergent and Spar and the related financing transactions occurred on January 1, 2000 the unaudited pro forma sales, net income and diluted earnings per share for the year ended December 31, 2000 would have been $2,554,600, $103,700 and $2.62. The pro forma results are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the acquisitions and the related financing transactions occurred on January 1, 2000 and 2001. On January 14, 2002, the Company agreed to acquire Aircraft Integration Systems ("AIS"), a division of Raytheon Company, for $1,130,000 in cash plus acquisition costs. The acquisition is expected to close in March 2002. The acquisition is expected to be financed using cash on hand, borrowings under the Company's senior credit facilities and a $500,000 senior subordinated bridge loan. The Company expects to offer and sell approximately $1,000,000 of debt and equity securities during the first half of 2002, depending on capital market conditions, and use the proceeds from those offerings to repay the $500,000 senior subordinated bridge loan and the borrowings made under the senior credit facilities. F-13 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) On January 2, 2002, the Company agreed to acquire the detection system business of PerkinElmer for $100,000 in cash plus acquisition costs. The acquisition is subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act and is expected to close by the end of the second quarter of 2002. On May 31, 2001, the Company sold a 30% interest in Aviation Communications and Surveillance Systems LLC ("ACSS") which comprised the Company's TCAS business to Thales Avionics, a wholly owned subsidiary of Thales (formerly Thomson-CSF), for $75,206 of cash. L-3 continues to consolidate the financial statements of ACSS. Interest and other income for the year ended December 31, 2001 includes a gain of $6,966 from the sale of a 30% interest in ACSS which was largely offset by a $6,341 write-down in the carrying amount of an investment in common stock. Also included in interest and other income for 2001 is a charge of $515 to account for the increase, in accordance with SFAS No. 133, in the fair value assigned to the embedded derivatives in L-3 Holdings' $420,000 4% Senior Subordinated Contingent Debt Securities due 2011 sold in the fourth quarter of 2001, and a loss of $751 from an equity method investment. Interest and other income for the year ended December 31, 2000 includes gains of $14,940 from the sales of the Company's interests in certain businesses. These gains were largely offset by losses of $12,456 on the write-down in the carrying value of certain investments and intangible assets. The net proceeds from the sales were $19,638, and are included in Other Investing Activities on the Statement of Cash Flows. In March 2001, the Company settled certain items with a third party provider related to an existing services agreement. In connection with the settlement, L-3 received a net cash payment of $14,200. The payment represents a credit for fees being paid over the term of the services agreement and incremental costs incurred by the Company over the same period arising from performance deficiencies under the services agreement. These incremental costs include additional operating costs for material management, vendor replacement, rework, warranty, manufacturing and engineering support, and administrative activities. The $14,200 cash receipt was recorded as a reduction of costs and expenses in 2001. 4. CONTRACTS IN PROCESS The components of contracts in process are presented in the table below. The unbilled contract receivables, inventoried contract costs and unliquidated progress payments are principally related to contracts with the U.S. Government and prime contractors or subcontractors of the U.S. Government.
DECEMBER 31, --------------------------- 2001 2000 ------------- ----------- Billed receivables, less allowances of $11,649 and $6,430 ......... $ 330,795 $ 310,185 ---------- --------- Unbilled contract receivables ..................................... 353,262 277,026 Less: unliquidated progress payments .............................. (102,739) (69,529) ---------- --------- Unbilled contract receivables, net ............................... 250,523 207,497 ---------- --------- Inventoried contract costs, gross ................................. 110,244 83,808 Less: unliquidated progress payments .............................. (6,575) (5,685) ---------- --------- Inventoried contract costs, net .................................. 103,669 78,123 Inventories at lower of cost or market ............................ 116,837 104,328 ---------- --------- Total contracts in process ....................................... $ 801,824 $ 700,133 ========== =========
The Company believes that approximately $289,396 of the unbilled contract receivables at December 31, 2001 will be billed and collected within one year. F-14 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The selling, general and administrative ("SG&A") cost data presented in the table below have been used in the determination of the costs and expenses presented on the statements of operations.
YEAR ENDED DECEMBER 31 ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- SG&A costs included in inventoried contract costs ...................................... $ 19,970 $ 24,396 $ 23,637 SG&A incurred costs ......................... 418,002 350,561 265,136 Independent research and development, including bid and proposal costs included in SG&A incurred costs ........................ 107,466 101,883 76,134
5. OTHER CURRENT LIABILITIES AND OTHER LIABILITIES At December 31, 2001, other current liabilities include an accrual of $43,641 for the remaining Spar common shares outstanding at December 31, 2001 which the Company acquired in January 2002, and $19,236 of estimated costs in excess of billings to complete contracts in process. At December 31, 2001, other liabilities include $18,814 for the non-current portion of estimated costs in excess of billings to complete contracts in process. At December 31, 2000, other current liabilities include $31,737 of estimated costs in excess of billings to complete contracts in process principally related to contracts assumed as part of the TDTS business that was acquired from Raytheon in February 2000, including the U.S. Army Aviation Combined Arms Tactical Trainer ("AVCATT") contract. At December 31, 2000, other liabilities include $59,641 for the non-current portion of estimated costs in excess of billings to complete contracts in process, principally for the AVCATT contract. At December 31, 2001, current and non-current estimated costs in excess of billings to complete contracts in process reflect contract costs incurred during 2001 that were charged against the estimated costs in excess of billings and favorable performance on the AVCATT contract related to cost reductions arising from engineering design changes, material sourcing changes, unit price reductions on several parts in the contract bill of materials and lower overhead costs that occurred during 2001. 6. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, ----------------------- 2001 2000 ---------- ---------- Land .................................................... $ 12,947 $ 11,242 Buildings and improvements .............................. 38,544 25,942 Machinery, equipment, furniture and fixtures ............ 260,338 192,679 Leasehold improvements .................................. 29,232 24,514 -------- -------- Gross property, plant and equipment .................... 341,061 254,377 Less: accumulated depreciation and amortization ......... 137,687 98,249 -------- -------- Property, plant and equipment, net ..................... $203,374 $156,128 ======== ========
Depreciation and amortization expense for property, plant and equipment was $40,362 for 2001, $36,158 for 2000, and $29,554 for 1999. F-15 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 7. DEBT The components of long-term debt and a reconciliation to the carrying amount of long-term debt are presented in the table below.
DECEMBER 31, ----------------------------- 2001 2000 ------------- ------------- Borrowings under Senior Credit Facilities .................... $ -- $ 190,000 10 3/8% Senior Subordinated Notes due 2007 ................... 225,000 225,000 8 1/2% Senior Subordinated Notes due 2008 .................... 180,000 180,000 8% Senior Subordinated Notes due 2008 ........................ 200,000 200,000 5 1/4% Convertible Senior Subordinated Notes due 2009 ........ 300,000 300,000 4% Senior Subordinated Convertible Contingent Debt Securities due 2011 .................................... 420,000 -- ---------- ---------- Principal amount of long-term debt ........................... 1,325,000 1,095,000 Less: Unamortized discount ................................... 2,502 -- Fair value of interest rate swap agreements ............... 7,246 -- ---------- ---------- Carrying amount of long-term debt ........................... $1,315,252 $1,095,000 ========== ==========
The borrowings under the Senior Credit Facilities, 10 3/8% Senior Subordinated Notes due 2007, 8 1/2% Senior Subordinated Notes due 2008 and 8% Senior Subordinated Notes due 2008 are the indebtedness of L-3 Communications. The 5 1/4% Convertible Senior Subordinated Notes due 2009 and the 4% Senior Subordinated Convertible Contingent Debt Securities due 2011 are the indebtedness of L-3 Holdings. Details on all of the outstanding debt of both L-3 Communications and L-3 Holdings are discussed below. In May 2001, L-3 Communications restructured its Senior Credit Facilities. At December 31, 2001, the Senior Credit Facilities were comprised of a $400,000 five year revolving credit facility maturing on May 15, 2006 and a $200,000 364-day revolving facility maturing on May 15, 2002 under which at the maturity date L-3 Communications may, (1) at its request and subject to approval of the lenders, extend the maturity date, in whole or in part, for an additional 364-day period, or (2) at its election, convert the outstanding principal amount thereunder into a term loan which would be repayable in a single payment two years from the conversion date. Additionally, the Senior Credit Facilities provided L-3 Communications the ability to increase, on an uncommitted basis, the amount of either the five year revolving credit facility or the 364-day revolving credit facility up to an additional $150,000 in the aggregate. At December 31, 2001, available borrowings under the Company's Senior Credit Facilities were $497,594, after reductions for outstanding letters of credit of $102,406. There were no outstanding borrowings under the Senior Credit Facilities at December 31, 2001. Borrowings under the Senior Credit Facilities bear interest, at L-3 Communications' option, at either: (i) a "base rate" equal to the higher of 0.50% per annum above the latest federal funds rate and the Bank of America "reference rate" (as defined) plus a spread ranging from 2.00% to 0.50% per annum depending on L-3 Communications' Debt Ratio at the time of determination or (ii) a "LIBOR rate" (as defined) plus a spread ranging from 3.00% to 1.50% per annum depending on L-3 Communications' Debt Ratio at the time of determination. The Debt Ratio is defined as the ratio of Consolidated Total Debt to Consolidated EBITDA. Consolidated Total Debt is equal to outstanding debt plus capitalized lease obligations minus the lesser of actual unrestricted cash or $50,000. Consolidated EBITDA is equal to consolidated net income (excluding extraordinary gains and losses, and gains and losses in connection with asset dispositions and discontinued operations) for the most recent four quarters, plus consolidated interest expense, income taxes, depreciation and amortization minus depreciation and amortization related to minority interest. At December 31, 2001, there were no borrowings outstanding under the Senior Credit F-16 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Facilities. L-3 Communications pays commitment fees calculated on the daily amounts of the available unused commitments under the Senior Credit Facilities at a rate ranging from 0.50% to 0.35% per annum, depending on L-3 Communications' Debt Ratio in effect at the time of determination. L-3 Communications pays letter of credit fees calculated at a rate ranging from 1.50% to 0.75% per annum for performance letters of credit and 3.00% to 1.50% for all other letters of credit, in each case depending on L-3 Communications' Debt Ratio at the time of determination. Additionally, in February 2002, the Company expects the lenders to approve a $150,000 increase in the amount of the Senior Credit Facilities. The five year revolving credit facility will increase by $100,000 to $500,000 and the 364-day revolving credit facility will increase by $50,000 to $250,000. Additionally, the maturity date of the $200,000 364-day revolving credit facility is expected to be extended to February 2003. In March 2002, L-3 Communications expects to borrow $500,000 under a senior subordinated Bridge Loan Facility to finance a portion of the purchase price of AIS and related expenses. The Bridge Loan Facility will be subordinated in right of payment to all of L-3 Communications' existing and future senior debt. Borrowings under the Bridge Loan Facility will bear interest through March 2003, at L-3 Communications' option, at either the one-month or three-month LIBOR rate plus a spread equal to 350 basis points. The Bridge Loan Facility will mature in May 2009, but if the loans under the facility are not repaid by March 2003, each lender's loan will be automatically converted into an exchange note with terms substantially similar to those of the senior subordinated notes discussed below, and will bear interest at a fixed rate equal to the yield to maturity on our highest yielding existing subordinated indebtedness at the time of exchange plus 100 basis points. Subject to the exceptions that will be set forth in the Bridge Loan Facility, L-3 Communications will be required to prepay the Bridge Loan Facility with the net cash proceeds from: o any debt offerings by L-3 Holdings or its subsidiaries, including L-3 Communications; o issuance of any equity interests in L-3 Holdings or L-3 Communications; o incurrence of any other indebtedness of L-3 Holdings or any of its subsidiaries, including L-3 Communications (other than under the Senior Credit Facilities and certain permitted indebtedness); and o any sale of assets or stock of any subsidiaries of L-3 Communications. In the fourth quarter of 2001, L-3 Holdings sold $420,000 of 4% Senior Subordinated Convertible Contingent Debt Securities ("CODES") due September 15, 2011. The net proceeds from this offering amounted to approximately $407,450 after underwriting discounts and commissions and other offering expenses. Interest is payable semi-annually on March 15 and September 15 of each year commencing March 15, 2002. The CODES are convertible into L-3 Holdings' common stock at a conversion price of $107.625 per share (3,902,439 shares) under any of the following circumstances: (1) during any Conversion Period (defined below) if the closing sales price of the common stock of L-3 Holdings is more than 120% of the conversion price ($129.15) for at least 20 trading days in the 30 consecutive trading-day period ending on the first day of the respective Conversion Period, (2) during the five business day period following any 10 consecutive trading-day period in which the average of the trading prices for the CODES was less than 105% of the conversion value; (3) if the credit ratings assigned to the CODES by either Moody's or Standard & Poor's are below certain specified ratings, (4) if they have been called for redemption by the Company, or (5) upon the occurrence of certain specified corporate transactions. A Conversion Period is the period from and including the thirtieth trading day in a fiscal quarter to, but not including, the thirtieth trading day of the immediately following fiscal quarter. There are four Conversion Periods in each fiscal year. Additionally, holders of the CODES have a right to receive contingent interest payments, not to exceed a per annum rate of 0.5% of the outstanding principal amount of the CODES, which will be paid on the CODES during any six-month period following a six-month period in which the average trading price of the CODES is above 120% of the principal amount of the CODES. The F-17 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) contingent interest payment provision as well as the ability of the holders of the CODES to exercise the conversion features as a result of changes in the credit ratings assigned to the CODES have been accounted for as embedded derivatives. The initial aggregate fair values assigned to the embedded derivatives was $2,502, which was also recorded as a discount to the CODES. The carrying values assigned to the embedded derivatives were recorded in other liabilities and will be adjusted periodically through other income (expense) for changes in their fair values. The CODES are subject to redemption at any time at the option of L-3 Holdings, in whole or in part, on or after October 24, 2004 at redemption prices (plus accrued and unpaid interest -- including contingent interest) starting at 102% of principal (plus accrued and unpaid interest -- including contingent interest) during the 12 month period beginning October 24, 2004 and declining annually to 100% of principal (plus accrued and unpaid interest -- including contingent interest) on September 15, 2006. The CODES are general unsecured obligations of L-3 Holdings and are subordinated in right of payment to all existing and future senior debt of L-3. In the fourth quarter of 2000, L-3 Holdings sold $300,000 of 5 1/4% Convertible Senior Subordinated Notes (the "Convertible Notes") due June 1, 2009. The net proceeds from this offering amounted to approximately $290,500 after underwriting discounts and other offering expenses, and were used to repay revolver borrowings outstanding under the Company's Senior Credit Facilities. Interest is payable semi-annually on June 1 and December 1 of each year commencing June 1, 2001. The Convertible Notes may be converted at any time into L-3 Holdings common stock at a conversion price of $81.50 per share. If all the Convertible Notes were converted, an additional 3,680,982 shares of L-3 Holdings common stock would have been outstanding at December 31, 2001. The Convertible Notes are general unsecured obligations of L-3 Holdings and are subordinated in right of payment to all existing and future senior debt of L-3 Holdings and L-3 Communications. The Convertible Notes are subject to redemption at any time, at the option of L-3 Holdings, in whole or in part, on or after December 1, 2003 at redemption prices (plus accrued and unpaid interest) starting at 102.625% of principal (plus accrued and unpaid interest) during the 12-month period beginning December 1, 2003 and declining annually to 100% of principal (plus accrued and unpaid interest) on December 1, 2005 and thereafter. In December 1998, L-3 Communications sold $200,000 of 8% Senior Subordinated Notes due August 1, 2008 (the "December 1998 Notes") with interest payable semi-annually on February 1 and August 1 of each year commencing February 1, 1999. The December 1998 Notes are general unsecured obligations of L-3 Communications and are subordinated in right of payment to all existing and future senior debt of L-3 Communications. The December 1998 Notes are subject to redemption at any time, at the option of L-3 Communications, in whole or in part, on or after August 1, 2003 at redemption prices (plus accrued and unpaid interest) starting at 104% of principal (plus accrued and unpaid interest) during the 12-month period beginning August 1, 2003 and declining annually to 100% of principal (plus accrued and unpaid interest) on August 1, 2006 and thereafter. In May 1998, L-3 Communications sold $180,000 of 8 1/2% Senior Subordinated Notes due May 15, 2008 (the "May 1998 Notes") with interest payable semi-annually on May 15 and November 15 of each year commencing November 15, 1998. The May 1998 Notes are general unsecured obligations of L-3 Communications and are subordinated in right of payment to all existing and future senior debt of L-3 Communications. The May 1998 Notes are subject to redemption at any time, at the option of L-3 Communications, in whole or in part, on or after May 15, 2003 at redemption prices (plus accrued and unpaid interest) starting at 104.250% of principal (plus accrued and unpaid interest) during the 12-month period beginning May 15, 2003 and declining annually to 100% of principal (plus accrued and unpaid interest) on May 15, 2006 and thereafter. In April 1997, L-3 Communications sold $225,000 of 10 3/8% Senior Subordinated Notes due May 1, 2007 (the "1997 Notes") with interest payable semi-annually on May 1 and November 1 of each year commencing November 1, 1997. The 1997 Notes are general unsecured obligations of L-3 Communica- F-18 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) tions and are subordinated in right of payment to all existing and future senior debt of L-3 Communications. The 1997 Notes are subject to redemption at any time, at the option of L-3 Communications, in whole or in part, on or after May 1, 2002 at redemption prices (plus accrued and unpaid interest) starting at 105.188% of principal (plus accrued and unpaid interest) during the 12-month period beginning May 1, 2002 and declining annually to 100% of principal (plus accrued and unpaid interest) on May 1, 2005 and thereafter. Collectively the 1997 Notes, May 1998 Notes and December 1998 Notes comprise the "Senior Subordinated Notes". The maturities on the Senior Subordinated Notes, Convertible Notes and CODES are $225,000 in 2007, $380,000 in 2008, $300,000 in 2009 and $420,000 in 2011. In November 2001, L-3 Communications entered into interest rate swap agreements on its $180,000 of 8 1/2% Senior Subordinated Notes due 2008. These swap agreements exchange the fixed interest rate for a variable interest rate on the entire principal amount. Under these swap agreements, L-3 Communications will pay or receive the difference between the fixed interest rate of 8 1/2% on the senior subordinated notes and a variable interest rate determined two business days prior to the interest payment date of the senior subordinated notes equal to (1) the six month LIBOR rate, set in arrears, plus (2) an average of 350.8 basis points. In July 2001, L-3 Communications entered into interest rate swap agreements on its $200,000 of 8% Senior Subordinated Notes due 2008. These swap agreements exchange the fixed interest rate for a variable interest rate on the entire principal amount. Under these swap agreements, L-3 Communications will pay or receive the difference between the fixed interest rate of 8% on the senior subordinated notes and a variable interest rate determined two business days prior to the interest payment date of the senior subordinated notes equal to (1) the six month LIBOR rate, set in arrears, plus (2) an average of 192 basis points. The difference to be paid or received on these swap agreements as interest rates change is recorded as an adjustment to interest expense. The swap agreements are accounted for as fair value hedges. The Senior Credit Facilities, Senior Subordinated Notes, Convertible Notes and CODES agreements contain (and the Bridge Loan Facility will contain) financial and other restrictive covenants that limit, among other things, the ability of the Company to borrow additional funds, dispose of assets, or pay cash dividends. The Company's most restrictive covenants are contained in the Senior Credit Facilities, as amended. The covenants require that (1) the Company's Debt Ratio be less than or equal to 4.50 for the quarter ended December 31, 2001, and that the maximum allowable Debt Ratio be 4.85 for the quarters ending March 31, 2002 and June 30, 2002, thereafter declining over time to less than or equal to 3.50 for the quarters ending December 31, 2004 and thereafter, and (2) the Company's Interest Coverage Ratio be greater than or equal to 2.50 for the quarter ended December 31, 2001, and that the minimum allowable Interest Coverage Ratio, thereafter increase over time to greater than or equal to at least 3.00 for the quarters ending December 31, 2003 and thereafter. The Interest Coverage Ratio is equal to the ratio of Consolidated EBITDA to Consolidated Cash Interest Expense. Consolidated Cash Interest Expense is equal to interest expense less the amortization of deferred debt issue costs included in interest expense. For purposes of calculating the financial covenants under the Senior Credit Facilities, the Convertible Notes and CODES are considered debt of L-3 Communications. The Senior Credit Facilities also limit the payment of dividends by L-3 Communications to L-3 Holdings except for payment of franchise taxes, fees to maintain L-3 Holdings' legal existence, income taxes up to certain amounts, interest accrued on the Convertible Notes and CODES or to provide for operating costs of up to $1,000 annually. Under the covenant, L-3 Communications may also pay permitted dividends to L-3 Holdings from its excess cash flow, as defined, a cumulative amount of $5,000, provided that the Debt Ratio is no greater than 3.5 to 1 as of the most recent fiscal quarter. As a result, at December 31, 2001, $5,000 of L-3 Communications net assets were available for payment of dividends to L-3 Holdings. Through December 31, 2001, the Company was in compliance with these covenants at all times. F-19 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) In connection with the Senior Credit Facilities, the Company has granted the lenders a first priority lien on the stock of L-3 Communications and substantially all of its domestic subsidiaries. The borrowings under the Senior Credit Facilities are guaranteed by L-3 Holdings and by substantially all of the domestic subsidiaries of L-3 Communications on a senior basis. The payment of principal and premium, if any, and interest on the Senior Subordinated Notes are (and the Bridge Loan Facility will be) unconditionally guaranteed, on an unsecured senior subordinated basis, jointly and severally, by all of L-3 Communications' restricted subsidiaries other than its foreign subsidiaries. The guarantees of the Senior Subordinated Notes are (and the Bridge Loan Facility will be) junior to the guarantees of the Senior Credit Facilities and rank pari passu with each other and the guarantees of the Convertible Notes and the CODES. Additionally, the Convertible Notes and CODES are unconditionally guaranteed, on an unsecured senior subordinated basis, jointly and severally, by L-3 Communications and substantially all of its direct and indirect domestic subsidiaries. These guarantees rank junior to the guarantees of the Senior Credit Facilities and rank pari passu with each other and the guarantees of the Senior Subordinated Notes and will rank pari passu with the guarantees of the Bridge Loan Facility. 8. FINANCIAL INSTRUMENTS Fair Value of Financial Instruments. The Company's financial instruments consist primarily of cash and cash equivalents, billed receivables, investments, trade accounts payable, customer advances, Senior Credit Facilities, Senior Subordinated Notes, Convertible Notes, CODES, foreign currency forward contracts, interest rate cap and floor contracts, interest rate swap agreements and embedded derivatives related to the issuance of the CODES. The carrying amounts of cash and cash equivalents, billed receivables, trade accounts payable, Senior Credit Facilities, and customer advances are representative of their respective fair values because of the short-term maturities or expected settlement dates of these instruments. The fair values of the Company's investments are based on quoted market prices, as available, and on historical cost for investments which it is not practicable to estimate fair value. The Senior Subordinated Notes are registered, unlisted public debt which are traded in the over-the-counter market and their fair values are based on quoted trading activity. The fair values of the Convertible Notes and CODES are based on quoted prices for the same or similar issues. The fair value of foreign currency forward contracts were estimated based on exchange rates at December 31, 2001 and 2000. The fair values of the interest rate cap and floor contracts, interest rate swap agreements and the embedded derivatives were estimated by discounting expected cash flows using quoted market interest rates. The carrying amounts and estimated fair values of the Company's financial instruments are presented in the table below.
DECEMBER 31, ---------------------------------------------- 2001 2000 ----------------------- ---------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE ---------- ------------ ---------- ----------- Investments ................................. $ 16,532 $ 16,532 $ 8,985 $ 8,985 Senior Subordinated Notes ................... 597,754 630,925 605,000 586,300 Convertible Notes ........................... 300,000 387,000 300,000 331,350 CODES ....................................... 417,498 432,600 -- -- Borrowings under Senior Credit Facilities ... -- -- 190,000 190,000 Interest rate caps .......................... -- -- 431 2 Interest rate floor ......................... (432) (432) (74) (104) Foreign currency forward contracts .......... 258 258 -- 392 Interest rate swaps ......................... (7,246) (7,246) -- -- Embedded derivatives ........................ (3,060) (3,060) -- --
F-20 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest Rate Risk Management. To mitigate risks associated with changing interest rates on borrowings under the Senior Credit Facilities, the Company entered into interest rate cap and interest rate floor contracts. The interest rate caps and floors are denominated in U.S. dollars and have designated maturities which occur every three months until the interest rate cap and floor contracts expire in March 2002. In 2001, the Company entered into interest rate swap agreements on $380,000 of its Senior Subordinated Notes to take advantage of the current low interest rate environment. These swap agreements exchanged the fixed interest rate for a variable interest rate on the entire notional amount, are denominated in U.S. dollars and have designated maturities which occur on the interest payment dates of the related Senior Subordinated Notes. Collectively the interest rate cap and floor contracts and interest rate swap agreements are herein referred to as the ("interest rate agreements"). Cash payments received from or paid to the counterparties on the interest rate agreements are the difference between the amount that the reference interest rates are greater than or less than the contract rates on the designated maturity dates, multiplied by the notional amounts underlying the respective interest rate agreements. Cash payments or receipts between the Company and counterparties are recorded as a component of interest expense. The initial cost or receipt of these arrangements, if any, are deferred and amortized as a component of interest expense over the term of the interest rate agreement. The Company manages exposure to counterparty credit risk by entering into the interest rate agreements only with major financial institutions that are expected to fully perform under the terms of such agreements. The notional amounts are used to measure the volume of these agreements and do not represent exposure to credit loss. Foreign Currency Exchange Risk Management. Some of the Company's U.S. operations have contracts with foreign customers which are denominated in foreign currencies. To mitigate the risk associated with certain of these contracts denominated in foreign currency, the Company has entered into foreign currency forward contracts. The Company's activities involving foreign currency forward contracts are designed to hedge the foreign denominated cash paid or received, primarily Euro, British Pound and Italian Lira. The Company manages exposure to counterparty credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. The notional amounts are used to measure the volume of these contracts and do not represent exposure to foreign currency losses. Information with respect to the interest rate agreements and foreign currency forward contracts is presented in the table below.
DECEMBER 31, ------------------------------------------------------------ 2001 2000 ----------------------------- ---------------------------- NOTIONAL UNREALIZED NOTIONAL UNREALIZED AMOUNT GAINS (LOSSES) AMOUNT GAINS (LOSSES) ---------- ---------------- ---------- --------------- Interest rate swaps ........................ $380,000 -- -- -- Interest rate caps ......................... 100,000 $ (107) $100,000 $ (429) Interest rate floor ........................ 50,000 (414) 50,000 (30) Foreign currency forward contracts ......... 7,138 258 6,863 392
9. L-3 HOLDINGS COMMON STOCK On June 29, 2001, the Company established the L-3 Communications Corporation Employee Stock Purchase Plan ("ESPP") and registered 1,500,000 shares of L-3 Holdings common stock, which may be purchased by employees of L-3 Communications Corporation and its U.S. subsidiaries through payroll deductions. In general, an eligible employee who participates in the ESPP may purchase L-3 Holdings' common stock at a fifteen percent discount. The ESPP is not subject to the Employment Retirement Income Security Act of 1974, as amended. As of December 31, 2001, $4,861 of employee contributions to the employee stock purchase plan were received by the Company and recorded as a component of F-21 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) shareholders' equity in the consolidated balance sheet. On January 7, 2002, the Company transferred 74,285 shares of L-3 Holdings' common stock to the trustee of the ESPP on behalf of those employees who made contributions to the ESPP in 2001. On May 2, 2001, L-3 Holdings sold 6,900,000 shares of common stock in a public offering for $80.00 per share. L-3 Holdings sold 4,575,000 shares and other selling stockholders, including affiliates of Lehman Brothers Inc., sold 2,325,000 secondary shares. Upon closing, L-3 Holdings received net proceeds after underwriting discounts and commissions and other offering expenses of $353,622. The net proceeds were contributed to L-3 Communications and were used to repay borrowings under the Senior Credit Facilities, pay for the KDI and EER acquisitions and to increase cash and cash equivalents. As additional consideration for the ILEX acquisition, L-3 Holdings issued 294,124 shares of its common stock valued at $17,357 in April 2001 based on the financial performance of ILEX in 1999 and 2000, and in August 1999, L-3 Holdings issued 150,955 shares of its common stock valued at $6,434 based on the financial performance of ILEX in 1998. There is no remaining contingent consideration for the ILEX acquisition. On February 4, 1999, L-3 Holdings sold 5,000,000 shares of common stock in a public offering for $42.00 per share (the "February 1999 Common Stock Offering"); the net proceeds amounted to $201,582 and were contributed by L-3 Holdings to L-3 Communications. In addition, 6,500,000 shares were also sold in the February 1999 Common Stock Offering by the Lehman Partnership and Lockheed Martin. In October 1999, Lockheed Martin sold its remaining interest in L-3 Holdings' common stock. In December 1999, the Lehman Partnership distributed to its partners approximately 3,800,000 shares of L-3 Holdings' common stock. As of December 31, 2001, the Lehman Partnership owned approximately 4.4% of the outstanding common stock of L-3 Holdings. On May 19, 1998, L-3 Holdings sold 6,900,000 shares of its common stock in an initial public offering ("IPO"). The net proceeds of the IPO amounted to $139,500 and were contributed by L-3 Holdings to L-3 Communications. Prior to the IPO, the common stock of L-3 Holdings consisted of three classes Class A, Class B, and Class C common stock. Immediately prior to the IPO, each authorized share of L-3 Holdings Class A common stock, Class B common stock and Class C common stock was converted into one class of common stock and the authorized L-3 Holdings common stock was increased to 100,000,000 shares. F-22 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 10. L-3 HOLDINGS EARNINGS PER SHARE A reconciliation of basic and diluted earnings per share ("EPS") is presented in the table below.
YEAR ENDED DECEMBER 31, ------------------------------------------- 2001 2000 1999 ------------- ------------ ------------ Basic: Net income ......................................... $ 115,458 $ 82,727 $ 58,689 --------- --------- --------- Weighted average common shares outstanding ......... 37,440 33,355 32,107 --------- --------- --------- Basic earnings per share ........................... $ 3.08 $ 2.48 $ 1.83 ========= ========= ========= Diluted: Net income ......................................... $ 115,458 $ 82,727 $ 58,689 After-tax interest expense savings on the assumed conversion of Convertible Notes .................. 10,502 -- -- --------- --------- --------- Net income including assumed conversion ............ $ 125,960 $ 82,727 $ 58,689 ========= ========= ========= Common and potential common shares: Weighted average common shares outstanding ......... 37,440 33,355 32,107 Assumed exercise of stock options .................. 3,846 3,940 3,376 Assumed purchase of common shares for treasury ..... (2,248) (2,342) (1,967) Assumed conversion of Convertible Notes ............ 3,681 -- -- --------- --------- --------- Common and potential common shares .................. 42,719 34,953 33,516 ========= ========= ========= Diluted earnings per share .......................... $ 2.95 $ 2.37 $ 1.75 ========= ========= =========
The 3,902,439 shares of L-3 Holdings' common stock that are issuable upon conversion of the CODES were not included in the computation of diluted EPS for the year ended December 31, 2001 because the conditions required for the CODES to become convertible have not been met. 11. INCOME TAXES Pretax income of the Company was $186,222 for 2001, $134,079 for 2000, and $95,430 for 1999 substantially all of which was derived from domestic operations. The components of the Company's provision for income taxes are presented in the table below.
YEAR ENDED DECEMBER 31, ----------------------------------- 2001 2000 1999 ---------- ---------- --------- Current income tax provision, primarily federal . ......... $18,126 $26,249 $ 7,910 Deferred income tax provision: Federal .................................................. 43,965 23,130 27,881 State and local .......................................... 8,673 1,973 950 ------- ------- ------- Subtotal ............................................... 52,638 25,103 28,831 ------- ------- ------- Total provision for income taxes .......................... $70,764 $51,352 $36,741 ======= ======= =======
F-23 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) A reconciliation of the statutory federal income tax rate to the effective income tax rate of the Company is presented in the table below.
YEAR ENDED DECEMBER 31, ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- Statutory federal income tax rate . ..................... 35.0% 35.0% 35.0% State and local income taxes, net of federal income tax benefit ............................................ 5.3 4.4 4.6 Foreign sales corporation and extra territorial income benefits ............................................... (3.6) (2.6) -- Nondeductible goodwill amortization and other expenses ............................................... 4.8 6.8 5.2 Research and experimentation and other tax credits ...... (5.0) (6.1) (7.1) Other, net .............................................. 1.5 0.8 0.8 ---- ---- ---- Effective income tax rate ............................... 38.0% 38.3% 38.5% ==== ==== ====
The provision for income taxes excludes current tax benefits related to compensation expense deductions for the exercise of stock options that were credited directly to shareholders' equity of $11,939 for 2001, $9,108 for 2000 and $1,011 for 1999. The significant components of the Company's net deferred tax assets and liabilities are presented in the table below.
DECEMBER 31, --------------------------- 2001 2000 ------------ ------------ Deferred tax assets: Inventoried costs ...................................... $ 8,520 $ 14,868 Compensation and benefits .............................. 11,460 10,461 Pension and postretirement benefits .................... 59,397 39,486 Property, plant and equipment .......................... 16,579 9,081 Income recognition on contracts in process ............. 16,670 55,942 Net operating loss carryforwards ....................... 32,480 9,660 Tax credit carryforwards ............................... 31,943 18,444 Other, net ............................................. 21,555 14,430 --------- --------- Total deferred tax assets ............................ 198,604 172,372 --------- --------- Deferred tax liabilities: Goodwill ............................................... (26,493) (18,903) Other, net ............................................. (11,263) (6,626) --------- --------- Total deferred tax liabilities ....................... (37,756) (25,529) --------- --------- Net deferred tax assets ............................. $ 160,848 $ 146,843 ========= ========= The following table presents the classification of the Company's net deferred tax assets. Current deferred tax assets . ........................... $ 62,965 $ 89,732 Long-term deferred tax assets ........................... 97,883 57,111 --------- --------- Total net deferred tax assets ........................ $ 160,848 $ 146,843 ========= =========
F-24 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) At December 31, 2001, the Company had $82,340 of U.S. net operating losses and $31,943 of tax credit carryforwards primarily related to U.S. and state research and experimentation credits and state investment tax credits. The net operating losses, some of which are subject to limitation, expire, if unused, between 2011 and 2021. The tax credits primarily expire, if unused, beginning in 2012. The Company believes that it will generate sufficient taxable income to utilize these net operating losses and tax credit carryforwards before they expire. 12. STOCK OPTIONS The Company adopted the 1999 Long Term Performance Plan in April 1999, and adopted the 1997 Option Plan in April 1997. As of December 31, 2001, the number of shares of L-3 Holdings' common stock authorized for grant of options or awards under these plans was 8,305,815. On April 26, 2001, an additional 3,000,000 shares of L-3 Holdings' common stock were authorized for grant of options or awards under the 1999 Long Term Performance Plan. The grants may be awarded to employees of the Company in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock or other incentive awards. The price at which options may be granted shall not be less than 100% of the fair market value of L-3 Holdings' common stock on the date of grant. In general, options expire after 10 years and are exercisable ratably over a 3 year period. As of December 31, 2001, the Company had 2,502,919 shares of L-3 Holdings' common stock available for awards under these plans. On January 1, 2001, January 1, 2000 and May 19, 1999, the Company awarded 30,464, 42,896 and 40,339 shares of restricted stock of L-3 Holdings to employees. The 2001 and 1999 awards vest January 1, 2004 and the 2000 award vests January 1, 2005. On April 5, 1999, the Company amended the terms of the stock options granted to Frank C. Lanza, Chairman, Chief Executive Officer and Robert V. LaPenta, President, Chief Financial Officer on April 30, 1997 for the purchase of 1,142,857 shares each of L-3 Holdings' common stock at an option price of $6.47. Such amendment eliminated the performance target acceleration provisions on the unvested performance options, so that 457,143 options for each of Mr. Lanza and Mr. LaPenta, vested on April 5, 1999. These performance options would have originally vested nine years after the grant date, but would have become exercisable with respect to 25% of the shares subject to such performance options on each of April 30, 1999, 2000, 2001 and 2002, to the extent certain targets for the Company's EBITDA were achieved. F-25 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The table below presents the Company's stock option activity. WEIGHTED AVERAGE NUMBER OF EXERCISE OPTIONS PRICE --------------- --------- (IN THOUSANDS) Balance at December 31, 1998 ......... 2,878 $ 9.27 Options granted ...................... 1,009 39.09 Options exercised .................... (79) 8.37 Options cancelled .................... (43) 29.99 ----- Balance at December 31, 1999 ......... 3,765 17.02 Options granted ...................... 661 47.73 Options exercised .................... (577) 15.52 Options cancelled .................... (221) 39.82 ----- Balance at December 31, 2000 ......... 3,628 21.42 Options granted ...................... 1,107 71.61 Options exercised .................... (564) 29.14 Options cancelled .................... (181) 42.46 ----- Balance at December 31, 2001 ......... 3,990 $ 33.36 ===== The following table summarizes information about stock options outstanding at December 31, 2001.
OUTSTANDING EXERCISABLE ------------------------------------------ ----------------------------------------- WEIGHTED WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED RANGE OF REMAINING AVERAGE REMAINING AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER CONTRACTUAL EXERCISE PRICES OF OPTIONS LIFE (YEARS) PRICE OF OPTIONS LIFE (YEARS) PRICE - ------------------------- ------------ -------------- ---------- ------------ -------------- --------- $6.47 ................... 1,859 5.5 $ 6.47 1,630 5.5 $ 6.47 $22.00 .................. 85 6.3 $ 22.00 85 6.3 $ 22.00 $32.75 - $39.99 ......... 370 7.7 $ 37.53 215 7.7 $ 37.23 $40.00 - $47.00 ......... 410 7.6 $ 41.59 128 7.3 $ 41.10 $58.00 .................. 184 8.6 $ 58.00 50 8.6 $ 58.00 $65.00 - $70.00.......... 642 9.3 $ 66.50 -- -- -- $79.39................... 440 9.9 $ 79.39 -- -- -- ----- ----- Total .................. 3,990 7.2 $ 33.36 2,108 5.9 $ 13.55 ===== =====
F-26 The weighted average fair values of stock options at their grant date during 2001, 2000 and 1999, where the exercise price equaled the market price (estimated fair value) on the grant date were $29.73, $20.19 and $14.60, respectively. In accordance with APB 25, no compensation expense was recognized. The following table reflects pro forma net income and L-3 Holdings EPS had the Company elected to adopt the fair value approach of SFAS 123. L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) YEAR ENDED DECEMBER 31, ------------------------------------------- 2001 2000 1999 ------------- ------------ ------------ Net income: As reported ............ $ 115,458 $ 82,727 $ 58,689 Pro forma .............. 107,573 75,064 54,625 L-3 Holdings Basic EPS: As reported ............ $ 3.08 $ 2.48 $ 1.83 Pro forma .............. 2.87 2.25 1.70 L-3 Holdings Diluted EPS: As reported ............ $ 2.95 $ 2.37 $ 1.75 Pro forma .............. 2.76 2.15 1.63 The estimated fair value of options granted was calculated using the Black-Scholes option-pricing valuation model. The weighted average assumptions used in the valuation models are presented in the table below. YEAR ENDED DECEMBER 31, ------------------------------ 2001 2000 1999 -------- -------- -------- Expected option term ............ 5.0 5.0 4.8 Expected volatility ............. 39.5% 35.8% 31.0% Expected dividend yield ......... -- -- -- Risk-free interest rate ......... 4.5% 6.4% 4.7% 13. COMMITMENTS AND CONTINGENCIES The Company leases certain facilities and equipment under agreements expiring at various dates through 2028. The following table presents future minimum payments under noncancellable operating leases with initial or remaining terms in excess of one year as of December 31, 2001. OPERATING LEASES ---------------------------------------- REAL ESTATE EQUIPMENT TOTAL ------------- ----------- ---------- 2002 ............... $ 60,163 $1,735 $ 61,898 2003 ............... 48,302 996 49,298 2004 ............... 32,693 379 33,072 2005 ............... 28,788 104 28,892 2006 ............... 25,722 12 25,734 Thereafter ......... 151,561 -- 151,561 -------- ------ -------- Total ............. $347,229 $3,226 $350,455 ======== ====== ======== F-27 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Real estate lease commitments have been reduced by minimum sublease rental income of $5,127 due in the future under noncancellable subleases. Leases covering major items of real estate and equipment contain renewal and or purchase options. Rent expense, net of sublease income was $41,370 for 2001, $34,123 for 2000 and $22,452 for 1999. On March 30, 1998, the Company entered into a real estate lease agreement, as lessee, with an unrelated lessor which expired on March 30, 2001, which is accounted for as an operating lease. On March 29, 2001, the Company exercised its option to renew the lease through March 30, 2003. On or before the lease expiration date, the Company can exercise options under the lease agreement to either renew the lease, purchase the property for $12,500, or sell the property on behalf of the lessor (the "Sale Option"). If the Company elects the Sale Option, the Company must pay the lessor a residual guarantee amount of $10,894, on or before the lease expiration date, and at the time the property is sold, the Company must pay the lessor a supplemental rent equal to the gross sales proceeds in excess of the residual guarantee amount not to exceed $1,606. On June 30, 1999, the Company entered into a real estate lease agreement, as lessee, with an unrelated lessor which expires on June 30, 2002, which is accounted for as an operating lease. On or before the lease expiration date, the Company can exercise options under the lease agreement to either renew the lease, purchase the property for $15,500, or sell the property on behalf of the lessor. If the Company elects the Sale Option, the Company must pay the lessor a residual guarantee amount of $13,524, on or before the lease expiration date, and at the time the property is sold, the Company must pay the lessor a supplemental rent equal to the gross sales proceeds in excess of the residual guarantee amount not to exceed $1,976. For both real estate lease agreements discussed above, if the gross sales proceeds are less than the sum of the residual guarantee amount and the supplemental rent, the Company is required to pay a supplemental rent to the extent the reduction in the fair value of the property is demonstrated by an independent appraisal to have been caused by the Company's failure to properly maintain the property. Accordingly, the aggregate residual guarantee amounts of $24,418 have been included in the noncancellable real estate operating lease payments relating to the expiration of such leases. On December 28, 2000, the Company entered into a sale-leaseback transaction on its facility located in Hauppauge, NY. The facility was sold for $13,650. The lease agreement which is accounted for as an operating lease, has an initial term of 14 years with a fixed annual rent that increases 2.5% annually. The Company has the option to extend the lease term for an additional 3 terms of 5 years each. The gain of $4,110 on the sale of the facility has been deferred and will be recognized ratably over the term of the lease. The Company has a contract to provide and operate for the U.S. Air Force ("USAF") a full-service training facility including simulator systems near a USAF base. The Company expects to lease the simulator systems from unrelated third parties, and has entered into agreements with the owner-lessors of the simulator systems, under which the Company is acting as the construction agent on behalf of the owner-lessors for procurement and construction for the simulator systems. The estimated project costs to construct the simulator systems is approximately $48,360. During the construction period, if certain events occur that are caused by the Company's actions or failures to act, these agreements may obligate the Company to make payments to the owner-lessors which may be equal to 89.9% of the incurred project costs for the simulator systems at the time of such defaults. At December 30, 2002, the estimated completion date of the construction, pursuant to these agreements, the Company, as lessee, will enter into leases each with a term of 15 years with the owner-lessors for the use of the simulator systems. These leases are expected to be accounted for as operating leases and the aggregate noncancellable rental payments under such leases are estimated to be $89,241. F-28 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The Company is engaged in providing products and services under contracts with the U.S. Government and to a lesser degree, under foreign government contracts, some of which are funded by the U.S. Government. All such contracts are subject to extensive legal and regulatory requirements, and, from time to time, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. Under U.S. Government procurement regulations, an indictment of the Company by a federal grand jury could result in the Company being suspended for a period of time from eligibility for awards of new government contracts. A conviction could result in debarment from contracting with the federal government for a specified term. Additionally, in the event that U.S. Government expenditures for products and services of the type manufactured and provided by the Company are reduced, and not offset by greater commercial sales or other new programs or products, or acquisitions, there may be a reduction in the volume of contracts or subcontracts awarded to the Company. The Company has been periodically subject to litigation, claims or assessments and various contingent liabilities incidental to its business. Management continually assesses the Company's obligations with respect to applicable environmental protection laws. While it is difficult to determine the timing and ultimate cost to be incurred by the Company in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which management is aware, the Company believes that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, individually or in the aggregate, would be material to the Company's consolidated results of operations. The Company accrues for these contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to those investigative actions, items of litigation, claims or assessments of which it is aware, management of the Company is of the opinion that the probability is remote that, after taking into account certain provisions that have been made with respect to these matters, the ultimate resolution of any such investigative actions, items of litigation, claims or assessments will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. 14. PENSIONS AND OTHER EMPLOYEE BENEFITS The Company maintains a number of pension plans, both contributory and noncontributory, covering employees at certain locations. Eligibility for participation in these plans varies and benefits are generally based on the participant's compensation and/or years of service. The Company's funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon. Plan assets are invested primarily in U.S. government and agency obligations and listed stocks and bonds. The Company also provides postretirement medical and life insurance benefits for retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company's pension plans. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions. F-29 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following table summarizes the balance sheet impact, as well as the benefit obligations, assets, funded status and rate assumptions associated with the pension and postretirement benefit plans.
POSTRETIREMENT PENSION PLANS BENEFIT PLANS ----------------------------- ----------------------------- 2001 2000 2001 2000 -------------- ------------ ------------- ------------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year ...... $ 415,483 $ 328,541 $ 68,538 $ 65,554 Service cost ................................. 18,516 16,343 1,709 1,670 Interest cost ................................ 31,428 28,029 4,746 4,754 Participants' contributions .................. 62 36 607 -- Amendments ................................... -- 853 -- -- Actuarial loss (gain) ........................ 22,277 8,867 4,043 (1,271) Acquisitions ................................. 63,793 48,187 12,369 1,879 Benefits paid ................................ (18,108) (15,373) (4,869) (4,048) ---------- --------- --------- --------- Benefit obligation at end of year ............ $ 533,451 $ 415,483 $ 87,143 $ 68,538 ---------- --------- --------- --------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year ........................................ $ 391,263 $ 367,451 $ -- $ -- Actual return on plan assets ................. (13,754) (21,905) -- -- Acquisitions ................................. 63,344 49,709 -- -- Employer contributions ....................... 8,108 11,345 4,262 4,048 Participants' contributions .................. 62 36 607 -- Benefits paid ................................ (18,108) (15,373) (4,869) (4,048) ---------- --------- --------- --------- Fair value of plan assets at end of year ..... $ 430,915 $ 391,263 $ -- $ -- ---------- --------- --------- --------- FUNDED STATUS OF THE PLANS ................... $ (102,536) $ (24,220) $ (87,143) $ (68,538) Unrecognized actuarial loss (gain) ........... 69,697 (5,044) (5,032) (9,401) Unrecognized prior service cost .............. 3,426 3,777 (547) (1,207) ---------- --------- --------- --------- Net amount recognized ........................ $ (29,413) $ (25,487) $ (92,722) $ (79,146) ========== ========= ========= ========= AMOUNTS RECOGNIZED IN THE BALANCE SHEETS CONSIST OF: Accrued benefit liability .................... $ (62,330) $ (26,377) $ (92,722) $ (79,146) Accumulated other comprehensive income........ 32,917 890 -- -- ---------- --------- --------- --------- Net amount recognized ........................ $ (29,413) $ (25,487) $ (92,722) $ (79,146) ========== ========= ========= ========= RATE ASSUMPTIONS: Discount rate ................................ 7.25% 7.50% 7.25% 7.50% Rate of return on plan assets ................ 9.50% 9.50% n.a. n.a. Salary increases ............................. 4.50% 4.50% 4.50% 4.50%
The annual increase in cost of benefits ("health care cost trend rate") is assumed to be an average of 10.00% in 2001 and is assumed to gradually decrease to a rate of 4.5% thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for postretirement medical benefit plans. A one percentage point decrease in the assumed health care cost trend rates would have the effect of decreasing the aggregate service and interest cost by $540 and the postretirement medical obligations by $6,139. A one percentage point increase in the assumed health care cost trend rate would have the effect of increasing the aggregate service and interest cost by $658 and the postretirement medical obligations by $6,651. F-30 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The following table summarizes the components of net periodic pension and postretirement medical costs.
POSTRETIREMENT PENSION PLANS PENSION PLANS --------------------------- --------------------- 2001 2000 2001 2000 ------------ ------------ --------- --------- COMPONENTS OF NET PERIODIC BENEFIT COST: Service cost ............................... $ 18,516 $ 16,343 $1,709 $1,670 Interest cost .............................. 31,428 28,029 4,746 4,754 Amortization of prior service cost ......... 351 351 (99) (99) Expected return on plan assets ............. (37,716) (39,109) -- -- Recognized actuarial (gain) loss ........... (424) (3,981) (887) (865) Recognition due to settlement .............. -- 307 -- -- --------- --------- ------ ------ Net periodic benefit cost ................. $ 12,155 $ 1,940 $5,469 $5,460 ========= ========= ====== ======
The accumulated benefit obligation, projected benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $300,072, $324,840, and $247,383, respectively, as of December 31, 2001 and $86,426, $92,180 and $78,773, respectively, as of December 31, 2000. In connection with the Company's assumption of certain plan obligations pursuant to the Company's acquisition of the predecessor company, Lockheed Martin has provided the Pension Benefit Guaranty Corporation ("PBGC") with commitments to assume sponsorship or other forms of financial support under certain circumstances with respect to the Company's pension plans for Communication Systems -- West and Aviation Recorders (the "Subject Plans"). Upon the occurrence of certain events, Lockheed Martin, at its option, has the right to decide whether to cause the Company to transfer sponsorship of any or all of the Subject Plans to Lockheed Martin, even if the PBGC has not sought to terminate the Subject Plans. Such a triggering event occurred in 1998, but reversed in 1999, relating to a decrease in the PBGC-mandated discount rate in 1998 that had resulted in an increase in the underlying liability. The Company notified Lockheed Martin of the 1998 triggering event, and in February 1999, Lockheed Martin informed the Company that it had no present intention to exercise its right to cause the Company to transfer sponsorship of the Subject Plans. If Lockheed Martin did assume sponsorship of these plans, it would be primarily liable for the costs associated with funding the Subject Plans or any costs associated with the termination of the Subject Plans but L-3 Communications would be required to reimburse Lockheed Martin for these costs. To date, the impact on pension expense and funding requirements resulting from this arrangement has not been significant. However, should Lockheed Martin assume sponsorship of the Subject Plans or if these plans were terminated, the impact of any increased pension expenses or funding requirements could be material to the Company. The Company has performed its obligations under the letter agreement with Lockheed Martin and the Lockheed Martin Commitment and has not received any communications from the PBGC concerning actions which the PBGC contemplates taking in respect of the Subject Plans. Employee Savings Plans. Under its various employee savings plans, the Company matches the contributions of participating employees up to a designated level. The extent of the match, vesting terms and the form of the matching contributions vary among the plans. Under these plans, the Company's matching contributions in L-3 Holdings common stock and cash were $21,462 for 2001, $15,201 for 2000 and $8,798 for 1999. F-31 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 15. SUPPLEMENTAL CASH FLOW INFORMATION
YEAR ENDED DECEMBER 31, ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- Interest paid .......................................... $81,552 $81,390 $50,532 Income taxes paid ...................................... 4,904 10,052 6,317 Noncash transactions: Common stock issued related to acquisition ............ 17,357 -- 6,432 Contribution in common stock to savings plans ......... 16,868 12,642 6,993
16. SEGMENT INFORMATION The Company has two reportable segments, Secure Communication Systems and Specialized Products, which are described in Note 1. The Company evaluates the performance of its operating divisions and reportable segments based on sales and operating income. All corporate expenses are allocated to the Company's divisions using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, all costs and expenses are included in the Company's measure of segment profitability.
SECURE ELIMINATION OF COMMUNICATION SPECIALIZED INTERSEGMENT CONSOLIDATED SYSTEMS PRODUCTS CORPORATE SALES TOTAL --------------- --------------- ----------- --------------- ------------- 2001 - ---- Sales ............................... $1,241,981 $1,109,641 $ (4,200) $2,347,422 Operating income .................... 146,270 129,060 275,330 Total assets ........................ 1,021,924 1,769,453 $544,056 3,335,433 Capital expenditures . .............. 16,115 31,727 279 48,121 Depreciation and amortization ....... 33,723 53,228 86,951 2000 - ---- Sales ............................... $ 856,970 $1,065,136 $ (12,045) $1,910,061 Operating income .................... 91,310 131,408 222,718 Total assets ........................ 792,949 1,480,790 $189,805 2,463,544 Capital expenditures ................ 10,750 22,830 33,580 Depreciation and amortization ....... 26,417 47,837 74,254 1999 - ---- Sales ............................... $ 544,418 $ 867,495 $ (6,451) $1,405,462 Operating income .................... 46,955 103,531 150,486 Total assets ........................ 370,918 1,065,236 $192,587 1,628,741 Capital expenditures . .............. 6,980 16,476 23,456 Depreciation and amortization ....... 18,451 35,267 53,718
Corporate assets not allocated to the reportable segments primarily include cash and cash equivalents, corporate office fixed assets, deferred income tax assets and deferred debt issuance costs. F-32 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Substantially all of the Company's operations are domestic. The Company's foreign operations are not material to the Company's results of operations, cash flows or financial position. Sales to principal customers are summarized in the table below.
YEAR ENDED DECEMBER 31, --------------------------------------------- 2001 2000 1999 ------------- ------------- ------------- U.S. Government agencies . .................. $1,614,858 $1,284,379 $ 924,006 Foreign Governments ......................... 200,913 144,274 127,637 Commercial export . ......................... 218,971 172,101 144,274 Other (principally U.S. commercial) ......... 312,680 309,307 209,545 ---------- ---------- ---------- Consolidated sales ......................... $2,347,422 $1,910,061 $1,405,462 ========== ========== ==========
17. UNAUDITED QUARTERLY FINANCIAL DATA Unaudited summarized financial data by quarter for the years ended December 31, 2001 and 2000 is presented in the table below.
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ------------- ------------- -------------- ------------ 2001 Sales .................... $ 461,901 $ 561,560 $ 618,164 $ 705,797 Operating income ......... 46,869 60,467 75,208 92,786 Net income ............... 14,158 23,336 33,435 44,529 Basic EPS . .............. $ 0.42 $ 0.62 $ 0.86 $ 1.14 Diluted EPS .............. $ 0.40 $ 0.60 $ 0.82 $ 1.06 2000 Sales .................... $ 377,052 $ 460,976 $ 514,415 $ 557,618 Operating income ......... 34,669 49,653 62,815 75,581 Net income ............... 10,929 16,459 24,116 31,223 Basic EPS ................ $ 0.33 $ 0.49 $ 0.72 $ 0.93 Diluted EPS .............. $ 0.32 $ 0.47 $ 0.69 $ 0.89
F-33 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 18. FINANCIAL INFORMATION OF L-3 COMMUNICATIONS AND ITS SUBSIDIARIES The shareholders' equity of L-3 Communications equals that of L-3 Holdings but its components of the common stock and additional paid-in capital accounts are different. The table below presents information regarding changes in common stock and additional paid-in capital of L-3 Communications for each of the three years ended December 31, 2001.
L-3 COMMUNICATIONS COMMON STOCK ------------------ ADDITIONAL SHARES PAR PAID-IN ISSUED VALUE CAPITAL TOTAL -------- ------- ------------- ------------- Balance at December 31, 1998 ............. 100 $-- $ 264,769 $ 264,769 Contributions from L-3 Holdings ......... 218,925 218,925 --- --- ---------- ---------- Balance at December 31, 1999 ............. 100 -- 483,694 483,694 Contributions from L-3 Holdings ......... 322,732 322,732 Push down of Convertible Notes .......... (290,500) (290,500) --- --- ---------- ---------- Balance at December 31, 2000 ............. 100 -- 515,926 515,926 Contributions from L-3 Holdings ......... 830,561 830,561 Push down of CODES ...................... (407,450) (407,450) --- --- ---------- ---------- Balance at December 31, 2001 ............. 100 $ $ 939,037 $ 939,037 === === ========== ==========
The net proceeds received by L-3 Holdings from the sale of its common stock, exercise of L-3 Holdings employee stock options and L-3 Holdings common stock contributed to the Company's savings plans are contributed to L-3 Communications. The net proceeds from the sale of the Convertible Notes and CODES by L-3 Holdings were also contributed to L-3 Communications and are reflected as indebtedness of L-3 Communications. See Notes 2 and 7. The debt of L-3 Communications, including the Senior Subordinated Notes and borrowings under amounts drawn against the Senior Credit Facilities are guaranteed, on a joint and several, full and unconditional basis, by certain of its wholly-owned domestic subsidiaries (the "Guarantor Subsidiaries"). See Note 7. The foreign subsidiaries and certain domestic subsidiaries of L-3 Communications (the "Non-Guarantor Subsidiaries") do not guarantee the debt of L-3 Communications. None of the debt of L-3 Communications has been issued by its subsidiaries. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L-3 Communications. In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statement based on Rule 3-10 of SEC Regulation S-X . The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements. The following condensed combining financial information present the results of operations, financial position and cash flows of (i) L-3 Communications excluding its consolidated subsidiaries (the "Parent") (ii) the Guarantor Subsidiaries, (iii) the Non-Guarantor Subsidiaries and (iv) the eliminations to arrive at the information for L-3 Communications on a consolidated basis. F-34 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GUARANTOR NON-GUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS L-3 COMMUNICATIONS ------------- -------------- --------------- ---------------- ------------------- CONDENSED COMBINING BALANCE SHEETS: - -------- AS OF DECEMBER 31, 2001: - ------------------------ Total current assets .................... $ 782,682 $ 300,585 $ 155,318 $ -- $1,238,585 Other long-term assets .................. 965,566 701,887 429,395 -- 2,096,848 Investment in and amounts due from consolidated subsidiaries ......... 1,229,572 150,580 43,236 (1,423,388) -- ---------- ---------- --------- ------------ ---------- Total assets ........................... $2,977,820 $1,153,052 $ 627,949 $ (1,423,388) $3,335,433 ========== ========== ========= ============ ========== Total current liabilities ............... $ 278,304 $ 136,579 $ 109,394 $ -- $ 524,277 Other long-term liabilities ............. 170,372 31,080 10,663 -- 212,115 Long-term debt .......................... 1,315,252 -- -- -- 1,315,252 Minority interest ....................... -- -- 69,897 -- 69,897 Shareholders' equity .................... 1,213,892 985,393 437,995 (1,423,388) 1,213,892 ---------- ---------- --------- ------------ ---------- Total liabilities and shareholders' equity ................. $2,977,820 $1,153,052 $ 627,949 $ (1,423,388) 3,335,433 ========== ========== ========= ============ ========== AS OF DECEMBER 31, 2000 Total current assets .................... $ 530,672 $ 229,531 $ 69,367 $ -- $ 829,570 Other long-term assets .................. 1,110,082 433,763 90,129 -- 1,633,974 Investment in and amounts due from (to) consolidated subsidiaries ........................... 613,153 55,805 (27,022) (641,936) -- ---------- ---------- --------- ------------ ---------- Total assets ........................... $2,253,907 $ 719,099 $ 132,474 $ (641,936) $2,463,544 ========== ========== ========= ============ ========== Total current liabilities ............... $ 365,123 $ 71,948 $ 31,598 $ -- $ 468,669 Other long-term liabilities ............. 101,215 103,173 2,918 -- 207,306 Long-term debt .......................... 1,095,000 -- -- -- 1,095,000 Shareholders' equity .................... 692,569 543,978 97,958 (641,936) 692,569 ---------- ---------- --------- ------------ ---------- Total liabilities and shareholders' equity ................. $2,253,907 $ 719,099 $ 132,474 $ (641,936) $2,463,544 ========== ========== ========= ============ ==========
F-35 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GUARANTOR NON-GUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS L-3 COMMUNICATIONS ------------- -------------- --------------- -------------- ------------------- CONDENSED COMBINING STATEMENTS OF OPERATIONS: - ------------ FOR THE YEAR ENDED DECEMBER 31, 2001: - ---------------------------------------------- Sales ........................................ $1,328,702 $854,094 $168,558 $ (3,932) $2,347,422 ---------- -------- -------- --------- ---------- Operating income ............................. 219,373 30,237 25,720 -- 275,330 Interest and other income (expense) .......... 8,335 (515) (6,081) -- 1,739 Interest expense ............................. 86,024 51 315 -- 86,390 Minority interest ............................ -- -- 4,457 -- 4,457 Provision for income taxes ................... 53,840 11,275 5,649 -- 70,764 Equity in net income of consolidated subsidiaries ................................ 27,614 -- -- (27,614) -- ---------- -------- -------- --------- ---------- Net income ................................... $ 115,458 $ 18,396 $ 9,218 $ (27,614) $ 115,458 ========== ======== ======== ========= ========== FOR THE YEAR ENDED DECEMBER 31, 2000: - ----------------------------------------------- Sales ........................................ $1,313,998 $441,677 $159,735 $ (5,349) $1,910,061 ---------- -------- -------- --------- ---------- Operating income ............................. 206,680 5,755 10,283 -- 222,718 Interest and other income .................... 3,061 264 1,068 -- 4,393 Interest expense ............................. 92,633 149 250 -- 93,032 Provision for income taxes ................... 44,852 2,248 4,252 -- 51,352 Equity in net income of consolidated subsidiaries ................................ 10,471 -- -- (10,471) -- ---------- -------- -------- --------- ---------- Net income ................................... $ 82,727 $ 3,622 $ 6,849 $ (10,471) $ 82,727 ========== ======== ======== ========= ========== FOR THE YEAR ENDED DECEMBER 31, 1999: - ----------------------------------------------- Sales ........................................ $ 837,924 $440,160 $130,122 $ (2,744) $1,405,462 ---------- -------- -------- --------- ---------- Operating income (loss) ...................... 103,753 52,016 (5,283) -- 150,486 Interest and other income .................... 4,738 469 327 -- 5,534 Interest expense ............................. 60,307 -- 283 -- 60,590 Provision (benefit) for income taxes ......... 18,238 20,091 (1,588) -- 36,741 Equity in net income of consolidated subsidiaries ................................ 28,743 -- -- (28,743) -- ---------- -------- -------- --------- ---------- Net income (loss) ............................ $ 58,689 $ 32,394 $ (3,651) $ (28,743) $ 58,689 ========== ======== ======== ========= ==========
F-36 L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GUARANTOR NON-GUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS L-3 COMMUNICATIONS ------------- -------------- --------------- -------------- ------------------- CONDENSED COMBINING STATEMENTS OF CASH FLOWS: - ------- FOR THE YEAR ENDED DECEMBER 31, 2001: - ---------------------------------------------- Net cash from operating activities ........... $ 104,169 $ 30,014 $ 38,785 $ -- $ 172,968 ---------- ---------- --------- ---------- ---------- Net cash (used in) investing activities ...... (470,091) (227,199) (61,820) 334,220 (424,890) ---------- ---------- --------- ---------- ---------- Net cash from financing activities ........... 667,424 187,862 59,198 (334,220) 580,264 ---------- ---------- --------- ---------- ---------- Net increase (decrease) in cash .............. 301,502 (9,323) 36,163 -- 328,342 Cash and cash equivalents, beginning of period ...................................... 18,708 4,911 9,061 -- 32,680 ---------- ---------- --------- ---------- ---------- Cash and cash equivalents, end of period ..... $ 320,210 $ (4,412) $ 45,224 $ -- $ 361,022 ========== ========== ========= ========== ========== FOR THE YEAR ENDED DECEMBER 31, 2000: - ----------------------------------------------- Net cash from (used in) operating activities . $ 108,726 $ (10,504) $ 15,583 $ -- $ 113,805 ---------- ---------- --------- ---------- ---------- Net cash (used in) investing activities ...... (607,579) (21,819) (8,163) 29,338 (608,223) ---------- ---------- --------- ---------- ---------- Net cash from (used in) financing activities . 483,524 32,070 (1,946) (29,338) 484,310 ---------- ---------- --------- ---------- ---------- Net increase (decrease) in cash .............. (15,329) (253) 5,474 -- (10,108) Cash and cash equivalents, beginning of period ...................................... 34,037 5,164 3,587 -- 42,788 ---------- ---------- --------- ---------- ---------- Cash and cash equivalents, end of period ..... $ 18,708 $ 4,911 $ 9,061 $ -- $ 32,680 ========== ========== ========= ========== ========== FOR THE YEAR ENDED DECEMBER 31, 1999: - ----------------------------------------------- Net cash from (used in) operating activities . $ 75,737 $ 31,315 $ (8,034) $ -- $ 99,018 ---------- ---------- --------- ---------- ---------- Net cash (used in) investing activities ...... (280,118) (155,607) (62,408) 213,331 (284,802) ---------- ---------- --------- ---------- ---------- Net cash from financing activities ........... 214,681 128,997 72,095 (213,331) 202,442 ---------- ---------- --------- ---------- ---------- Net increase in cash ......................... 10,300 4,705 1,653 -- 16,658 Cash and cash equivalents, beginning of period ...................................... 23,737 459 1,934 -- 26,130 ---------- ---------- --------- ---------- ---------- Cash and cash equivalents, end of period ..... $ 34,037 $ 5,164 $ 3,587 $ -- $ 42,788 ========== ========== ========= ========== ==========
F-37 [THIS PAGE INTENTIONALLY LEFT BLANK] EX-10.40 3 file002.txt THIRD AMENDED AND RESTATED CREDIT AGREEMENT ================================================================================ THIRD AMENDED AND RESTATED CREDIT AGREEMENT AMONG L-3 COMMUNICATIONS CORPORATION, A DELAWARE CORPORATION, AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, THE CERTAIN FINANCIAL INSTITUTIONS NAMED AS SENIOR MANAGING AGENTS HEREIN, BANC OF AMERICA SECURITIES LLC AND LEHMAN BROTHERS, INC., AS ARRANGERS, BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT AND LEHMAN COMMERCIAL PAPER INC., AS DOCUMENTATION AGENT AND SYNDICATION AGENT DATED AS OF MAY 16, 2001 ================================================================================ TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS............................................................................................1 1.1 Defined Terms...................................................................................1 1.2 Other Definitional Provisions..................................................................26 1.3 Interrelationship with Original Credit Agreement...............................................26 1.4 Confirmation of Existing Obligations...........................................................27 1.5 Accounting for Interests in TCAS Subsidiary....................................................27 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS.............................................................27 2.1 Commitments....................................................................................27 2.2 Procedure for Borrowing........................................................................31 2.3 Commitment Fee.................................................................................32 2.4 Termination or Reduction of Revolving Credit Commitments.......................................32 2.5 Repayment of Loans; Evidence of Debt...........................................................32 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments.......................33 2.7 Conversion and Continuation Options............................................................36 2.8 Minimum Amounts and Maximum Number of Tranches.................................................37 2.9 Interest Rates and Payment Dates...............................................................37 2.10 Computation of Interest and Fees...............................................................38 2.11 Inability to Determine Interest Rate...........................................................38 2.12 Pro Rata Treatment and Payments................................................................39 2.13 Illegality.....................................................................................40 2.14 Requirements of Law............................................................................41 2.15 Taxes..........................................................................................42 2.16 Indemnity......................................................................................45 2.17 Replacement of Lenders.........................................................................45 2.18 Certain Fees...................................................................................46 2.19 Certain Rules Relating to the Payment of Additional Amounts....................................46 SECTION 3. LETTERS OF CREDIT.....................................................................................47 3.1 L/C Commitment.................................................................................47 3.2 Procedure for Issuance of Letters of Credit....................................................48 3.3 Fees, Commissions and Other Charges............................................................48 3.4 L/C Participation..............................................................................49 3.5 Reimbursement Obligation of the Borrower.......................................................50
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3.6 Obligations Absolute...........................................................................51 3.7 Letter of Credit Payments......................................................................51 3.8 Application....................................................................................51 3.9 Determination of Exchange Rate.................................................................52 SECTION 4. REPRESENTATIONS AND WARRANTIES........................................................................52 4.1 Financial Condition............................................................................52 4.2 No Change......................................................................................52 4.3 Corporate Existence; Compliance with Law.......................................................52 4.4 Corporate Power; Authorization; Enforceable Obligations........................................52 4.5 No Legal Bar...................................................................................53 4.6 No Material Litigation.........................................................................53 4.7 No Default.....................................................................................53 4.8 Ownership of Property; Liens...................................................................53 4.9 Intellectual Property..........................................................................53 4.10 Taxes..........................................................................................54 4.11 Federal Regulations............................................................................54 4.12 ERISA..........................................................................................54 4.13 Investment Company Act; Other Regulations......................................................55 4.14 Subsidiaries...................................................................................55 4.15 Purpose of Loans...............................................................................55 4.16 Environmental Matters..........................................................................55 4.17 Collateral Documents...........................................................................56 4.18 Accuracy and Completeness of Information.......................................................56 4.19 Labor Matters..................................................................................57 SECTION 5. CONDITIONS PRECEDENT..................................................................................57 5.1 Conditions to Effectiveness....................................................................57 5.2 Conditions to Each Extension of Credit.........................................................60 SECTION 6. AFFIRMATIVE COVENANTS.................................................................................60 6.1 SEC Filings....................................................................................60 6.2 Certificates; Other Information................................................................61 6.3 Payment of Taxes and Material Obligations......................................................62 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law............................................................................................62 6.5 Insurance......................................................................................62 6.6 Inspection of Property; Books and Records; Discussions.........................................62 6.7 Notices........................................................................................63 6.8 Environmental Laws.............................................................................63 6.9 Further Assurances.............................................................................64
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6.10 Additional Collateral..........................................................................64 6.11 Foreign Jurisdictions..........................................................................65 6.12 Government Contracts...........................................................................65 6.13 TCAS Subsidiary...............................................................................65 6.14 Required Distributions for TCAS Subsidiary.....................................................65 SECTION 7. NEGATIVE COVENANTS....................................................................................65 7.1 Financial Condition Covenants..................................................................66 7.2 Limitation on Indebtedness.....................................................................67 7.3 Limitation on Liens............................................................................68 7.4 Limitation on Guarantee Obligations............................................................69 7.5 Limitation on Fundamental Changes..............................................................70 7.6 Limitation on Sale of Assets...................................................................70 7.7 Limitation on Dividends........................................................................71 7.8 Designated Senior Debt.........................................................................71 7.9 Limitation on Investments, Loans and Advances..................................................72 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements.....................................................................................73 7.11 Limitation on Transactions with Affiliates.....................................................74 7.12 Limitation on Sales and Leasebacks.............................................................75 7.13 Limitation on Changes in Fiscal Year...........................................................75 7.14 Limitation on Negative Pledge Clauses..........................................................75 7.15 Limitation on Lines of Business................................................................75 SECTION 8. EVENTS OF DEFAULT.....................................................................................75 SECTION 9. THE AGENTS; THE ARRANGERS.............................................................................79 9.1 Appointment....................................................................................79 9.2 Delegation of Duties...........................................................................79 9.3 Exculpatory Provisions.........................................................................79 9.4 Reliance by Agents.............................................................................79 9.5 Notice of Default..............................................................................80 9.6 Non-Reliance on Agents and Other Lenders.......................................................80 9.7 Indemnification................................................................................81 9.8 Agents, in Their Individual Capacities.........................................................81 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent......................81 9.10 The Arrangers and the Senior Managing Agents...................................................82
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SECTION 10. MISCELLANEOUS........................................................................................82 10.1 Amendments and Waivers.........................................................................82 10.2 Notices........................................................................................83 10.3 No Waiver; Cumulative Remedies.................................................................86 10.4 Survival of Representations and Warranties.....................................................86 10.5 Payment of Expenses and Taxes..................................................................86 10.6 Successors and Assigns; Participation and Assignments..........................................87 10.7 Adjustments; Set-off...........................................................................90 10.8 Counterparts...................................................................................91 10.9 Severability...................................................................................91 10.10 Integration....................................................................................92 10.11 GOVERNING LAW..................................................................................92 10.12 SUBMISSION TO JURISDICTION; WAIVERS............................................................92 10.13 Acknowledgments................................................................................93 10.14 WAIVERS OF JURY TRIAL..........................................................................93 10.15 Confidentiality................................................................................93 10.16 Conversion of Currencies.......................................................................93 10.17 Existing Agreements Superseded.................................................................94 10.18 Closing Date Loans and Assignments.............................................................94
iv EXHIBITS Exhibit A-1 Form of Revolving Credit Note Exhibit A-2 Form of Swing Line Note Exhibit B-1 Form of Parent Guarantee Exhibit B-2 Form of Subsidiary Guarantee Exhibit B-3 Form of Parent Pledge Agreement Exhibit B-4A Form of Borrower Pledge Agreement Exhibit B-4B Form of Charge Over Shares Exhibit B-5 Form of Subsidiary Pledge Agreement Exhibit C-1 Form of Legal Opinion of Simpson Thacher and Bartlett Exhibit C-2 Form of Internal Counsel Opinion Exhibit D Form of Borrowing Certificate Exhibit E Form of Certificate of Non-U.S. Lender Exhibit F Form of Assignment and Acceptance Exhibit G Form of Increased Commitment Agreement Exhibit H Form of Lender Addition Agreement SCHEDULES Schedule I Lenders and Commitments Schedule II Pricing Grid Schedule III Transaction Documents Schedule 4.4 Required Consents Schedule 4.5 No Legal Bar Schedule 4.6 Material Litigation Schedule 4.9 Intellectual Property Claims Schedule 4.10 Taxes Schedule 4.14 Subsidiaries Schedule 7.2(f) Existing Indebtedness Schedule 7.3(f) Existing Liens Schedule 7.4 Existing Guarantee Obligations Schedule 7.9(c) Officers v THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 16, 2001, among L-3 Communications Corporation, a Delaware corporation (the "Borrower") which is wholly owned by L-3 Communications Holdings, Inc., a Delaware corporation ("Holdings"), the several banks and other financial institutions or entities from time to time parties hereto (the "Lenders"), Banc of America Securities LLC ("BAS") and Lehman Brothers, Inc. ("LBI"), as arrangers (each, in such capacity, an "Arranger" and together, the "Arrangers"), Bank of America, N.A. ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "Administrative Agent"), Lehman Commercial Paper Inc. ("LCPI"), as syndication agent and documentation agent (in such capacity, the "Syndication Agent" and the "Documentation Agent"), and certain financial institutions named as senior managing-agents, AMENDS AND RESTATES IN FULL the Second Amended and Restated Credit Agreement, dated as of April 24, 2000 (as amended, supplemented and/or modified from time to time prior to the date hereof, the "Original Credit Agreement"), among the Borrower, the lenders party thereto from time to time (the "Original Lenders"), BAS and LCPI as arrangers, the Syndication Agent, Documentation Agent, the Administrative Agent and certain financial institutions named as co-agents; this amendment and restatement of the Original Credit Agreement, as amended, supplemented, restated or otherwise modified from time to time, is hereinafter referred to as this "Agreement" or the "Credit Agreement". WHEREAS, the Borrower has requested that the Original Credit Agreement be amended and restated in full as set forth herein. NOW, THEREFORE, the parties hereto hereby agree to amend and restate the Original Credit Agreement as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Acquired Business": a company or business unit acquired by the Borrower or any of its Subsidiaries, provided that the Borrower has delivered to the Administrative Agent historical financial statements of such company or business unit prepared in accordance with GAAP. "Additional Lenders": each of the Lenders party hereto other than the Original Lenders. "Additional Subordinated Indebtedness": unsecured Indebtedness for borrowed money of the Borrower or any of its Subsidiaries incurred after the Closing Date which (i) requires no cash payments of principal prior to the date that is one year after the Termination Date, (ii) such Indebtedness does not contain limitations on the ability of Borrower or any of its Subsidiaries to incur Indebtedness which are more restrictive than those found in Section 4.09 (Incurrence of Indebtedness and Issuance of Preferred Stock) of any of the Original Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture, and (iii) such Indebtedness is subordinated to the Obligations on terms no less favorable to the Lenders, Facility B Lenders and Facility C Lenders (if Facility C exists) than those governing the Original Subordinated Notes, the New Subordinated Notes and/or the December 1998 Subordinated Notes. "Adjustment Date": the fifth day following the receipt by the Administrative Agent of the financial statements for the most recently completed fiscal period furnished pursuant to subsection 6.1 and the compliance certificate with respect to such financial statements furnished pursuant to subsection 6.2(c). "Administrative Agent": BOA, or following the resignation of BOA as Administrative Agent, any other Lender which may be appointed as Administrative Agent pursuant to subsection 9.9. "Affected Class": as defined in subsection 10.1. "Affected Lender": as defined in subsection 10.7. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Documentation Agent and the Administrative Agent. "Aggregate Outstanding Extensions of Credit": as to any Lender with respect to any Type of Loan at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans of such Type made by such Lender then outstanding and (b) such Lender's Commitment Percentage of the L/C Obligations then outstanding. "Agreement": this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Agreement Currency": as defined in subsection 10.16(b). "Alternative Currency": any currency which as of the time of any issuance or renewal, as applicable, of a Foreign L/C is freely tradable and convertible into Dollars and has been approved as an "Alternative Currency" for the purposes of this Agreement by the Issuing Lender. "Applicable Creditor": as defined in subsection 10.16(b). "Applicable Holdback": as defined in subsection 2.6(b)(ii). 2 "Applicable Issuing Lender": an Issuing Lender as to which any proposed Assignee under subsection 10.6 shall become an L/C Participant upon giving effect to the relevant Assignment and Acceptance. "Applicable Margin": at any time, the percentages set forth on Schedule II under the relevant column heading opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Applicable Margins determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Applicable Margins shall be (i) for the first 35 days subsequent to such due date, the Applicable Margin in effect prior to such due date and (ii) thereafter, those set forth opposite a Debt Ratio captioned "greater than 4.25," in either case, until the date of delivery of such financial statements and compliance certificate. "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit. "Asset Sale": any sale, sale-leaseback, or other disposition by any Person or any Subsidiary thereof of any of its property or assets, including the stock of any Subsidiary of such Person, except sales and dispositions permitted by subsection 7.6 other than subsection 7.6(b) or (e). "Assignee": as defined in subsection 10.6(c). "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). "Available Commitment": as to any Lender and any Type of Loan, at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment with respect to such Type of Loan over (b) such Lender's Aggregate Outstanding Extensions of Credit with respect to such Type of Loan. "BAS": as defined in the preamble to this Agreement. "Base Rate": for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BOA in Charlotte, North Carolina, as its "reference rate." (The "reference rate" is a rate set by BOA based upon various factors including BOA's costs and desired return, general economic conditions and other factors, and is used as a 3 reference point for pricing some loans, which may be priced at, above, or below such announced rate.) "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "BOA": as defined in the recitals to this Agreement. "Borrower Pledge Agreement": the Third Amended and Restated Borrower Pledge Agreement substantially in the form of Exhibit B-4A, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 4.16. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco, California are authorized or required by law to close and, if the applicable Business Day relates to Eurodollar Loans or Foreign L/Cs, any day on which dealings are carried on in the applicable London interbank market. "Calculation Date": with respect to each Foreign L/C, during the period that such Foreign L/C is outstanding (or the Reimbursement Obligation in connection therewith has not been fully satisfied) (i) the last Business Day of a fiscal month, (ii) the date on which such Letter of Credit is to be issued or renewed by the Issuing Lender, (iii) the date on which any draft presented under such Letter of Credit is paid by the Issuing Lender, (iv) such other dates as the Borrower may reasonably request from time to time, and (v) such other dates as the Issuing Lender or the Administrative Agent may select from time to time, provided that the Borrower receives prompt notice thereof. "Capital Expenditures" for any fiscal period, the aggregate of all expenditures that, in conformity with GAAP (but excluding capitalized interest), are or are required to be included as additions during such period to property, plant or equipment reflected on the consolidated balance sheet of the Borrower and its Subsidiaries, excluding the expenditures relating to the Transaction. "Capital Lease Obligations": of any Person as of the date of determination, the aggregate liability of such Person under Financing Leases reflected on a balance sheet of such Person under GAAP. "Capital Partners": Lehman Brothers Capital Partners III, L.P. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership 4 interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's Ratings Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency if both of S&P and Moody's cease publishing ratings of investments, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control": the occurrence of any of the following events: (i) the Principals and their Related Parties, as a whole, shall at any time cease to own, directly or indirectly, 51% of the Voting Stock of Holdings (measured by voting power rather than number of shares), determined on a fully diluted basis, and any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals and their Related Parties shall become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 25% of the Voting Stock of Holdings (measured by voting power rather than number of shares); (ii) a majority of the members of the Board of Directors of Holdings fail to be (a) members of the Board of Directors incumbent as of the Closing Date, or (b) members nominated by the members of the Board of Directors incumbent on the Closing Date, or (c) members appointed by members of the Board nominated under clause (a) or (b); (iii) Holdings shall, at any time, cease to own 100% of the Capital Stock of the Borrower; or 5 (iv) a "Change of Control" shall have occurred under the Original Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture. "Charge Over Shares": the Second Amended and Restated Charge Over Shares substantially in the form of Exhibit B-4B, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Class": (i) Lenders having Loan Exposure (taken together as a single class), (ii) Facility B Lenders having Facility B Loan Exposure (taken together as a single class) and (iii) if Facility C exists, Facility C Lenders having Facility C Loan Exposure (taken together as a single class). "Closing Date": the date on which the conditions precedent set forth in subsection 5.1 are satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Credit Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Pledge Agreement. "Commitment": as to any Lender, such Lender's Revolving Credit Commitment. "Commitment Fee Rate": at any time, the applicable rates per annum on Schedule II under the relevant column heading for the Revolving Credit Facility set forth opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Commitment Fee Rate determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Commitment Fee Rate shall be (i) for the first 35 days subsequent to such due date, the Commitment Fee Rate in effect prior to such due date and (ii) thereafter, that set forth opposite a Debt Ratio captioned "greater than 4.25," in either case, until the date of delivery of such financial statements and compliance certificate. "Commitment Percentage": as to the Commitment of any Lender with respect to any Type of Loan at any time, the percentage which the Commitment of such Lender with respect to such Type of Loan then constitutes of the aggregate Commitments with respect to such Type of Loan (or, at any time after such Commitments shall have expired or terminated, the percentage which the aggregate amount of the Aggregate Outstanding Extensions of Credit of such Lender with respect to such Type of Loan constitutes of the aggregate amount of the Aggregate Outstanding Extensions of Credit of all Lenders with respect to such Type of Loan). "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA 6 or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 (b) or (c) of the Code. "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Interest Expense of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, payable in cash, of the Borrower and its Subsidiaries for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Interest Expense": for any Person, as of the last day of any fiscal quarter, the amount of interest expense of such Person for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Net Income": for any Person and for any fiscal period, net income of such Person, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Assets": at any date, all assets of the Borrower and its Subsidiaries as determined according to the consolidated balance sheet contained in the SEC filing most recently delivered pursuant to subsection 6.1 or, if no such SEC filing has yet been delivered, the balance sheet referred to in subsection 4.1(a)(ii). "Consolidated Total Debt": at any date, the sum of (i) all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g) and (ii) the outstanding amount of Permitted Convertible Securities. "Consolidated Working Capital": at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in accordance with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date over (b) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries on such date (excluding, to the extent it would 7 otherwise be included under current liabilities, any short-term Consolidated Total Debt and the current portion of any long-term Consolidated Total Debt). "Continuing Lenders": each of the Original Lenders other than the Departing Lenders. "Constitutional Documents": as to any Person, the articles or certificate of incorporation and by-laws, partnership agreement or other organizational documents of such Person. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Convertible Securities": at any time (i) unsecured convertible debt securities issued by Holdings having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility B Credit Agreement and the Facility C Credit Agreement (if Facility C exists) on terms and conditions acceptable to the Agents and/or (ii) unsecured debt securities issued by Holdings to a trust (the "Trust") having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility B Credit Agreement and the Facility C Credit Agreement (if Facility C exists) on terms and conditions acceptable to the Agents which Trust, in turn, issues preferred stock securities to investors which are convertible at the option of the holder thereof into shares of common stock of Holdings. "Credit Documents": this Agreement, the Notes, the Applications, the Guarantees, the Fee Letter and the Pledge Agreements. "Credit Parties": the Borrower, Holdings, and each Subsidiary of the Borrower which is a party to a Credit Document. "Debt Ratio": as at the last day of any fiscal quarter, the ratio of (a) Consolidated Total Debt minus Designated Cash Balances on such date to (b) Consolidated EBITDA. "December 1998 Subordinated Debt Documents": the December 1998 Subordinated Notes, the December 1998 Subordinated Notes Indenture, the Underwriting Agreement related thereto among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., and BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "December 1998 Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the December 1998 Subordinated Notes were issued. 8 "December 1998 Subordinated Notes": the Borrower's Senior Subordinated Notes, due December 1, 2008 ("Initial December 1998 Subordinated Notes") issued on or about the December 8, 1998 and any notes, having the same terms as the Initial December 1998 Subordinated Notes, issued in exchange for the Initial December 1998 Subordinated Notes as contemplated by the documents governing the issuance of the Initial December 1998 Subordinated Notes. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Departing Lenders": each of the financial institutions identified on the signature pages hereto as a Departing Lender. "Designated Cash Balances": at any time, the lesser of (a) actual unrestricted cash balances on hand of Borrower and its Subsidiaries which are not subject to any Liens in favor of any Person (other than those described in subsection 7.3(o) hereof) and (b) $50,000,000. "Dollar Equivalent": at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in an Alternative Currency, the equivalent amount in Dollars as determined on the basis of the Exchange Rate for the purchase of Dollars with such Alternative Currency as of the most recent Calculation Date. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic L/C": a Letter of Credit denominated in Dollars. "Dow Jones Page 3750": the display designated as page "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or such other page as may replace the "3750" page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for Dollar deposits. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirement (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health as affected by the environment as has been, is now, or may at any time hereafter be, in effect, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.ss.ss. 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C.ss.ss.9601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.ss.ss.1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.ss.ss.6901 et seq.; the Clean Water Act; 33 U.S.C.ss.ss.1251 et seq.; the 9 Clean Air Act, 42 U.S.C.ss.ss.7401 et seq.; or other similar federal and/or state environmental laws. "Environmental Permits": any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any applicable Environmental Law. "Equity Documents": the Stockholders Agreement, the Subscription Agreements and the Option Agreements. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Eurodollar Business Day": means any Business Day on which commercial banks are open in London for the transaction of international business, including dealings in Dollar deposits in the international interbank markets. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Loans Maturity Date": (a) for any date on which any Eurodollar Loans are outstanding, the Business Day on which the Interest Period for all such outstanding Eurodollar Loans concurrently terminate and (b) for any date on which no Eurodollar Loans are outstanding, any Business Day. "Eurodollar Rate": means, for any Interest Period, with respect to Eurodollar Loans comprising part of the same borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows: LIBOR Eurodollar Rate = ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (ii) the net decrease, if any, in Consolidated Working 10 Capital during such fiscal year, (iii) to the extent deducted in computing such Consolidated Net Income for the Borrower and its Subsidiaries, non-cash interest expense, depreciation and amortization for such fiscal year, (iv) extraordinary non-cash losses during such fiscal year subtracted in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (v) change in deferred tax liability of the Borrower for such fiscal year, (vi) non-cash losses in connection with asset dispositions whether or not constituting extraordinary losses and (vii) non-cash ordinary losses less (b) the sum, without duplication, of (i) the aggregate amount of cash Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, (ii) the net increase, if any, in Consolidated Working Capital during such fiscal year, (iii) the aggregate amount of payments of principal in respect of any Indebtedness not prohibited hereunder during such fiscal year (other than prepayments of (x) Revolving Credit Loans not accompanied by reductions of the Commitments hereunder, (y) Facility B Loans not accompanied by reductions of Facility B Commitments and/or (z) Facility C Loans not accompanied by reductions of Facility C Commitments, if Facility C exists), (iv) deferred income tax credit of the Borrower for such fiscal year, (v) extraordinary non-cash gains during such fiscal year added in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (vi) non-cash gains in connection with asset dispositions whether or not constituting extraordinary gains and (vii) non-cash ordinary gains. "Exchange Act": the Securities Exchange Act of 1934, as amended. "Exchange Rate": on any day, with respect to any Alternative Currency, the spot rate at which Dollars are offered on such day by the Issuing Lender in San Francisco, California (or such other location selected by the Issuing Lender) for such Alternative Currency. "Facility B Administrative Agent": the "Administrative Agent" as defined in the Facility B Credit Agreement. "Facility B Agents": the "Agents" as defined in the Facility B Credit Agreement. "Facility B Commitments": the "Commitments" as defined in the Facility B Credit Agreement. "Facility B Credit Agreement": that certain Second Amended and Restated 364 Day Credit Agreement of even date herewith among the Borrower, the Facility B Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LBI and Banc of America Securities LLC as arrangers and certain financial institutions named as senior managing agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility B Credit Documents": the "Credit Documents" as defined in the Facility B Credit Agreement. 11 "Facility B Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility B Credit Agreement. "Facility B L/C Obligations": the "L/C Obligations" as defined in the Facility B Credit Agreement. "Facility B Lenders": the "Lenders" as defined in the Facility B Credit Agreement. "Facility B Loan Exposure": the "Loan Exposure" as defined in the Facility B Credit Agreement. "Facility B Loans": the "Loans" as defined in the Facility B Credit Agreement. "Facility B Notes": the "Notes" as defined in the Facility B Credit Agreement. "Facility B Reimbursement Obligations": the "Reimbursement Obligations" as defined in the Facility B Credit Agreement. "Facility C": a separately documented senior credit facility consisting of and evidencing all or any portion of the then available Incremental Facility which Borrower may hereafter cause to exist in accordance with the terms of Section 2.1(a). "Facility C Administrative Agent": the "Administrative Agent" as defined in the Facility C Credit Agreement. "Facility C Agents": the "Agents" as defined in the Facility C Credit Agreement. "Facility C Commitments": the "Commitments" as defined in the Facility C Credit Agreement. "Facility C Credit Agreement": that certain credit agreement evidencing Facility C which may hereafter be executed by and among the Borrower, the Facility C Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities LLC as arrangers and certain financial institutions named as senior managing agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility C Credit Documents": the "Credit Documents" as defined in the Facility C Credit Agreement. "Facility C Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility C Credit Agreement. "Facility C L/C Obligations": the "L/C Obligations" as defined in the Facility C Credit Agreement. "Facility C Lenders": the "Lenders" as defined in the Facility C Credit Agreement. 12 "Facility C Loan Exposure": the "Loan Exposure" as defined in the Facility C Credit Agreement. "Facility C Loans": the "Loans" as defined in the Facility C Credit Agreement. "Facility C Notes": the "Notes" as defined in the Facility C Credit Agreement. "Federal Funds Effective Rate": for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the FRB (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day the appropriate rate for such previous day is not yet published in H.15(519), the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Fee Letter": that certain fee letter between the Agents and the Borrower dated on or about March 30, 2001. "Financial L/C": a standby Letter of Credit not constituting a Performance L/C. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "First Offer Requirement": as defined in subsection 2.1(a). "Foreign L/C": a Letter of Credit denominated in an Alternative Currency. "Foreign L/C Obligations": at any time, an amount equal to the sum of (i) the Dollar Equivalent of the aggregate then undrawn and unexpired face amount of all then outstanding Foreign L/Cs and (ii) the Dollar Equivalent of the aggregate amount of all drawings under Foreign L/Cs which have not then been reimbursed pursuant to subsection 3.5. "Foreign Subsidiary": any Subsidiary which is organized under the laws of any jurisdiction outside the United States or under the laws of the U.S. Virgin Islands. "FRB": means the Board of Governors of the Federal Reserve System, and any governmental authority succeeding to any of its principal functions. "GAAP": generally accepted accounting principles in the United States of America in effect on the Closing Date. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 13 "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, reimbursement obligations under letters of credit and any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantees": the Parent Guarantee and the Subsidiary Guarantee. "Immaterial Subsidiary": any Subsidiary of the Borrower having assets not exceeding five percent (5%) of the Consolidated Total Assets. "Increased Commitment Agreement": as defined in subsection 2.1(a). "Incremental Facility": as defined in subsection 2.1(a). "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and accrued expenses incurred in the ordinary course of business), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and all reimbursement and other obligations with respect to any letters of credit and surety bonds, whether or not matured or drawn, (e) all 14 liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof and (f) all Attributable Debt of such Person with respect to sale and leaseback transactions of such Person. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Base Rate Loan, the last Business Day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last Business Day of such Interest Period, and (c) as to any Eurodollar Loan having an interest period longer than three months, (i) each Business Day which is three months or a whole multiple thereof after the first day of such Interest Period and (ii) the last Business Day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three, six or, if made available by the Administrative Agent and the Lenders, nine or twelve months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; (b) thereafter, each period commencing on the last day of the preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six or, if made available by the Administrative Agent and Lenders, nine or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; and (c) solely for the purpose of permitting the Borrower and the Arrangers to complete syndication of the Commitments, a period commencing on the borrowing date, conversion date, or last day of the preceding Interest Period, as the case may be, with respect to such Eurodollar Loan and ending on a Business Day which is seven (7) days thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current borrowing date, conversion date or Interest Period with respect thereto; provided, that such Interest Period option shall terminate and cease to be available to Borrower 180 days after the Closing Date; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next 15 succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period for any Loan that would otherwise extend beyond the applicable Termination Date shall end on the applicable Termination Date; and (iii) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period would otherwise be scheduled to end) shall end on the last Business Day of the appropriate calendar month. "Interest Rate Agreement": any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. "Interest Rate Agreement Obligations": the obligations of the Borrower or any of its Subsidiaries to make payments to counterparties under Interest Rate Agreements in the event of the occurrence of a termination event thereunder. "Investment Fund": as defined in subsection 10.6(c). "Issuing Lender": BOA, in its capacity as issuer of any Letter of Credit or, at the election of BOA, such other Lender or Lenders that agrees to act as Issuing Lender at the request of the Borrower, or upon resignation by BOA as an Issuing Lender at any time upon notice to the other parties to this Agreement, such other Lender or Lenders that agree to act as Issuing Lender at the request of the Borrower and to whom the Required Lenders consent in writing. "Judgment Currency": as defined in subsection 10.16 (b). "LBI": as defined in the recitals to this Agreement. "LCPI": as defined in the recitals to this Agreement. "L/C Fee Payment Date": the last Business Day of each March, June, September and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the Dollar Equivalent of the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the Dollar Equivalent of the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5. "L/C Participants": a collective reference to all the Revolving Credit Lenders other than the Applicable Issuing Lender. 16 "Lender" and "Lenders": the persons identified as Lenders and listed on the signature pages of this Agreement (including the Issuing Lender and the Swing Line Lender), together with their successors and permitted assigns pursuant to subsection 10.6. "Lender Addition Agreement": as defined in subsection 2.1(a). "Letters of Credit": as defined in subsection 3.1(a). "LIBOR": as to any Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period quoted on the second Eurodollar Business Day prior to the first day of such Interest Period, as such rate appears on the Dow Jones Page 3750 as of 11:00 A.M. (London time) on such date, as determined by the Administrative Agent and notified to the Lenders and the Borrower on such second prior Eurodollar Business Day. If LIBOR cannot be determined based on the Dow Jones Page 3750, LIBOR means the rate per annum, as supplied to the Administrative Agent, quoted by BOA's London Branch to prime banks in the London interbank market for deposits in Dollars at approximately 11:00 A.M. (London time) two Eurodollar Business Days prior to the first day of such Interest Period in an amount approximately equal to the principal amount of the Loans to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Account": as defined in subsection 2.5(d). "Loan Exposure": with respect to any Lender as of any date of determination, (i) if there are no outstanding Letters of Credit or Revolving Credit Loans, that Lender's Revolving Credit Commitment, and (ii) otherwise, the sum of (a) the aggregate outstanding principal amount of the Revolving Credit Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the Dollar Equivalent of the aggregate stated or face amount in respect of all Letters of Credit issued by that Lender and outstanding (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) in the event that such Lender is the Swing Line Lender, the aggregate principal amount of Swing Line Loans made by such Lender then outstanding (net of any participations purchased by other Lenders in such Swing Line Loans) plus (d) the Dollar Equivalent of the aggregate amount of all participations purchased by that Lender in any outstanding Swing Line Loans or Letters of Credit or any unreimbursed drawings under any Letters of Credit. 17 "Lockheed": Lockheed Martin Corporation, a Maryland corporation. "Material Adverse Effect": a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Credit Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder. "Materials of Environmental Concern": any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could give rise to liability under, any applicable Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds": the aggregate cash proceeds (including Cash Equivalents) received by Holdings or any of its Subsidiaries in respect of: (a) any issuance by Holdings or any of its Subsidiaries of Indebtedness after the Closing Date; (b) any Asset Sale; and (c) any cash payments received in respect of promissory notes or other evidences of indebtedness delivered to Holdings or such Subsidiary in respect of an Asset Sale; in each case net of (without duplication) (i), (A) in the case of an Asset Sale, the amount required to repay any Indebtedness (other than the Loans) secured by a Lien on any assets of Holdings or a Subsidiary of Holdings that are sold or otherwise disposed of in connection with such Asset Sale and (B) reasonable and appropriate amounts established by Holdings or such Subsidiary, as the case may be, as a reserve against liabilities associated with such Asset Sale and retained by Holdings or such Subsidiary, (ii) the reasonable expenses (including legal fees and brokers' and underwriters' commissions, lenders fees, credit enhancement fees, accountants' fees, investment banking fees, survey costs, title insurance premiums and other customary fees, in any case, paid to third parties or, to the extent permitted hereby, Affiliates) incurred in effecting such issuance or sale and (iii) any taxes reasonably attributable to such sale and reasonably estimated by Holdings or such Subsidiary to be actually payable. "New Lender": as defined in subsection 2.1(a). "New Subordinated Debt Documents": the New Subordinated Notes, the New Subordinated Notes Indenture, the Underwriting Agreement dated as of May 18, 1998 18 among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., and BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "New Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the New Subordinated Notes were issued. "New Subordinated Notes": the Borrower's 8 1/2% Senior Subordinated Notes, due 2008 ("Initial New Subordinated Notes") issued on or about May 22, 1998 and any notes, having the same terms as the Initial New Subordinated Notes, issued in exchange for the Initial New Subordinated Notes as contemplated by the documents governing the issuance of the Initial New Subordinated Notes. "New 364-Day Credit Agreement": as defined in subsection 5.1(q). "Non-Excluded Taxes": as defined in subsection 2.15. "Non-U.S. Lender": as defined in subsection 2.15. "Nonconsenting Lenders": as defined in subsection 2.17. "Notes": The Revolving Credit Notes and the Swing Line Note (or any of them). "Obligations": as defined in the Guarantees and the Pledge Agreements. "Option Agreements": the Option Agreements between Holdings and each of Frank C. Lanza and Robert V. LaPenta, each dated as of the April 30, 1997. "Original Agents": the "Agents" under and as defined in the Original Credit Agreement. "Original Closing Date": April 28, 2000. "Original Credit Agreement": as defined in the preamble to this Agreement. "Original Indenture": the Indenture between the Borrower and The Bank of New York, as trustee, pursuant to which the Original Subordinated Notes are issued. "Original Lenders": as defined in the preamble to this Agreement. "Original Purchase Agreement": the Purchase Agreement, dated as of April 25, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Original Registration Rights Agreement": the Registration Rights Agreement, dated as of April 30, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. 19 "Original Subordinated Debt Documents": the Original Indenture, the Original Registration Rights Agreement, the Original Purchase Agreement and the Original Subordinated Notes. "Original Subordinated Notes": the Borrower's 10 3/8% Senior Subordinated Notes, due 2007 (the "Initial Subordinated Notes"), issued on the April 30, 1997, and any subordinated notes of the Borrower, having the same terms as the Initial Subordinated Notes, issued in exchange for the Initial Subordinated Notes as contemplated by the Original Subordinated Debt Documents. "Parent Distributions": as defined in the Parent Guarantee. "Parent Guarantee": the Third Amended and Restated Parent Guarantee substantially in the form of Exhibit B-1, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Parent Pledge Agreement": the Third Amended and Restated Parent Pledge Agreement substantially in the form of Exhibit B-3, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Participant": as defined in subsection 10.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any successor thereto. "Performance L/C": a standby Letter of Credit issued to ensure the performance of services and/or delivery of goods by or on behalf of the Borrower. "Permitted Convertible Securities": as defined in subsection 7.4(g). "Permitted Liens": Liens permitted to exist under subsection 7.3. "Permitted Stock Payments": (A) dividends by the Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by the Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing, provided that the aggregate amount paid under this clause (B) does not exceed the amount that the Borrower would be required to pay in respect of the income of the Borrower and its Subsidiaries if the Borrower were a stand alone entity that was not owned by Holdings, (C) from and after May 1, 1999, dividends by the Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) the aggregate amount of dividends paid by the Borrower to Holdings under this clause (C) since the Closing Date does not exceed $5,000,000 and (D) dividends by the Borrower to 20 Holdings to fund interest expense or dividends in respect of the Permitted Convertible Securities issued by Holdings, provided that such dividends under this clause (D) shall not, in any fiscal year, exceed an amount equal to the interest or dividends actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all intercompany advances funded pursuant to subsection 7.9(l) hereof by the Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity maintains, administers, contributes to or is required to contribute to, or under which the Borrower or any Commonly Controlled Entity may incur any liability. "Pledge Agreements": the collective reference to the Parent Pledge Agreement, the Borrower Pledge Agreement, the Charge Over Shares, the Subsidiary Pledge Agreement, and any other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Principals": each of Lehman Brothers Holdings, Inc., Capital Partners, Lockheed, Frank C. Lanza and Robert V. LaPenta. "Properties": as defined in subsection 4.16. "Refunded Swing Line Loan": as defined in subsection 2.1(b)(iii). "Register": as defined in subsection 10.6(d). "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Amount": as defined in subsection 3.5(a). "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of Credit. "Related Party": with respect to the Principals, (a) any controlling stockholder, 51% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (b) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 51% or more controlling interest of which consist of the Principals and/or such other Persons referred to in the immediately preceding clause (a). 21 "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under the regulations of the PBGC. "Required Class Lenders": at any time, (a) for the Lenders having Loan Exposure, Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders, (b) for the Facility B Lenders having Facility B Loan Exposure, Facility B Lenders having or holding more than 50% of the aggregate Facility B Loan Exposure of all Facility B Lenders and (c) if Facility C exists, for the Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding more than 50% of the aggregate Facility C Loan Exposure of all Facility C Lenders. "Required Lenders": at any time, Lenders the Loan Exposure for all Types of Loans of which aggregate more than 50%. "Requirement of Law": as to any Person, the Constitutional Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Class Lenders": at any time, (a) for the Class of Lenders having Loan Exposure, Lenders having or holding 66 2/3% of the aggregate Loan Exposure of all Lenders, (b) for the Class of Facility B Lenders having Facility B Loan Exposure, Facility B Lenders having or holding 66 2/3% of the aggregate Facility B Loan Exposure of all Facility B Lenders and (c) if Facility C exists, for the Class of Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding 66 2/3% of the aggregate Facility C Loan Exposure of all Facility C Lenders. "Responsible Officer": the chief executive officer, the president or vice president of the Borrower or, with respect to financial matters, the chief financial officer, vice president-finance, treasurer or controller of the Borrower. "Restricted Government Contracts": as defined in the Pledge Agreements. "Revolving Credit Commitment": the commitment of a Lender, as set forth on Schedule I hereto as amended from time to time pursuant to this Agreement, to make Revolving Credit Loans to the Borrower pursuant to subsection 2.1(a) and to issue and/or purchase participations in Letters of Credit pursuant to Section 3; and "Revolving Credit Commitments" means such commitments of all Lenders in the aggregate, which shall be $400,000,000. "Revolving Credit Commitment Period": the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Revolving Credit Commitments shall terminate as provided herein. 22 "Revolving Credit Lender": any Lender or Lenders having a Revolving Credit Commitment or a Revolving Credit Loan outstanding. "Revolving Credit Loans": the Loans made by Revolving Credit Lenders to the Borrower pursuant to Subsection 2.1(a). "Revolving Credit Notes": (i) the promissory notes of the Borrower, if any, issued pursuant to subsection 2.5(f) of the Original Credit Agreement prior to the Closing Date and/or pursuant to subsection 2.5(f) of this Agreement on or after the Closing Date, in each case, to evidence the Revolving Credit Loans of any Lender and (ii) any promissory notes issued by the Borrower pursuant to subsection 10.6(d) in connection with assignments of the Revolving Credit Commitments and Revolving Credit Loans of any Lenders, in each case substantially in the form of Exhibit A-1 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Revolving 364 Day Commitment": as defined in the Facility B Credit Agreement. "SPD Technologies": SPD Technologies Inc., a Delaware corporation. "SPD Technologies Acquisition Agreement": the Agreement and Plan of Merger, dated as of July 2, 1998, among L-3 Communications Corporation, SPD Merger Co., SPD Technologies, Inc. and Midmark Capital L.P. "SEC": the Securities and Exchange Commission. "Securities Act": Securities Act of 1933, as amended. "Senior Managing Agents": collectively, Fleet National Bank, The Bank of New York, Credit Lyonnais, First Union Commercial Corporation and Barclays Bank plc. "Similar Business": a business, at least a majority of whose revenues in the most recently ended calendar year were derived from (i) the sale of defense products, electronics, communications systems, aerospace products, avionics products and/or communications products, (ii) any services related thereto, (iii) any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto or any business of the Borrower and/or its Subsidiaries existing as of the Closing Date, and (iv) any combination of any of the foregoing. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Stockholders Agreement": the Stockholders Agreement, dated as of April 30, 1997, by and among the Borrower, Holdings, the Principals and any other party that may from time to time become a party thereto as provided therein, as the same may be amended, supplemented or otherwise modified from time to time. 23 "Subordinated Debt": indebtedness outstanding under or in respect of the Original Subordinated Notes, the New Subordinated Notes, the December 1998 Subordinated Notes and/or Additional Subordinated Indebtedness. "Subordinated Debt Documents": the Original Subordinated Debt Documents, the December 1998 Subordinated Debt Documents, the New Subordinated Debt Documents and any similar indentures, registration rights agreements, purchase agreements, notes and/or similar agreements and instruments executed by Borrower and/or any of its Subsidiaries in respect of any Additional Subordinated Indebtedness. "Subscription Agreements": the Common Stock Subscription Agreements between Holdings and each of Frank C. Lanza, Robert V. LaPenta, Capital Partners and Lockheed, each dated as of April 30, 1997. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, directly or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantee": the Third Amended and Restated Subsidiary Guarantee substantially in the form of Exhibit B-2, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Subsidiary Pledge Agreement": the Third Amended and Restated Subsidiary Pledge Agreement substantially in the form of Exhibit B-5, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Swing Line Lender": means BOA, or, following the resignation of BOA as Swing Line Lender at any time upon notice to the other parties to this Agreement, any other Lender which is appointed as Swing Line Lender by the Required Lenders and reasonably acceptable to Borrower. "Swing Line Loans": as defined in subsection 2.1(b). "Swing Line Note": as defined in subsection 2.5(f). "TCAS Acquired Company": Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. 24 "TCAS Acquisition Documents": the Asset Purchase Agreement among Honeywell Inc. (as seller), Borrower (as buyer), and Honeywell International Inc. (as guarantor), dated as of February 10, 2000 (as amended), and all material agreements, instruments and other documents executed or delivered pursuant thereto or in connection with all exhibits, schedules and attachments thereto. "TCAS Subsidiary": a Subsidiary of Borrower organized as a Delaware limited liability company which will hold and operate the assets and business of the TCAS Acquired Company. "Term Loans": as defined in the Facility B Credit Agreement. "Termination Date": May 15, 2006. "Tranche": the collective reference to Eurodollar Loans with then-current Interest Periods which all begin on the same date and end on the same date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "Eurodollar Tranches". "Transaction": the transactions contemplated by the Transaction Documents. "Transaction Agreement": that certain Transaction Agreement, dated as of March 28, 1997 by and among Lockheed, Holdings, Capital Partners and its Affiliates, Frank C. Lanza and Robert V. LaPenta. "Transaction Documents": (i) the Transaction Agreement, the Schedules thereto and the documents set forth on Schedule III hereto, (ii) the Equity Documents and (iii) the Subordinated Debt Documents. "Transferee": as defined in subsection 10.6(f). "Type": a Revolving Credit Loan or a Swing Line Loan, as applicable. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "U.S. Taxes": any tax, assessment, or other charge or levy and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon, imposed by or on behalf of the United States or any taxing authority thereof. "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. "Wholly Owned Subsidiary": a Subsidiary of Borrower, the Capital Stock of which is 100% owned and controlled, directly or indirectly, by Borrower. 25 1.2 Other Definitional Provisions. ------------------------------ (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Credit Document or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Credit Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 1.3 Interrelationship with Original Credit Agreement. ------------------------------------------------- (a) As stated in the preamble hereof, this Credit Agreement is intended to amend and restate the provisions of the Original Credit Agreement and, notwithstanding any substitution of Notes as of the Closing Date, except as expressly modified herein, (x) all of the terms and provisions of the Original Credit Agreement shall continue to apply for the period prior to the Closing Date, including any determinations of payment dates, interest rates, Events of Default or any amount that may be payable to the Original Agents or the Original Lenders (or their assignees or replacements hereunder), and (y) the obligations under the Original Credit Agreement shall continue to be paid or prepaid on or prior to the Closing Date, and shall from and after the Closing Date continue to be owing and be subject to the terms of this Credit Agreement. All references in the Notes and the other Credit Documents to (i) the Original Credit Agreement or the "Credit Agreement" shall be deemed to include references to this Credit Agreement and (ii) the "Lenders" or a "Lender" or to the "Agents" or any "Agent" shall mean such terms as defined in this Credit Agreement. As to all periods occurring on or after the Closing Date, all of the covenants set forth in the Original Credit Agreement shall be of no further force and effect, it being understood that all obligations of the Borrower under the Original Credit Agreement shall be governed by this Credit Agreement from and after the Closing Date. (b) The Borrower, the Agents and the Lenders acknowledge and agree that all outstanding Loans (including all outstanding L/C Obligations) under the Original Credit Agreement are hereby converted into Revolving Credit Loans (and, as applicable, L/C Obligations) outstanding hereunder effective as of the Closing Date. The Borrower, the Agents and the Lenders acknowledge and agree that all interest, fees, costs and reimbursable expenses accruing or arising under the Original Credit Agreement which remain unpaid and outstanding as 26 of the Closing Date shall be and remain outstanding and payable as an obligation under this Agreement and the other Credit Documents. 1.4 Confirmation of Existing Obligations. The Borrower hereby agrees and admits that, as of the date hereof, it has no defenses to, or offsets or counterclaim against, any of its obligations to the Agents or any Lender under the Credit Documents of any kind whatsoever. 1.5 Accounting for Interests in TCAS Subsidiary. Notwithstanding anything to the contrary contained in this Agreement or any other Credit Document, for purposes of computing the amount of any financial terms and/or computing compliance with any of the financial tests and/or covenants set forth in this Agreement or any other Credit Document in respect of the TCAS Subsidiary at any time it is not a Wholly Owned Subsidiary, Borrower shall (i) only be permitted to include that portion of any assets and/or liabilities attributable to the TCAS Subsidiary which corresponds directly with the percentage of Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower and (ii) eliminate depreciation and amortization expenses of the TCAS Subsidiary included in the consolidated financial statements of the Borrower that are applicable to the minority interests owned by Persons other than Borrower or its Subsidiaries in the TCAS Subsidiary in determining Borrower's Consolidated EBITDA. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments. ------------ (a) Revolving Credit Loans. Subject to the terms and conditions hereof, each Revolving Credit Lender severally agrees to make revolving credit loans to the Borrower, from time to time during the Revolving Credit Commitment Period, in an aggregate principal amount at any one time outstanding which, when added to the aggregate principal amount of outstanding Swing Line Loans in which such Lender has purchased a participation (or, in the case of the Swing Line Lender, the Swing Line Loans made by such Swing Line Lender less the participations purchased in such Swing Line Loans by any other Lender) and such Lender's Commitment Percentage of the then outstanding L/C Obligations, does not exceed the amount of such Lender's Revolving Credit Commitment. During the Revolving Credit Commitment Period, the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. At any time not less than thirty (30) days prior to the Termination Date, and subject to the terms of the Fee Letter, the Borrower may increase the aggregate Commitments by (I) entering into a binding written agreement, substantially in the form of Exhibit G hereto, with any Lender to increase the Commitment of such Lender (an "Increased Commitment Agreement") which Increase Commitment Agreement shall be presented to the Agents for acknowledgment and acceptance (which shall not be withheld unless the effect thereof would be to exceed the maximum permitted amount herein for all Commitments, Facility B Commitments and Facility C Commitments (if Facility C exists) in the aggregate) and/or (II) subject to the First Offer Requirement (as defined below) enter into a binding written agreement substantially in the 27 form of Exhibit H hereto (a "Lender Addition Agreement") with any bank, financial institution, or Investment Fund to become a Lender under this Agreement by making a Commitment and causing such Person to take all other actions required to become a new Lender hereunder (a "New Lender"); provided that the sum of (i) the aggregate Commitments of all Lenders (including New Lenders), (ii) the aggregate Facility B Commitments of all Facility B Lenders and (iii) the aggregate Facility C Commitments (if Facility C exists) of all Facility C Lenders (if Facility C exists) may not exceed $750,000,000 at any time (such new or increased commitments, the "Incremental Facility"); and provided further that, no consent of any Lender shall be required for such Incremental Facility except for the consents described under clauses (I) and (II) above. In order to become a New Lender, a party must execute a Lender Addition Agreement and deliver the same to the Administrative Agent, the Syndication Agent and the Borrower for counter-execution. On the Eurodollar Loans Maturity Date (or, subject to compliance with subsection 2.16, on any Business Day) occurring on or immediately following the date that (i) the Agents have acknowledged their acceptance of any Increased Commitment Agreement delivered pursuant to clause (I) above or (ii) any Lender Addition Agreement has been executed by all necessary parties and delivered to the Agents, the increase in any such Lender's Commitment contemplated thereby shall become effective and/or the New Lender shall become a party to this Agreement, as applicable. Promptly thereafter, the Administrative Agent shall amend Schedule I hereto to accurately reflect the Commitments of the Lenders then in existence, whereupon such amended Schedule I shall be substituted for the pre-existing Schedule I, be deemed a part of this Agreement without any further action or consent of any party and be promptly distributed to each Lender and the Borrower by the Administrative Agent. The Incremental Facility shall have such economic terms (i.e., pricing, amount, tenor, amortization) as shall be agreed at the time with the lenders participating therein, and shall, otherwise, be on the same terms as this Agreement; provided that without the written consent of Required Class Lenders for each Class, (i) the applicable interest rate margin under the Incremental Facility shall not exceed the Applicable Margin under this Agreement or the "Applicable Margin" under and as defined in the Facility B Credit Agreement by more than fifty basis points and (ii) the maturity date of the Incremental Facility shall be equal to or occurring after the scheduled Termination Date under this Agreement or the "Termination Date" under and as defined in the Facility B Credit Agreement; provided further that if the Borrower chooses to implement the Incremental Facility pursuant to clause (I) or (II) above, the Incremental Facility shall have the same economic terms (i.e., pricing, tenor, amortization) as this Agreement. In the alternative, without the consent of any Lender, Borrower may cause the Incremental Facility to be implemented and separately documented as Facility C, which shall have BOA as the administrative agent and provide for a ratable sharing of all Collateral and Guarantee Obligations under the Guarantees among and between the Lenders, the Facility B Lenders and the Facility C Lenders. In any case, the Administrative Agent shall have the right to execute, on behalf of the Lenders, any amendments and/or other documents necessary to implement the Incremental Facility; provided that such amendments and/or other documents do not affect any of the rights or obligations of any Lender for which the written consent of such Lender is necessary under subsection 10.1 unless the written consent of such Lender is received by the Administrative Agent. When the Incremental Facility is not implemented and separately documented as Facility C, the Borrower shall send the Administrative Agent (for distribution to each Lender) a written offer to participate in the Incremental Facility pursuant to clause (I) above, and each such Lender shall have the 28 right, but no obligation, to commit to a ratable portion of the Incremental Facility, provided that no later than fourteen (14) days after receipt of such written request, each such Lender shall advise the Administrative Agent and the Borrower whether it intends to participate in the Incremental Facility and the amount of its proposed commitment (the "First Offer Requirement"). Only after satisfying the First Offer Requirement and allocating requested commitments to Lenders requesting participation in such Incremental Facility shall Borrower be permitted to offer participation in any remaining commitments for the Incremental Facility to any proposed New Lender pursuant to clause (II) above. (b) Swing Line Loans. ----------------- (i) Subject to the terms and conditions hereof, the Swing Line Lender agrees to make $15,000,000 of the credit otherwise available to the Borrower under the Revolving Credit Commitments by making swing line loans (individually, a "Swing Line Loan"; collectively, the "Swing Line Loans") to the Borrower from time to time during the Revolving Credit Commitment Period; provided, that no Swing Line Loan shall be made if, after giving effect thereto, the aggregate principal amount of Revolving Credit Loans then outstanding plus the aggregate principal amount of Swing Line Loans then outstanding, plus the aggregate amount of L/C Obligations would exceed the Revolving Credit Commitments of the Revolving Credit Lenders. Amounts borrowed by the Borrower under this subsection 2.1(b) may be repaid and, through but excluding the Termination Date, reborrowed. All Swing Line Loans shall be made as Base Rate Loans and may not be converted into Eurodollar Loans. In order to borrow a Swing Line Loan, the Borrower shall give the Swing Line Lender, with a copy to the Administrative Agent, irrevocable notice (which notice must be received by the Swing Line Lender prior to 12:00 Noon, New York City time) on the requested Borrowing Date specifying the amount of the requested Swing Line Loan which shall be in a minimum amount of $1,000,000 or whole multiples of $100,000 in excess thereof. The proceeds of the Swing Line Loan will be made available by the Swing Line Lender to the Borrower at the office of the Swing Line Lender by crediting the account of the Borrower at such office with such proceeds. (ii) The Swing Line Loans shall be evidenced by a Loan Account and, if requested by the Swing Line Lender, a promissory note of the Borrower, substantially in the form of Exhibit A-2 (the "Swing Line Note"), with appropriate insertions, payable to the order of the Swing Line Lender and representing the obligation of the Borrower to pay the unpaid principal amount of the Swing Line Loans, with interest thereon as prescribed in subsection 2.9. The Swing Line Note, if any, shall (i) be dated the Closing Date, (ii) be stated to mature on the Termination Date and (iii) bear interest, payable on the dates specified in 2.9, for the period from the date thereof to the Termination Date on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum specified in subsection 2.9. (iii) The Swing Line Lender, at any time in its sole and absolute discretion, may on behalf of the Borrower (which hereby irrevocably directs the Swing Line Lender to act on its behalf) request each Lender, including the Swing Line Lender, to make a Revolving Credit Loan (which shall be a Base Rate Loan) in an amount equal to such Lender's Commitment Percentage of such Swing Line Loan (the "Refunded Swing Line Loans") outstanding on the date such notice is given. Unless any of the events described in clause (f) of 29 Section 8 shall have occurred (in which event the procedures of subsection 2.1(b)(iv) shall apply) each Lender shall, not later than 12:00 P.M., New York City time, on the Business Day next succeeding the date on which such notice is given, make available to the Swing Line Lender in immediately available funds the amount equal to the Revolving Credit Loan to be made by such Lender. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the Refunded Swing Line Loans. Upon any request by the Swing Line Lender to the Lenders pursuant to this subsection 2.1(b)(iii), the Administrative Agent shall promptly give notice to the Borrower of such request. (iv) If prior to the making of a Revolving Credit Loan pursuant to subsection 2.1(b)(iii) one of the events described in clause (f) of Section 8 shall have occurred, each Lender will, on the date such Loan was to have been made, purchase an undivided participating interest in the Swing Line Loans in an amount equal to its Commitment Percentage. Each Lender will immediately transfer to the Swing Line Lender, in immediately available funds, the amount of its participation. (v) Whenever, at any time after the Swing Line Lender has received from any Lender such Lender's participating interest in a Swing Line Loan, the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Lender will return to the Swing Line Lender any portion thereof previously distributed to it. (vi) Each Lender's obligation to purchase participating interests pursuant to subsection 2.1(b)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the Swing Line Lender, any other Lender or anyone else for any reason whatsoever, (b) the occurrence or continuance of any Default or Event of Default; (c) any adverse change in the condition (financial or otherwise) of the Borrower; (d) any breach of this Agreement by the Borrower or any other Lender; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (c) Except for Swing Line Loans, which shall be Base Rate Loans, the Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.7, provided that, no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Termination Date. 2.2 Procedure for Borrowing. The Borrower may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 11:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date, if all or any part of the requested Loans are 30 to be initially Eurodollar Loans, (b) 11:00 A.M., New York City time, on the requested Borrowing Date in the case of a Base Rate Loan other than a Swing Line Loan), specifying (i) the amount to be borrowed of each Type of Loan, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of Base Rate Loans (other than Swing Line Loans or Refunded Swing Line Loans), $2,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $2,000,000, such lesser amount), (y) in the case of Swing Line Loans, as provided in subsection 2.1(b)(i) and (z) in the case of Eurodollar Loans, $5,000,000 or a whole multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 11:00 A.M., New York City time (in the case of Eurodollar Loans) or 2:30 P.M., New York City time (in the case of Base Rate Loans), on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in accordance with the Borrower's payment instructions with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. All notices given by the Borrower under this subsection 2.2 may be made by telephonic notice promptly confirmed in writing. 2.3 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to and including the Termination Date, computed at the Commitment Fee Rate on the daily amount of the Available Commitment of such Revolving Credit Lender during the period for which payment is made, payable quarterly in arrears on the last Business Day of each March, June, September and December and on the Termination Date, commencing on the first of such dates to occur after the date hereof. 2.4 Termination or Reduction of Revolving Credit Commitments. The Borrower shall have the right, upon not less than three Business Days' written notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments ratably among the Revolving Credit Lenders; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans then outstanding, when added to the then outstanding L/C Obligations and the outstanding Swing Line Loans, would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $2,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect. 31 2.5 Repayment of Loans; Evidence of Debt. ------------------------------------- (a) Payments on Revolving Credit Loans and Swing Line Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent on the Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8) (x) for the account of each Revolving Credit Lender the then unpaid principal amount of each Revolving Credit Loan of such Lender and (y) for the account of the Swing Line Lender (and each other Revolving Credit Lender that has purchased a participation in then outstanding Swing Line Loans) the then unpaid principal amount of Swing Line Loans. (b) Interest. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date such Loans are made until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.9. (c) Recording. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (d) Loan Accounts and Register; Notes (i) The Loans made by, and the Commitments of, each Lender shall be evidenced by one or more loan accounts ("Loan Accounts") maintained by such Lender and by the Register maintained by the Administrative Agent in the ordinary course of business. The Register maintained by the Administrative Agent shall, in the event of a discrepancy between the entries in the Administrative Agent's books and any Lender's books relating to such matters, be controlling and, absent manifest error, shall be conclusive as to the amount of the Loans made by the Lender to the Borrower, the interest and payments thereon and any other amounts owing in respect of this Agreement. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this subsection 2.5(d) and subsection 10.6, to maintain the Register on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. 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 subsection 2.5(d) and subsection 10.6 (other than any losses, claims, damages and liabilities to the extent incurred by reason of the gross negligence or willful misconduct of the Administrative Agent). (ii) If requested by any Lender, the Borrower shall execute and deliver to such Lender (and deliver a copy thereof to the Administrative Agent) one or more promissory notes evidencing the Loans owing to such Lender pursuant to this Agreement in accordance with subsection 2.5(f). (e) Prima Facie Evidence. The entries made in the Register and the Loan Accounts of each Lender maintained pursuant to subsection 2.5(d) shall, to the extent permitted 32 by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such Loan Account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. For the avoidance of doubt, the existence or non-existence of any Note representing any Obligations owing to any Lender hereunder shall not affect the existence, amount, validity or enforceability of such Obligations, which in all events shall be absolute and unconditional. (f) Notes. The Borrower agrees that the Borrower will execute and deliver to each Lender that requests any such Note pursuant to subsection 2.5(d)(ii), a promissory note of the Borrower evidencing the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate insertions as to date and principal amount (a "Revolving Credit Note"). The Borrower also agrees that, if requested by the Swing Line Lender, the Borrower will execute and deliver to the Swing Line Lender a promissory note of the Borrower evidencing the Swing Line Loans of the Swing Line Lender, substantially in the form of Exhibit A-2 with appropriate insertions as to date and principal amount. 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments. (a) Subject to subsections 2.12 and 2.16, the Borrower may at any time and from time to time prepay any Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days prior to the date of prepayment in the case of Eurodollar Loans or on any Business Day in the case of Base Rate Loans, specifying the date and amount of prepayment, the Type of Loan to be prepaid (which Loans shall be prepaid on a pro rata basis among the applicable Lenders) and whether the prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.16. Partial prepayments shall be in an aggregate principal amount of $2,000,000 or a whole multiple of $100,000 in excess thereof. (b) (i) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2), 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility B Loans and the Facility C Loans (if Facility C exists) and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the 60th day following the date of receipt of such Net Proceeds (the "Debt Prepayment Waiting Period"), the Commitments, the Facility B Commitments and the Facility C Commitments (if Facility C exists) shall be permanently reduced as set forth in clause (iii) of this subsection 2.6(b) by the amount so prepaid on the last day of the Debt Prepayment Waiting Period. During the term of any Debt Prepayment Waiting Period, a portion of the Commitments, the Facility B Commitments and the Facility C Commitments (if Facility C exists) equal to the amount of prepayments received in respect of the 33 Loans, the Facility B Loans and the Facility C Loans (if Facility C exists), as applicable, from the issuance and/or incurrence of such Indebtedness shall be unavailable to Borrower and deemed excluded from each Lender's, Facility B Lender's and Facility C Lender's (if Facility C exists) "Available Commitment" (as such term is defined herein and in each of the Facility B Credit Agreement and Facility C Credit Agreement, if Facility C exists) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale (other than in respect of a sale of all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower (a "Final TCAS Sale")), such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans, the Facility B Loans and the Facility C Loans (if Facility C exists) and permanent reduction of the Commitments, the Facility B Commitments and the Facility C Commitments (if Facility C exists) as set forth in clause (iii) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales (other than in respect of a Final TCAS Sale) shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iii) of this subsection 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. If Holdings, Borrower or any of its Subsidiaries shall receive Net Proceeds from a Final TCAS Sale, such Net Proceeds shall be applied on or prior to the third Business Day after receipt thereof toward prepayment of the Loans, the Facility B Loans and the Facility C Loans (if Facility C exists) and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the 60th day following the date of such Final TCAS Sale, the ("TCAS Waiting Period"), the Commitments, the Facility B Commitments and the Facility C Commitments (if Facility C exists) shall be permanently reduced as set forth in clause (iii) of this subsection 2.6(b) by the amount so prepaid on the last day of the TCAS Waiting Period. During the term of any TCAS Waiting Period, a portion of the Commitments, the Facility B Commitments and the Facility C Commitments (if Facility C exists) equal to the amount of prepayments received in respect of the Loans, the Facility B Loans and the Facility C Loans (if Facility C exists) from such Final TCAS Sale shall be unavailable to Borrower and deemed excluded from each Lender's, Facility B Lender's and Facility C Lender's (if Facility C exists) "Available Commitment" (as such term is defined herein and in each of the Facility B Credit Agreement and Facility C Credit Agreement, if Facility C exists) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales (other than a Final TCAS Sale) occurring since the Original Closing Date that has not been applied toward the prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iii) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may 34 retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(i) and (ii) shall be applied ratably to the outstanding principal amount of Loans, Facility B Loans and Facility C Loans (if Facility C exists), with a corresponding ratable permanent reduction of the Commitments, the Facility B Commitments and the Facility C Commitments (if Facility C exists) as and when required by subsection 2.6(b)(i) and (ii). Commitment, Facility B Commitment and Facility C Commitment (if Facility C exists) reductions made pursuant to subsections 2.6(b)(i) and (ii) (and the corresponding subsections of the Facility B Credit Agreement and the Facility C Credit Agreement, if Facility C exists) shall be applied to each Lender's respective Commitment, each Facility B Lender's Facility B Commitment and/or each Facility C Lender's Facility C Commitment (if Facility C exists), as applicable, on a pro rata basis and shall reduce permanently such Commitments, Facility B Commitments and Facility C Commitments (if Facility C exists). At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility B Credit Agreement and the Facility C Credit Agreement, if Facility C exists). Mandatory prepayments shall not be subject to any minimum amount requirement. (iv) In addition, if after giving effect to (i) any reduction of the Revolving Credit Commitments under subsection 2.4, 2.5 or 2.6 or (ii) any recalculation of the Exchange Rate pursuant to subsection 3.9, the aggregate outstanding principal amount of Swing Line Loans plus the aggregate outstanding principal amount of Revolving Credit Loans plus the aggregate outstanding amount of L/C Obligations shall exceed the aggregate amount of the Revolving Credit Commitments, such reduction or recalculation shall be accompanied by prepayment in the amount of such excess to be applied (x) first, to the outstanding Swing Line Loans and (y) second, to outstanding Revolving Credit Loans (in each case, together with any amounts payable under subsection 2.16)); provided that if the aggregate principal amount of Swing Line Loans and Revolving Credit Loans then outstanding is less than the amount of such excess (because Letters of Credit constitute a portion of such excess), the Borrower shall immediately, without notice or demand, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount (but in no event greater than such balance) in a cash collateral account opened by the Administrative Agent for the benefit of the Revolving Credit Lenders (such deposit to be in Dollars with respect to Domestic L/Cs and the applicable Alternative Currency with respect to Foreign L/Cs). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants in such Letters of Credit, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Credit Documents. Any amounts deposited in such accounts shall be released to the Borrower on any Calculation Date on which the aggregate outstanding principal amount of Swing Line Loans plus the aggregate outstanding principal amount of Revolving Credit Loans plus the aggregate outstanding amount of L/C Obligations equals or is less than the aggregate amount of the 35 Revolving Credit Commitments, provided that no Default or Event of Default has occurred and is continuing. 2.7 Conversion and Continuation Options. ------------------------------------ (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans, by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M. New York City time, on the Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans (other than Swing Line Loans) to Eurodollar Loans by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M., New York City time, on the third Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each applicable Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is then continuing and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans and of the amount and Type of Loan to be converted, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is then continuing or (ii) after the date that is one month prior to the Termination Date and provided, further, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. (c) All notices given by Borrower under this subsection 2.7 may be made by telephonic notice promptly confirmed in writing. 2.8 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $100,000 in excess thereof. All Loans hereunder may be converted or continued into Base Rate Loans without reference to the minimum principal amount requirements for new Base Rate borrowings set forth in subsection 2.2 above. In no event shall the number of outstanding Eurodollar Tranches plus outstanding Facility B Eurodollar Tranches and Facility C Eurodollar Tranches (if Facility C exists) exceed 20 at any time. 36 2.9 Interest Rates and Payment Dates. --------------------------------- (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable with respect to each Loan in arrears on each Interest Payment Date and on the Termination Date, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.10 Computation of Interest and Fees. --------------------------------- (a) Interest on Base Rate Loans and fees shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; all other interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.9(a) or (c). 2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the 37 eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn in writing by the Administrative Agent (which the Administrative Agent agrees to do when the Administrative Agent has determined, or has been instructed by the Required Lenders that, the circumstances that prompted the delivery of such notice no longer exist), no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.12 Pro Rata Treatment and Payments. -------------------------------- (a) Each borrowing by the Borrower from the Revolving Credit Lenders hereunder, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Revolving Credit Commitments of Revolving Credit Lenders shall be made pro rata according to the respective Commitment Percentages of the Revolving Credit Lenders. Except during any period in which an Event of Default has occurred and is continuing, each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans, and any application by the Administrative Agent of the proceeds of any Collateral, shall be made pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder in respect of any Loan, whether on account of principal, interest, Reimbursement Obligations (whether in respect of Domestic L/Cs or Foreign L/Cs), fees, expenses or otherwise, shall be made without set off or counterclaim and shall be made prior to 11:00 A.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders with respect to such Loans, at the Administrative Agent's office specified in subsection 10.2, in Dollars and in immediately available funds; provided, that, with respect to any Reimbursement Obligations of the Borrower arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. At any time that an Event of Default has occurred and is continuing, all payments (including prepayments) made by Borrower hereunder and any application by the Administrative Agent of the proceeds of any Collateral and/or payment under any Guarantee shall be applied in the following order: (1) to the ratable payment of all amounts due and owing by the Borrower pursuant to subsection 10.5 of this Agreement, subsection 10.5 of the Facility B Credit Agreement or subsection 10.5 of the Facility C Credit Agreement (if Facility C exists) to the Agents, the Facility B Agents and/or the Facility C Agents (if Facility C exists), and after 38 payment in full thereof, to any other Lender, Facility B Lender or Facility C Lender (if Facility C exists); (2) to the ratable payment of all interest, fees and commissions due and owing under this Agreement, the Facility B Credit Agreement or the Facility C Credit Agreement (if Facility C exists) to the Agents, the Facility B Agents, the Facility C Agents (if Facility C exists), the Swing Line Lender, any Lender, any Facility B Lender or any Facility C Lender (if Facility C exists); (3) to the ratable payment (or cash collateralization) of the aggregate outstanding principal amount of Loans, Facility B Loans, Facility C Loans (if Facility C exists) and the aggregate L/C Obligations, Facility B L/C Obligations and the Facility C L/C Obligations (if Facility C exists); and (4) to the ratable payment of all other obligations of the Borrower to the Agents, the Facility B Agents, the Facility C Agents (if Facility C exists), the Swing Line Lender, any Lender, any Facility B Lender, or any Facility C Lender (if Facility C exists) under any Credit Document, Facility B Credit Document or Facility C Credit Document (if Facility C exists). For purposes of applying payments and proceeds distributed under clause 3 above, each Lender will first apply such amounts to all outstanding Loans of such Lender before such amounts will be held as cash collateral for L/C Obligations in which such Lender is a L/C Participant. The Administrative Agent, the Facility B Administrative Agent and the Facility C Administrative Agent (if Facility C exists) shall ratably distribute such payments to the applicable Lenders, the Facility B Lenders and the Facility C Lenders (if Facility C exists) promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Lender to make any Loan to be made by it shall not relieve any other Lender of its obligation hereunder to make its Loan on such Borrowing Date. 2.13 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be 39 canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.16. If circumstances subsequently change so that any affected Lender shall determine that it is no longer so affected, such Lender will promptly notify the Borrower and the Administrative Agent, and upon receipt of such notice, the obligations of such Lender to make or continue Eurodollar Loans or to convert Base Rate Loans into Eurodollar Loans shall be reinstated. 2.14 Requirements of Law. -------------------- (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 2.15 and changes in the rate of net income taxes (including branch profits taxes and minimum taxes) or franchise taxes (imposed in lieu of net income taxes) of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender upon written demand such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable; provided that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, in its reasonable discretion, in any legal, economic or regulatory manner) to designate a different Eurodollar lending office if the making of such designation would allow the Lender or its Eurodollar lending office to continue to perform its obligations to make Eurodollar Loans or to continue to fund or maintain Eurodollar Loans and avoid the need for, or reduce the amount of, such increased cost. If any Lender becomes entitled to claim any additional amounts pursuant to 40 this subsection, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section, the Borrower may convert all Eurodollar Loans of such Lender then outstanding into Base Rate Loans in accordance with the terms hereof. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such costs; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such additional amount or amounts; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amount or amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection, showing the calculation thereof in reasonable detail, submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.15 Taxes. ------ (a) Except as provided in this subsection 2.15, all payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority ("Taxes"), excluding Taxes on net income (including, without limitation, branch profits taxes and minimum taxes) and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any 41 Lender as a result of a present or former connection between any Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to any Agent or any Lender hereunder or under any Note, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof with respect to any Taxes that are imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or that are attributable to such Lender's failure to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the relevant Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt, if any, received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the relevant Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender, Assignee and Participant that is not a citizen or resident of the United States of America, a corporation, partnership created or organized in or under the laws of the United States of America, any estate that is subject to U.S. federal income taxation regardless of the source of its income or any trust which is subject to the supervision of a court within the United States and the control of a United States fiduciary as described in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: (A) two duly completed and signed copies of either Internal Revenue Service Form W-8 ECI (relating to such Non-U.S. Lender and entitling it to a complete exemption from withholding of U.S. Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents) or Form W-8 BEN (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents), or successor and related applicable forms, as the case may be; or 42 (B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit E (or such other form of statement as shall be reasonably requested by the Borrower from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or successor and related applicable form (it being understood and agreed that no Participant and, without the prior written consent of the Borrower described in clause (B) of the proviso to the first sentence of subsection 10.6(c), no Assignee shall be entitled to deliver any forms or statements pursuant to this clause (B), but rather shall be required to deliver forms pursuant to clause (A) of this subsection 2.15(b)). Further, each Non-U.S. Lender agrees (i) to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Forms W-8 ECI or W-8 BEN, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable U.S. laws and regulations and (ii) in the case of a Non-U.S. Lender that delivers a statement in the form of Exhibit E (or such other form of statement as shall have been requested by the Borrower), to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such statement on an annual basis on the anniversary of the date on which such Non-U.S. Lender became a party to this Agreement and to deliver promptly to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower from time to time unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this subsection 2.15(b). Each Non-U.S. Lender agrees to indemnify and hold harmless the Borrower from and against any taxes, penalties, interest or other costs or losses (including, without limitation, reasonable attorneys' fees and expenses) incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations to deduct or withhold any U.S. Taxes from any payments made 43 pursuant to this Agreement to such Non-U.S. Lender or the Administrative Agent which failure resulted from the Borrower's reliance on any form, statement, certificate or other information provided to it by such Non-U.S. Lender pursuant to clause (B) or clause (ii) of this subsection 2.15(b). The Borrower hereby agrees that for so long as a Non-U.S. Lender complies with this subsection 2.15(b), the Borrower shall not withhold any amounts from any payments made pursuant to this Agreement to such Non-U.S. Lender, unless the Borrower reasonably determines that it is required by law to withhold or deduct any amounts from any payments made to such Non-U.S. Lender pursuant to this Agreement. A Non-U.S. Lender shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this subsection 2.15(b) that such Non-U.S. Lender is not legally able to deliver (it being understood and agreed that the Borrower shall withhold or deduct such amounts from any payments made to such Non-U.S. Lender that the Borrower reasonably determines are required by law and that payments resulting from a failure to comply with this paragraph (b) shall not be subject to payment or indemnity by the Borrower pursuant to subsection 2.15(a)). If any Credit Party other than the Borrower makes any payment to any Non-U.S. Lender under any Credit Document, the foregoing provisions of this subsection 2.15 shall apply to such Non-U.S. Lender and such Credit Party as if such Credit Party were the Borrower (but a Non-U.S. Lender shall not be required to provide any form or make any statement to any such Credit Party unless such Non-U.S. Lender has received a request to do so from such Credit Party and has a reasonable time to comply with such request). (c) If a Lender shall become aware that it is entitled to receive a refund (whether by way of a direct payment or by offset) in respect of a Non-Excluded Tax paid by the Borrower, which refund, in the good faith judgment of such Lender, is allocable to such payment made pursuant to this Section, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after the receipt of a request from the Borrower, apply for such refund at the Borrower's sole expense. If any Lender receives such refund (as described in the preceding sentence), it shall repay the amount of such refund (together with any interest received thereon) to the Borrower if all the payments due under this Section has been paid in full. 2.16 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto (but excluding loss of margin). Such indemnification under this subsection 2.16 may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (but excluding loss of margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Each Lender claiming any payment pursuant to this subsection 2.16 shall do so by giving notice thereof to the Borrower and the Administrative Agent (showing calculation of the amount claimed in reasonable detail) within 60 Business Days after a failure to borrow, convert or continue Eurodollar Loans, or to prepay, after notice or after a prepayment of Eurodollar 44 Loans on a day which is not the last day of an Interest Period therefor. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.17 Replacement of Lenders. If at any time (a) the Borrower becomes obligated to pay additional amounts described in subsections 2.13, 2.14 or 2.15 as a result of any condition described in such subsections, (b) any Lender ceases to make Eurodollar Loans pursuant to subsection 2.13, (c) any Lender becomes insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or other Person having similar powers or (d) any Lender becomes a "Nonconsenting Lender" (hereinafter defined), then the Borrower may, on five (5) Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to subsection 10.6 all of its rights and obligations under this Agreement to a Lender or other entity selected by the Borrower and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of such Lender's Loans and all accrued interest and fees and other amounts payable hereunder (including amounts payable under subsection 2.16 as though such Loans were being paid instead of being purchased); provided that (i) the Borrower shall have no right to replace the Administrative Agent, (ii) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender, (iii) in the event of a replacement of a Nonconsenting Lender or a Lender to which the Borrower becomes obligated to pay additional amounts under one of the subsections described in clause (a) above, in order for the Borrower to be entitled to replace such a Lender, such replacement must take place no later than 180 days after (A) the date the Nonconsenting Lender shall have notified the Borrower and the Administrative Agent of its failure to agree to any requested consent, waiver or amendment or (B) the Lender shall have demanded payment of additional amounts under one of the subsections described in clause (a) above, as the case may be, and (iv) in no event shall the Lender hereby replaced be required to pay or surrender to its replacement Lender or other entity any of the fees received by such Lender hereby replaced pursuant to this Agreement. In the case of a replacement of a Lender to which the Borrower becomes obligated to pay additional amounts pursuant to this subsection 2.17, the Borrower shall pay such additional amounts to such Lender prior to such Lender being replaced and the payment of such additional amounts shall be a condition to the replacement of such Lender. In the event that (x) the Borrower or the Administrative Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Credit Documents or to agree to any amendment thereto, (y) the consent, waiver or amendment in question requires the agreement of all Lenders in accordance with the terms of subsection 10.1 and (z) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a "Nonconsenting Lender." 2.18 Certain Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the non-refundable fees at the times and in the amounts as set forth in the Fee Letter. 45 2.19 Certain Rules Relating to the Payment of Additional Amounts. ------------------------------------------------------------ (a) Upon the request, and at the expense, of the Borrower, each Lender to which the Borrower is required to pay any additional amount pursuant to subsection 2.14 or 2.15 shall reasonably afford the Borrower the opportunity to contest, and reasonably cooperate with the Borrower in contesting, the imposition of any Non-Excluded Taxes or other amounts giving rise to such payment; provided that (i) such Lender shall not be required to afford the Borrower the opportunity to so contest unless the Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse such Lender for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with the Borrower in contesting the imposition of such Non-Excluded Taxes. (b) Each Lender agrees that if it makes any demand for payment under subsection 2.14 or 2.15(a), or if any adoption or change of the type described in subsection 2.13 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its reasonable discretion) to designate a different lending office if the making of such a designation would allow the Lender to continue to make and maintain Eurodollar Loans and would reduce or obviate the need for the Borrower to make payments under subsection 2.14 or 2.15(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.13. SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. --------------- (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the Revolving Credit Lenders set forth in subsection 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (x) the L/C Obligations would exceed the Revolving Credit Commitment or (y) the Available Commitment with respect to Revolving Credit Loans of all Revolving Credit Lenders less the aggregate principal amount of the Swing Line Loans then outstanding would be less than zero. (b) Each Domestic L/C shall (i) be denominated in Dollars, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods and (iii) expire no later than the fifth Business Day prior to the Termination Date. (c) Each Foreign L/C shall (i) be denominated in an Alternative Currency, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods, and (iii) expire no later than the fifth Business Day prior to the Termination Date. For 46 purposes of this Agreement, the amount deemed outstanding under each Foreign L/C at any time, and the amount of the Borrower's Reimbursement Obligations under subsection 3.5 for any amounts paid by the Issuing Lender in connection with any Foreign L/C, shall be the Dollar Equivalent, as determined on the most recent Calculation Date, of (x) such Letter of Credit or (y) the Reimbursement Amount (as defined in Subsection 3.5(a)), as applicable. (d) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, Domestic L/Cs shall also be subject to the laws of the State of New York. (e) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if (i) such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law or any policies of the Issuing Lender or (ii) in the case of any Foreign L/C, it has determined that it cannot provide such Letter of Credit in the applicable Alternative Currency. 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit at any time prior to the fifth Business Day prior to the Termination Date by delivering to the Issuing Lender with a copy to the Administrative Agent at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower and the Administrative Agent (with copies for each Lender) promptly following the issuance thereof. 3.3 Fees, Commissions and Other Charges. ------------------------------------ (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit fee with respect to each Letter of Credit, computed for the period from and including the date of issuance of such Letter of Credit to the expiration date of such Letter of Credit at a rate per annum equal to (i) in the case of any such Letter of Credit issued as a Performance L/C, one-half (1/2) of the Applicable Margin then in effect for Eurodollar Loans, of the Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding and (ii) in the case of any other Letter of Credit (except for the type described in clause (i) above), the Applicable Margin then in effect for Eurodollar Loans, of the Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding, payable, in each such case, in arrears on each L/C Fee Payment Date and on the Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit 47 is outstanding. Such fees shall be payable to the Administrative Agent to be shared ratably among the Revolving Credit Lenders in accordance with their respective Commitment Percentages. In addition, the Borrower shall pay to the Issuing Lender, for its sole account, a fee equal to 0.125% per annum of the Dollar Equivalent of the aggregate face amount of all outstanding Letters of Credit payable quarterly in arrears on each L/C Fee Payment Date and on the Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit is outstanding. (b) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the relevant L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4 L/C Participation. ------------------ (a) The Issuing Lender irrevocably agrees to sell and hereby sells to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Commitment Percentage from time to time in effect in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement or any such reimbursement payment received by the Issuing Lender is avoided or required to be returned in accordance with applicable law, such L/C Participant shall pay to the Issuing Lender upon demand in Dollars at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's then Commitment Percentage of the Dollar Equivalent of the amount of such draft (determined on the date such draft is paid), or any part thereof, which is not so indefeasibly reimbursed; provided that, if such demand is made prior to 11:00 A.M., New York City time, on a Business Day, such L/C Participant shall make such payment to the Issuing Lender prior to the end of such Business Day and otherwise such L/C Participant shall make such payment on the next succeeding Business Day. (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to subsection 3.4(a) in respect of any portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate, as quoted by the Issuing Lender, during the period from and including the 48 date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.4(a) is not in fact made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will, if such payment is received prior to 11:00 A.M., New York City time, on a Business Day, distribute to such L/C Participant its pro rata share thereof prior to the end of such Business Day and otherwise the Issuing Lender will distribute such payment on the next succeeding Business Day; provided, however, that in the event that any such payment received by the Issuing Lender and distributed to the L/C Participants shall be required to be returned by the Issuing Lender, each such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 3.5 Reimbursement Obligation of the Borrower. ----------------------------------------- (a) The Borrower agrees to reimburse the Issuing Lender on the same Business Day on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender provided such notice is received by 1:00 P.M., New York City time, on such Business Day, and the next Business Day if such notice is received after such time. The Issuing Lender shall provide notice to the Borrower on each Business Day on which a draft is presented indicating the Dollar Equivalent of the amount of (i) such draft so paid (and, in the case of a Foreign L/C, the amount of such draft so paid stated in the applicable Alternative Currency) and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment ((i) and (ii) collectively with any interest accruing pursuant to paragraph (b) below, the "Reimbursement Amount"). Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds; provided, that, with respect to any Reimbursement Obligations of the Borrower arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. (b) Interest shall be payable on the Dollar Equivalent of any and all amounts remaining unpaid by the Borrower under this subsection from the date a draft presented under any Letter of Credit is paid by the Issuing Lender until payment in full (i) at the rate which would 49 be payable on any Loans that are Base Rate Loans at such time until such payment is required to be made pursuant to subsection 3.5(a), and (ii) thereafter, at the rate which would be payable on any Loans that are Base Rate Loans at such time which were then overdue. (c) For the avoidance of doubt, subject to the provisos in the third sentence of subsection 2.12(a) and the last sentence of subsection 3.5(a) of this Agreement, all payments due from the Borrower hereunder in respect of Foreign L/Cs (and Reimbursement Obligations in connection therewith) shall be made in Dollars as provided in subsection 2.12 of this Agreement. 3.6 Obligations Absolute. --------------------- (a) The Borrower's obligations under subsection 3.5(a) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any L/C Participant or any beneficiary of a Letter of Credit. (b) The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged (unless the Issuing Lender has knowledge of such invalidity, fraud or forgery), (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred, or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) Neither the Issuing Lender nor any L/C Participant shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower and the Administrative Agent of the date and the Dollar Equivalent of the amount thereof (and, in the case of a Foreign L/C, the amount thereof stated in the applicable Alternative Currency). If any draft shall be presented for payment under any Letter of Credit, the responsibility of the Issuing Lender to the Borrower in connection with such draft shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including 50 each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. 3.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall govern and control. 3.9 Determination of Exchange Rate. On each Calculation Date with respect to each outstanding Foreign L/C, the Issuing Lender shall determine the Exchange Rate as of such Calculation Date with respect to the applicable Alternative Currency and shall promptly notify the Administrative Agent and the Borrower thereof and of the Dollar Equivalent of all Foreign L/Cs outstanding on such Calculation Date. The Exchange Rate so determined shall become effective on such Calculation Date and shall remain effective until the next succeeding Calculation Date. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents, the Issuing Lender, the Swing Line Lender and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Agents, the Issuing Lender, the Swing Line Lender and each Lender that: 4.1 Financial Condition. The audited consolidated balance sheets at December 31, 2000 and the related statements of income and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, certified by PricewaterhouseCoopers L.L.P. have been delivered to the Agents and the Lenders and have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited financial statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. 4.2 No Change. Since December 31, 2000, there has been no development, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of Holdings, the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that 51 the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. Each of Holdings, the Borrower and its Subsidiaries has the corporate power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of such Credit Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower and each other Credit Party is a party, except those referred to in subsections 4.17 and 6.12 and those set forth on Schedule 4.4. This Agreement has been, and each other Credit Document will be, duly executed and delivered on behalf of the Borrower and each other Credit Party. This Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Credit Party thereto enforceable against each such Credit Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.5 No Legal Bar. Except as set forth on Schedule 4.5 or as could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of each Credit Document, the borrowing and use of the proceeds of the Loans and the consummation of the transactions contemplated by the Credit Documents: (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon Holdings, the Borrower or any Subsidiary of the Borrower or any of their respective properties or assets and (b) will not result in the creation or imposition of any Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations, except for the Liens arising under the Pledge Agreements. 4.6 No Material Litigation. Except as set forth on Schedule 4.6, no litigation by, investigation by, or proceeding of or before any arbitrator or any Governmental Authority is pending or, to the knowledge of the Borrower, overtly threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues with respect to any Credit Document or any of the transactions contemplated hereby or thereby or which could reasonably be expected to have a Material Adverse Effect. 4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries (i) has good record and insurable title in fee simple to, or a valid leasehold interest 52 in, all its material real property, (ii) has good title to, or a valid leasehold interest in, all its other material property and (iii) none of such property in clauses (i) and (ii) is or shall be subject to any Lien except as permitted by subsection 7.3. 4.9 Intellectual Property. Holdings, the Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). To the best of the Borrower's knowledge, and except as set forth on Schedule 4.9, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim which could reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by Holdings, the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 Taxes. Except as set forth on Schedule 4.10, each of Holdings, the Borrower and its Subsidiaries has filed or caused to be filed all material tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 4.12 ERISA. The Borrower has provided to the Agents a true and correct copy of all agreements, arrangements and understandings relating to the transfer of Plans from Lockheed to the Borrower (the "Transfer Agreements"). The Transfer Agreements are in full force and effect and have not been waived or modified without the consent of the Agents (which shall not be unreasonably withheld) except to the extent any such waiver or modification, singly or in the aggregate, could not be reasonably expected to have a Material Adverse Effect. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no Reportable Event has occurred with respect to any Single Employer Plan, all contributions required to be made with respect to a Plan have been timely made; none of the Borrower or any of its Subsidiaries nor any Commonly Controlled Entity has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or expects to incur any liability (including any indirect, contingent or secondary liability) under any of the 53 foregoing Sections with respect to any Plan; no termination of, or institution of proceedings to terminate or appoint a trustee to administer, a Single Employer Plan has occurred; and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code (except that with respect to any Multiemployer Plan, such representation is deemed made only to the knowledge of the Borrower). No "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA), extension of any amortization period (within the meaning of Section 412 of the Code) or Lien in favor of the PBGC or a Plan has arisen or has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan. As of the last annual valuation date prior to the date on which this representation is made or deemed made, the fair market value of the assets available for benefits under each Single Employer Plan did not exceed the actuarial present value of all accumulated benefit obligations under such Plan by more than $20,000,000, all as determined in accordance with Statement of Financial Accounting Standards No. 87. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan for which there is any outstanding liability, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made in an amount which would be reasonably likely to have a Material Adverse Effect. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. 4.13 Investment Company Act; Other Regulations. None of the Borrower or 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. None of the Borrower or any of its subsidiaries is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 4.14 Subsidiaries. The Subsidiaries of the Borrower and their respective jurisdictions of incorporation shall be as set forth on Schedule 4.14. 4.15 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower (i) to pay fees and expenses related to the preparation and negotiation of this Agreement and the other Credit Documents, (ii) to refinance and/or repay all Indebtedness outstanding under the New 364-Day Credit Agreement, and (iii) for working capital, capital expenditures and other lawful corporate purposes, including, without limitation, the making of Investments permitted under subsection 7.9. 4.16 Environmental Matters. Except insofar as any exception to any of the following, or any aggregation of such exceptions, is not reasonably likely to result in a Material Adverse Effect: (a) The facilities and properties owned, leased or operated Holdings, by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) 54 constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law. (b) None of Holdings, the Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which Holdings, the Borrower or any Subsidiary is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (e) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of Holdings, the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Environmental Laws. (f) The Properties and all operations at the Properties are in compliance, and have in the last 3 years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Environmental Law with respect to the Properties or the business operated by Holdings, the Borrower or any of its Subsidiaries (the "Business") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (g) Holdings, the Borrower and its Subsidiaries hold and are in compliance with all Environmental Permits necessary for their operations. 4.17 Collateral Documents. Upon execution and delivery thereof by the parties thereto, each Pledge Agreement will be effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in the pledged stock described therein and, when stock certificates representing or constituting the pledged stock described therein are delivered to the Administrative Agent, together with undated stock powers 55 executed in blank therefor, such security interest shall, subject to the existence of Permitted Liens, constitute a perfected first lien on, and security interest in, all right, title and interest of the pledgor party thereto in the pledged stock described therein. 4.18 Accuracy and Completeness of Information. No fact is known to Holdings, the Borrower or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been disclosed to the Lenders by Holdings, the Borrower or its Subsidiaries in writing prior to the date hereof. Neither Holdings, the Borrower nor any Subsidiary of the Borrower is aware of any material liability of the Borrower or any of its Subsidiaries which is not fully disclosed in the most recent financial statements delivered to the Agents and Lenders pursuant to subsections 4.1 and 6.1 hereto. 4.19 Labor Matters. There are no strikes pending or, to the Borrower's knowledge, overtly threatened against Holdings, the Borrower or any of its Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of Holdings, the Borrower and each of its Subsidiaries (and their predecessors) have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, or in the aggregate, be reasonably expected to have a Material Adverse Effect. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Effectiveness. This Agreement shall not be effective until the following conditions precedent have been satisfied or waived in writing by the Administrative Agent and the Requisite Class Lenders: (a) Credit Documents. The Administrative Agent shall have received (i) this Agreement, (ii) the Guarantees and (iii) the Pledge Agreements, in each case executed, duly acknowledged and delivered by duly authorized officers of each party thereto, with a counterpart or a conformed copy for each Lender. Notwithstanding the foregoing, no Immaterial Subsidiary or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the capital stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. (b) Fees and Expenses. The Agents, the Arrangers and the Lenders shall have received all fees, expenses and other consideration required to be paid on or before the Closing Date and all attorneys fees and disbursements incurred by the Agents in connection with this Agreement (for which invoices have been furnished to Borrower) shall have been paid on or before the Closing Date. (c) Good Standing Certificates. The Administrative Agent shall have received certificates of good standing for each Credit Party issued by the Secretary of State (or other relevant governmental officers) of the jurisdiction of incorporation of each Credit Party. 56 (d) Consents, Authorizations and Filings, Etc. All consents, authorizations and filings, if any, required in connection with the execution, delivery and performance by the Credit Parties, and the validity and enforceability against the Credit Parties, of the Credit Documents to which any of them is a party, shall have been obtained or made, and such consents, authorizations and filings shall be in full force and effect, except such consents, authorizations and filings, the failure to obtain which would not have a Material Adverse Effect. (e) Insurance. The Lenders shall have received (i) a reasonably satisfactory schedule describing all insurance maintained by the Borrower and its Subsidiaries pursuant to subsection 6.5, and (ii) binders (or other customary evidence as to the obtaining and maintenance by the Borrower and its Subsidiaries of such insurance) for each policy set forth on such schedule insuring against casualty and other usual and customary risks. (f) Litigation. On the Closing Date, there shall be no actions, suits or proceedings pending or threatened in any court or before any arbitrator or Governmental Authority against any Credit Party (a) with respect to this Agreement or any other Credit Document or any Transaction Document or the transactions contemplated hereby or thereby or the ability of any Credit Party to perform their respective obligations under the Credit Documents or (b) which the Agents or the Required Lenders shall determine could reasonably be expected to have a Material Adverse Effect. (g) Borrowing Certificate. If any Loan is to be requested on the Closing Date, the Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit D, with appropriate insertions and attachments, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (h) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, (ii) the borrowings contemplated hereunder, and (iii) the stock pledges pursuant to the Borrower Pledge Agreement, certified by the Secretary or an Assistant Secretary of the Borrower as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (i) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Credit Document reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. 57 (j) Corporate Proceedings of Other Credit Parties. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Credit Party (other than the Borrower) authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, and (ii) the granting by it of the Liens created pursuant to the Pledge Agreements to which it is a party, certified by the Secretary or an Assistant Secretary of each such Credit Party as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (k) Credit Party Incumbency Certificates. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Credit Party (other than the Borrower), dated the Closing Date, as to the incumbency and signature of the officers of such Credit Party executing any Credit Document, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Credit Party. (l) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Credit Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the such Credit Party. (m) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender the executed legal opinion of each of Simpson Thacher and Bartlett, special counsel to the Credit Parties, and Christopher C. Cambria, Vice President - General Counsel and Secretary of the Borrower and counsel to the other Credit Parties, substantially in the form of Exhibits C-1 and C-2, respectively. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Agents may reasonably require. (n) Pledged Stock; Stock Powers. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to each of the Pledge Agreements together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. (o) Projections. Each Lender shall have received financial projections of the Borrower in form and substance reasonably satisfactory to the Agents prepared by the Borrower. (p) No Default. No Default or Event of Default shall have occurred and be continuing. (q) Termination of New 364-Day Credit Agreement. Borrower shall have caused the payment in full of all Indebtedness outstanding under and the termination of all commitments in respect of that certain New 364-Day Credit Agreement dated as of April 24, 2000, among Borrower, BOA as administrative agent, the other parties named as agents therein 58 and the lenders party thereto (as amended, supplemented, restated or otherwise modified, from time to time, the "New 364-Day Credit Agreement"). (r) Closing Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, certifying that as of the Closing Date, no Liens exist upon any Credit Parties' assets except for Liens permitted pursuant to subsection 7.3. (s) Facility B Credit Agreement. All conditions set forth in clauses (a) through (r) of subsection 5.1 of the Facility B Credit Agreement shall have been satisfied or waived in writing by the Facility B Lenders required to effect a waiver of such condition. 5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit (including the issuance of any Letter of Credit) requested to be provided by it on any date (including, without limitation, its initial Loan and Letter(s) of Credit but excluding Revolving Credit Loans made to repay Refunded Swing Line Loans) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Credit Party in or pursuant to the Credit Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for any representation and warranty which is expressly made as of an earlier date, which representation and warranty shall have been true and correct in all material respects as of such earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or will occur or exist after giving effect to the extensions of credit requested to be made on such date. Borrower shall not be in violation of Section 4.09 (Incurrence of Indebtedness and Issuance of Preferred Stock) of any of the Original Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture on such date nor will such a violation occur or exist after giving effect to the extensions of credit requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be satisfactory in form and substance to the Agents, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by, and each Letter of Credit issued on behalf of, the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. 59 SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or any Agent hereunder or under any other Credit Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 6.1 SEC Filings. The Borrower will file on a timely basis with the SEC, to the extent such filings are accepted by the SEC and whether or not the Borrower has a class of securities registered under the Exchange Act, the annual reports, quarterly reports (including with respect to the fourth quarter of each fiscal year) and other documents that the Borrower would be required to file if the Borrower were subject to section 13(a) or 15(d) of the Exchange Act. The Borrower will also be required (i) to deliver to the Administrative Agent and each Lender, copies of such reports and documents within five days after the date on which the Borrower files such reports and documents with the SEC or the date on which the Borrower would be required to file such reports and documents if the Borrower were so required and (ii) if filing such reports and documents with the SEC is not accepted by the SEC or is prohibited under the Exchange Act, to promptly notify the Administrative Agent in writing of the occurrence of any such event and to supply at the Borrower's cost copies of such reports and documents to the Administrative Agent and any Lender upon request. All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Administrative Agent with copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of the independent certified public accountants reporting on such financial statements stating that, in performing their audit, nothing came to their attention that caused them to believe that the Borrower failed to comply with the provisions of subsection 7.1, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of a Responsible Officer stating that, to the best of such Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.10 with respect thereto) and (ii) such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (c) concurrently with the delivery of financial statements pursuant to subsection 6.1, a certificate of a Responsible Officer of the Borrower setting forth, in reasonable detail, the computations, as applicable, of (i) the Debt Ratio and (ii) the financial covenants set forth in subsection 7.1, as of such last day or for the fiscal period then ended, as the case may be; 60 (d) not later than 60 days after the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Officer has no reason to believe they are incorrect or misleading in any material respect; (e) within five days after the same are sent, copies of all financial statements and reports which the Borrower or Holdings sends to its stockholders; and (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Taxes and Material Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its (i) material taxes, fees, assessments, and other governmental charges and (ii) other material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law. Except as permitted by subsection 7.5 and subsection 7.6, (a) continue to engage in business of the same general type as now conducted by it; (b) preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; (c) keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear and damage by fire and/or other casualty or taking by condemnation excepted) except if (i) in the reasonable business judgment of the Borrower or such Subsidiary, as the case may be, it is in its best economic interest not to preserve and maintain such rights, privileges or franchises, and (ii) such failure to preserve and maintain such privileges, rights or franchises would not materially adversely affect the rights of the Lenders hereunder or the value of the Collateral, and except as otherwise permitted pursuant to subsection 7.5; and (d) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.5 Insurance. The Borrower will, and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies of similar stature engaged in the same or similar businesses operating in the same or similar locations. 6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records (except to the extent any such access is restricted by a Requirement of Law) at any reasonable time on a Business Day and as 61 often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that the Administrative Agent or such Lender shall notify the Borrower prior to any contact with such accountants and give the Borrower the opportunity to participate in such discussions; provided, further, that the Borrower shall notify the Administrative Agent of any such visits, inspections or discussions prior to each occurrence thereof. 6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries, (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect or (iii) any material asset sale (describing in reasonable detail the assets sold, the consideration received therefor and the proposed use of the proceeds thereof); (c) any other litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $7,500,000 or more and not covered by insurance or in which injunctive or similar relief is sought; and (d) the following events, as soon as possible and in any event within 45 days after the Borrower knows or has reason to know thereof: (i) the incurrence of an accumulated funding deficiency or the filing of an application to the Secretary of the Treasury 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 with respect to a Plan, the creation of any Lien in favor of the PBGC or a Plan, the occurrence of any "Trigger Event" (as defined in the Transfer Agreements) and the reassumption by Lockheed of sponsorship of any Single Employer Plan, (ii) except where such event or liability could not reasonably be expected to have a Material Adverse Effect, the occurrence or expected occurrence of any Reportable Event with respect to any Plan (other than a Multiple Employer Plan), or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, or a failure to make any required contribution to a Plan, (iii) the institution of proceedings by the PBGC with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan or (iv) except as could not reasonably be expected to have a Material Adverse Effect, the institution of proceedings or the taking of any other action with respect to the withdrawal from or termination of any Single Employer Plan; Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 62 6.8 Environmental Laws. ------------------- (a) (i) Comply in all material respects with all Environmental Laws applicable to it, and obtain, comply in all material respects with and maintain any and all material Environmental Permits necessary for its operations as conducted and as planned; and (ii) take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply in all material respects with all applicable Environmental Laws, and obtain, comply in all material respects with and maintain any and all material Environmental Permits, applicable to any of them. Notwithstanding the foregoing, upon learning of any actual or suspected noncompliance, the Borrower or one or more of its Subsidiaries, as appropriate, shall promptly undertake all reasonable efforts to achieve material compliance. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions in each case required under applicable Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding applicable Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 6.9 Further Assurances. Upon the reasonable request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed and delivered any and all documents which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 6.10 Additional Collateral. ---------------------- (a) With respect to any Capital Stock of any newly created or acquired Subsidiary or any newly issued Capital Stock of any existing Subsidiary acquired after the Original Closing Date by the Borrower or any of its Subsidiaries that is intended to be subject to the Lien created by any of the Pledge Agreements but which is not so subject, promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Pledge Agreements or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such Capital Stock, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including delivering all such original certificates evidencing such Capital Stock to the Administrative Agent together with undated stock powers executed in blank therefor, and (iii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, the Borrower shall not be required to grant to the Administrative Agent a Lien upon the Capital Stock of any Immaterial Subsidiary; provided that if an Immaterial Subsidiary ceases to be an Immaterial Subsidiary, Borrower shall within thirty (30) days of such event comply with the foregoing requirements. 63 (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary, Foreign Subsidiary or TCAS Subsidiary (except as provided below) of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder; provided, that if, after the consummation of any sale of a portion of Capital Stock of the TCAS Subsidiary, the TCAS Subsidiary thereafter becomes a Wholly Owned Subsidiary, then the TCAS Subsidiary shall become a party to the Subsidiary Guarantee and Subsidiary Pledge Agreement and Borrower shall promptly (and in any event within 30 days after such event occurs) comply with the requirements of this subsection 6.10(b) with respect to the TCAS Subsidiary. 6.11 Foreign Jurisdictions. Maintain due qualification as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.12 Government Contracts. The Borrower and its Subsidiaries shall apply for and maintain all material facility security clearances and personnel security clearances required of the Borrower under all Requirements of Law to perform and deliver under any and all Government Contracts and as otherwise may be necessary to continue to perform the business of the Borrower and its Subsidiaries. 6.13 TCAS Subsidiary. The Borrower shall at all times own, directly or indirectly, at least fifty-one percent (51%) of the Capital Stock of the TCAS Subsidiary; provided, that Borrower shall be permitted to sell all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower without violating the terms of this subsection so long as the Net Proceeds resulting therefrom are applied in accordance with the terms of subsection 2.6(b)(ii) and (iii) hereof. 6.14 Required Distributions for TCAS Subsidiary. To the extent not prohibited under applicable law, the Borrower shall cause the TCAS Subsidiary to distribute to the holders of Capital Stock of the TCAS Subsidiary not later than the 50th day after each fiscal quarter of Borrower for the immediately preceding fiscal quarter (i) all amounts necessary to fund tax obligations arising by virtue of the ownership of such Capital Stock ("Tax Distributions") and (ii) after giving effect to the funding of such quarterly Tax Distributions, all unrestricted cash on hand not needed to fund the anticipated working capital and capital expenditure needs of the TCAS Subsidiary. 64 SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any portion of the Commitments remain in effect or any amount is owing to any Lender or any of the Agents hereunder or under any other Credit Document, the Borrower shall not, and (except with respect to subsection 7.1), shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Financial Condition Covenants. ------------------------------ (a) Debt Ratio. Permit the Debt Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite the date on which such fiscal quarter ends: Fiscal Quarter Ending Ratio --------------------- ----- June 30, 2001 4.50 September 30, 2001 4.50 December 31, 2001 4.50 March 31, 2002 4.50 June 30, 2002 4.50 September 30, 2002 4.50 December 31, 2002 4.25 March 31, 2003 4.25 June 30, 2003 4.25 September 30, 2003 4.25 December 31, 2003 4.00 March 31, 2004 4.00 June 30, 2004 4.00 September 30, 2004 4.00 December 31, 2004 and thereafter 3.50 (b) Interest Coverage. Permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense at the last day of any fiscal quarter set forth below to be less than the ratio set forth opposite the date on which such fiscal quarter ends (such ratio, the "Interest Coverage Ratio"): Fiscal Quarter Ending Interest Coverage Ratio --------------------- ----------------------- June 30, 2001 2.50 September 30, 2001 2.50 December 31, 2001 2.50 March 31, 2002 2.50 June 30, 2002 2.50 September 30, 2002 2.50 65 December 31, 2002 2.75 March 31, 2003 2.75 June 30, 2003 2.75 September 30, 2003 2.75 December 31, 2003 and thereafter 3.00 7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrower under this Agreement and the Facility B Credit Agreement and the Facility C Credit Agreement (if Facility C exists); (b) Indebtedness of the Borrower incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding $50,000,000 at any time outstanding; (c) Indebtedness assumed in connection with any Investment permitted pursuant to subsection 7.9(k) hereof; (d) additional Indebtedness of the Borrower and/or its Subsidiaries not exceeding $75,000,000 in aggregate principal amount at any one time outstanding (of which up to $50,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); (e) Indebtedness of the Borrower or any Subsidiary in respect of any Subordinated Debt; (f) the Indebtedness of the Borrower and its Subsidiaries outstanding on the Closing Date and reflected on Schedule 7.2(f), and refundings or refinancings thereof, provided that no such refunding or refinancing shall shorten the maturity or increase the principal amount of the original Indebtedness; (g) Guarantee Obligations permitted by subsection 7.4; (h) the incurrence by any Credit Party of intercompany Indebtedness between or among the Credit Parties; provided, however, that if the Borrower is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations; (i) Indebtedness secured by Permitted Liens; (j) Indebtedness of the Borrower or any of its Subsidiaries (other than as described under subsection 7.2(a) above) incurred in connection with the issuance of any surety bonds, performance letters of credit or other similar performance bonds required pursuant to any Contractual Obligation or Requirement of Law to which Borrower or any of its Subsidiaries are subject in an aggregate principal amount not exceeding $100,000,000 at any time outstanding; and 66 (k) Indebtedness of the Borrower in respect of any Interest Rate Agreements. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances previously or hereafter incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by subsection 7.2(f), provided that no such Lien is expanded to cover any additional property (other than after-acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) after the Closing Date and that the amount of Indebtedness secured thereby is not increased and extensions, renewals or replacements thereof provided that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the original Indebtedness; and provided, further, that the assets of the Borrower and its Subsidiaries encumbered by such Liens are existing equipment and other existing tangible assets; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsection 7.2(b) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) and (iii) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property at the time it was acquired; 67 (h) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 7.2(c), provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not expanded to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Borrower and all Subsidiaries) $50,000,000 in aggregate amount at any time outstanding; (j) Liens created pursuant to the Pledge Agreements; (k) Liens on the property of the Borrower or any of its Subsidiaries in favor of landlords securing licenses, subleases or leases entered into in the ordinary course of business; (l) licenses, leases or subleases permitted hereunder granted to other Persons not interfering in any material respect in the business of the Borrower or any of its Subsidiaries; (m) so long as no Default or Event of Default shall have occurred and be continuing under clause (f) of Section 8, attachment or judgment Liens in an aggregate amount outstanding at any one time not in excess of $7,500,000; (n) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower, or any of its subsidiaries in the ordinary course of business; and (o) Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry. 7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 7.4 and extensions, renewals and replacements thereof, provided, however, that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the Indebtedness guaranteed by the original guarantee; (b) Guarantee Obligations of Holdings, Borrower or its Subsidiaries incurred after the date hereof in respect of an aggregate amount of obligations not to exceed $50,000,000 at any one time outstanding; (c) Guarantee Obligations of Holdings, Borrower or any Subsidiary in respect of any Subordinated Debt provided such Guarantee Obligations are subordinated to the 68 Obligations on terms no less favorable to the Lenders, Facility B Lenders and Facility C Lenders (if Facility C exists) than those governing the Subordinated Debt; (d) Guarantee Obligations under the Credit Documents and the Facility B Credit Documents and the Facility C Credit Documents (if Facility C exists); (e) L/C Obligations, Facility B L/C Obligations and Facility C L/C Obligations (if Facility C exists); (f) Guarantee Obligations of Holdings, Borrower or any Subsidiary in respect of obligations of a Subsidiary permitted to be incurred by such Subsidiary by this Agreement; provided, that so long as the TCAS Subsidiary is not a Wholly Owned Subsidiary, no Guarantee Obligations by Borrower or any Subsidiary in respect of obligations of the TCAS Subsidiary shall be permitted under this clause (f) in excess of $3,000,000 at any time; (g) Guarantee Obligations in respect of up to $300,000,000 principal amount of Convertible Securities issued by Holdings having an initial annual interest rate not in excess of 7% per annum which initial annual interest rate may be subject to subsequent adjustments in accordance with the terms of such Convertible Securities in the event of a Reset Transaction (the "Permitted Convertible Securities"). As used herein, a "Reset Transaction" shall have the meaning ascribed to such term in the Indenture governing the issuance of the Convertible Senior Subordinated Notes of Holdings due 2009 as in effect at the time of such issuance; and (h) Guarantee Obligations of Holdings or any Subsidiary of the Borrower in respect of obligations of Borrower permitted to be incurred by Borrower under this Agreement other than in respect of Indebtedness of Borrower permitted under subsection 7.2(e). 7.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporations); and (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary of the Borrower that is a Credit Party. 7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: 69 (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of any property or assets not otherwise permitted by this subsection 7.6; provided that the Net Proceeds thereof shall be applied pursuant to subsection 2.6(b)(ii); (c) as permitted pursuant to subsection 7.5(b); (d) the sale, lease, transfer or exchange of inventory in the ordinary course of business; (e) transfers resulting from any casualty or condemnation of property or assets; (f) intercompany sales or transfers of assets made in the ordinary course of business; (g) licenses, leases or subleases of tangible property in the ordinary course of business; (h) any consignment arrangements or similar arrangements for the sale of assets in the ordinary course of business; (i) the sale or discount of overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; and (j) the conveyance, sale, assignment or contribution to any new Subsidiary of the Borrower or any existing Subsidiary of the Borrower assets of the Borrower or any Subsidiary of the Borrower not exceeding five percent (5%) of the Consolidated Total Assets. 7.7 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary other than Permitted Stock Payments. 7.8 Designated Senior Debt. Designate any Indebtedness or other obligation, other than Indebtedness under the Credit Documents, the Facility B Credit Documents and the Facility C Credit Documents (if Facility C exists) as "Designated Senior Debt," as such term is defined in the Original Indenture as in effect on April 30, 1997, the New Subordinated Debt Indenture as in effect on May 22, 1998 or December 1998 Subordinated Debt Indenture as in effect on the December 8, 1998, or any comparable designation that confers upon the holders of such Indebtedness or other obligation (or any Person acting on their behalf) the right to initiate 70 blockage periods under the Original Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture or any other Indebtedness or other obligation of the Borrower and its Subsidiaries (other than as a result of a payment default). 7.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person ("Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) loans to officers of the Borrower listed on Schedule 7.9(c) in aggregate principal amounts outstanding not to exceed the respective amounts set forth for such officers on said Schedule; (d) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $1,000,000 at any one time outstanding; (e) Investments by the Borrower in its Subsidiaries that are Credit Parties and investments by such Subsidiaries in the Borrower and in other Subsidiaries that are Credit Parties; (f) so long as no Event of Default has occurred and is continuing, loans by the Borrower to its employees (other than any Principals or their Related Parties) in connection with (i) management incentive plans, (ii) management stock purchase plans, and (iii) obligations of employee option-holders of Storm Control Systems, Inc. to fund the exercise of such options, which loans in (i), (ii) and (iii) in the aggregate do not exceed $5,000,000; (g) Investments in existence on the Original Closing Date and extensions, renewals, modifications or restatements or replacements thereof; (h) promissory notes and other similar non-cash consideration received by the Borrower and its Subsidiaries in connection with the dispositions permitted by subsection 7.6(b); (i) Investments permitted by subsection 7.6(b) and subsection 7.6(j); (j) Investments (including debt obligations and Capital Stock) 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; (k) Investments made at any time from and after the Original Closing Date to acquire (i) all or any portion of the Capital Stock, or all or any portion of the assets, of any 71 Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business, or (ii) all or substantially all of the assets of any division of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business; provided, that, (a) if such Investment is an acquisition of a majority of the Voting Stock of any Person, such Person's board of directors or similar governing body shall have approved such acquisition and (b) at the time of each such Investment described above in clauses (i) and (ii) (both before and after giving effect to such Investment), there shall exist no Default or Event of Default; provided, further, that in connection with each individual, or series of related, Investments made pursuant to this subsection 7.9(k) exceeding $50,000,000, the Borrower shall deliver to the Administrative Agent, no later than two (2) Business Days after the consummation of such Investment or Investments, a certificate of a Responsible Officer that certifies that no Default or Event of Default has occurred and is continuing or will be caused as a result of consummating such proposed Investment; (l) Investments consisting of intercompany advances by Borrower to Holdings to fund interest or dividend expense in respect of the Permitted Convertible Securities issued by Holdings, provided that such intercompany advances shall not, in any fiscal year, exceed an amount equal to the interest or dividends actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all Permitted Stock Payments funded pursuant to clause (D) of the definition thereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year; and (m) solely with respect to the TCAS Subsidiary (I) Investments by Borrower in the TCAS Subsidiary consisting of a contribution of all assets related to the TCAS Acquired Company occurring substantially concurrent with Borrower's sale of a portion of the Capital Stock of the TCAS Subsidiary to another Person and (II) at any time the TCAS Subsidiary is not a Wholly Owned Subsidiary, the aggregate amount of Investments by Borrower or any other Subsidiaries in the TCAS Subsidiary at any time (other than and in addition to the contribution to the TCAS Subsidiary by Borrower of (x) the assets related to the TCAS Acquired Company in an amount not to exceed the product of (a) the final purchase price paid by Borrower for the TCAS Acquired Company pursuant to the TCAS Acquisition Documents, after giving effect to any post-closing purchase price adjustments required pursuant to such TCAS Acquisition Documents and (b) the Borrower's percentage ownership interest in the TCAS Subsidiary immediately following such transaction and (y) subject to the written consent of the Agents, which shall not be unreasonably withheld or delayed, cash for the ongoing operating needs of the TCAS Subsidiary funded within 3 months after the date the TCAS Subsidiary ceases to be a Wholly Owned Subsidiary), provided that such Investments do not at any time exceed the greater of (i) $17,000,000 or (ii) the sum of $10,000,000 plus an amount equal to ten percent (10%) of the aggregate cash distributions received by Borrower from the TCAS Subsidiary during the immediately preceding 12-month period. 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements. (a) Make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, any 72 Subordinated Debt or amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any such Subordinated Debt Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). (b) Amend its Constitutional Documents in any manner which could adversely affect the rights of the Lenders under the Credit Documents or their ability to enforce the same. (c) Modify or amend, or waive any provision or condition contained in, any of the Transaction Documents in any manner that could reasonably be expected to be adverse to the Lenders. 7.11 Limitation on Transactions with Affiliates. ------------------------------------------- (a) Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) otherwise permitted under this Agreement, (ii) in the ordinary course of the Borrower's or such Subsidiary's business and (iii) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. (b) In addition, notwithstanding the foregoing, the Borrower and its Subsidiaries shall be entitled to make the following payments and/or to enter into the following transactions: (i) the payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Borrower and Holdings; (ii) the employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; (iii) payments to directors and officers of the Borrower and its Subsidiaries in respect of the indemnification of such Persons in such respective capacities from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, as the case may be, pursuant to the Constitutional Documents or other corporate action of the Borrower or its Subsidiaries, respectively, or pursuant to applicable law; and (iv) transactions described in the Transaction Documents. 7.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary; provided that the 73 Borrower may enter into a sale and leaseback transaction if the Borrower could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction and (b) incurred a Lien to secure such Indebtedness, in each case in accordance with the restrictions contained in this Agreement and the other Credit Documents. 7.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. 7.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement, the Facility B Credit Agreement and the Facility C Credit Agreement (if Facility C exists), (b) the Subordinated Debt Documents, and (c) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary (other than an Immaterial Subsidiary), except for Similar Businesses. SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; (b) Any representation or warranty made or deemed made by the Borrower or any other Credit Party herein or in any other Credit Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (c) The Borrower or any other Credit Party shall default in the observance or performance of any agreement contained in Section 7 or subsection 6.7(a) of this Agreement, Section 4 of the Parent Guarantee, Section 4 of the Subsidiary Guarantee, Section 4 of the Parent Pledge Agreement, Section 4 of the Borrower Pledge Agreement, or Section 4 of the Subsidiary Pledge Agreement; (d) The Borrower or any other Credit Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; 74 (e) The Borrower or any of its Subsidiaries shall (i) default (x) in any payment of principal of or interest of any Indebtedness (other than the Loans, the L/C Obligations and any intercompany debt) or Interest Rate Agreement Obligations or (y) in the payment of any Guarantee Obligation (excluding any guaranties of the Obligations), beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation 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 beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless (i) the aggregate amount of Indebtedness, Interest Rate Agreement Obligations and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $15,000,000 and (ii) such default continues for a period in excess of 10 days; (f) (i) Holdings, the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against Holdings, Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with 75 respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan that is not in the ordinary course; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (h) One or more judgments or decrees shall be entered against Holdings, the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance (which coverage has been acknowledged by the appropriate insurers)) of $15,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; (i) (i) Any of the Pledge Agreements shall cease, for any reason, to be in full force and effect (unless released by the Administrative Agent at the direction of the requisite Lenders or as otherwise permitted under this Agreement or the other Credit Documents), or the Borrower or any other Credit Party which is a party to any of the Pledge Agreements shall so assert or (ii) the Lien created by any of the Pledge Agreements shall cease to be enforceable and of the same effect and priority purported to be created thereby (and, if such invalidity is such so as to be amenable to cure without materially disadvantaging the position of the Administrative Agent and the Lenders, as the case may be, as secured parties thereunder, the Credit Party shall have failed to cure such invalidity within 30 days after notice from the Administrative Agent); (j) The Guarantee Obligation of any Credit Party under the Credit Documents 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 Credit Party or any Person acting on behalf of any Credit Party, shall deny or disaffirm its obligations under such Guarantee Obligation; (k) There shall have occurred a Change in Control; or (l) An "Event of Default" as defined in the Facility B Credit Agreement and/or the Facility C Credit Agreement (if Facility C exists) shall have occurred and be continuing; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the 76 following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the Dollar Equivalent of the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants (and the benefit of each such "Issuing Lender" and the "L/C Participants" as defined in the Facility B Credit Agreement and the Facility C Credit Agreement, if Facility C exists), a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement, the Facility B Credit Agreement and the Facility C Credit Agreement (if Facility C exists), the other Credit Documents, the other Facility B Credit Documents and the Facility C Credit Documents (if Facility C exists). Amounts held in such cash collateral account shall be applied by the Administrative Agent in accordance with subsection 2.12 hereof. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants (and each applicable "Issuing Lender" and the "L/C Participants" as defined in the Facility B Credit Agreement and the Facility C Credit Agreement, if Facility C exists), such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account. EXCEPT AS EXPRESSLY PROVIDED ABOVE IN THIS SECTION, PRESENTMENT, DEMAND, PROTEST AND ALL OTHER NOTICES OF ANY KIND ARE HEREBY EXPRESSLY WAIVED. SECTION 9. THE AGENTS; THE ARRANGERS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints each of the Agents as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes each of the Agents, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, 77 functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any of the Agents. 9.2 Delegation of Duties. The Agents may execute any of their duties under this Agreement and the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Agents shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. None of the Agents shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Borrower. 9.4 Reliance by Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Except as expressly provided in this Agreement, the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that any Agent receives 78 such a notice, such Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Class Lenders; provided that unless and until such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders, the Facility B Lenders and the Facility C Lenders (if Facility C exists) taken as a whole. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by any of the Agents hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by any of the Agents to any Lender. Each Lender represents to each of the Agents that it has, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit worthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any of the Agents hereunder (or copies of which have been provided to the Administrative Agent pursuant to this Agreement), none of the Agents shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Lenders agree to indemnify each of the Agents in their respective capacities as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages with respect to all Types of Loans in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against any of the Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any of the Agents under or in connection with any of the foregoing provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. The 79 agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agents, in Their Individual Capacities. The Agents and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agents were not acting in such capacities hereunder and under the other Credit Documents. With respect to the Loans made or renewed by it and any Note issued to it or Loan Account maintained by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include the Agents in their individual capacities. 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall, unless a Default or Event of Default shall have occurred and be continuing, be approved by the Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. Similarly, the Syndication Agent and/or the Documentation Agent may resign as Syndication Agent and/or Documentation Agent, as the case may be, upon 30 days' notice to the Lenders. The procedure for replacement and effective date of resignation for the Syndication Agent and the Documentation Agent shall be identical to that provided above for the Administrative Agent. 9.10 The Arrangers and the Senior Managing Agents. Except as expressly set forth herein, each of the Arrangers and the Senior Managing Agents, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Credit Documents. 80 SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend any scheduled date of maturity of any Loan, extend the expiration of any Letter of Credit beyond the Termination Date, or reduce the stated rate or amount of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without the consent of each Lender affected thereby, or increase the commitment of any Lender or extend the expiry of the commitment of any Lender without the consent of such Lender, (ii) amend, modify or waive the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Credit Documents, in each case without the written consent of all the Lenders, (iii) release all or substantially all of the Collateral or release all or substantially all of the Credit Parties from their Guarantee Obligations under the Credit Documents without the consent of all Lenders, (iv) amend, modify or waive any provision of Section 9 without the written consent of the then Agents, (v) amend, modify or waive any provision of subsection 2.1(b), any other provision of this Agreement relating to the Swing Line Loans or the Swing Line Note, if any, without the written consent of the Swing Line Lender, or (vi) amend, modify or waive any provision of this Agreement or any other Credit Document which would directly and adversely affect the Arrangers or the Agents or the Issuing Lender or the Swing Line Lender without the written consent of the Arrangers, the Agents or the Issuing Lender or the Swing Line Lender, as the case may be. In addition to the foregoing, (A) no amendment, modification, termination or waiver of any provision of subsection 2.5, subsection 2.6 or subsection 2.12 which has the effect of changing any interim scheduled payments, voluntary or mandatory prepayments, the application of any scheduled payment or voluntary or mandatory prepayment, the application of proceeds of any Collateral or any Commitment reductions applicable to any Class (an "Affected Class") in a manner that disproportionately disadvantages such Class relative to the other Class shall be effective without the written concurrence of the Requisite Class Lenders of the Affected Class (it being understood and agreed that any amendment, modification, termination or waiver of any provision which only postpones or reduces any interim scheduled payment, voluntary or mandatory prepayment or Commitment reduction from those set forth in subsection 2.6 with respect to only one Class shall be deemed to not disproportionately disadvantage the other Class and, therefore, shall not require the consent of Requisite Class Lenders of such other Class), (B) no amendment, modification, termination or waiver of any provision of any Guarantee or Pledge Agreement shall be effective without the written concurrence of the Requisite Class Lenders for each Class, (C) no amendment, 81 modification, termination or waiver of any provision of subsection 2.1(a) which specifically requires the written consent of the Required Class Lenders shall be effective without the written concurrence of the Required Class Lenders of each Class; and (D) no amendment, modification or waiver with respect to any provision of this subsection 10.1 or to the definition of "Requisite Class Lenders" or "Required Class Lenders" shall be effective without the written concurrence of all Lenders, all Facility B Lenders and all Facility C Lenders (if Facility C exists). Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agents and the Issuing Lender and all future holders of the Loans. Any extension of a Letter of Credit by the Issuing Lender shall be treated hereunder as issuance of a new Letter of Credit. In the case of any waiver, the Borrower, the Lenders and the Agents and the Issuing Lender shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Administrative Agent, Swing Line Lender, Issuing Lender, the Syndication Agent and the Documentation Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: Holdings, the Borrower or any of its Subsidiaries: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, NY 10016 Attention: Robert LaPenta Fax: (212) 805-5470 with a copy to Attention: Christopher C. Cambria Fax: (212) 805-5494 82 The Administrative Agent: Addresses for notices of borrowing, prepayments and other administrative matters: Bank of America, N.A. 101 N. Tryon Street, 15th Floor Charlotte, NC 28255 Attention: Jennifer Thompson Fax: (704) 409-0024 Tel: (704) 388-1558 Addresses for all other notices (including with respect to amendments and waivers): Bank of America, N.A. 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Agency Management #10831 Liliana Claar, Vice President Fax: (415) 436-3425 Tel: (415) 436-2770 with a copy to: Bank of America, N.A. 335 Madison Avenue New York, NY 10017 Attention: Steve Aronowitz Fax: (212) 503-7066 Tel: (212) 503-7950 The Swing Line Lender: Bank of America, N.A. 231 South LaSalle Street Chicago, IL 60697 Attention: Renee Waller Fax: (312) 974-9626 Tel: (312) 828-3874 83 The Issuing Lender: Bank of America, N.A. 333 S. Beaudry Avenue, 19th Floor Los Angeles CA 90017-1486 Attention: Trade Operations Center - Standby Letters of Credit #22621 Sandra M. Leon, Vice President Fax: (213) 345-6694 Tel: (213) 345-5231 The Documentation Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 11th Floor New York, New York 10285 Attention: Andrew Keith Fax: (212) 526-0242 The Syndication Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 11th Floor New York, New York 10285 Attention: Andrew Keith Fax: (212) 526-0242 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.12 or 3.2 shall not be effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each of the Agents for all of their respective reasonable out-of-pocket costs and expenses 84 incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, charges and disbursements of a single counsel for the Lenders (in addition to any local counsel), (b) to pay or reimburse each Lender and each Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to any Agent, (c) to pay, indemnify, and hold each Lender and each Agent and each Issuing Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and each Arranger, each Agent and each Issuing Lender harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or the other Credit Documents or the use of the proceeds of the Loans in connection with the Transaction, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), it being understood that the Borrower shall have an obligation hereunder to the Lender or any Agent with respect to any indemnified liabilities incurred by any Agents, Arranger or the Issuing Lender or any Lender as a result of any Materials of Environmental Concern that are first manufactured, emitted, generated, treated, released, spilled, stored or disposed of on, at or from any Property or any violation of any Environmental Law, which in any case first occurs on or with respect to such Property (i) after the Property is transferred to any Agent, Arranger, Issuing Lender or any Lender or their successors or assigns by foreclosure sale, deed in lieu of foreclosure, or similar transfer or, following such transfer, (ii) in connection with, but prior to, the sale, leasing or other transfer of such Property by such Agent, Arranger, Issuing Lender, or any Lender or their successors or assigns to one or more third parties; provided, however, that the Borrower shall have no obligation hereunder to any Agent or the Issuing Lender or any Lender with respect to otherwise indemnified liabilities arising from the gross negligence or willful misconduct of such Agent or the Issuing Lender or any such Lender, or with respect to otherwise indemnified liabilities following the sale, leasing or other transfer of such Property to one or more third parties. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participation and Assignments. ------------------------------------------------------ (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns, except that the 85 Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender or any other interest of such Lender hereunder and under the other Credit Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Credit Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Credit Document except for those specified in clauses (i), (ii) and (iii) of the proviso to subsection 10.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.14, 2.15 and 2.16 with respect to its participation in the Letters of Credit, the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that in the case of subsection 2.15, such Participant shall have complied with the requirements of said subsection; provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender, any affiliate thereof or, in the case of Lender that is an investment fund which is regularly engaged in making, purchasing or investing in loans or securities (an "Investment Fund"), any other such Investment Fund which is under common management with such Lender, or, with the consent of the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender (which in each case shall not be unreasonably withheld), to an additional bank, Investment Fund or financial institution (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Credit Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit F, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) and delivered 86 to the Administrative Agent for its acceptance and recording in the Register with a copy to the Syndication Agent, provided that, in the case of any such assignment to an additional bank or financial institution, (A) either (x) such assignment is of all the rights and obligations of the assigning Lender or (y) the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments remaining with the assigning Lender are each not less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent) and (B) each Assignee which is a Non-U.S. Lender shall comply with the provisions of clause (A) of subsection 2.15(b) hereof, or, with the prior written consent of the Borrower, which shall not be unreasonably withheld, the provisions of clause (B) of subsection 2.15(b) hereof (and, in either case, with all of the other provisions of subsection 2.15(b) hereof). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (f) of this subsection, the consent of the Borrower shall not be required for any assignment which occurs at any time when any of the events described in clause (f) of Section 8 shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and Commitments of and principal amounts of the Loans of each Type owing to each Lender from time to time and the registered owners of the Obligations evidenced by the Notes and the Loan Accounts. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan, a Note or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan, Commitment or other obligation evidenced by a Note or a Loan Account shall be effective only upon appropriate entries with respect thereto being made in the Register, and prior to such recordation, all amounts owing to the assignor with respect thereto shall remain owing to the assignor. Any assignment or transfer of all or part of an Obligation evidenced by a Note shall be registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Obligation, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof, and thereupon one or more new Notes shall be issued to the designated Assignee, if requested, and the old Note shall be returned by the Administrative Agent to the Borrower marked "canceled." 87 (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (provided that no such payment shall be required whenever LCPI or BOA is the assigning Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. Following the effective date of any such Assignment and Acceptance, the Administrative Agent shall be entitled to update Schedule I hereto to reflect the then outstanding Commitments of each Lender whereupon such amended Schedule I shall be substituted for the pre-existing Schedule I and be deemed a part of this Agreement without any further action or consent of any party and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 10.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this subsection 10.6, any interest in this Agreement or any Loan is transferred to any Transferee which would be a Non-U.S. Lender upon the effectiveness of such transfer, the assigning Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the assigning Lender (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) that under applicable law and treaties no U.S. Taxes will be required to be withheld by the Administrative Agent, the Borrower or the assigning Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the assigning Lender (and, in the case of any Assignee registered in the Register, the Administrative Agent and the Borrower such Internal Revenue Service Forms required to be furnished pursuant to subsection 2.15(b) and (iii) to agree (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) to be bound by the provisions of subsection 2.15(b). (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (i) Notwithstanding any other provision contained in this Agreement or any other Credit Document to the contrary, (x) any Lender may assign all or any portion of the Loans held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by 88 such Federal Reserve Bank, provided that any payment in respect of such assigned Loans made by the Borrower to or for the account of the assigning or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect to such assigned Loans to the extent of such payments and (y) with the consent of the Administrative Agent (not to be unreasonably withheld), any Lender which is an Investment Fund may pledge all or any portion of its Loans to its trustee in support of its obligations to its trustee. No such assignment shall release the assigning Lender from its obligations hereunder. 10.7 Adjustments; Set-off. --------------------- (a) At any time that an Event of Default has occurred and is continuing, if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (f) of Section 8, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, Facility B Lender or Facility C Lender (if Facility C exists) (any such affected Lender, Facility B Lender or Facility C Lender (if Facility C exists) hereinafter, an "Affected Lender"), if any, in respect of the Borrower's obligations owing to such other Affected Lender, whether under this Agreement, the Facility B Credit Agreement or Facility C Credit Agreement (if Facility C exists), including any interest thereon, such benefited Lender shall purchase for cash from each other Affected Lender a participating interest in such portion of each such other Affected Lender's Loans or the Reimbursement Obligations owing to it, Facility B Loans or Facility B Reimbursement Obligations and/or Facility C Loans or Facility C Reimbursement Obligations (if Facility C exists) owing to it, or shall provide such other Affected Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Affected Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest unless the benefited Lender is required by court order to pay interest thereon, in which case each Lender returning funds to such benefited Lender shall pay its pro rata share of such interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and Borrower also agree that all proceeds of any such set- 89 off shall be subject to the ratable sharing provisions of subsections 2.12 and 10.7(a) hereof to the same extent as if an Event of Default had occurred and was then continuing. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; 90 (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND (e) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 10.13 Acknowledgments. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) none of the Arrangers, the Agents nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between any of the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS, THE ARRANGERS, THE LENDERS AND THE OTHER PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 10.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the Borrower in writing as confidential (excluding any such information already in the possession of such Lender or provided to such Lender by a third party not in violation of this Agreement which, in either case, is not, to the knowledge of such Lender, subject to a confidentiality agreement); provided that nothing herein shall prevent any Lender from disclosing any such information (i) to any Agent or any other Lender or any of its Affiliates, (ii) to any Transferee or prospective Transferee or to any direct or indirect contractual counterparties in swap agreements or such 91 contractual counterparties' professional advisors which receives such information and agrees to be bound by the confidentiality provisions hereof, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. 10.16 Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the date on which final judgment is given. (b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this subsection 10.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. 10.17 Existing Agreements Superseded. As set forth in subsection 1.3 hereof, the Original Credit Agreement is superseded by this Credit Agreement, which has been executed in renewal, amendment, restatement and modification, but not in novation or extinguishment of, the obligations under the Original Credit Agreement. 10.18 Closing Date Loans and Assignments. (a) On and as of the Closing Date, each of the Departing Lenders, Continuing Lenders and Additional Lenders shall sell, assign and transfer, or purchase and assume, as the case may be, such interests in (i) the Commitments (as defined in the Original Credit Agreement, the "Existing Commitments") and (ii) the Loan Exposure (as defined in the Original Credit Agreement, the "Existing Loan Exposure") of the Departing Lenders and Continuing Lenders immediately prior to the Closing Date, as shall be necessary in order that, after giving effect to all such assignments and purchases, the Existing Commitments and the Existing Loan Exposure will be held by the Continuing Lenders and Additional Lenders as set forth in Schedule I to this 92 Agreement. Each Additional Lender and Continuing Lender purchasing interests of any type under this Section shall be deemed to have purchased such interests from each Departing Lender and Continuing Lender selling interests of such type ratably in accordance with the amounts of such interests sold by such Departing Lenders and Continuing Lenders. The assignments and purchases provided for in this Section shall be without recourse, warranty or representation, except that each Departing Lender and Continuing Lender assigning any interests shall be deemed to have represented that it is the legal and beneficial owner of the interests assigned by it and that such interests are free and clear of any adverse claim, and the purchase price for each such assignment and purchase shall equal the principal amount of the Loans purchased. All accrued but unpaid interest and fees due and owing thereon through but not including the Closing Date shall be paid to such Departing Lender by Borrower on or as of the Closing Date. Concurrently with the effectiveness of the assignments and purchases provided for above, the Departing Lenders shall cease to be parties to the Original Credit Agreement and shall be released from all further obligations thereunder and shall have no further rights to or interest in any of the Collateral (as defined in the Original Credit Agreement); provided, however, that the Departing Lenders shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16, 9.7, 10.5 and 10.16 of the Original Loan Agreement as in effect immediately prior to the Closing Date. (b) On the Closing Date, (i) each Additional Lender and Continuing Lender that is purchasing interests in the Existing Loan Exposure and Existing Commitments pursuant to subsection (a) above shall pay the purchase price for the interests purchased by it pursuant to such subsection (a) by wire transfer of immediately available funds to the Administrative Agent not later than 1:00 p.m. (New York time), and (ii) the Administrative Agent shall pay to each Departing Lender and Continuing Lender that is assigning interests in Existing Loan Exposure and Existing Commitments pursuant to subsection (a) above, out of the amounts received by the Administrative Agent from each Additional Lender and Continuing Lender pursuant to clause (i) of this subsection (b), the purchase price for the interests assigned by it pursuant to such subsection (a) by wire transfer of immediately available funds not later than 3:00 p.m. (New York time). (c) Each of the parties hereto hereby consents to the assignments and purchases provided for in subsections (a) and (b) above and agrees that (i) each Additional Lender and Continuing Lender that is purchasing or accepting interests in the Existing Commitments, the Existing Loan Exposure pursuant to subsection (a) above are assignees of the Departing Lenders and certain Continuing Lenders permitted under Section 10.6 of the Original Loan Agreement and (ii) each Additional Lender and each Continuing Lender shall have all the rights and obligations of a Lender under this Agreement with respect to the interests purchased by it pursuant to such subsections. [SIGNATURE PAGES FOLLOW] 93 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: ------------------------------------ Title: BANK OF AMERICA, N.A. as Administrative Agent By: ------------------------------------ Title: BANK OF AMERICA, N.A. as a Lender and Swing Line Lender By: ------------------------------------ Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THE BANK OF NEW YORK By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT BANK ONE, N.A. By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT FLEET NATIONAL BANK By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT CREDIT LYONNAIS By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT FIRST UNION COMMERCIAL CORPORATION By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THE FUJI BANK, LIMITED By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT HSBC BANK USA By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ------------------------------------ Title: By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT COMERICA BANK By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT CREDIT INDUSTRIEL ET COMMERCIAL By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THE DAI-ICHI KANGYO BANK, LTD. By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT BARCLAYS BANK PLC By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT RZB FINANCE LLC By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT ERSTE BANK, NEW YORK By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT GENERAL ELECTRIC CAPITAL CORPORATION By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT MITSUBISHI TRUST AND BANKING CORPORATION By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT SOCIETE GENERALE By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT SUNTRUST BANK By: ------------------------------------ Title: SIGNATURE PAGES TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT DEPARTING LENDER: The undersigned Departing Lender hereby consents to the amendment and restatement of the Original Credit Agreement and agrees to be bound by Section 10.18 of this Agreement. THE BANK OF NOVA SCOTIA By: ------------------------------------ Name: ------------------------------- Title: ------------------------------ Address: One Liberty Plaza New York, NY 10006 Attn: Ben Sileo Facsimile No.: (212) 225-5099 Schedule I To Credit Agreement Lenders/Address for Notices Revolving Credit Commitment LEHMAN COMMERCIAL PAPER INC. $35,000,000.00 3 World Financial Center, 11th Floor New York, New York 10285 Attention: Andrew Keith Fax : (212) 526-0242 Tel : (212) 526-4059 BANK OF AMERICA, N.A. $35,000,000.00 335 Madison Avenue New York, New York 10017 Attention: Steve Aronowitz Fax: (212) 503-7066 Tel: (212) 503-7950 with a copy to other parties listed in ss.10.2 for BOA. CREDIT LYONNAIS $30,000,000.00 1301 Avenue of the Americas New York, NY 10019-6022 Attention: Judy Domkowski Fax: (212) 459-3179 Tel: (212) 261-7341 FLEET NATIONAL BANK $30,000,000.00 100 Federal Street MA DE 10010A Boston, MA 02110 Attention: Roger Boucher Fax: (617) 434-0601 Tel: (617) 434-3951 BARCLAYS BANK PLC $30,000,000.00 222 Broadway New York, NY 10038 Attention: L. Peter Yetman Fax: (212) 412-7683 Tel: (212) 412-4000 I-1 BANK ONE, N.A. $16,666,666.67 153 West 51st Street New York, NY 10019-6025 Attention: Andrea Kantor Fax: (212) 373-1180 Tel: (212) 373-1023 THE BANK OF NEW YORK $30,000,000.00 One Wall Street New York, NY 10286 Attention: Ken Sneider Fax: (212) 635-6999 Tel: (212) 635-6863 SOCIETE GENERALE $16,666,666.67 181 West Madison Chicago, IL 60602 Attention: John Root Fax: (312) 578-5099 Tel: (212) 578-5158 HSBC BANK USA $16,666,666.67 452 Fifth Ave. New York, NY 10018 Attention: Bruce Wicks Fax: (212) 525-2556 Tel: (212) 525-2534 FIRST UNION COMMERCIAL CORPORATION $30,000,000.00 301 S. College Street Charlotte, NC 28288-0860 Attention: Barbara VanMeerten Fax: (704) 374-4793 Tel: (704) 374-7115 THE FUJI BANK LIMITED $10,000,000.00 Two World Trade Center, 79th Floor New York, NY 10048-0001 Attention: David Manheim Fax: (212) 898-2399 Tel: (212) 898-2723 I-2 BANK OF TOKYO - MITSUBISHI TRUST COMPANY $10,000,000.00 1251 Avenue of the Americas, 18th Floor New York, NY 10020 Attention: Hidekazu Kojima Fax: (212) 782-4981 Tel: (212) 782-4795 COMERICA BANK $13,333,333.33 500 Woodward Avenue, 9th Floor, MC 3280 Detroit, MI 48275-3280 Attention: Joel S. Gordon Fax: (313) 222-3330 Tel: (313) 222-3647 CREDIT INDUSTRIEL ET COMMERCIAL $16,666,666.67 520 West Madison Avenue, 37th Floor New York, NY 10022 Attention: Brian O'Leary Fax: (212) 715-4535 Tel: (212) 715-4422 THE DAI-ICHI KANGYO BANK, LTD. $10,000,000.00 One World Trade Center, 48th Floor New York, NY 10048 Attention: Nicholas A. Fiore Fax: (212) 912-1879 Tel: (212) 432-6784 RZB FINANCE LLC $3,333,333.33 1133 Avenue of the Americas New York, NY 10036 Attention: Klaus D. Hein Fax: (212) 944-2093 Tel: (212) 845-4100 I-3 ERSTE BANK, NEW YORK $10,000,000.00 280 Park Avenue, 32nd Floor, West Building New York, NY 10017 Attention: John Fay Fax: (212) 984-5627 Tel: (212) 984-5636 GE CAPITAL COMMERCIAL FINANCE, INC. $10,000,000.00 60 Long Ridge Road Stamford, CT 06927-5100 Attention: Andrew Santacroce Fax: (203) 316-7978 Tel: (203) 961-2577 THE INDUSTRIAL BANK OF JAPAN, LIMITED $10,000,000.00 1251 Avenue of the Americas New York, NY 10020 Attention: Wayne Wright Fax: (212) 282-4488 Tel: (212) 282-3462 THE MITSUBISHI TRUST AND BANKING CORPORATION $10,000,000.00 520 Madison Avenue New York, NY 10020 Attention: Rosetta Conti Fax: (212) 644-6825 Tel: (212) 891-8268 THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND $10,000,000.00 LaTouche House, I.F.S.C. Custom House Docks Dublin 1 Ireland Attention: Brendan McLoughlin Fax: 011-353-1-829-0129 Tel: 011-353-1-609-3513 I-4 SUNTRUST BANK $16,666,666.67 711 Fifth Avenue, 16th Floor New York, NY 10022 Attention: Armen Karozichian Fax: (212) 371-9386 Tel: (212) 583-2604 I-5 Schedule II to Credit Agreement PRICING GRID**
REVOLVING CREDIT FACILITY REVOLVING CREDIT FACILITY, REVOLVING CREDIT APPLICABLE MARGIN- APPLICABLE MARGIN-BASE COMMITMENT DEBT RATIO EURODOLLAR RATE* RATE* FEE* - ------------------------------------------------------------------------------------------------- >4.25x 300.0 200.0 50 >3.75x 250.0 150.0 50 >3.25x 200.0 100.0 45 >2.75x 175.0 75.0 40 <=2.75x 150.0 50.0 35
- --------------------------- * Notwithstanding the foregoing Pricing Grid, the Applicable Margins and the Commitment Fee Rate for the Revolving Credit Facility for the period following the Closing Date through but excluding the Adjustment Date related to the fiscal quarter ending as of September 30, 2001 will be no lower in cost to Borrower than the pricing level applicable if the Debt Ratio is greater than 3.25x but not greater than 3.75x; provided, however, nothing contained herein shall limit the effect of any increase in the pricing level on any Adjustment Date occurring after the Closing Date if the Debt Ratio exceeds 3.75x. ** Pricing Grid (except for Debt Ratios) reflects basis points. II-1 EX-10.41 4 file003.txt 2ND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT ================================================================================ SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT AMONG L-3 COMMUNICATIONS CORPORATION, A DELAWARE CORPORATION, AS BORROWER, THE SEVERAL LENDERS FROM TIME TO TIME PARTIES HERETO, THE CERTAIN FINANCIAL INSTITUTIONS NAMED AS SENIOR MANAGING AGENTS HEREIN, BANC OF AMERICA SECURITIES LLC AND LEHMAN BROTHERS INC., AS ARRANGERS, BANK OF AMERICA, N.A. , AS ADMINISTRATIVE AGENT AND LEHMAN COMMERCIAL PAPER INC., AS DOCUMENTATION AGENT AND SYNDICATION AGENT DATED AS OF MAY 16, 2001 ================================================================================ TABLE OF CONTENTS Page
Section 1. DEFINITIONS.....................................................................................1 1.1 Defined Terms...................................................................................1 1.2 Other Definitional Provisions..................................................................27 1.3 Interrelationship with Original Credit Agreement...............................................28 1.4 Confirmation of Existing Obligations...........................................................29 1.5 Accounting for Interests in TCAS Subsidiary....................................................29 Section 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS......................................................29 2.1 Commitments....................................................................................29 2.2 Procedure for Borrowing........................................................................31 2.3 Commitment Fee.................................................................................32 2.4 Termination or Reduction of Revolving 364 Day Commitments......................................32 2.5 Extension of Revolving 364 Day Termination Date; Conversion Option; Repayment of Loans; Evidence of Debt...............................................................................32 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments.......................36 2.7 Conversion and Continuation Options............................................................39 2.8 Minimum Amounts and Maximum Number of Tranches.................................................40 2.9 Interest Rates and Payment Dates...............................................................40 2.10 Computation of Interest and Fees...............................................................41 2.11 Inability to Determine Interest Rate...........................................................41 2.12 Pro Rata Treatment and Payments................................................................42 2.13 Illegality.....................................................................................43 2.14 Requirements of Law............................................................................44 2.15 Taxes..........................................................................................46 2.16 Indemnity......................................................................................49 2.17 Replacement of Lenders.........................................................................49 2.18 Certain Fees...................................................................................50 2.19 Certain Rules Relating to the Payment of Additional Amounts....................................50 Section 3. LETTERS OF CREDIT..............................................................................51 3.1 L/C Commitment.................................................................................51 3.2 Procedure for Issuance of Letters of Credit....................................................52 3.3 Fees, Commissions and Other Charges............................................................52 3.4 L/C Participation..............................................................................53 3.5 Reimbursement Obligation of the Borrower.......................................................54 3.6 Obligations Absolute...........................................................................55 3.7 Letter of Credit Payments......................................................................56 3.8 Application....................................................................................56 3.9 Determination of Exchange Rate.................................................................56 Section 4. REPRESENTATIONS AND WARRANTIES.................................................................56 4.1 Financial Condition............................................................................56 4.2 No Change......................................................................................57 4.3 Corporate Existence; Compliance with Law.......................................................57 4.4 Corporate Power; Authorization; Enforceable Obligations........................................57 4.5 No Legal Bar...................................................................................57 i 4.6 No Material Litigation.........................................................................58 4.7 No Default.....................................................................................58 4.8 Ownership of Property; Liens...................................................................58 4.9 Intellectual Property..........................................................................58 4.10 Taxes..........................................................................................58 4.11 Federal Regulations............................................................................59 4.12 ERISA..........................................................................................59 4.13 Investment Company Act; Other Regulations......................................................59 4.14 Subsidiaries...................................................................................60 4.15 Purpose of Loans...............................................................................60 4.16 Environmental Matters..........................................................................60 4.17 Collateral Documents...........................................................................61 4.18 Accuracy and Completeness of Information.......................................................61 4.19 Labor Matters..................................................................................61 Section 5. CONDITIONS PRECEDENT...........................................................................62 5.1 Conditions to Effectiveness....................................................................62 5.2 Conditions to Each Extension of Credit.........................................................65 Section 6. AFFIRMATIVE COVENANTS..........................................................................66 6.1 SEC Filings....................................................................................66 6.2 Certificates; Other Information................................................................66 6.3 Payment of Taxes and Material Obligations......................................................67 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law................67 6.5 Insurance......................................................................................68 6.6 Inspection of Property; Books and Records; Discussions.........................................68 6.7 Notices........................................................................................68 6.8 Environmental Laws.............................................................................69 6.9 Further Assurances.............................................................................69 6.10 Additional Collateral..........................................................................70 6.11 Foreign Jurisdictions..........................................................................71 6.12 Government Contracts...........................................................................71 6.13 TCAS Subsidiary...............................................................................71 Section 7. NEGATIVE COVENANTS.............................................................................71 7.1 Financial Condition Covenants..................................................................71 7.2 Limitation on Indebtedness.....................................................................72 7.3 Limitation on Liens............................................................................74 7.4 Limitation on Guarantee Obligations............................................................76 7.5 Limitation on Fundamental Changes..............................................................77 7.6 Limitation on Sale of Assets...................................................................77 7.7 Limitation on Dividends........................................................................78 7.8 Designated Senior Debt.........................................................................78 7.9 Limitation on Investments, Loans and Advances..................................................78 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements................80 7.11 Limitation on Transactions with Affiliates.....................................................81 7.12 Limitation on Sales and Leasebacks.............................................................81 7.13 Limitation on Changes in Fiscal Year...........................................................82 7.14 Limitation on Negative Pledge Clauses..........................................................82 7.15 Limitation on Lines of Business................................................................82 ii Section 8. EVENTS OF DEFAULT..............................................................................82 Section 9. THE AGENTS; THE ARRANGERS......................................................................86 9.1 Appointment....................................................................................86 9.2 Delegation of Duties...........................................................................86 9.3 Exculpatory Provisions.........................................................................86 9.4 Reliance by Agents.............................................................................87 9.5 Notice of Default..............................................................................87 9.6 Non-Reliance on Agents and Other Lenders.......................................................87 9.7 Indemnification................................................................................88 9.8 Agents, in Their Individual Capacities.........................................................88 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent......................88 9.10 The Arrangers and the Senior Managing Agents...................................................89 Section 10. MISCELLANEOUS..................................................................................89 10.1 Amendments and Waivers.........................................................................89 10.2 Notices........................................................................................90 10.3 No Waiver; Cumulative Remedies.................................................................93 10.4 Survival of Representations and Warranties.....................................................93 10.5 Payment of Expenses and Taxes..................................................................93 10.6 Successors and Assigns; Participation and Assignments..........................................94 10.7 Adjustments; Set-off...........................................................................98 10.8 Counterparts...................................................................................99 10.9 Severability...................................................................................99 10.10 Integration....................................................................................99 10.11 GOVERNING LAW..................................................................................99 10.12 SUBMISSION TO JURISDICTION; WAIVERS............................................................99 10.13 Acknowledgments...............................................................................100 10.14 WAIVERS OF JURY TRIAL.........................................................................101 10.15 Confidentiality...............................................................................101 10.16 Conversion of Currencies......................................................................101 10.17 Existing Agreements Superseded................................................................102 10.18 Closing Date Loans and Assignments............................................................102
iii EXHIBITS Exhibit A-1 Form of Revolving 364 Day Note Exhibit A-2 Form of Term Note Exhibit B-1 Form of Parent Guarantee Exhibit B-2 Form of Subsidiary Guarantee Exhibit B-3 Form of Parent Pledge Agreement Exhibit B-4A Form of Borrower Pledge Agreement Exhibit B-4B Form of Charge Over Shares Exhibit B-5 Form of Subsidiary Pledge Agreement Exhibit C-1 Form of Legal Opinion of Simpson Thacher and Bartlett Exhibit C-2 Form of Internal Counsel Opinion Exhibit D Form of Borrowing Certificate Exhibit E Form of Certificate of Non U.S. Lender Exhibit F Form of Assignment and Acceptance Exhibit G Form of Increased Commitment Agreement Exhibit H Form of Lender Addition Agreement SCHEDULES Schedule I Lenders and Commitments Schedule II Pricing Grid Schedule III Transaction Documents Schedule 4.4 Required Consents Schedule 4.5 No Legal Bar Schedule 4.6 Material Litigation Schedule 4.9 Intellectual Property Claims Schedule 4.10 Taxes Schedule 4.14 Subsidiaries Schedule 7.2(f) Existing Indebtedness Schedule 7.3(f) Existing Liens Schedule 7.4 Existing Guarantee Obligations Schedule 7.9(c) Officers iv THIS SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT, dated as of May 16, 2001, among L-3 Communications Corporation, a Delaware corporation (the "Borrower") which is wholly owned by L-3 Communications Holdings, Inc., a Delaware corporation ("Holdings"), the several banks and other financial institutions or entities from time to time parties hereto (the "Lenders"), Banc of America Securities LLC ("BAS") and Lehman Brothers, Inc. ("LBI") as arrangers (each, in such capacity, an "Arranger" and together, the "Arrangers"), Bank of America, N.A., ("BOA") as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "Administrative Agent"), Lehman Commercial Paper Inc. ("LCPI"), as syndication agent and documentation agent (in such capacity, the "Syndication Agent" and the "Documentation Agent"), and certain financial institutions named as senior managing agents AMENDS AND RESTATES IN FULL the Amended and Restated 364 Day Credit Agreement, dated as of April 24, 2000 (as amended, supplemented and/or modified from time to time prior to the date hereof, the "Original Credit Agreement"), among the Borrower, the lenders party thereto from time to time (the "Original Lenders"), BAS and LCPI as arrangers, the Syndication Agent, Documentation Agent, the Administrative Agent and certain financial institutions named as co-agents; this amendment and restatement of the Original Credit Agreement, as amended, supplemented, restated or otherwise modified from time to time, is hereinafter referred to as this "Agreement" or the "Credit Agreement". WHEREAS, the Borrower has requested that the Original Credit Agreement be amended and restated in full as set forth herein. NOW, THEREFORE, the parties hereto hereby agree to amend and restate the Original Credit Agreement as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Acquired Business": a company or business unit acquired by the Borrower or any of its Subsidiaries, provided that the Borrower has delivered to the Administrative Agent historical financial statements of such company or business unit prepared in accordance with GAAP. "Additional Lenders": each of the Lenders party hereto other than the Original Lenders. "Additional Subordinated Indebtedness": unsecured Indebtedness for borrowed money of the Borrower or any of its Subsidiaries incurred after the Closing Date which (i) requires no cash payments of principal prior to the date that is one year after the Termination Date as defined in the Facility A Credit Agreement, (ii) such Indebtedness does not contain limitations on the ability of Borrower or any of its Subsidiaries to incur Indebtedness which are more restrictive than those found in Section 4.09 (Incurrence of Indebtedness and Issuance of Preferred Stock) of any of the Original Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture, and (iii) such Indebtedness is subordinated to the Obligations on terms no less favorable to the Lenders, Facility A Lenders and Facility C Lenders (if Facility C exists) than those governing the Original Subordinated Notes, the New Subordinated Notes and/or the December 1998 Subordinated Notes. "Adjustment Date": the fifth day following the receipt by the Administrative Agent of the financial statements for the most recently completed fiscal period furnished pursuant to subsection 6.1 and the compliance certificate with respect to such financial statements furnished pursuant to subsection 6.2(c). "Administrative Agent": BOA, or following the resignation of BOA as Administrative Agent, any other Lender which may be appointed as Administrative Agent pursuant to subsection 9.9. "Affected Class": as defined in subsection 10.1. "Affected Lender": as defined in subsection 10.7. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent, the Documentation Agent and the Administrative Agent. "Aggregate Outstanding Extensions of Credit": as to any Lender with respect to any Type of Loan at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans of such Type made by such Lender then outstanding and (b) such Lender's Commitment Percentage of the L/C Obligations then outstanding. "Agreement": this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. "Agreement Currency": as defined in subsection 10.16(b). "Alternative Currency": any currency which as of the time of any issuance or renewal, as applicable, of a Foreign L/C is freely tradable and convertible into Dollars and has been approved as an "Alternative Currency" for the purposes of this Agreement by the Issuing Lender. "Applicable Creditor": as defined in subsection 10.16(b). "Applicable Holdback": as defined in subsection 2.6(b)(ii). 2 "Applicable Issuing Lender": an Issuing Lender as to which any proposed Assignee under subsection 10.6 shall become an L/C Participant upon giving effect to the relevant Assignment and Acceptance. "Applicable Margin": at any time, the percentages set forth on Schedule II under the relevant column heading opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Applicable Margins determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Applicable Margins shall be (i) for the first 35 days subsequent to such due date, the Applicable Margin in effect prior to such due date and (ii) thereafter, those set forth opposite a Debt Ratio captioned "greater than 4.25," in either case, until the date of delivery of such financial statements and compliance certificate. "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to issue a Letter of Credit. "Asset Sale": any sale, sale-leaseback, or other disposition by any Person or any Subsidiary thereof of any of its property or assets, including the stock of any Subsidiary of such Person, except sales and dispositions permitted by subsection 7.6 other than subsection 7.6(b) or (e). "Assignee": as defined in subsection 10.6(c). "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). "Available Commitment": as to any Lender and any Type of Loan, at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment with respect to such Type of Loan over (b) such Lender's Aggregate Outstanding Extensions of Credit with respect to such Type of Loan. "BAS": as defined in the preamble to this Agreement. "Base Rate": for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BOA in Charlotte, North Carolina, as its "reference rate." (The "reference rate" is a rate set by BOA based upon various factors including BOA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) 3 "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "BOA": as defined in the recitals to this Agreement. "Borrower Pledge Agreement": the Third Amended and Restated Borrower Pledge Agreement substantially in the form of Exhibit B-4A, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 4.16. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco, California are authorized or required by law to close and, if the applicable Business Day relates to Eurodollar Loans or Foreign L/Cs, any day on which dealings are carried on in the applicable London interbank market. "Calculation Date": with respect to each Foreign L/C, during the period that such Foreign L/C is outstanding (or the Reimbursement Obligation in connection therewith has not been fully satisfied) (i) the last Business Day of a fiscal month, (ii) the date on which such Letter of Credit is to be issued or renewed by the Issuing Lender, (iii) the date on which any draft presented under such Letter of Credit is paid by the Issuing Lender, (iv) such other dates as the Borrower may reasonably request from time to time, and (v) such other dates as the Issuing Lender or the Administrative Agent may select from time to time, provided that the Borrower receives prompt notice thereof. "Capital Expenditures" for any fiscal period, the aggregate of all expenditures that, in conformity with GAAP (but excluding capitalized interest), are or are required to be included as additions during such period to property, plant or equipment reflected on the consolidated balance sheet of the Borrower and its Subsidiaries, excluding the expenditures relating to the Transaction. "Capital Lease Obligations": of any Person as of the date of determination, the aggregate liability of such Person under Financing Leases reflected on a balance sheet of such Person under GAAP. "Capital Partners": Lehman Brothers Capital Partners III, L.P. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. 4 "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 90 days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's Ratings Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency if both of S&P and Moody's cease publishing ratings of investments, (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Change of Control": the occurrence of any of the following events: (i) the Principals and their Related Parties, as a whole, shall at any time cease to own, directly or indirectly, 51% of the Voting Stock of Holdings (measured by voting power rather than number of shares), determined on a fully diluted basis, and any "person" (as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Principals and their Related Parties shall become the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 25% of the Voting Stock of Holdings (measured by voting power rather than number of shares); (ii) a majority of the members of the Board of Directors of Holdings fail to be (a) members of the Board of Directors incumbent as of the Closing Date, or (b) members nominated by the members of the Board of Directors incumbent on the Closing Date, or (c) members appointed by members of the Board nominated under clause (a) or (b); (iii) Holdings shall, at any time, cease to own 100% of the Capital Stock of the Borrower; or (iv) a "Change of Control" shall have occurred under the Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture. 5 "Charge Over Shares": the Second Amended and Restated Charge Over Shares substantially in the form of Exhibit B-4B, to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified. "Class": (i) Lenders having Loan Exposure (taken together as a single class), (ii) Facility A Lenders having Facility A Loan Exposure (taken together as a single class) and (iii) if Facility C exists, Facility C Lenders having Facility C Loan Exposure (taken together as a single class). "Closing Date": the date on which the conditions precedent set forth in subsection 5.1 are satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all assets of the Credit Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Pledge Agreement. "Commitment": as to any Lender, such Lender's Revolving 364 Day Commitment and, subject to satisfaction of the conditions precedent in subsection 2.5(b) hereto, Term Loan Commitment. "Commitment Fee Rate": at any time, the applicable rates per annum on Schedule II under the relevant column heading for the Revolving 364 Day Facility set forth opposite the level of the Debt Ratio most recently determined; provided that (a) except as expressly set forth in Schedule II, the Commitment Fee Rate determined for any Adjustment Date shall remain in effect until a subsequent Adjustment Date for which the Debt Ratio falls within a different level and (b) if the financial statements and related compliance certificate for any fiscal period are not delivered by the date due pursuant to subsections 6.1 and 6.2, the Commitment Fee Rate shall be (i) for the first 35 days subsequent to such due date, the Commitment Fee Rate in effect prior to such due date and (ii) thereafter, that set forth opposite a Debt Ratio captioned "greater than 4.25," in either case, until the date of delivery of such financial statements and compliance certificate. "Commitment Percentage": as to the Commitment of any Lender with respect to any Type of Loan at any time, the percentage which the Commitment of such Lender with respect to such Type of Loan then constitutes of the aggregate Commitments with respect to such Type of Loan (or, at any time after such Commitments shall have expired or terminated, the percentage which the aggregate amount of the Aggregate Outstanding Extensions of Credit of such Lender with respect to such Type of Loan constitutes of the aggregate amount of the Aggregate Outstanding Extensions of Credit of all Lenders with respect to such Type of Loan). "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 (b) or (c) of the Code. 6 "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Interest Expense of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of the Borrower, its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, payable in cash, of the Borrower and its Subsidiaries for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Interest Expense": for any Person, as of the last day of any fiscal quarter, the amount of interest expense of such Person for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Net Income": for any Person and for any fiscal period, net income of such Person, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Assets": at any date, all assets of the Borrower and its Subsidiaries as determined according to the consolidated balance sheet contained in the SEC filing most recently delivered pursuant to subsection 6.1 or, if no such SEC filing has yet been delivered, the balance sheet referred to in subsection 4.1(a). "Consolidated Total Debt": at any date, the sum of (i) all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g) and (ii) the outstanding amount of Permitted Convertible Securities. "Consolidated Working Capital": at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in accordance with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date over (b) the sum of all amounts that would, in accordance with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries on such date (excluding, to the extent it would otherwise be included under current liabilities, any short-term Consolidated Total Debt and the current portion of any long-term Consolidated Total Debt). 7 "Continuing Lenders": each of the Original Lenders other than the Departing Lenders. "Constitutional Documents": as to any Person, the articles or certificate of incorporation and by-laws, partnership agreement or other organizational documents of such Person. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Conversion Option": as defined in subsection 2.5(b). "Convertible Securities": at any time (i) unsecured convertible debt securities issued by Holdings having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility A Credit Agreement and the Facility C Credit Agreement (if Facility C exists) on terms and conditions acceptable to the Agents and/or (ii) unsecured debt securities issued by Holdings to a trust (the "Trust") having no principal amortization or sinking fund requirements which are guaranteed by Borrower but subordinated in right of payment to the Obligations and the "Obligations" as defined under the Facility A Credit Agreement and the Facility C Credit Agreement (if Facility C exists) on terms and conditions acceptable to the Agents which Trust, in turn, issues preferred stock securities to investors which are convertible at the option of the holder thereof into shares of common stock of Holdings. "Credit Documents": this Agreement, the Notes, the Applications, the Guarantees, the Fee Letter and the Pledge Agreements. "Credit Parties": the Borrower, Holdings, and each Subsidiary of the Borrower which is a party to a Credit Document. "Debt Ratio": as at the last day of any fiscal quarter, the ratio of (a) Consolidated Total Debt minus Designated Cash Balances on such date to (b) Consolidated EBITDA. "December 1998 Subordinated Debt Documents": the December 1998 Subordinated Notes, the December 1998 Subordinated Notes Indenture, the Underwriting Agreement related thereto among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "December 1998 Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the December 1998 Subordinated Notes were issued. "December 1998 Subordinated Notes": the Borrower's Senior Subordinated Notes, due December 1, 2008 ("Initial December 1998 Subordinated Notes") issued on or 8 about the December 8, 1998 and any notes, having the same terms as the Initial December 1998 Subordinated Notes, issued in exchange for the Initial December 1998 Subordinated Notes as contemplated by the documents governing the issuance of the Initial December 1998 Subordinated Notes. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Departing Lenders": each of the financial institutions identified on the signature pages hereto as Departing Lender. "Designated Cash Balances": at any time, the lesser of (a) actual unrestricted cash balances on hand of Borrower and its Subsidiaries which are not subject to any Liens in favor of any Person (other than those described in subsection 7.3(o) hereof) and (b) $50,000,000. "Dollar Equivalent": at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in an Alternative Currency, the equivalent amount in Dollars as determined on the basis of the Exchange Rate for the purchase of Dollars with such Alternative Currency as of the most recent Calculation Date. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic L/C": a Letter of Credit denominated in Dollars. "Dow Jones Page 3750": the display designated as page "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or such other page as may replace the "3750" page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for Dollar deposits. "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirement (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health as affected by the environment as has been, is now, or may at any time hereafter be, in effect, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.ss.ss. 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C.ss. ss. 9601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.ss.ss.1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.ss.ss.6901 et seq.; the Clean Water Act; 33 U.S.C.ss.ss.1251 et seq.; the Clean Air Act, 42 U.S.C.ss.ss. 7401 et seq.; or other similar federal and/or state environmental laws. 9 "Environmental Permits": any and all permits, licenses, registrations, notifications, exemptions and any other authorization required under any applicable Environmental Law. "Equity Documents": the Stockholders Agreement, the Subscription Agreements and the Option Agreements. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). "Eurodollar Business Day": means any Business Day on which commercial banks are open in London for the transaction of international business, including dealings in Dollar deposits in the international interbank markets. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Loans Maturity Date": (a) for any date on which any Eurodollar Loans are outstanding, the Business Day on which the Interest Period for all such outstanding Eurodollar Loans concurrently terminate and (b) for any date on which no Eurodollar Loans are outstanding, any Business Day. "Eurodollar Rate": means, for any Interest Period, with respect to Eurodollar Loans comprising part of the same borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows: Eurodollar Rate = LIBOR ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (ii) the net decrease, if any, in Consolidated Working Capital during such fiscal year, (iii) to the extent deducted in computing such Consolidated Net Income for the Borrower and its Subsidiaries, non-cash interest expense, depreciation and amortization for such fiscal year, (iv) extraordinary non-cash 10 losses during such fiscal year subtracted in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (v) change in deferred tax liability of the Borrower for such fiscal year, (vi) non-cash losses in connection with asset dispositions whether or not constituting extraordinary losses and (vii) non-cash ordinary losses less (b) the sum, without duplication, of (i) the aggregate amount of cash Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, (ii) the net increase, if any, in Consolidated Working Capital during such fiscal year, (iii) the aggregate amount of payments of principal in respect of any Indebtedness not prohibited hereunder during such fiscal year (other than prepayments of (x) Revolving 364 Day Loans not accompanied by reductions of the Commitments hereunder, (y) Facility A Loans not accompanied by reductions of Facility A Commitments and/or (z) Facility C Loans not accompanied by reductions of Facility C Commitments, if Facility C exists), (iv) deferred income tax credit of the Borrower for such fiscal year, (v) extraordinary non-cash gains during such fiscal year added in the determination of Consolidated Net Income for the Borrower and its Subsidiaries for such fiscal year, (vi) non-cash gains in connection with asset dispositions whether or not constituting extraordinary gains and (vii) non-cash ordinary gains. "Exchange Act": the Securities Exchange Act of 1934, as amended. "Exchange Rate": on any day, with respect to any Alternative Currency, the spot rate at which Dollars are offered on such day by the Issuing Lender in San Francisco, California (or such other location selected by the Issuing Lender) for such Alternative Currency. "Extending Lender": any Lender consenting to the Extension Option. "Extension Option": as defined in subsection 2.5(a). "Facility A Administrative Agent": the "Administrative Agent" as defined in the Facility A Credit Agreement. "Facility A Agents": the "Agents" as defined in the Facility A Credit Agreement. "Facility A Commitments": the "Commitments" as defined in the Facility A Credit Agreement. 11 "Facility A Credit Agreement": that certain Third Amended and Restated Credit Agreement of even date herewith among the Borrower, the Facility A Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LBI and Banc of America Securities LLC as arrangers and certain financial institutions named as senior managing agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility A Credit Documents": the "Credit Documents" as defined in the Facility A Credit Agreement. "Facility A Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility A Credit Agreement. "Facility A L/C Obligations": the "L/C Obligations" as defined in the Facility A Credit Agreement. "Facility A Lenders": the "Lenders" as defined in the Facility A Credit Agreement. "Facility A Loan Exposure": the "Loan Exposure" as defined in the Facility A Credit Agreement. "Facility A Loans": the "Loans" as defined in the Facility A Credit Agreement. "Facility A Notes": the "Notes" as defined in the Facility A Credit Agreement. "Facility A Reimbursement Obligations": the "Reimbursement Obligations" as defined in the Facility A Credit Agreement. "Facility C": a separately documented senior credit facility consisting of and evidencing all or any portion of the then available Incremental Facility which Borrower may hereafter cause to exist in accordance with the terms of Section 2.1(a). "Facility C Administrative Agent": the "Administrative Agent" as defined in the Facility C Credit Agreement. "Facility C Agents": the "Agents" as defined in the Facility C Credit Agreement. "Facility C Commitments": the "Commitments" as defined in the Facility C Credit Agreement. "Facility C Credit Agreement": that certain credit agreement evidencing Facility C which may hereafter be executed by and among the Borrower, the Facility C Lenders, BOA as administrative agent, LCPI as syndication agent and documentation agent, LCPI and Banc of America Securities LLC as arrangers and certain financial institutions named as senior managing agents, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Facility C Credit Documents": the "Credit Documents" as defined in the Facility C Credit Agreement. "Facility C Eurodollar Tranche": "Eurodollar Tranche" as defined in the Facility C Credit Agreement. "Facility C L/C Obligations": the "L/C Obligations" as defined in the Facility C Credit Agreement. 12 "Facility C Lenders": the "Lenders" as defined in the Facility C Credit Agreement. "Facility C Loan Exposure": the "Loan Exposure" as defined in the Facility C Credit Agreement. "Facility C Loans": the "Loans" as defined in the Facility C Credit Agreement. "Facility C Notes": the "Notes" as defined in the Facility C Credit Agreement. "Federal Funds Effective Rate": for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the FRB (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day the appropriate rate for such previous day is not yet published in H.15(519), the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Fee Letter": that certain fee letter between the Agents and the Borrower dated on or about March 30, 2001. "Financial L/C": a standby Letter of Credit not constituting a Performance L/C. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "First Offer Requirement": as defined in subsection 2.1(a). "Foreign L/C": a Letter of Credit denominated in an Alternative Currency. "Foreign L/C Obligations": at any time, an amount equal to the sum of (i) the Dollar Equivalent of the aggregate then undrawn and unexpired face amount of all then outstanding Foreign L/Cs and (ii) the Dollar Equivalent of the aggregate amount of all drawings under Foreign L/Cs which have not then been reimbursed pursuant to subsection 3.5. "Foreign Subsidiary": any Subsidiary which is organized under the laws of any jurisdiction outside the United States or under the laws of the U.S. Virgin Islands. "FRB": means the Board of Governors of the Federal Reserve System, and any governmental authority succeeding to any of its principal functions. "GAAP": generally accepted accounting principles in the United States of America in effect on the Closing Date. 13 "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, reimbursement obligations under letters of credit and any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Guarantees": the Parent Guarantee and the Subsidiary Guarantee. "Immaterial Subsidiary": any Subsidiary of the Borrower having assets not exceeding five percent (5%) of the Consolidated Total Assets. "Increased Commitment Agreement": as defined in subsection 2.1(a). "Incremental Facility": as defined in subsection 2.1(a). "Indebtedness": of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and accrued expenses incurred in the ordinary course of business), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under 14 Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and all reimbursement and other obligations with respect to any letters of credit and surety bonds, whether or not matured or drawn, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof and (f) all Attributable Debt of such Person with respect to sale and leaseback transactions of such Person. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Base Rate Loan, the last Business Day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last Business Day of such Interest Period, and (c) as to any Eurodollar Loan having an interest period longer than three months, (i) each Business Day which is three months or a whole multiple thereof after the first day of such Interest Period and (ii) the last Business Day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three, six or, if made available by the Administrative Agent and the Lenders, nine or twelve months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; (b) thereafter, each period commencing on the last day of the preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six or, if made available by the Administrative Agent and Lenders, nine or twelve months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; (c) solely for the purpose of permitting the Borrower to (i) convert Revolving 364 Day Loans into Term Loans on the Revolving 364 Day Termination Date pursuant to the exercise of the Conversion Option, (ii) repay Revolving 364 Day Loans owing to Nonconsenting Lenders on the Revolving 364 Day Termination Date in connection with the exercise of the Extension Option and (iii) fund any scheduled amortization payment pursuant to subsection 2.5(b) in respect of any Term Loans then outstanding, a period commencing on the last day of the preceding Interest Period applicable to such Eurodollar Loan and ending on a Business Day which is no less than seven (7) and no more than thirty (30) days thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; and 15 (d) solely for the purpose of permitting the Borrower and the Arrangers to complete syndication of the Commitments, a period commencing on the borrowing date, conversion date, or last day of the preceding Interest Period, as the case may be, with respect to such Eurodollar Loan and ending on a Business Day which is seven (7) days thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current borrowing date, conversion date or Interest Period with respect thereto; provided, that such Interest Period option shall terminate and cease to be available to Borrower 180 days after the Closing Date; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period for any Loan that would otherwise extend beyond the applicable Termination Date shall end on the applicable Termination Date; (iii) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period would otherwise be scheduled to end) shall end on the last Business Day of the appropriate calendar month; and (iv) no Interest Period with respect to any portion of any Type of Term Loan shall extend beyond a date on which the Borrower is required to make a scheduled payment of principal of Term Loans of such Type unless the sum of (a) the aggregate principal amount of Term Loans of such Type that are Base Rate Loans plus (b) the aggregate principal amount of Term Loans of such Type that are Eurodollar Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on Term Loans of such Type on such date. "Interest Rate Agreement": any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement. "Interest Rate Agreement Obligations": the obligations of the Borrower or any of its Subsidiaries to make payments to counterparties under Interest Rate Agreements in the event of the occurrence of a termination event thereunder. "Investment Fund": as defined in subsection 10.6(c). "Issuing Lender": BOA, in its capacity as issuer of any Letter of Credit or, at the election of BOA, such other Lender or Lenders that agrees to act as Issuing Lender at the 16 request of the Borrower, or upon resignation by BOA as an Issuing Lender at any time upon notice to the other parties to this Agreement, such other Lender or Lenders that agree to act as Issuing Lender at the request of the Borrower and to whom the Required Lenders consent in writing. "Judgment Currency": as defined in subsection 10.16 (b). "LBI": as defined in the recitals to this Agreement. "LCPI": as defined in the recitals to this Agreement. "L/C Fee Payment Date": the last Business Day of each March, June, September and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the Dollar Equivalent of the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the Dollar Equivalent of the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5. "L/C Participants": a collective reference to all the Revolving 364 Day Lenders other than the Applicable Issuing Lender. "Lender" and "Lenders": the persons identified as Lenders and listed on the signature pages of this Agreement (including the Issuing Lender), together with their successors and permitted assigns pursuant to subsection 10.6; provided that the term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "Lender Addition Agreement": as defined in subsection 2.1(a). "Letters of Credit": as defined in subsection 3.1(a). "LIBOR": as to any Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period quoted on the second Eurodollar Business Day prior to the first day of such Interest Period, as such rate appears on the Dow Jones Page 3750 as of 11:00 A.M. (London time) on such date, as determined by the Administrative Agent and notified to the Lenders and the Borrower on such second prior Eurodollar Business Day. If LIBOR cannot be determined based on the Dow Jones Page 3750, LIBOR means the rate per annum, as supplied to the Administrative Agent, quoted by BOA's London Branch to prime banks in the London interbank market for deposits in Dollars at approximately 11:00 A.M. (London time) two Eurodollar Business Days prior to the first day of such Interest Period in an amount approximately equal to the principal amount of the Loans to which such Interest Period is to apply and for a period of time comparable to such Interest Period. 17 "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Account": as defined in subsection 2.5(g). "Loan Exposure": with respect to any Lender as of any date of determination, (i) if there are no outstanding Letters of Credit or Revolving 364 Day Loans, that Lender's Revolving 364 Day Commitment, and (ii) otherwise, the sum of (a) the aggregate outstanding principal amount of the Revolving 364 Day Loans of that Lender plus (b) in the event that Lender is an Issuing Lender, the Dollar Equivalent of the aggregate stated or face amount in respect of all Letters of Credit issued by that Lender and outstanding (in each case net of any participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) plus (c) in the event that Lender is a Term Lender, the outstanding principal amount of the Term Loans of that Lender plus (d) the Dollar Equivalent of the aggregate amount of all participations purchased by that Lender in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit. "Lockheed": Lockheed Martin Corporation, a Maryland corporation. "Material Adverse Effect": a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Credit Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder. "Materials of Environmental Concern": any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could give rise to liability under, any applicable Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds": the aggregate cash proceeds (including Cash Equivalents) received by Holdings or any of its Subsidiaries in respect of: (a) any issuance by Holdings or any of its Subsidiaries of Indebtedness after the Closing Date; 18 (b) any Asset Sale; and (c) any cash payments received in respect of promissory notes or other evidences of indebtedness delivered to Holdings or such Subsidiary in respect of an Asset Sale; in each case net of (without duplication) (i), (A) in the case of an Asset Sale, the amount required to repay any Indebtedness (other than the Loans) secured by a Lien on any assets of Holdings or a Subsidiary of Holdings that are sold or otherwise disposed of in connection with such Asset Sale and (B) reasonable and appropriate amounts established by Holdings or such Subsidiary, as the case may be, as a reserve against liabilities associated with such Asset Sale and retained by Holdings or such Subsidiary, (ii) the reasonable expenses (including legal fees and brokers' and underwriters' commissions, lenders fees, credit enhancement fees, accountants' fees, investment banking fees, survey costs, title insurance premiums and other customary fees, in any case, paid to third parties or, to the extent permitted hereby, Affiliates) incurred in effecting such issuance or sale and (iii) any taxes reasonably attributable to such sale and reasonably estimated by Holdings or such Subsidiary to be actually payable. "New Lender": as defined in subsection 2.1(a). "New Subordinated Debt Documents": the New Subordinated Notes, the New Subordinated Notes Indenture, the Underwriting Agreement dated as of May 18, 1998 among Borrower, its domestic Subsidiaries, Lehman Brothers Inc., and BancAmerica Robertson Stephens (n/k/a Banc of America Securities LLC) and any other documents or agreements executed in connection therewith. "New Subordinated Debt Indenture": the Indenture between the Borrower and the Bank of New York, as trustee, pursuant to which the New Subordinated Notes were issued. "New Subordinated Notes": the Borrower's 8 1/2% Senior Subordinated Notes, due 2008 ("Initial New Subordinated Notes") issued on or about May 22, 1998 and any notes, having the same terms as the Initial New Subordinated Notes, issued in exchange for the Initial New Subordinated Notes as contemplated by the documents governing the issuance of the Initial New Subordinated Notes. "New 364-Day Credit Agreement": as defined in subsection 5.1(q). "Non-Excluded Taxes": as defined in subsection 2.15(a). "Non-U.S. Lender": as defined in subsection 2.15(b). "Nonconsenting Lenders": as defined in subsection 2.17. "Notes": The Revolving 364 Day Notes and the Term Notes (or any of them). 19 "Obligations": as defined in the Guarantees and the Pledge Agreements. "Option Agreements": the Option Agreements between Holdings and each of Frank C. Lanza and Robert V. LaPenta, each dated as of April 30, 1997. "Original Agents": the "Agents" under and as defined in the Original Credit Agreement. "Original Closing Date": April 28, 2000. "Original Credit Agreement": as defined in the preamble to this Agreement. "Original Indenture": the Indenture between the Borrower and The Bank of New York, as trustee, pursuant to which the Original Subordinated Notes are issued. "Original Lenders": as defined in the preamble to this Agreement. "Original Purchase Agreement": the Purchase Agreement, dated as of April 25, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Original Registration Rights Agreement": the Registration Rights Agreement, dated as of April 30, 1997, among the Borrower and each of Lehman Brothers, Inc. and BancAmerica Securities, Inc. "Original Subordinated Debt Documents": the Original Indenture, the Original Registration Rights Agreement, the Original Purchase Agreement and the Original Subordinated Notes. "Original Subordinated Notes": the Borrower's 103/8 % Senior Subordinated Notes, due 2007 (the "Initial Subordinated Notes"), issued on April 30, 1997, and any subordinated notes of the Borrower, having the same terms as the Initial Subordinated Notes, issued in exchange for the Initial Subordinated Notes as contemplated by the Original Subordinated Debt Documents. "Parent Distributions": as defined in the Parent Guarantee. "Parent Guarantee": the Third Amended and Restated Parent Guarantee substantially in the form of Exhibit B-1, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Parent Pledge Agreement": the Third Amended and Restated Parent Pledge Agreement substantially in the form of Exhibit B-3, to be executed and delivered by Holdings, as the same may be amended, supplemented or otherwise modified. "Participant": as defined in subsection 10.6(b). 20 "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any successor thereto. "Performance L/C": a standby Letter of Credit issued to ensure the performance of services and/or delivery of goods by or on behalf of the Borrower. "Permitted Convertible Securities": as defined in subsection 7.4(g). "Permitted Liens": Liens permitted to exist under subsection 7.3. "Permitted Stock Payments": (A) dividends by the Borrower to Holdings in amounts equal to the amounts required for Holdings to (i) pay franchise taxes and other fees required to maintain its legal existence and (ii) provide for other operating costs of up to $1,000,000 per fiscal year, (B) dividends by the Borrower to Holdings in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing, provided that the aggregate amount paid under this clause (B) does not exceed the amount that the Borrower would be required to pay in respect of the income of the Borrower and its Subsidiaries if the Borrower were a stand alone entity that was not owned by Holdings, (C) from and after May 1, 1999, dividends by the Borrower to Holdings payable solely out of Excess Cash Flow, provided that, with respect to this clause (C), (i) as of the last day of the most recently completed fiscal quarter the Debt Ratio is less than or equal to 3.5 to 1, and (ii) the aggregate amount of dividends paid by the Borrower to Holdings under this clause (C) since the Closing Date does not exceed $5,000,000 and (D) dividends by the Borrower to Holdings to fund interest expense or dividends in respect of the Permitted Convertible Securities issued by Holdings, provided that such dividends under this clause (D) shall not, in any fiscal year, exceed an amount equal to the interest or dividends actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all intercompany advances funded pursuant to subsection 7.9(l) hereof by the Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity maintains, administers, contributes to or is required to contribute to, or under which the Borrower or any Commonly Controlled Entity may incur any liability. "Pledge Agreements": the collective reference to the Parent Pledge Agreement, the Borrower Pledge Agreement, the Charge Over Shares, the Subsidiary Pledge Agreement, and any other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. 21 "Principals": each of Lehman Brothers Holdings, Inc., Capital Partners, Lockheed, Frank C. Lanza and Robert V. LaPenta. "Properties": as defined in subsection 4.16. "Register": as defined in subsection 10.6(d). "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Amount": as defined in subsection 3.5(a). "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of Credit. "Related Party": with respect to the Principals, (a) any controlling stockholder, 51% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (b) a trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 51% or more controlling interest of which consist of the Principals and/or such other Persons referred to in the immediately preceding clause (a). "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under the regulations of the PBGC. "Required Class Lenders": at any time, (a) for the Lenders having Loan Exposure, Lenders having or holding more than 50% of the aggregate Loan Exposure of all Lenders, (b) for the Facility A Lenders having Facility A Loan Exposure, Facility A Lenders having or holding more than 50% of the aggregate Facility A Loan Exposure of all Facility A Lenders and (c) if Facility C exists, for the Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding more than 50% of the aggregate Facility C Loan Exposure of all Facility C Lenders. "Required Lenders": at any time, Lenders the Loan Exposure for all Types of Loans of which aggregate more than 50%. "Requirement of Law": as to any Person, the Constitutional Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Requisite Class Lenders": at any time, (a) for the Class of Lenders having Loan Exposure, Lenders having or holding 66 2/3% of the aggregate Loan Exposure of all Lenders, (b) for the Class of Facility A Lenders having Facility A Loan Exposure, 22 Facility A Lenders having or holding 66 2/3% of the aggregate Facility A Loan Exposure of all Facility A Lenders and (c) if Facility C exists, for the Class of Facility C Lenders having Facility C Loan Exposure, Facility C Lenders having or holding 66 2/3% of the aggregate Facility C Loan Exposure of all Facility C Lenders. "Responsible Officer": the chief executive officer, the president or vice president of the Borrower or, with respect to financial matters, the chief financial officer, vice president-finance, treasurer or controller of the Borrower. "Restricted Government Contracts": as defined in the Pledge Agreements. "Revolving 364 Day Commitment": the commitment of a Lender, as set forth on Schedule I hereto as amended from time to time pursuant to this Agreement, to make Revolving 364 Day Loans to the Borrower pursuant to Subsection 2.1(a)(i) and to issue and/or purchase participations in Letters of Credit pursuant to Section 3; and "Revolving 364 Day Commitments" means such commitments of all Lenders in an aggregate amount not to exceed $200,000,000 at any time. "Revolving 364 Day Commitment Period": the period from and including the Closing Date to but not including the Revolving 364 Day Termination Date or such earlier date on which the Revolving 364 Day Commitments shall terminate as provided herein. "Revolving 364 Day Lender": any Lender or Lenders having a Revolving 364 Day Commitment or a Revolving 364 Day Loan outstanding. "Revolving 364 Day Loans": the Loans made by Revolving 364 Day Lenders to the Borrower pursuant to Subsection 2.1(a)(i). "Revolving 364 Day Notes": (i) the promissory notes of the Borrower, if any, issued pursuant to subsection 2.5(i) of the Original Credit Agreement prior to the Closing Date and/or pursuant to subsection 2.5(f) of this Agreement on or after the Closing Date, in each case, to evidence the Revolving 364 Day Loans of any Lender and (ii) any promissory notes issued by the Borrower pursuant to subsection 10.6(d) in connection with assignments of the Revolving 364 Day Commitments and Revolving 364 Day Loans of any Lenders, in each case substantially in the form of Exhibit A-1 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Revolving 364 Day Termination Date": May 15, 2002, as the same may be extended in accordance with subsection 2.5(a) hereof. "SPD Technologies": SPD Technologies Inc., a Delaware corporation. "SPD Technologies Acquisition Agreement": the Agreement and Plan of Merger, dated as of July 2, 1998, among L-3 Communications Corporation, SPD Merger Co., SPD Technologies, Inc. and Midmark Capital L.P. 23 "SEC": the Securities and Exchange Commission. "Securities Act": Securities Act of 1933, as amended. "Senior Manging Agents": collectively, Fleet National Bank, The Bank of New York, Credit Lyonnais, First Union Commercial Corporation and Barclays Bank plc. "Similar Business": a business, at least a majority of whose revenues in the most recently ended calendar year were derived from (i) the sale of defense products, electronics, communications systems, aerospace products, avionics products and/or communications products, (ii) any services related thereto, (iii) any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto or any business of the Borrower and/or its Subsidiaries existing as of the Closing Date, and (iv) any combination of any of the foregoing. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Stockholders Agreement": the Stockholders Agreement, dated as of April 30, 1997, by and among the Borrower, Holdings, the Principals and any other party that may from time to time become a party thereto as provided therein, as the same may be amended, supplemented or otherwise modified from time to time. "Subordinated Debt": indebtedness outstanding under or in respect of the Original Subordinated Notes, the New Subordinated Notes, the December 1998 Subordinated Notes and/or Additional Subordinated Indebtedness. "Subordinated Debt Documents": the Original Subordinated Debt Documents, the December 1998 Subordinated Debt Documents, the New Subordinated Debt Documents and any similar indentures, registration rights agreements, purchase agreements, notes and/or similar agreements and instruments executed by Borrower and/or any of its Subsidiaries in respect of any Additional Subordinated Indebtedness. "Subscription Agreements": the Common Stock Subscription Agreements between Holdings and each of Frank C. Lanza, Robert V. LaPenta, Capital Partners and Lockheed, each dated as of April 30, 1997. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, directly or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. 24 "Subsidiary Guarantee": the Third Amended and Restated Subsidiary Guarantee substantially in the form of Exhibit B-2, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Subsidiary Pledge Agreement": the Third Amended and Restated Subsidiary Pledge Agreement substantially in the form of Exhibit B-5, to be executed and delivered by the Borrower's Subsidiaries (other than any Immaterial Subsidiary or Foreign Subsidiary of the Borrower), as the same may be amended, supplemented or otherwise modified. "Swing Line Lender": as defined in the Facility A Credit Agreement. "TCAS Acquired Company": Honeywell Inc.'s Traffic Alert and Collision Avoidance System product line. "TCAS Acquisition Documents": the Asset Purchase Agreement among Honeywell Inc. (as seller), Borrower (as buyer), and Honeywell International Inc. (as guarantor), dated as of February 10, 2000, and all material agreements, instruments and other documents executed or delivered pursuant thereto or in connection with all exhibits, schedules and attachments thereto. "TCAS Subsidiary": a Subsidiary of Borrower organized as a Delaware limited liability company which will hold and operate the assets and business of the TCAS Acquired Company. "Term Loan Commitment or Term Loan Commitments": the commitments of a Lender to convert all outstanding Revolving 364 Day Loans as of the Revolving 364 Day Termination Date into Term Loans pursuant to subsection 2.5(b); and Term Loan Commitments means such commitments of all Lenders in the aggregate, which shall not exceed an amount equal to the lesser of (x) the aggregate amount of Revolving 364 Day Loans outstanding as of the Revolving 364 Day Termination Date and (y) the aggregate amount of the Revolving 364 Day Commitments existing on the Revolving 364 Day Termination Date. "Term Lender": any Lender having a Term Loan Commitment or a Term Loan outstanding. "Term Loans": the Loans made or deemed made by the Term Lenders to the Borrower pursuant to subsection 2.1(a)(ii). "Term Notes": (i) the promissory notes of the Borrower, if any, which may be hereafter issued pursuant to subsection 2.5(b) on or about the Revolving 364 Day Termination Date to evidence all Revolving 364 Day Loans which were converted into Term Loans of any Lender and (ii) any promissory notes issued by the Borrower pursuant to subsection 10.6(d) in connection with assignments of the Term Loan Commitments and Term Loans of any Lender, in each case substantially in the form of Exhibit A-2 25 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "Termination Date": (i) with respect to the Term Loans, if any, the earlier to occur of (a) May 15, 2006 or (b) the second anniversary of the effective date of the exercise of the Conversion Option with respect to such Term Loans and (ii) with respect to the Revolving 364 Day Commitments, the Revolving 364 Day Termination Date. "Tranche": the collective reference to Eurodollar Loans with then-current Interest Periods which all begin on the same date and end on the same date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "Eurodollar Tranches". "Transaction": the transactions contemplated by the Transaction Documents. "Transaction Agreement": that certain Transaction Agreement, dated as of March 28, 1997 by and among Lockheed, Holdings, Capital Partners and its Affiliates, Frank C. Lanza and Robert V. LaPenta. "Transaction Documents": (i) the Transaction Agreement, the Schedules thereto and the documents set forth on Schedule III hereto, (ii) the Equity Documents and (iii) the Subordinated Debt Documents. "Transferee": as defined in subsection 10.6(f). "Type": a Revolving 364 Day Loan or a Term Loan, as applicable. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "U.S. Taxes": any tax, assessment, or other charge or levy and any liabilities with respect thereto, including any penalties, additions to tax, fines or interest thereon, imposed by or on behalf of the United States or any taxing authority thereof. "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. "Wholly Owned Subsidiary": a Subsidiary of Borrower, the Capital Stock of which is 100% owned and controlled, directly or indirectly, by Borrower. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Credit Document or any certificate or other document made or delivered pursuant hereto. 26 (b) As used herein and in any Credit Document, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 1.3 Interrelationship with Original Credit Agreement. (a) As stated in the preamble hereof, this Credit Agreement is intended to amend and restate the provisions of the Original Credit Agreement and, notwithstanding any substitution of Notes as of the Closing Date, except as expressly modified herein, (x) all of the terms and provisions of the Original Credit Agreement shall continue to apply for the period prior to the Closing Date, including any determinations of payment dates, interest rates, Events of Default or any amount that may be payable to the Original Agents or the Original Lenders (or their assignees or replacements hereunder), and (y) the obligations under the Original Credit Agreement shall continue to be paid or prepaid on or prior to the Closing Date, and shall from and after the Closing Date continue to be owing and be subject to the terms of this Credit Agreement. All references in the Notes and the other Credit Documents to (i) the Original Credit Agreement or the "Credit Agreement" shall be deemed to include references to this Credit Agreement and (ii) the "Lenders" or a "Lender" or to the "Agents" or any "Agent" shall mean such terms as defined in this Credit Agreement. As to all periods occurring on or after the Closing Date, all of the covenants set forth in the Original Credit Agreement shall be of no further force and effect, it being understood that all obligations of the Borrower under the Original Credit Agreement shall be governed by this Credit Agreement from and after the Closing Date. (b) The Borrower, the Agents and the Lenders acknowledge and agree that all outstanding Loans (including all outstanding L/C Obligations) under the Original Credit Agreement are hereby converted into Loans (and, as applicable, L/C Obligations) outstanding hereunder effective as of the Closing Date. The Borrower, the Agents and the Lenders acknowledge and agree that all interest, fees, costs and reimbursable expenses accruing or arising under the Original Credit Agreement which remain unpaid and outstanding as of the Closing Date shall be and remain outstanding and payable as an obligation under this Agreement and the other Credit Documents. 27 1.4 Confirmation of Existing Obligations. The Borrower hereby agrees and admits that, as of the date hereof, it has no defenses to, or offsets or counterclaim against, any of its obligations to the Agents or any Lender under the Credit Documents of any kind whatsoever 1.5 Accounting for Interests in TCAS Subsidiary. Notwithstanding anything to the contrary contained in this Agreement or any other Credit Document, for purposes of computing the amount of any financial terms and/or computing compliance with any of the financial tests and/or covenants set forth in this Agreement or any other Credit Document in respect of the TCAS Subsidiary at any time it is not a Wholly Owned Subsidiary, Borrower shall (i) only be permitted to include that portion of any assets and/or liabilities attributable to the TCAS Subsidiary which corresponds directly with the percentage of Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower and (ii) eliminate depreciation and amortization expenses of the TCAS Subsidiary included in the consolidated financial statements of the Borrower that are applicable to the minority interests owned by Persons other than Borrower or its Subsidiaries in the TCAS Subsidiary in determining Borrower's Consolidated EBITDA. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS 2.1 Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make the loans described in this subsection 2.1(a) as applicable to the Borrower. (i) Revolving 364 Day Loans. Each Revolving 364 Day Lender severally agrees to make revolving credit loans to the Borrower, from time to time during the Revolving 364 Day Commitment Period, in an aggregate principal amount at any one time outstanding which, when added to such Lender's Commitment Percentage with respect to Revolving 364 Day Loans of the then outstanding L/C Obligations, does not exceed the amount of such Lender's Revolving 364 Day Commitment. During the Revolving 364 Day Commitment Period, the Borrower may use the Revolving 364 Day Commitments by borrowing, prepaying the Revolving 364 Day Loans, in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. At any time not less than thirty (30) days prior to the "Termination Date" (as defined in the Facility A Credit Agreement), and subject to the terms of the Fee Letter, the Borrower may increase the aggregate Commitments by (I) entering into a binding written agreement, substantially in the form of Exhibit G hereto, with any Lender to increase the Commitment of such Lender (an "Increased Commitment Agreement") which Increase Commitment Agreement shall be presented to the Agents for acknowledgment and acceptance (which shall not be withheld unless the effect thereof would be to exceed the maximum permitted amount herein for all Commitments, Facility A Commitments and Facility C Commitments (if Facility C exists) in the aggregate) and/or (II) subject to the First Offer Requirement (as defined below) enter into a binding written agreement substantially in the form of Exhibit H hereto (a "Lender Addition Agreement") with any bank, financial institution, or Investment Fund to become a Lender under this Agreement by making a Commitment and causing such Person to take all other actions required to 28 become a new Lender hereunder (a "New Lender"); provided that the sum of (i) the aggregate Commitments of all Lenders (including New Lenders), (ii) the aggregate Facility A Commitments of all Facility A Lenders and (iii) the aggregate Facility C Commitments (if Facility C exists) of all Facility C Lenders (if Facility C exists) may not exceed $750,000,000 at any time (such new or increased commitments, the "Incremental Facility"); and provided further that, no consent of any Lender shall be required for such Incremental Facility except for the consents described under clauses (I) and (II) above. In order to become a New Lender, a party must execute a Lender Addition Agreement and deliver the same to the Administrative Agent, the Syndication Agent and the Borrower for counter-execution. On the Eurodollar Loans Maturity Date (or, subject to compliance with subsection 2.16, on any Business Day) occurring on or immediately following the date that (i) the Agents have acknowledged their acceptance of any Increased Commitment Agreement delivered pursuant to clause (I) above or (ii) any Lender Addition Agreement has been executed by all necessary parties and delivered to the Agents, the increase in any such Lender's Commitment contemplated thereby shall become effective and/or the New Lender shall become a party to this Agreement, as applicable. Promptly thereafter, the Administrative Agent shall amend Schedule I hereto to accurately reflect the Commitments of the Lenders then in existence, whereupon such amended Schedule I shall be substituted for the pre-existing Schedule I, be deemed a part of this Agreement without any further action or consent of any party and be promptly distributed to each Lender and the Borrower by the Administrative Agent. The Incremental Facility shall have such economic terms (i.e., pricing, amount, tenor, amortization) as shall be agreed at the time with the lenders participating therein, ---- and shall, otherwise, be on the same terms as this Agreement; provided that without the written consent of Required Class Lenders for each Class, (i) the applicable interest rate margin under the Incremental Facility shall not exceed the Applicable Margin under this Agreement or the "Applicable Margin" under and as defined in the Facility A Credit Agreement by more than fifty basis points and (ii) the maturity date of the Incremental Facility shall be equal to or occurring after the scheduled Termination Date under this Agreement or the "Termination Date" under and as defined in the Facility A Credit Agreement; provided further that if the Borrower chooses to implement the Incremental Facility pursuant to clause (I) or (II) above, the Incremental Facility shall have the same economic terms (i.e. pricing, tenor, amortization) as this Agreement. In the alternative, without the consent of any Lender, Borrower may cause the Incremental Facility to be implemented and separately documented as Facility C, which shall have BOA as the administrative agent and provide for a ratable sharing of all Collateral and Guarantee Obligations under the Guarantees among and between the Lenders, the Facility A Lenders and the Facility C Lenders. In any case, the Administrative Agent shall have the right to execute, on behalf of the Lenders, any amendments and/or other documents necessary to implement the Incremental Facility; provided that such amendments and/or other documents do not affect any of the rights or obligations of any Lender for which the written consent of such Lender is necessary under subsection 10.1 unless the written consent of such Lender is received by the Administrative Agent. When the Incremental Facility is not implemented and separately documented as Facility C, the Borrower shall send the Administrative Agent (for distribution to each Lender) a written offer to participate in the Incremental Facility pursuant to clause (I) above, and each such Lender 29 shall have the right, but no obligation, to commit to a ratable portion of the Incremental Facility, provided that no later than fourteen (14) days after receipt of such written request, each such Lender shall advise the Administrative Agent and the Borrower whether it intends to participate in the Incremental Facility and the amount of its proposed commitment (the "First Offer Requirement"). Only after satisfying the First Offer Requirement and allocating requested commitments to Lenders requesting participation in such Incremental Facility shall Borrower be permitted to offer participation in any remaining commitments for the Incremental Facility to any proposed New Lender pursuant to clause (II) above. (ii) Term Loans. In the event the conditions in subsection 2.5(b) to the exercise of the Conversion Option are satisfied, each Extending Lender severally agrees to convert, effective upon the Revolving 364 Day Termination Date, a principal amount of Revolving 364 Day Loans of such Lender into a Term Loan of such Lender to the Borrower in an aggregate principal amount which does not exceed the lesser of (a) the principal amount of Revolving 364 Day Loans of such Lender outstanding on the Revolving 364 Day Termination Date and (b) the principal amount of such Lender's 364 Day Commitment outstanding on the Revolving 364 Day Termination Date. Amounts borrowed under this subsection 2.1(a)(ii) and subsequently repaid may not be reborrowed. (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.7, provided that, except as contemplated in clause (c) of the definition of Interest Period, no Revolving 364 Day Loan shall be made as a Eurodollar Loan after the day that is one month prior to the applicable Termination Date. 2.2 Procedure for Borrowing. The Borrower may borrow under the Revolving 364 Day Commitments during the Revolving 364 Day Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to (a) 11:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date, if all or any part of the requested Loans are to be initially Eurodollar Loans, (b) 11:00 A.M., New York City time, on the requested Borrowing Date in the case of a Base Rate Loan), specifying (i) the amount to be borrowed of each Type of Loan, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective lengths of the initial Interest Periods therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $2,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $2,000,000, such lesser amount), and (y) in the case of Eurodollar Loans, $5,000,000 or a whole multiple of $100,000 in excess thereof; provided that the Borrower may nevertheless borrow amounts below such minimum amounts in clauses (x) or (y) above solely for the purpose of (i) converting Revolving 364 Day Loans into Term Loans on the Revolving 364 Day Termination Date, (ii) repaying Revolving 364 Day Loans owing to any Nonconsenting Lenders on the Revolving 364 Day Termination Date and (iii) funding any 30 scheduled amortization payment pursuant to subsection 2.5(b) in respect of any Term Loans then outstanding. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 11:00 A.M., New York City time (in the case of Eurodollar Loans) or 2:30 P.M., New York City time (in the case of Base Rate Loans), on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in accordance with the Borrower's payment instructions with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. All notices given by the Borrower under this subsection 2.2 may be made by telephonic notice promptly confirmed in writing. 2.3 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving 364 Day Lender a commitment fee for the period from and including the first day of the Revolving 364 Day Commitment Period to and including the Revolving 364 Day Termination Date, computed at the Commitment Fee Rate on the daily amount of the Available Commitment of such Revolving 364 Day Lender during the period for which payment is made, payable quarterly in arrears on the last Business Day of each March, June, September and December and on the Termination Date, commencing on the first of such dates to occur after the date hereof. 2.4 Termination or Reduction of Revolving 364 Day Commitments. The Borrower shall have the right, upon not less than three Business Days' written notice to the Administrative Agent, to terminate the Revolving 364 Day Commitments or, from time to time, to reduce the amount of the Revolving 364 Day Commitments ratably among the Revolving 364 Day Lenders; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving 364 Day Loans made on the effective date thereof, the aggregate principal amount of the Revolving 364 Day Loans then outstanding, when added to the then outstanding L/C Obligations, would exceed the Revolving 364 Day Commitments then in effect. Any such reduction shall be in an amount equal to $2,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce permanently the Revolving 364 Day Commitments then in effect. 2.5 Extension of Revolving 364 Day Termination Date; Conversion Option; Repayment of Loans; Evidence of Debt. (a) Extension of Revolving 364 Day Termination Date. The Borrower may elect to forward to the Administrative Agent (for distribution to each Lender) no earlier than sixty (60) but no later than fifty-five (55) days prior to any scheduled Revolving 364 Day Termination Date a written request asking each Revolving 364 Day Lender to consent to the extension of the Revolving 364 Day Termination Date for an additional period not to exceed 364 days. Borrower may renew such extension requests annually. Not later than thirty (30) days after receipt of such written request, each Lender shall advise the Administrative Agent and the Borrower in writing whether such Lender consents to the proposed extension if all the conditions, including those set forth in subsection 5.2 of this 31 Agreement, thereto have been satisfied. If all of the Revolving 364 Day Lenders have consented in writing to such extension and all conditions set forth in subsection 5.2 shall have been satisfied, then effective on the initially scheduled Revolving 364 Day Termination Date, the Revolving 364 Day Termination Date shall be deemed automatically extended by the additional period to which the Revolving 364 Day Lenders have consented, which shall not exceed 364 days (herein, the "Extension Option"). If less than all of the Revolving 364 Day Lenders consent to the exercise of the proposed Extension Option (the "Extending Lenders"), the Borrower may replace all, some or none of such Nonconsenting Lenders on or before the initially scheduled Revolving 364 Day Termination Date pursuant to subsection 2.17 and repay all outstanding Revolving 364 Day Loans owing to each Nonconsenting Lender that is not being replaced, if any, on the initially scheduled Revolving 364 Day Termination Date (without giving effect to the Extension Option); provided that if the Extending Lenders do not hold more than 50% of the outstanding Revolving 364 Day Commitments, the Borrower will not be entitled to exercise the Extension Option with respect to any Extending Lenders nor shall any Lender failing to consent to the Extension Option be deemed a Nonconsenting Lender and be subject to replacement under subsection 2.17 as a result thereof. Subject to the foregoing proviso, if the Borrower desires to exercise the Extension Option with the Extending Lenders, Borrower shall provide the Administrative Agent (for distribution to each Lender) with not less than five (5) days prior written notice thereof in addition to satisfying all conditions precedent set forth above (other than the requirement that all Revolving 364 Day Lenders have timely consented to the Extension Option). On the date the Extension Option becomes effective, Schedule I hereto shall be deemed amended to accurately reflect the Revolving 364 Day Commitments of the Revolving 364 Day Lenders then in existence and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (b) Conversion Option. Subject to the terms of this subsection 2.5(b), whether or not the Extension Option is utilized, the Borrower shall be entitled as of the Revolving 364 Day Termination Date to convert the principal amount of any or all Revolving 364 Day Loans (but not any obligations in respect of any Letters of Credit) outstanding as of the Revolving 364 Day Termination Date into Term Loans so long as each of the following conditions are met as of the effective date of such conversion to the satisfaction of the Administrative Agent (the "Conversion Option"): (i) each of the conditions precedent set forth in subsection 5.2 of this Agreement shall be satisfied, (ii) not later than five (5) Business Days before the Revolving 364 Day Termination Date, all Letters of Credit shall have terminated and/or been released and canceled to the satisfaction of the Issuing Lender and the Administrative Agent and all outstanding L/C Obligations in respect of any Letters of Credit shall have been paid in full in cash or cash collateralized on terms deemed satisfactory by the Administrative Agent and the Issuing Lender and (iii) not later than five (5) days before the Revolving 364 Day Termination Date, the Borrower shall have provided the Administrative Agent 32 (for distribution to each Lender) (x) written notice of the Borrower's desire to exercise the Conversion Option, (y) a certificate of a Responsible Officer of the Borrower specifying the aggregate amount of Revolving 364 Day Loans to be paid in full and the amount of such Loans which will be converted to Term Loans, in each case, on the Revolving 364 Day Termination Date and certifying that all conditions precedent to exercise of the Conversion Option are satisfied and will remain satisfied on the Revolving 364 Day Termination Date and (z) Term Notes in the form of Exhibit A-2 hereto for each Lender that requests a Term Note pursuant to subsection 2.5(g)(ii) in the amount of each such Lender's respective Revolving 364 Day Loans which are to be converted into Term Loans of such Lender. If the Conversion Option is exercised, the Term Loans shall be repaid by the Borrower on the Termination Date applicable to such Term Loans. (c) Replacement of Nonconsenting Lenders. If any Revolving 364 Day Lender declines to consent or fails to timely indicate its consent to the exercise by Borrower of the Extension Option and the Extending Lenders hold more than 50% of the Revolving 364 Day Commitments, such Lender shall be deemed a Nonconsenting Lender and be subject to replacement in accordance with the terms of subsection 2.17 hereof. (d) Payments on Revolving 364 Day Loans. Subject to the exercise of the Conversion Option in accordance with the terms of subsection 2.5(b), the Borrower hereby unconditionally promises to pay to the Administrative Agent on the Revolving 364 Day Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8) for the account of each Revolving 364 Day Lender the then unpaid principal amount of each Revolving 364 Day Loan of such Lender. (e) Interest. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date such Loans are made until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.9. (f) Recording. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (g) Loan Accounts and Register; Notes. (i) The Loans made by, and the Commitments of, each Lender shall be evidenced by one or more loan accounts ("Loan Accounts") maintained by such Lender and by the Register maintained by the Administrative Agent in the ordinary course of business. The Register maintained by the Administrative Agent shall, in the event of a discrepancy between the entries in the Administrative Agent's books and any Lender's books relating to such matters, be controlling and, absent manifest error, shall be 33 conclusive as to the amount of the Loans made by the Lender to the Borrower, the interest and payments thereon and any other amounts owing in respect of this Agreement. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this subsection 2.5(g) and subsection 10.6, to maintain the Register on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. 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 subsection 2.5(g) and subsection 10.6 (other than any losses, claims, damages and liabilities to the extent incurred by reason of the gross negligence or willful misconduct of the Administrative Agent). (ii) If requested by any Lender, the Borrower shall execute and deliver to such Lender (and deliver a copy thereof to the Administrative Agent) one or more promissory notes evidencing the Loans owing to such Lender pursuant to this Agreement in accordance with subsection 2.5(i). (h) Prima Facie Evidence. The entries made in the Register and the Loan Accounts of each Lender maintained pursuant to subsection 2.5(g) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such Loan Account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. For the avoidance of doubt, the existence or non-existence of any Note representing any Obligations owing to any Lender hereunder shall not affect the existence, amount, validity or enforceability of such Obligations, which in all events shall be absolute and unconditional. (i) Notes. The Borrower agrees that the Borrower will execute and deliver to each Lender that requests any such Note pursuant to subsection 2.5(g)(ii), a promissory note of the Borrower evidencing the Revolving 364 Day Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate insertions as to date and principal amount (a "Revolving 364 Day Note"). 2.6 Optional Prepayments; Mandatory Prepayments and Reduction of Commitments. (a) Subject to subsections 2.12 and 2.16, the Borrower may at any time and from time to time prepay any Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days prior to the date of prepayment in the case of Eurodollar Loans or on any Business Day in the case of Base Rate Loans, specifying the date and amount of prepayment, the Type of Loan to be prepaid (which Loans shall be prepaid on a pro rata basis among the 34 applicable Lenders) and whether the prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice, the Administrative Agent shall promptly notify each applicable Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.16. Partial prepayments shall be in an aggregate principal amount of $2,000,000 or a whole multiple of $100,000 in excess thereof. In the event of any voluntary prepayment of the Term Loans, such voluntary prepayment shall be deemed applied to the next scheduled amortization payment(s) as described in subsection 2.5(b) (rather than be applied in inverse order of maturity). (b) (i) If, subsequent to the Original Closing Date, Holdings or any of its Subsidiaries shall incur or permit the incurrence of any Indebtedness (other than Indebtedness permitted pursuant to subsection 7.2, 100% of the Net Proceeds thereof shall be promptly ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility C Loans (if Facility C exists) and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the 60th day following the date of receipt of such Net Proceeds (the "Debt Prepayment Waiting Period"), the Commitments, the Facility A Commitments and the Facility C Commitments (if Facility C exists) shall be permanently reduced as set forth in clause (iii) of this subsection 2.6(b) by the amount so prepaid on the last day of the Debt Prepayment Waiting Period. During the term of any Debt Prepayment Waiting Period, a portion of the Commitments, the Facility A Commitments and the Facility C Commitments (if Facility C exists) equal to the amount of prepayments received in respect of the Loans, the Facility A Loans and the Facility C Loans (if Facility C exists), as applicable, from the issuance and/or incurrence of such Indebtedness shall be unavailable to Borrower and deemed excluded from each Lender's, Facility A Lender's and Facility C Lender's (if Facility C exists) "Available Commitment" (as such term is defined herein and in each of the Facility A Credit Agreement and Facility C Credit Agreement, if Facility C exists) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. Nothing in this paragraph (b) shall be deemed to permit any Indebtedness not permitted by subsection 7.2. (ii) If, subsequent to the Closing Date, Holdings or any of its Subsidiaries shall receive Net Proceeds from any Asset Sale (other than in respect of a sale of all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower (a "Final TCAS Sale")), such Net Proceeds, subject to the Applicable Holdback (defined below) shall be promptly and ratably applied toward the prepayment of the Loans, the Facility A Loans and the Facility C Loans (if Facility C exists) and permanent reduction of the Commitments, the Facility A Commitments and the Facility C Commitments (if Facility C exists) as set forth in clause (iii) of this subsection 2.6(b); provided that Net Proceeds from any Asset Sales (other than in respect of a Final TCAS Sale) shall not be required to be so applied to the extent that such Net Proceeds are used by the Borrower or 35 such Subsidiary to acquire assets to be employed in the business of the Borrower or its Subsidiaries within 365 days of receipt thereof, but if such Net Proceeds, subject to the Applicable Holdback (as defined below), are not so used, 100% of the amount of such Net Proceeds not so used shall be applied toward the prepayment of the Loans and the permanent reduction of the Commitments as set forth in clause (iii) of this subsection 2.6(b) on the earlier of (x) the 366th day after receipt of such Net Proceeds and (y) the date on which the Borrower has determined that such Net Proceeds shall not be so used. If Holdings, Borrower or any of its Subsidiaries shall receive Net Proceeds from a Final TCAS Sale, such Net Proceeds shall be applied on or prior to the third Business Day after receipt thereof toward prepayment of the Loans, the Facility A Loans and the Facility C Loans (if Facility C exists) and, unless the Required Class Lenders shall have waived such requirement in writing, on or before the 60th day following the date of such Final TCAS Sale, the ("TCAS Waiting Period"), the Commitments, the Facility A Commitments and the Facility C Commitments (if Facility C exists) shall be permanently reduced as set forth in clause (iii) of this subsection 2.6(b) by the amount so prepaid on the last day of the TCAS Waiting Period. During the term of any TCAS Waiting Period, a portion of the Commitments, the Facility A Commitments and the Facility C Commitments (if Facility C exists) equal to the amount of prepayments received in respect of the Loans, the Facility A Loans and the Facility C Loans (if Facility C exists) from such Final TCAS Sale shall be unavailable to Borrower and deemed excluded from each Lender's, Facility A Lender's and Facility C Lender's (if Facility C exists) "Available Commitment" (as such term is defined herein and in each of the Facility A Credit Agreement and Facility C Credit Agreement, if Facility C exists) unless Borrower shall have received a written waiver of such mandatory commitment reduction from the Required Class Lenders. As used herein, "Applicable Holdback" shall mean an amount of Net Proceeds not in excess of $20,000,000 derived from any Asset Sales (other than a Final TCAS Sale) occurring since the Original Closing Date that has not been applied toward the prepayment of Loans and the permanent reduction of the Commitments as set forth in clause (iii) of subsection 2.6(b) which Borrower and/or its applicable Subsidiary may retain and not apply as a mandatory prepayment without the requirement of utilizing the same to acquire assets to be employed in the business of the Borrower or such applicable Subsidiary; provided, that if any Event of Default shall have occurred and be continuing, the Applicable Holdback amount shall be automatically reduced to zero unless and until such Event of Default is acknowledged in writing by the Required Lenders (or all the Lenders in cases where the unanimous consent of the Lenders is required) as cured or waived. (iii) Except during any period in which an Event of Default has occurred and is continuing, any mandatory prepayments required by subsection 2.6(b)(i) and (ii) shall be applied ratably to the outstanding principal amount of Loans, Facility A Loans and Facility C Loans (if Facility C exists), with a corresponding ratable permanent reduction of the Commitments, Facility A Commitments and the Facility C Commitments (if Facility C exists) as and when required by subsection 2.6(b)(i) and (ii). Commitment, Facility A Commitment and Facility C Commitment (if Facility C exists) reductions made pursuant to subsections 2.6(b)(i) and (ii) (and the corresponding subsections of the Facility A Credit Agreement and the Facility C Credit Agreement, if Facility C exists) 36 shall be applied to each Lender's respective Commitment, each Facility A Lender's Facility A Commitment and/or each Facility C Lender's Facility C Commitment (if Facility C exists), as applicable, on a pro rata basis and shall reduce permanently such Commitments, Facility A Commitments and Facility C Commitments (if Facility C exists). At any time that an Event of Default has occurred and is continuing, all mandatory prepayments shall be applied in accordance with the terms of subsection 2.12 hereof (and the corresponding subsection of the Facility A Credit Agreement and the Facility C Credit Agreement, if Facility C exists). Mandatory prepayments shall not be subject to any minimum amount requirement. (iv) If after giving effect to (i) any reduction of the Revolving 364 Day Commitments under subsection 2.4, 2.5 or 2.6 or (ii) any recalculation of the Exchange Rate pursuant to subsection 3.9, the aggregate outstanding principal amount of Revolving 364 Day Loans plus the aggregate outstanding amount of L/C Obligations shall exceed the aggregate amount of the Revolving 364 Day Commitments, such reduction or recalculation shall be accompanied by prepayment in the amount of such excess to be applied to the Revolving 364 Day Loans; provided that if the aggregate principal amount of Revolving 364 Day Loans then outstanding is less than the amount of such excess (because Letters of Credit constitute a portion of such excess), the Borrower shall immediately, without notice or demand, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount (but in no event greater than such balance) in a cash collateral account opened by the Administrative Agent for the benefit of the Revolving 364 Day Lenders (such deposit to be in Dollars with respect to Domestic L/Cs and the applicable Alternative Currency with respect to Foreign L/Cs). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants in such Letters of Credit, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Credit Documents. Any amounts deposited in such accounts shall be released to the Borrower on any Calculation Date on which the aggregate outstanding principal amount of Revolving 364 Day Loans plus the aggregate outstanding amount of L/C Obligations equals or is less than the aggregate amount of the Revolving 364 Day Commitments, provided that no Default or Event of Default has occurred and is continuing. 2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans, by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M. New York City time, on the Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent prior irrevocable notice of such election at or before 11:00 A.M., New York City time, on the third Business Day immediately preceding the date of the proposed conversion and of the amount and Type of Loan to be converted. Any such notice of conversion to 37 Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each applicable Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is then continuing and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Termination Date with respect to such Loan. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans and of the amount and Type of Loan to be converted, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is then continuing or (ii) after the date that is one month prior to the Termination Date with respect to such Loan and provided, further, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. (c) All notices given by Borrower under this subsection 2.7 may be made by telephonic notice promptly confirmed in writing. 2.8 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $100,000 in excess thereof; provided that the Borrower may nevertheless borrow amounts in any Eurodollar Tranche below such minimum amounts solely for the purpose of (i) converting Revolving 364 Day Loans into Term Loans on the Revolving 364 Day Termination Date, (ii) repaying Revolving 364 Day Loans owing to any Nonconsenting Lenders on the Revolving 364 Day Termination Date or (iii) funding any scheduled amortization payment pursuant to subsection 2.5(b) in respect of any Term Loans then outstanding. All Loans hereunder may be converted or continued into Base Rate Loans without reference to the minimum principal amount requirements for new Base Rate borrowings set forth in subsection 2.2 above. In no event shall the number of outstanding Eurodollar Tranches under this Agreement plus the number of outstanding Facility A Eurodollar Tranches and Facility C Eurodollar Tranches (if Facility C exists) exceed 20 at any time. 2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. 38 (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable with respect to each Loan in arrears on each Interest Payment Date and on the Termination Date with respect to such Loan, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.10 Computation of Interest and Fees. (a) Interest on Base Rate Loans and fees shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; all other interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.9(a) or (c). 2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the eurodollar market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or 39 (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn in writing by the Administrative Agent (which the Administrative Agent agrees to do when the Administrative Agent has determined, or has been instructed by the Required Lenders that, the circumstances that prompted the delivery of such notice no longer exist), no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Loans to Eurodollar Loans. 2.12 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Revolving 364 Day Lenders hereunder, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Revolving 364 Day Commitments of Revolving 364 Day Lenders shall be made pro rata according to the respective Commitment Percentages of the Revolving 364 Day Lenders. Except during any period in which an Event of Default has occurred and is continuing, each payment (including each prepayment) by the Borrower on account of principal of and interest on any Term Loans and/or the Revolving 364 Day Loans, and any application by the Administrative Agent of the proceeds of any Collateral, shall be made pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder in respect of any Loan, whether on account of principal, interest, Reimbursement Obligations (whether in respect of Domestic L/Cs or Foreign L/Cs), fees, expenses or otherwise, shall be made without set off or counterclaim and shall be made prior to 11:00 A.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders with respect to such Loans, at the Administrative Agent's office specified in subsection 10.2, in Dollars and in immediately available funds; provided, that, with respect to any Reimbursement Obligations of the Borrower arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. At any time that an Event of Default has occurred and is continuing, all payments (including prepayments) made by Borrower hereunder and any application by the Administrative Agent of the proceeds of any Collateral and/or payment under any Guarantee shall be applied in the following order: (1) to the ratable payment of all amounts due and owing by the Borrower pursuant to 40 subsection 10.5 of this Agreement, subsection 10.5 of the Facility A Credit Agreement or subsection 10.5 or the Facility C Credit Agreement (if Facility C exists) to the Agents, the Facility A Agents and/or the Facility C Agents (if Facility C exists) and, after payment in full thereof, to any other Lender, Facility A Lender or Facility C Lender (if Facility C exists); (2) to the ratable payment of all interest, fees and commissions due and owing under this Agreement, the Facility A Credit Agreement or the Facility C Credit Agreement (if Facility C exists) or to the Agents, the Facility C Agents (if Facility C exists), the Facility A Agents, the Swing Line Lender, any Lender, any Facility A Lender or any Facility C Lender (if Facility C exists); (3) to the ratable payment (or cash collateralization) of the aggregate outstanding principal amount of Loans, Facility A Loans and Facility C Loans (if Facility C exists) and the aggregate L/C Obligations, Facility A L/C Obligations and Facility C L/C Obligations (if Facility C exists); and (4) to the ratable payment of all other obligations of the Borrower to the Agents, the Facility A Agents, the Facility C Agents (if Facility C exists), the Swing Line Lender, any Lender, any Facility A Lender or any Facility C Lender (if Facility C exists) under any Credit Document, Facility A Credit Document or Facility C Credit Document (if Facility C exists). For purposes of applying payments and proceeds distributed under clause 3 above, each Lender will first apply such amounts to all outstanding Loans of such Lender before such amounts will be held as cash collateral for L/C Obligations in which such Lender is a L/C Participant. The Administrative Agent, the Facility A Administrative Agent and the Facility C Administrative Agent (if Facility C exists) shall ratably distribute such payments to the applicable Lenders, the Facility A Lenders and the Facility C Lenders (if Facility C exists) promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such 41 Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Lender to make any Loan to be made by it shall not relieve any other Lender of its obligation hereunder to make its Loan on such Borrowing Date. 2.13 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.16. If circumstances subsequently change so that any affected Lender shall determine that it is no longer so affected, such Lender will promptly notify the Borrower and the Administrative Agent, and upon receipt of such notice, the obligations of such Lender to make or continue Eurodollar Loans or to convert Base Rate Loans into Eurodollar Loans shall be reinstated. 2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 2.15 and changes in the rate of net income taxes (including branch profits taxes and minimum taxes) or franchise taxes (imposed in lieu of net income taxes) of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount 42 receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender upon written demand such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable; provided that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, in its reasonable discretion, in any legal, economic or regulatory manner) to designate a different Eurodollar lending office if the making of such designation would allow the Lender or its Eurodollar lending office to continue to perform its obligations to make Eurodollar Loans or to continue to fund or maintain Eurodollar Loans and avoid the need for, or reduce the amount of, such increased cost. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. If the Borrower so notifies the Administrative Agent within five Business Days after any Lender notifies the Borrower of any increased cost pursuant to the foregoing provisions of this Section, the Borrower may convert all Eurodollar Loans of such Lender then outstanding into Base Rate Loans in accordance with the terms hereof. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such costs; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such additional amount or amounts; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amount or amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so 43 entitled. A certificate as to any additional amounts payable pursuant to this subsection, showing the calculation thereof in reasonable detail, submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.15 Taxes. (a) Except as provided in this subsection 2.15, all payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority ("Taxes"), excluding Taxes on net income (including, without limitation, branch profits taxes and minimum taxes) and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between any Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to any Agent or any Lender hereunder or under any Note, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof with respect to any Taxes that are imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or that are attributable to such Lender's failure to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the relevant Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt, if any, received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the relevant Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 44 (b) Each Lender, Assignee and Participant that is not a citizen or resident of the United States of America, a corporation, partnership created or organized in or under the laws of the United States of America, any estate that is subject to U.S. federal income taxation regardless of the source of its income or any trust which is subject to the supervision of a court within the United States and the control of a United States fiduciary as described in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: (A) two duly completed and signed copies of either Internal Revenue Service Form W-8 ECI (relating to such Non-U.S. Lender and entitling it to a complete exemption from withholding of U.S. Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents) or Form W-8 BEN (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement and the other Credit Documents), or successor and related applicable forms, as the case may be; or (B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit E (or such other form of statement as shall be reasonably requested by the Borrower from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 or successor and related applicable form (it being understood and agreed that no Participant and, without the prior written consent of the Borrower described in clause (B) of the proviso to the first sentence of subsection 10.6(c), no Assignee shall be entitled to deliver any forms or statements pursuant to this clause (B), but rather shall be required to deliver forms pursuant to clause (A) of this subsection 2.15(b)). Further, each Non-U.S. Lender agrees (i) to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Forms W-8 ECI or W-8 BEN, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable U.S. laws and regulations and (ii) in the case of a Non-U.S. Lender that delivers a statement in the form of Exhibit E (or such other form of statement as shall have been requested by the Borrower), to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such statement on an annual basis on the anniversary of the date on which 45 such Non-U.S. Lender became a party to this Agreement and to deliver promptly to the Borrower and the Administrative Agent, and if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower from time to time unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this subsection 2.15(b). Each Non-U.S. Lender agrees to indemnify and hold harmless the Borrower from and against any taxes, penalties, interest or other costs or losses (including, without limitation, reasonable attorneys' fees and expenses) incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations to deduct or withhold any U.S. Taxes from any payments made pursuant to this Agreement to such Non-U.S. Lender or the Administrative Agent which failure resulted from the Borrower's reliance on any form, statement, certificate or other information provided to it by such Non-U.S. Lender pursuant to clause (B) or clause (ii) of this subsection 2.15(b). The Borrower hereby agrees that for so long as a Non-U.S. Lender complies with this subsection 2.15(b), the Borrower shall not withhold any amounts from any payments made pursuant to this Agreement to such Non-U.S. Lender, unless the Borrower reasonably determines that it is required by law to withhold or deduct any amounts from any payments made to such Non-U.S. Lender pursuant to this Agreement. A Non-U.S. Lender shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this subsection 2.15(b) that such Non-U.S. Lender is not legally able to deliver (it being understood and agreed that the Borrower shall withhold or deduct such amounts from any payments made to such Non-U.S. Lender that the Borrower reasonably determines are required by law and that payments resulting from a failure to comply with this paragraph (b) shall not be subject to payment or indemnity by the Borrower pursuant to subsection 2.15(a)). If any Credit Party other than the Borrower makes any payment to any Non-U.S. Lender under any Credit Document, the foregoing provisions of this subsection 2.15 shall apply to such Non-U.S. Lender and such Credit Party as if such Credit Party were the Borrower (but a Non-U.S. Lender shall not be required to provide any form or make any statement to any such Credit Party unless such Non-U.S. Lender has received a request to do so from such Credit Party and has a reasonable time to comply with such request). (c) If a Lender shall become aware that it is entitled to receive a refund (whether by way of a direct payment or by offset) in respect of a Non-Excluded Tax paid by the Borrower, which refund, in the good faith judgment of such Lender, is allocable to such payment made pursuant to this Section, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after the receipt of a request from the Borrower, apply for such refund at the Borrower's sole expense. If any Lender receives such refund (as described in the preceding sentence), it shall repay the amount of such refund (together with any interest received thereon) to the Borrower if all the payments due under this Section has been paid in full. 46 2.16 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto (but excluding loss of margin). Such indemnification under this subsection 2.16 may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (but excluding loss of margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Each Lender claiming any payment pursuant to this subsection 2.16 shall do so by giving notice thereof to the Borrower and the Administrative Agent (showing calculation of the amount claimed in reasonable detail) within 60 Business Days after a failure to borrow, convert or continue Eurodollar Loans, or to prepay, after notice or after a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period therefor. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.17 Replacement of Lenders. If at any time (a) the Borrower becomes obligated to pay additional amounts described in subsections 2.13, 2.14 or 2.15 as a result of any condition described in such subsections, (b) any Lender ceases to make Eurodollar Loans pursuant to subsection 2.13, (c) any Lender becomes insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or other Person having similar powers or (d) any Lender becomes a "Nonconsenting Lender" (hereinafter defined), then the Borrower may, on five (5) Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to subsection 10.6 all of its rights and obligations under this Agreement to a Lender or other entity selected by the Borrower and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of such Lender's Loans and all accrued interest and fees and other amounts payable hereunder (including amounts payable under subsection 2.16 as though such Loans were being paid instead of being purchased); provided that (i) the Borrower shall have no right to replace the Administrative Agent, (ii) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender, (iii) in the event of a replacement of a Nonconsenting Lender or a Lender to which the Borrower becomes obligated to pay additional amounts under one of the 47 subsections described in clause (a) above, in order for the Borrower to be entitled to replace such a Lender, such replacement must take place no later than 180 days after (A) the date the Nonconsenting Lender shall have notified the Borrower and the Administrative Agent of its failure to agree to any requested consent, waiver or amendment or (B) the Lender shall have demanded payment of additional amounts under one of the subsections described in clause (a) above, as the case may be, and (iv) in no event shall the Lender hereby replaced be required to pay or surrender to its replacement Lender or other entity any of the fees received by such Lender hereby replaced pursuant to this Agreement. In the case of a replacement of a Lender to which the Borrower becomes obligated to pay additional amounts pursuant to this subsection 2.17, the Borrower shall pay such additional amounts to such Lender prior to such Lender being replaced and the payment of such additional amounts shall be a condition to the replacement of such Lender. In the event that (x) the Borrower or the Administrative Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Credit Documents or to agree to any amendment thereto or consent to the Extension Option, (y) the consent, waiver or amendment in question requires the agreement of all Lenders in accordance with the terms of subsection 10.1 or relates to a request to exercise the Extension Option under subsection 2.5(a) and (z) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a "Nonconsenting Lender." 2.18 Certain Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the non-refundable fees at the times and in the amounts as set forth in the Fee Letter. 2.19 Certain Rules Relating to the Payment of Additional Amounts. (a) Upon the request, and at the expense, of the Borrower, each Lender to which the Borrower is required to pay any additional amount pursuant to subsection 2.14 or 2.15 shall reasonably afford the Borrower the opportunity to contest, and reasonably cooperate with the Borrower in contesting, the imposition of any Non-Excluded Taxes or other amounts giving rise to such payment; provided that (i) such Lender shall not be required to afford the Borrower the opportunity to so contest unless the Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse such Lender for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with the Borrower in contesting the imposition of such Non-Excluded Taxes. (b) Each Lender agrees that if it makes any demand for payment under subsection 2.14 or 2.15(a), or if any adoption or change of the type described in subsection 2.13 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its reasonable discretion) to designate a different lending office if the making of such a designation would allow the Lender to continue to make and maintain Eurodollar Loans and would reduce or obviate the need for the Borrower to make payments under subsection 2.14 or 2.15(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.13. 48 SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the Revolving 364 Day Lenders set forth in subsection 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving 364 Day Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (x) the L/C Obligations would exceed the Revolving 364 Day Commitments or (y) the Available Commitment with respect to Revolving 364 Day Loans of all Revolving 364 Day Lenders then outstanding would be less than zero. (b) Each Domestic L/C shall (i) be denominated in Dollars, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods and (iii) expire no later than the fifth Business Day prior to the Revolving 364 Day Termination Date. (c) Each Foreign L/C shall (i) be denominated in an Alternative Currency, (ii) be a Performance L/C or a Financial L/C issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, or be a commercial letter of credit for the purchase of goods, and (iii) expire no later than the fifth Business Day prior to the Revolving 364 Day Termination Date. For purposes of this Agreement, the amount deemed outstanding under each Foreign L/C at any time, and the amount of the Borrower's Reimbursement Obligations under subsection 3.5 for any amounts paid by the Issuing Lender in connection with any Foreign L/C, shall be the Dollar Equivalent, as determined on the most recent Calculation Date, of (x) such Letter of Credit or (y) the Reimbursement Amount (as defined in Subsection 3.5(a)), as applicable. (d) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, Domestic L/Cs shall also be subject to the laws of the State of New York. (e) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if (i) such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law or any policies of the Issuing Lender or (ii) in the case of any Foreign L/C, it has determined that it cannot provide such Letter of Credit in the applicable Alternative Currency. 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit at any time prior to the fifth Business Day prior to the Revolving 364 Day Termination Date by delivering to the Issuing 49 Lender with a copy to the Administrative Agent at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower and the Administrative Agent (with copies for each Lender) promptly following the issuance thereof. 3.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit fee with respect to each Letter of Credit, computed for the period from and including the date of issuance of such Letter of Credit to the expiration date of such Letter of Credit at a rate per annum equal to (i) in the case of any such Letter of Credit issued as a Performance L/C, one-half (1/2) of the Applicable Margin then in effect for Eurodollar Loans, of the Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding and (ii) in the case of any other Letter of Credit (except for the type described in clause (i) above), the Applicable Margin then in effect for Eurodollar Loans, of the Dollar Equivalent of the aggregate face amount of such Letters of Credit outstanding, payable, in each such case, in arrears on each L/C Fee Payment Date and on the Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit is outstanding. Such fees shall be payable to the Administrative Agent to be shared ratably among the Revolving 364 Day Lenders in accordance with their respective Commitment Percentages with respect to Revolving 364 Day Loans. In addition, the Borrower shall pay to the Issuing Lender, for its sole account, a fee equal to 0.125% per annum of the Dollar Equivalent of the aggregate face amount of all outstanding Letters of Credit payable quarterly in arrears on each L/C Fee Payment Date and on the Revolving 364 Day Termination Date; provided, that, with respect to any Foreign L/C, the Dollar Equivalent of the face amount of such Letter of Credit shall be recalculated on each Calculation Date during the period that such Letter of Credit is outstanding. (b) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, 50 effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the relevant L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4 L/C Participation. (a) The Issuing Lender irrevocably agrees to sell and hereby sells to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Commitment Percentage with respect to Revolving 364 Day Loans from time to time in effect in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement or any such reimbursement payment received by the Issuing Lender is avoided or required to be returned in accordance with applicable law, such L/C Participant shall pay to the Issuing Lender upon demand in Dollars at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's then Commitment Percentage with respect to Revolving 364 Day Loans of the Dollar Equivalent of the amount of such draft (determined on the date such draft is paid), or any part thereof, which is not so indefeasibly reimbursed; provided that, if such demand is made prior to 11:00 A.M., New York City time, on a Business Day, such L/C Participant shall make such payment to the Issuing Lender prior to the end of such Business Day and otherwise such L/C Participant shall make such payment on the next succeeding Business Day. (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to subsection 3.4(a) in respect of any portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate, as quoted by the Issuing Lender, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.4(a) is not in fact made available to the Issuing Lender 51 by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will, if such payment is received prior to 11:00 A.M., New York City time, on a Business Day, distribute to such L/C Participant its pro rata share thereof prior to the end of such Business Day and otherwise the Issuing Lender will distribute such payment on the next succeeding Business Day; provided, however, that in the event that any such payment received by the Issuing Lender and distributed to the L/C Participants shall be required to be returned by the Issuing Lender, each such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees to reimburse the Issuing Lender on the same Business Day on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender provided such notice is received by 1:00 P.M., New York City time, on such Business Day, and the next Business Day if such notice is received after such time. The Issuing Lender shall provide notice to the Borrower on each Business Day on which a draft is presented indicating the Dollar Equivalent of the amount of (i) such draft so paid (and, in the case of a Foreign L/C, the amount of such draft so paid stated in the applicable Alternative Currency) and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment ((i) and (ii) collectively with any interest accruing pursuant to paragraph (b) below, the "Reimbursement Amount"). Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds; provided, that, with respect to any Reimbursement Obligations of the Borrower arising from the presentment to the Issuing Lender of a draft under a Foreign L/C, the Borrower may make payment in the applicable Alternative Currency if such payment is received by the Issuing Lender on the date such draft is paid by the Issuing Lender. (b) Interest shall be payable on the Dollar Equivalent of any and all amounts remaining unpaid by the Borrower under this subsection from the date a draft presented under any Letter of Credit is paid by the Issuing Lender until 52 payment in full (i) at the rate which would be payable on any Loans that are Base Rate Loans at such time until such payment is required to be made pursuant to subsection 3.5(a), and (ii) thereafter, at the rate which would be payable on any Loans that are Base Rate Loans at such time which were then overdue. (c) For the avoidance of doubt, subject to the provisos in the third sentence of subsection 2.12(a) and the last sentence of subsection 3.5(a) of this Agreement, all payments due from the Borrower hereunder in respect of Foreign L/Cs (and Reimbursement Obligations in connection therewith) shall be made in Dollars as provided in subsection 2.12 of this Agreement. 3.6 Obligations Absolute. (a) The Borrower's obligations under subsection 3.5(a) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any L/C Participant or any beneficiary of a Letter of Credit. (b) The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged (unless the Issuing Lender has knowledge of such invalidity, fraud or forgery), (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred, or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) Neither the Issuing Lender nor any L/C Participant shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower and the Administrative Agent of the date and the Dollar Equivalent of the amount thereof (and, in the 53 case of a Foreign L/C, the amount thereof stated in the applicable Alternative Currency). If any draft shall be presented for payment under any Letter of Credit, the responsibility of the Issuing Lender to the Borrower in connection with such draft shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit. 3.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall govern and control. 3.9 Determination of Exchange Rate. On each Calculation Date with respect to each outstanding Foreign L/C, the Issuing Lender shall determine the Exchange Rate as of such Calculation Date with respect to the applicable Alternative Currency and shall promptly notify the Administrative Agent and the Borrower thereof and of the Dollar Equivalent of all Foreign L/Cs outstanding on such Calculation Date. The Exchange Rate so determined shall become effective on such Calculation Date and shall remain effective until the next succeeding Calculation Date. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents, the Issuing Lender, and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Agents, the Issuing Lender, and each Lender that: 4.1 Financial Condition. The audited consolidated balance sheets at December 31, 2000 and the related statements of income and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, certified by PricewaterhouseCoopers L.L.P. have been delivered to the Agents and the Lenders and have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited financial statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. 4.2 No Change. Since December 31, 2000, there has been no development, event or circumstance which has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of Holdings, the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the 54 extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. Each of Holdings, the Borrower and its Subsidiaries has the corporate power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of such Credit Documents. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrower and each other Credit Party is a party, except those referred to in subsections 4.17 and 6.12 and those set forth on Schedule 4.4. This Agreement has been, and each other Credit Document will be, duly executed and delivered on behalf of the Borrower and each other Credit Party. This Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Credit Party thereto enforceable against each such Credit Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.5 No Legal Bar. Except as set forth on Schedule 4.5 or as could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of each Credit Document, the borrowing and use of the proceeds of the Loans and the consummation of the transactions contemplated by the Credit Documents: (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon Holdings, the Borrower or any Subsidiary of the Borrower or any of their respective properties or assets and (b) will not result in the creation or imposition of any Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations, except for the Liens arising under the Pledge Agreements. 4.6 No Material Litigation. Except as set forth on Schedule 4.6, no litigation by, investigation by, or proceeding of or before any arbitrator or any Governmental Authority is pending or, to the knowledge of the Borrower, overtly threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues with respect to any Credit Document or any of the transactions contemplated hereby or thereby or which could reasonably be expected to have a Material Adverse Effect. 4.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 55 4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and its Subsidiaries (i) has good record and insurable title in fee simple to, or a valid leasehold interest in, all its material real property, (ii) has good title to, or a valid leasehold interest in, all its other material property and (iii) none of such property in clauses (i) and (ii) is or shall be subject to any Lien except as permitted by subsection 7.3. 4.9 Intellectual Property. Holdings, the Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). To the best of the Borrower's knowledge, and except as set forth on Schedule 4.9, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim which could reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by Holdings, the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 Taxes. Except as set forth on Schedule 4.10, each of Holdings, the Borrower and its Subsidiaries has filed or caused to be filed all material tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 4.12 ERISA. The Borrower has provided to the Agents a true and correct copy of all agreements, arrangements and understandings relating to the transfer of Plans from Lockheed to the Borrower (the "Transfer Agreements"). The Transfer Agreements are in full force and effect and have not been waived or modified without the consent of the Agents (which shall not be unreasonably withheld) except to the extent any such waiver or modification, singly or in the aggregate, could not be reasonably expected to have a Material Adverse Effect. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no Reportable Event has occurred with respect to any Single Employer Plan, all contributions required to be made with respect to a Plan have been timely made; none of the Borrower or any of its Subsidiaries nor any Commonly Controlled Entity has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of 56 the Code or expects to incur any liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan; no termination of, or institution of proceedings to terminate or appoint a trustee to administer, a Single Employer Plan has occurred; and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code (except that with respect to any Multiemployer Plan, such representation is deemed made only to the knowledge of the Borrower). No "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA), extension of any amortization period (within the meaning of Section 412 of the Code) or Lien in favor of the PBGC or a Plan has arisen or has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan. As of the last annual valuation date prior to the date on which this representation is made or deemed made, the fair market value of the assets available for benefits under each Single Employer Plan did not exceed the actuarial present value of all accumulated benefit obligations under such Plan by more than $20,000,000, all as determined in accordance with Statement of Financial Accounting Standards No. 87. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan for which there is any outstanding liability, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made in an amount which would be reasonably likely to have a Material Adverse Effect. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. 4.13 Investment Company Act; Other Regulations. None of the Borrower or 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. None of the Borrower or any of its subsidiaries is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 4.14 Subsidiaries. The Subsidiaries of the Borrower and their respective jurisdictions of incorporation shall be as set forth on Schedule 4.14. 4.15 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower (i) to pay fees and expenses related to the preparation and negotiation of this Agreement and the other Credit Documents, (ii) to refinance and/or repay all Indebtedness outstanding under the New 364-Day Credit Agreement, and (iii) for working capital, capital expenditures and other lawful corporate purposes, including, without limitation, the making of Investments permitted under subsection 7.9. 4.16 Environmental Matters. Except insofar as any exception to any of the following, or any aggregation of such exceptions, is not reasonably likely to result in a Material Adverse Effect: (a) The facilities and properties owned, leased or operated Holdings, by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in 57 amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law. (b) None of Holdings, the Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which Holdings, the Borrower or any Subsidiary is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (e) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of Holdings, the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Environmental Laws. (f) The Properties and all operations at the Properties are in compliance, and have in the last 3 years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Environmental Law with respect to the Properties or the business operated by Holdings, the Borrower or any of its Subsidiaries (the "Business") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (g) Holdings, the Borrower and its Subsidiaries hold and are in compliance with all Environmental Permits necessary for their operations. 58 4.17 Collateral Documents. Upon execution and delivery thereof by the parties thereto, each Pledge Agreement will be effective to create in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in the pledged stock described therein and, when stock certificates representing or constituting the pledged stock described therein are delivered to the Administrative Agent, together with undated stock powers executed in blank therefor, such security interest shall, subject to the existence of Permitted Liens, constitute a perfected first lien on, and security interest in, all right, title and interest of the pledgor party thereto in the pledged stock described therein. 4.18 Accuracy and Completeness of Information. No fact is known to Holdings, the Borrower or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been disclosed to the Lenders by Holdings, the Borrower or its Subsidiaries in writing prior to the date hereof. Neither Holdings, the Borrower nor any Subsidiary of the Borrower is aware of any material liability of the Borrower or any of its Subsidiaries which is not fully disclosed in the most recent financial statements delivered to the Agents and Lenders pursuant to subsections 4.1 and 6.1 hereto. 4.19 Labor Matters. There are no strikes pending or, to the Borrower's knowledge, overtly threatened against Holdings, the Borrower or any of its Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of Holdings, the Borrower and each of its Subsidiaries (and their predecessors) have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, or in the aggregate, be reasonably expected to have a Material Adverse Effect. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Effectiveness. This Agreement shall not be effective until the following conditions precedent have been satisfied or waived in writing by the Administrative Agent and the Requisite Class Lenders: (a) Credit Documents. The Administrative Agent shall have received (i) this Agreement, (ii) the Guarantees and (iii) the Pledge Agreements, in each case executed, duly acknowledged and delivered by duly authorized officers of each party thereto, with a counterpart or a conformed copy for each Lender. Notwithstanding the foregoing, no Immaterial Subsidiary or Foreign Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the capital stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder. (b) Fees and Expenses. The Agents, the Arrangers and the Lenders shall have received all fees, expenses and other consideration required to be paid on or before the Closing Date and all attorneys fees and disbursements incurred 59 by the Agents in connection with this Agreement (for which invoices have been furnished to Borrower) shall have been paid on or before the Closing Date. (c) Good Standing Certificates. The Administrative Agent shall have received certificates of good standing for each Credit Party issued by the Secretary of State (or other relevant governmental officers) of the jurisdiction of incorporation of each Credit Party. (d) Consents, Authorizations and Filings, Etc. All consents, authorizations and filings, if any, required in connection with the execution, delivery and performance by the Credit Parties, and the validity and enforceability against the Credit Parties, of the Credit Documents to which any of them is a party, shall have been obtained or made, and such consents, authorizations and filings shall be in full force and effect, except such consents, authorizations and filings, the failure to obtain which would not have a Material Adverse Effect. (e) Insurance. The Lenders shall have received (i) a reasonably satisfactory schedule describing all insurance maintained by the Borrower and its Subsidiaries pursuant to subsection 6.5, and (ii) binders (or other customary evidence as to the obtaining and maintenance by the Borrower and its Subsidiaries of such insurance) for each policy set forth on such schedule insuring against casualty and other usual and customary risks. (f) Litigation. On the Closing Date, there shall be no actions, suits or proceedings pending or threatened in any court or before any arbitrator or Governmental Authority against any Credit Party (a) with respect to this Agreement or any other Credit Document or any Transaction Document or the transactions contemplated hereby or thereby or the ability of any Credit Party to perform their respective obligations under the Credit Documents or (b) which the Agents or the Required Lenders shall determine could reasonably be expected to have a Material Adverse Effect. (g) Borrowing Certificate. If any Loan is to be requested on the Closing Date, the Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit D, with appropriate insertions and attachments, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (h) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, (ii) the borrowings contemplated hereunder, and (iii) the stock pledges pursuant to the Borrower Pledge Agreement, certified by the Secretary or an Assistant Secretary 60 of the Borrower as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (i) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Credit Document reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (j) Corporate Proceedings of Other Credit Parties. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Credit Party (other than the Borrower) authorizing (i) the execution, delivery and performance of the Credit Documents to which it is a party, and (ii) the granting by it of the Liens created pursuant to the Pledge Agreements to which it is a party, certified by the Secretary or an Assistant Secretary of each such Credit Party as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (k) Credit Party Incumbency Certificates. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Credit Party (other than the Borrower), dated the Closing Date, as to the incumbency and signature of the officers of such Credit Party executing any Credit Document, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Credit Party. (l) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Credit Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the such Credit Party. (m) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender the executed legal opinion of each of Simpson Thacher and Bartlett, special counsel to the Credit Parties, and Christopher C. Cambria, Vice President - General Counsel and Secretary of the Borrower and counsel to the other Credit Parties, substantially in the form of Exhibits C-1 and C-2, respectively. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Agents may reasonably require. 61 (n) Pledged Stock; Stock Powers. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to each of the Pledge Agreements together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. (o) Projections. Each Lender shall have received financial projections of the Borrower in form and substance reasonably satisfactory to the Agents prepared by the Borrower. (p) No Default. No Default or Event of Default shall have occurred and be continuing. (q) Termination of New 364-Day Credit Agreement. Borrower shall have caused the payment in full of all Indebtedness outstanding under and the termination of all commitments in respect of that certain New 364-Day Credit Agreement dated as of April 24, 2000, among Borrower, BOA as administrative agent, the other parties named as agents therein and the lenders party thereto (as amended, supplemented, restated or otherwise modified from time to time, the "New 364-Day Credit Agreement"). (r) Closing Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Certificate of the Borrower, dated the Closing Date, certifying that as of the Closing Date, no Liens exist upon any Credit Parties' assets except for Liens permitted pursuant to subsection 7.3. (s) Facility A Credit Agreement. All conditions set forth in clauses (a) through (r) of subsection 5.1 of the Facility A Credit Agreement shall have been satisfied or waived in writing by the Facility A Lenders required to effect a waiver of such condition. 5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit (including the issuance of any Letter of Credit) requested to be provided by it on any date (including, without limitation, its initial Loan and Letter(s) of Credit) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Credit Party in or pursuant to the Credit Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except for any representation and warranty which is expressly made as of an earlier date, which representation and warranty shall have been true and correct in all material respects as of such earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or will occur or exist after giving effect to the extensions of credit requested to be made on such date. Borrower shall not be in violation of Section 4.09 (Incurrence of Indebtedness and Issuance of Preferred Stock) of any of the Original Indenture, the New Subordinated Debt Indenture or 62 the December 1998 Subordinated Debt Indenture on such date nor will such a violation occur or exist after giving effect to the extensions of credit requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be satisfactory in form and substance to the Agents, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by, and each Letter of Credit issued on behalf of, the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or any Agent hereunder or under any other Credit Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 6.1 SEC Filings. The Borrower will file on a timely basis with the SEC, to the extent such filings are accepted by the SEC and whether or not the Borrower has a class of securities registered under the Exchange Act, the annual reports, quarterly reports (including with respect to the fourth quarter of each fiscal year) and other documents that the Borrower would be required to file if the Borrower were subject to section 13(a) or 15(d) of the Exchange Act. The Borrower will also be required (i) to deliver to the Administrative Agent and each Lender, copies of such reports and documents within five days after the date on which the Borrower files such reports and documents with the SEC or the date on which the Borrower would be required to file such reports and documents if the Borrower were so required and (ii) if filing such reports and documents with the SEC is not accepted by the SEC or is prohibited under the Exchange Act, to promptly notify the Administrative Agent in writing of the occurrence of any such event and to supply at the Borrower's cost copies of such reports and documents to the Administrative Agent and any Lender upon request. All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Administrative Agent with copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of the independent certified public accountants reporting 63 on such financial statements stating that, in performing their audit, nothing came to their attention that caused them to believe that the Borrower failed to comply with the provisions of subsection 7.1, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsection 6.1, a certificate of a Responsible Officer stating that, to the best of such Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 6.10 with respect thereto) and (ii) such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate; (c) concurrently with the delivery of financial statements pursuant to subsection 6.1, a certificate of a Responsible Officer of the Borrower setting forth, in reasonable detail, the computations, as applicable, of (i) the Debt Ratio and (ii) the financial covenants set forth in subsection 7.1, as of such last day or for the fiscal period then ended, as the case may be; (d) not later than 60 days after the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Officer has no reason to believe they are incorrect or misleading in any material respect; (e) within five days after the same are sent, copies of all financial statements and reports which the Borrower or Holdings sends to its stockholders; and (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Taxes and Material Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its (i) material taxes, fees, assessments, and other governmental charges and (ii) other material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 6.4 Conduct of Business; Maintenance of Existence and Property; Compliance with Law. Except as permitted by subsection 7.5 and subsection 7.6, (a) continue to engage in business of the same general type as now conducted by it; (b) preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; (c) keep all property useful and necessary in its business in good working order and condition (ordinary wear and tear and damage by fire and/or other casualty or taking by condemnation excepted) except if 64 (i) in the reasonable business judgment of the Borrower or such Subsidiary, as the case may be, it is in its best economic interest not to preserve and maintain such rights, privileges or franchises, and (ii) such failure to preserve and maintain such privileges, rights or franchises would not materially adversely affect the rights of the Lenders hereunder or the value of the Collateral, and except as otherwise permitted pursuant to subsection 7.5; and (d) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 6.5 Insurance. The Borrower will, and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies of similar stature engaged in the same or similar businesses operating in the same or similar locations. 6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records (except to the extent any such access is restricted by a Requirement of Law) at any reasonable time on a Business Day and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that the Administrative Agent or such Lender shall notify the Borrower prior to any contact with such accountants and give the Borrower the opportunity to participate in such discussions; provided, further, that the Borrower shall notify the Administrative Agent of any such visits, inspections or discussions prior to each occurrence thereof. 6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries, (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect or (iii) any material asset sale (describing in reasonable detail the assets sold, the consideration received therefor and the proposed use of the proceeds thereof); (c) any other litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $7,500,000 or more and not covered by insurance or in which injunctive or similar relief is sought; and (d) the following events, as soon as possible and in any event within 45 days after the Borrower knows or has reason to know thereof: (i) the incurrence of an accumulated funding deficiency or the filing of an application to the Secretary of the 65 Treasury 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 with respect to a Plan, the creation of any Lien in favor of the PBGC or a Plan, the occurrence of any "Trigger Event" (as defined in the Transfer Agreements) and the reassumption by Lockheed of sponsorship of any Single Employer Plan, (ii) except where such event or liability could not reasonably be expected to have a Material Adverse Effect, the occurrence or expected occurrence of any Reportable Event with respect to any Plan (other than a Multiple Employer Plan), or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, or a failure to make any required contribution to a Plan, (iii) the institution of proceedings by the PBGC with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan or (iv) except as could not reasonably be expected to have a Material Adverse Effect, the institution of proceedings or the taking of any other action with respect to the withdrawal from or termination of any Single Employer Plan; Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 6.8 Environmental Laws. (a) (i) Comply in all material respects with all Environmental Laws applicable to it, and obtain, comply in all material respects with and maintain any and all material Environmental Permits necessary for its operations as conducted and as planned; and (ii) take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply in all material respects with all applicable Environmental Laws, and obtain, comply in all material respects with and maintain any and all material Environmental Permits, applicable to any of them. Notwithstanding the foregoing, upon learning of any actual or suspected noncompliance, the Borrower or one or more of its Subsidiaries, as appropriate, shall promptly undertake all reasonable efforts to achieve material compliance. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions in each case required under applicable Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding applicable Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 6.9 Further Assurances. Upon the reasonable request of the Administrative Agent, promptly perform or cause to be performed any and all acts and execute or cause to be executed and delivered any and all documents which are necessary or advisable to maintain in favor of the Administrative Agent, for the benefit of the Lenders, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law. 66 6.10 Additional Collateral. (a) With respect to any Capital Stock of any newly created or acquired Subsidiary or any newly issued Capital Stock of any existing Subsidiary acquired after the Original Closing Date by the Borrower or any of its Subsidiaries that is intended to be subject to the Lien created by any of the Pledge Agreements but which is not so subject, promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Pledge Agreements or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such Capital Stock, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including delivering all such original certificates evidencing such Capital Stock to the Administrative Agent together with undated stock powers executed in blank therefor, and (iii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, the Borrower shall not be required to grant to the Administrative Agent a Lien upon the Capital Stock of any Immaterial Subsidiary; provided that if an Immaterial Subsidiary ceases to be an Immaterial Subsidiary, Borrower shall within thirty (30) days of such event comply with the foregoing requirements. (b) With respect to any Person that, subsequent to the Original Closing Date, becomes a direct or indirect Subsidiary of the Borrower, promptly (and in any event within 30 days after such Person becomes a Subsidiary): (i) cause such new Subsidiary to become a party to the Subsidiary Pledge Agreement and the Subsidiary Guarantee and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent legal opinions relating to the matters described in clause (i) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. Notwithstanding the foregoing, no Immaterial Subsidiary, Foreign Subsidiary or TCAS Subsidiary (except as provided below) of the Borrower shall be required to execute a Subsidiary Guarantee or Subsidiary Pledge Agreement, and no more than 65% of the Capital Stock of or equity interests in any Foreign Subsidiary of the Borrower or any of its Subsidiaries if more than 65% of the assets of such Subsidiary are securities of foreign companies (such determination to be made on the basis of fair market value), shall be required to be pledged hereunder; provided, that if, after the consummation of any sale of a portion of Capital Stock of the TCAS Subsidiary, the TCAS Subsidiary thereafter becomes a Wholly Owned Subsidiary, then the TCAS Subsidiary shall become a party to the Subsidiary Guarantee and Subsidiary Pledge Agreement and Borrower shall promptly (and in any event within 30 days 67 after such event occurs) comply with the requirements of this subsection 6.10(b) with respect to the TCAS Subsidiary. 6.11 Foreign Jurisdictions. Maintain due qualification as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.12 Government Contracts. The Borrower and its Subsidiaries shall apply for and maintain all material facility security clearances and personnel security clearances required of the Borrower under all Requirements of Law to perform and deliver under any and all Government Contracts and as otherwise may be necessary to continue to perform the business of the Borrower and its Subsidiaries. 6.13 TCAS Subsidiary. The Borrower shall at all times own, directly or indirectly, at least fifty-one percent (51%) of the Capital Stock of the TCAS Subsidiary; provided, that Borrower shall be permitted to sell all of the Capital Stock of the TCAS Subsidiary owned, directly or indirectly, by Borrower without violating the terms of this subsection so long as the Net Proceeds resulting therefrom are applied in accordance with the terms of subsection 2.6(b)(ii) and (iii) hereof. 6.14 Required Distributions for TCAS Subsidiary. To the extent not prohibited under applicable law, the Borrower shall cause the TCAS Subsidiary to distribute to the holders of Capital Stock of the TCAS Subsidiary not later than the 50th day after each fiscal quarter of Borrower for the immediately preceding fiscal quarter (i) all amounts necessary to fund tax obligations arising by virtue of the ownership of such Capital Stock ("Tax Distributions") and (ii) after giving effect to the funding of such quarterly Tax Distributions, all unrestricted cash on hand not needed to fund the anticipated working capital and capital expenditure needs of the TCAS Subsidiary. SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any portion of the Commitments remain in effect or any amount is owing to any Lender or any of the Agents hereunder or under any other Credit Document, the Borrower shall not, and (except with respect to subsection 7.1), shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Debt Ratio. Permit the Debt Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite the date on which such fiscal quarter ends: Fiscal Quarter Ending Ratio June 30, 2001 4.50 68 September 30, 2001 4.50 December 31, 2001 4.50 March 31, 2002 4.50 June 30, 2002 4.50 September 30, 2002 4.50 December 31, 2002 4.25 March 31, 2003 4.25 June 30, 2003 4.25 September 30, 2003 4.25 December 31, 2003 4.00 March 31, 2004 4.00 June 30, 2004 4.00 September 30 2004 4.00 December 31, 2004 and thereafter 3.50 (b) Interest Coverage. Permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense at the last day of any fiscal quarter set forth below to be less than the ratio set forth opposite the date on which such fiscal quarter ends (such ratio, the "Interest Coverage Ratio"): Fiscal Quarter Ending Interest Coverage Ratio June 30, 2001 2.50 September 30, 2001 2.50 December 31, 2001 2.50 March 31, 2002 2.50 June 30, 2002 2.50 September 30, 2002 2.50 December 31, 2002 2.75 March 31, 2003 2.75 June 30, 2003 2.75 September 30, 2003 2.75 December 31, 2003 and thereafter 3.00 7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrower under this Agreement, the Facility A Credit Agreement and the Facility C Credit Agreement (if Facility C exists); 69 (b) Indebtedness of the Borrower incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding $50,000,000 at any time outstanding; (c) Indebtedness assumed in connection with any Investment permitted pursuant to subsection 7.9(k) hereof; (d) additional Indebtedness of the Borrower and/or its Subsidiaries not exceeding $75,000,000 in aggregate principal amount at any one time outstanding (of which up to $50,000,000 may be secured by Liens permitted pursuant to subsection 7.3(i) hereof); (e) Indebtedness of the Borrower or any Subsidiary in respect of any Subordinated Debt; (f) the Indebtedness of the Borrower and its Subsidiaries outstanding on the Closing Date and reflected on Schedule 7.2(f), and refundings or refinancings thereof, provided that no such refunding or refinancing shall shorten the maturity or increase the principal amount of the original Indebtedness; (g) Guarantee Obligations permitted by subsection 7.4; (h) the incurrence by any Credit Party of intercompany Indebtedness between or among the Credit Parties; provided, however, that if the Borrower is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations; (i) Indebtedness secured by Permitted Liens; (j) Indebtedness of the Borrower or any of its Subsidiaries (other than as described under subsection 7.2(a) above) incurred in connection with the issuance of any surety bonds, performance letters of credit or other similar performance bonds required pursuant to any Contractual Obligation or Requirement of Law to which Borrower or any of its Subsidiaries are subject in an aggregate principal amount not exceeding $100,000,000 at any time outstanding; and (k) Indebtedness of the Borrower in respect of any Interest Rate Agreements. 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect 70 thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, zoning restrictions, other restrictions and other similar encumbrances previously or hereafter incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by subsection 7.2(f), provided that no such Lien is expanded to cover any additional property (other than after-acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) after the Closing Date and that the amount of Indebtedness secured thereby is not increased and extensions, renewals or replacements thereof provided that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the original Indebtedness; and provided, further, that the assets of the Borrower and its Subsidiaries encumbered by such Liens are existing equipment and other existing tangible assets; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by subsection 7.2(b) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien) and (iii) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such property at the time it was acquired; 71 (h) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 7.2(c), provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not expanded to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary (other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), and (iii) the amount of Indebtedness secured thereby is not increased; (i) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Borrower and all Subsidiaries) $50,000,000 in aggregate amount at any time outstanding; (j) Liens created pursuant to the Pledge Agreements; (k) Liens on the property of the Borrower or any of its Subsidiaries in favor of landlords securing licenses, subleases or leases entered into in the ordinary course of business; (l) licenses, leases or subleases permitted hereunder granted to other Persons not interfering in any material respect in the business of the Borrower or any of its Subsidiaries; (m) so long as no Default or Event of Default shall have occurred and be continuing under clause (f) of Section 8, attachment or judgment Liens in an aggregate amount outstanding at any one time not in excess of $7,500,000; (n) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower, or any of its subsidiaries in the ordinary course of business; and (o) Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry. 7.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 7.4 and extensions, renewals and replacements thereof, provided, however, that no such extension, renewal or replacement shall shorten the fixed maturity or increase the principal amount of the Indebtedness guaranteed by the original guarantee; 72 (b) Guarantee Obligations of Holdings, Borrower or its Subsidiaries incurred after the date hereof in respect of an aggregate amount of obligations not to exceed $50,000,000 at any one time outstanding; (c) Guarantee Obligations of Holdings, Borrower or any Subsidiary in respect of any Subordinated Debt provided such Guarantee Obligations are subordinated to the Obligations on terms no less favorable to the Lenders, Facility A Lenders and Facility C Lenders (if Facility C exists) than those governing the Subordinated Debt; (d) Guarantee Obligations under the Credit Documents and the Facility A Credit Documents and the Facility C Credit Documents (if Facility C exists); (e) L/C Obligations, Facility A L/C Obligations and Facility C L/C Obligations (if Facility C exists); (f) Guarantee Obligations of Holdings, Borrower or any Subsidiary in respect of obligations of a Subsidiary permitted to be incurred by such Subsidiary by this Agreement; provided, that so long as the TCAS Subsidiary is not a Wholly Owned Subsidiary, no Guarantee Obligations by Borrower or any Subsidiary in respect of obligations of the TCAS Subsidiary shall be permitted under this clause (f) in excess of $3,000,000 at any time; (g) Guarantee Obligations in respect of up to $300,000,000 principal amount of Convertible Securities issued by Holdings having an initial annual interest rate not in excess of 7% per annum which initial annual interest rate may be subject to subsequent adjustments in accordance with the terms of such Convertible Securities in the event of a Reset Transaction (the "Permitted Convertible Securities"). As used herein, a "Reset Transaction" shall have the meaning ascribed to such term in the Indenture governing the issuance of the Convertible Senior Subordinated Notes of Holdings due 2009 as in effect at the time of such issuance; and (h) Guarantee Obligations of Holdings or any Subsidiary of the Borrower in respect of obligations of Borrower permitted to be incurred by Borrower under this Agreement other than in respect of Indebtedness of Borrower permitted under subsection 7.2(e). 7.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporations); and 73 (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary of the Borrower that is a Credit Party. 7.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary, except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of any property or assets not otherwise permitted by this subsection 7.6; provided that the Net Proceeds thereof shall be applied pursuant to subsection 2.6(b)(ii); (c) as permitted pursuant to subsection 7.5(b); (d) the sale, lease, transfer or exchange of inventory in the ordinary course of business; (e) transfers resulting from any casualty or condemnation of property or assets; (f) intercompany sales or transfers of assets made in the ordinary course of business; (g) licenses, leases or subleases of tangible property in the ordinary course of business; (h) any consignment arrangements or similar arrangements for the sale of assets in the ordinary course of business; (i) the sale or discount of overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; and (j) the conveyance, sale, assignment or contribution to any new Subsidiary of the Borrower or any existing Subsidiary of the Borrower assets of the Borrower or any Subsidiary of the Borrower not exceeding five percent (5%) of the Consolidated Total Assets. 7.7 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the 74 Borrower or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary other than Permitted Stock Payments. 7.8 Designated Senior Debt. Designate any Indebtedness or other obligation, other than Indebtedness under the Credit Documents, the Facility A Credit Documents and the Facility C Credit Documents (if Facility C exists) as "Designated Senior Debt," as such term is defined in the Original Indenture as in effect on April 30, 1997, the New Subordinated Debt Indenture as in effect on May 22, 1998 or the December 1998 Subordinated Debt Indenture as in effect on December 8, 1998, or any comparable designation that confers upon the holders of such Indebtedness or other obligation (or any Person acting on their behalf) the right to initiate blockage periods under the Original Indenture, the New Subordinated Debt Indenture or the December 1998 Subordinated Debt Indenture or any other Indebtedness or other obligation of the Borrower and its Subsidiaries (other than as a result of a payment default). 7.9 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person ("Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) loans to officers of the Borrower listed on Schedule 7.9(c) in aggregate principal amounts outstanding not to exceed the respective amounts set forth for such officers on said Schedule; (d) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for the Borrower and its Subsidiaries not to exceed $1,000,000 at any one time outstanding; (e) Investments by the Borrower in its Subsidiaries that are Credit Parties and investments by such Subsidiaries in the Borrower and in other Subsidiaries that are Credit Parties; (f) so long as no Event of Default has occurred and is continuing, loans by the Borrower to its employees (other than any Principals or their Related Parties) in connection with (i) management incentive plans, (ii) management stock purchase plans, and (iii) obligations of employee option-holders of Storm Control Systems, Inc. to fund the exercise of such options, which loans in (i), (ii) and (iii) in the aggregate do not exceed $5,000,000; (g) Investments in existence on the Original Closing Date and extensions, renewals, modifications or restatements or replacements thereof; 75 (h) promissory notes and other similar non-cash consideration received by the Borrower and its Subsidiaries in connection with the dispositions permitted by subsection 7.6(b); (i) Investments permitted by subsection 7.6(b) and subsection 7.6(j); (j) Investments (including debt obligations and Capital Stock) 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; (k) Investments made at any time from and after the Original Closing Date to acquire (i) all or any portion of the Capital Stock, or all or any portion of the assets, of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business, or (ii) all or substantially all of the assets of any division of any Person (other than the Borrower or any of its Subsidiaries) that is engaged in a Similar Business; provided, that, (a) if such Investment is an acquisition of a majority of the Voting Stock of any Person, such Person's board of directors or similar governing body shall have approved such acquisition and (b) at the time of each such Investment described above in clauses (i) and (ii) (both before and after giving effect to such Investment), there shall exist no Default or Event of Default; provided, further, that in connection with each individual, or series of related, Investments made pursuant to this subsection 7.9(k) exceeding $50,000,000, the Borrower shall deliver to the Administrative Agent, no later than two (2) Business Days after the consummation of such Investment or Investments, a certificate of a Responsible Officer that certifies that no Default or Event of Default has occurred and is continuing or will be caused as a result of consummating such proposed Investment; (l) Investments consisting of intercompany advances by Borrower to Holdings to fund interest or dividend expense in respect of the Permitted Convertible Securities issued by Holdings, provided that such intercompany advances shall not, in any fiscal year, exceed an amount equal to the interest or dividends actually accruing on the outstanding principal amount of such Permitted Convertible Securities in such fiscal year less the sum of all Permitted Stock Payments funded pursuant to clause (D) of the definition thereof by Borrower to Holdings in respect of such Permitted Convertible Securities in such fiscal year; and (m) solely with respect to the TCAS Subsidiary (I) Investments by Borrower in the TCAS Subsidiary consisting of a contribution of all assets related to the TCAS Acquired Company occurring substantially concurrent with Borrower's sale of a portion of the Capital Stock of the TCAS Subsidiary to another Person and (II) at any time the TCAS Subsidiary is not a Wholly Owned Subsidiary, the aggregate amount of Investments by Borrower or any other Subsidiaries in the TCAS Subsidiary at any time (other than and in addition to the contribution to the TCAS Subsidiary by Borrower of (x) the assets related to the TCAS Acquired Company in an amount not to exceed the product of (a) the final purchase price paid by Borrower for the TCAS Acquired Company pursuant to the TCAS Acquisition Documents, after giving effect to any post- 76 closing purchase price adjustments required pursuant to such TCAS Acquisition Documents and (b) the Borrower's percentage ownership interest in the TCAS Subsidiary immediately following such transaction and (y) subject to the written consent of the Agents, which shall not be unreasonably withheld or delayed, cash for the ongoing operating needs of the TCAS Subsidiary funded within 3 months after the date the TCAS Subsidiary ceases to be a Wholly Owned Subsidiary), provided that such Investments do not at any time exceed the greater of (i) $17,000,000 or (ii) the sum of $10,000,000 plus an amount equal to ten percent (10%) of the aggregate cash distributions received by Borrower from the TCAS Subsidiary during the immediately preceding 12-month period. 7.10 Limitation on Optional Payments and Modifications of Instruments and Agreements. (a) Make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, any Subordinated Debt or amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any such Subordinated Debt Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). (b) Amend its Constitutional Documents in any manner which could adversely affect the rights of the Lenders under the Credit Documents or their ability to enforce the same. (c) Modify or amend, or waive any provision or condition contained in, any of the Transaction Documents in any manner that could reasonably be expected to be adverse to the Lenders. 7.11 Limitation on Transactions with Affiliates. (a) Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) otherwise permitted under this Agreement, (ii) in the ordinary course of the Borrower's or such Subsidiary's business and (iii) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. (b) In addition, notwithstanding the foregoing, the Borrower and its Subsidiaries shall be entitled to make the following payments and/or to enter into the following transactions: (i) the payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Borrower and Holdings; 77 (ii) the employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; (iii) payments to directors and officers of the Borrower and its Subsidiaries in respect of the indemnification of such Persons in such respective capacities from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, as the case may be, pursuant to the Constitutional Documents or other corporate action of the Borrower or its Subsidiaries, respectively, or pursuant to applicable law; and (iv) transactions described in the Transaction Documents. 7.12 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary; provided that the Borrower may enter into a sale and leaseback transaction if the Borrower could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction and (b) incurred a Lien to secure such Indebtedness, in each case in accordance with the restrictions contained in this Agreement and the other Credit Documents. 7.13 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than December 31. 7.14 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement, the Facility A Credit Agreement and the Facility C Credit Agreement (if Facility C exists), (b) the Subordinated Debt Documents, and (c) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby other than after acquired title in or on such property and proceeds of the existing collateral in accordance with the instrument creating such Lien), which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.15 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary (other than an Immaterial Subsidiary), except for Similar Businesses. SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other 78 amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; (b) Any representation or warranty made or deemed made by the Borrower or any other Credit Party herein or in any other Credit Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (c) The Borrower or any other Credit Party shall default in the observance or performance of any agreement contained in Section 7 or subsection 6.7(a) of this Agreement, Section 4 of the Parent Guarantee, Section 4 of the Subsidiary Guarantee, Section 4 of the Parent Pledge Agreement, Section 4 of the Borrower Pledge Agreement, or Section 4 of the Subsidiary Pledge Agreement; (d) The Borrower or any other Credit Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; (e) The Borrower or any of its Subsidiaries shall (i) default (x) in any payment of principal of or interest of any Indebtedness (other than the Loans, the L/C Obligations and any intercompany debt) or Interest Rate Agreement Obligations or (y) in the payment of any Guarantee Obligation (excluding any guaranties of the Obligations), beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness, Interest Rate Agreement Obligation or Guarantee Obligation 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 beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that no Default or Event of Default shall exist under this paragraph unless (i) the aggregate amount of Indebtedness, Interest Rate Agreement Obligations and/or Guarantee Obligations in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $15,000,000 and (ii) such default continues for a period in excess of 10 days; (f) (i) Holdings, the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future 79 law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against Holdings, Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings, the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan that is not in the ordinary course; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (h) One or more judgments or decrees shall be entered against Holdings, the Borrower or any of its Subsidiaries involving in the aggregate a 80 liability (not paid or fully covered by insurance (which coverage has been acknowledged by the appropriate insurers)) of $15,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; (i) (i) Any of the Pledge Agreements shall cease, for any reason, to be in full force and effect (unless released by the Administrative Agent at the direction of the requisite Lenders or as otherwise permitted under this Agreement or the other Credit Documents), or the Borrower or any other Credit Party which is a party to any of the Pledge Agreements shall so assert or (ii) the Lien created by any of the Pledge Agreements shall cease to be enforceable and of the same effect and priority purported to be created thereby (and, if such invalidity is such so as to be amenable to cure without materially disadvantaging the position of the Administrative Agent and the Lenders, as the case may be, as secured parties thereunder, the Credit Party shall have failed to cure such invalidity within 30 days after notice from the Administrative Agent); (j) The Guarantee Obligation of any Credit Party under the Credit Documents 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 Credit Party or any Person acting on behalf of any Credit Party, shall deny or disaffirm its obligations under such Guarantee Obligation; (k) There shall have occurred a Change in Control; or (l) An "Event of Default" as defined in the Facility A Credit Agreement and/or the Facility C Credit Agreement (if Facility C exists) shall have occurred and be continuing; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. 81 With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the Dollar Equivalent of the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants (and the benefit of each such "Issuing Lender" and the "L/C Participants" as defined in the Facility A Credit Agreement and the Facility C Credit Agreement, if Facility C exists), a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement, the Facility A Credit Agreement, and the Facility C Credit Agreement (if Facility C exists), the other Credit Documents, the other Facility A Credit Documents and the Facility C Credit Documents (if Facility C exists). Amounts held in such cash collateral account shall be applied by the Administrative Agent in accordance with subsection 2.12 hereof. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants (and each applicable "Issuing Lender" and the "L/C Participants" as defined in the Facility A Credit Agreement and the Facility C Credit Agreement, if Facility C exists), such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account. EXCEPT AS EXPRESSLY PROVIDED ABOVE IN THIS SECTION, PRESENTMENT, DEMAND, PROTEST AND ALL OTHER NOTICES OF ANY KIND ARE HEREBY EXPRESSLY WAIVED. SECTION 9. THE AGENTS; THE ARRANGERS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints each of the Agents as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes each of the Agents, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any of the Agents. 9.2 Delegation of Duties. The Agents may execute any of their duties under this Agreement and the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Agents shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this 82 Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. None of the Agents shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Borrower. 9.4 Reliance by Agents. The Agents shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Except as expressly provided in this Agreement, the Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that any Agent receives such a notice, such Agent shall give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Class Lenders; provided that unless and until such Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders, the Facility A Lenders and the Facility C Lenders (if Facility C exists) taken as a whole. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither any of the Agents nor any of their officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by any of the Agents hereafter taken, including any review of the affairs of the Borrower, 83 shall be deemed to constitute any representation or warranty by any of the Agents to any Lender. Each Lender represents to each of the Agents that it has, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit worthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by any of the Agents hereunder (or copies of which have been provided to the Administrative Agent pursuant to this Agreement), none of the Agents shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Lenders agree to indemnify each of the Agents in their respective capacities as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages with respect to all Types of Loans in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against any of the Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any of the Agents under or in connection with any of the foregoing provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agents, in Their Individual Capacities. The Agents and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agents were not acting in such capacities hereunder and under the other Credit Documents. With respect to the Loans made or renewed by it and any Note issued to it or Loan Account maintained by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include the Agents in their individual capacities. 84 9.9 Successor Administrative Agent, Syndication Agent and Documentation Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall, unless a Default or Event of Default shall have occurred and be continuing, be approved by the Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. Similarly, the Syndication Agent and/or the Documentation Agent may resign as Syndication Agent and/or Documentation Agent, as the case may be, upon 30 days' notice to the Lenders. The procedure for replacement and effective date of resignation for the Syndication Agent and the Documentation Agent shall be identical to that provided above for the Administrative Agent. 9.10 The Arrangers and the Senior Managing Agents. Except as expressly set forth herein, each of the Arrangers and the Senior Managing Agents, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Credit Documents. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend any scheduled date of maturity of any Loan, extend the expiration of any Letter of Credit beyond the Revolving 364 Day 85 Termination Date, or reduce the stated rate or amount of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without the consent of each Lender affected thereby, or increase the commitment of any Lender or extend the expiry of the commitment of any Lender without the consent of such Lender, (ii) amend, modify or waive the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Credit Documents, in each case without the written consent of all the Lenders, (iii) release all or substantially all of the Collateral or release all or substantially all of the Credit Parties from their Guarantee Obligations under the Credit Documents without the consent of all Lenders, (iv) amend, modify or waive any provision of Section 9 without the written consent of the then Agents, or (v) amend, modify or waive any provision of this Agreement or any other Credit Document which would directly and adversely affect the Arrangers or the Agents or the Issuing Lender without the written consent of the Arrangers, the Agents or the Issuing Lender, as the case may be. In addition to the foregoing, (A) no amendment, modification, termination or waiver of any provision of subsection 2.5, subsection 2.6 or subsection 2.12 which has the effect of changing any interim scheduled payments, voluntary or mandatory prepayments, the application of any scheduled payment or voluntary or mandatory prepayment, the application of proceeds of any Collateral or any Commitment reductions applicable to any Class (an "Affected Class") in a manner that disproportionately disadvantages such Class relative to the other Class shall be effective without the written concurrence of the Requisite Class Lenders of the Affected Class (it being understood and agreed that any amendment, modification, termination or waiver of any provision which only postpones or reduces any interim scheduled payment, voluntary or mandatory prepayment or Commitment reduction from those set forth in subsection 2.6 with respect to only one Class shall be deemed to not disproportionately disadvantage the other Class and, therefore, shall not require the consent of Requisite Class Lenders of such other Class), (B) no amendment, modification, termination or waiver of any provision of any Guarantee or Pledge Agreement shall be effective without the written concurrence of the Requisite Class Lenders for each Class, (C) no amendment, modification, termination or waiver of any provision of subsection 2.1(a) which specifically requires the written consent of the Required Class Lenders shall be effective without the written concurrence of the Required Class Lenders of each Class; and (D) no amendment, modification or waiver with respect to any provision of this subsection 10.1 or to the definition of "Requisite Class Lenders" or "Required Class Lenders" shall be effective without the written concurrence of all Lenders, all Facility A Lenders and all Facility C Lenders (if Facility C exists). Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Agents and the Issuing Lender and all future holders of the Loans. Any extension of a Letter of Credit by the Issuing Lender shall be treated hereunder as issuance of a new Letter of Credit. In the case of any waiver, the Borrower, the Lenders and the Agents and the Issuing Lender shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the 86 case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower, the Administrative Agent, Issuing Lender, the Syndication Agent and the Documentation Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: Holdings, the Borrower or any of its Subsidiaries: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, NY 10016 Attention: Robert LaPenta Fax: (212) 805-5470 with a copy to Attention: Christopher C. Cambria Fax: (212) 805-5494 The Administrative Agent: Addresses for notices of borrowing, prepayments and other administrative matters: Bank of America, N.A. 101 N. Tryon Street, 15th Floor Charlotte, NC 28255 Attention: Jennifer Thompson Fax: (704) 409-0024 Tel: (704) 388-1558 Addresses for all other notices (including with respect to amendments and waivers): Bank of America, N.A. 1455 Market Street, 12th Floor San Francisco, CA 94103 87 Attention: Agency Management #10831 Liliana Claar, Vice President Fax: (415) 436-3425 Tel: (415) 436-2770 with a copy to: Bank of America, N.A. 335 Madison Avenue New York, NY 10017 Attention: Steve Aronowitz Fax: (212) 503-7066 Tel: (212) 503-7950 The Issuing Lender: Bank of America, N.A. 333 S. Beaudry Avenue, 19th Floor Los Angeles CA 90017-1486 Attention: Trade Operations Center - Standby Letters of Credit #22621 Sandra M. Leon, Vice President Fax: (213) 345-6694 Tel: (213) 345-5231 The Documentation Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 11th Floor New York, New York 10285 Attention: Andrew Keith Fax: (212) 526-0242 The Syndication Agent: Lehman Commercial Paper Inc. 3 World Financial Center, 11th Floor New York, New York 10285 Attention: Andrew Keith Fax: (212) 526-0242 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.12 or 3.2 shall not be effective until received. 88 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each of the Agents for all of their respective reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, charges and disbursements of a single counsel for the Lenders (in addition to any local counsel), (b) to pay or reimburse each Lender and each Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to any Agent, (c) to pay, indemnify, and hold each Lender and each Agent and each Issuing Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and each Arranger, each Agent and each Issuing Lender harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement or the other Credit Documents or the use of the proceeds of the Loans in connection with the Transaction, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), it being understood that the Borrower shall have an obligation hereunder to the Lender or any Agent with respect to any indemnified liabilities incurred by any Agents, Arranger or the Issuing Lender or any Lender as a result of any Materials of Environmental Concern that are first manufactured, emitted, generated, treated, released, spilled, stored or disposed of on, at or from any Property or any violation of any Environmental Law, which in any case first occurs on or with respect to such Property (i) after the Property is transferred to any Agent, Arranger, Issuing Lender or any Lender or their successors or assigns 89 by foreclosure sale, deed in lieu of foreclosure, or similar transfer or, following such transfer, (ii) in connection with, but prior to, the sale, leasing or other transfer of such Property by such Agent, Arranger, Issuing Lender, or any Lender or their successors or assigns to one or more third parties; provided, however, that the Borrower shall have no obligation hereunder to any Agent or the Issuing Lender or any Lender with respect to otherwise indemnified liabilities arising from the gross negligence or willful misconduct of such Agent or the Issuing Lender or any such Lender, or with respect to otherwise indemnified liabilities following the sale, leasing or other transfer of such Property to one or more third parties. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participation and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law and the limitations set forth in subsection 2.1(a)(ii), at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender or any other interest of such Lender hereunder and under the other Credit Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Credit Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Credit Document except for those specified in clauses (i), (ii) and (iii) of the proviso to subsection 10.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 2.14, 2.15 and 2.16 with respect to its participation in the Letters of Credit, the Commitments and the 90 Loans outstanding from time to time as if it was a Lender; provided that in the case of subsection 2.15, such Participant shall have complied with the requirements of said subsection; provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law and the limitations set forth in subsection 2.1(a)(ii), at any time and from time to time assign to any Lender, any affiliate thereof or, in the case of Lender that is an investment fund which is regularly engaged in making, purchasing or investing in loans or securities (an "Investment Fund"), any other such Investment Fund which is under common management with such Lender, or, with the consent of the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender (which in each case shall not be unreasonably withheld), to an additional bank, Investment Fund or financial institution (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Credit Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit F, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) and delivered to the Administrative Agent for its acceptance and recording in the Register with a copy to the Syndication Agent, provided that, in the case of any such assignment to an additional bank or financial institution, (A) either (x) such assignment is of all the rights and obligations of the assigning Lender or (y) the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments remaining with the assigning Lender are each not less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent) and (B) each Assignee which is a Non-U.S. Lender shall comply with the provisions of clause (A) of subsection 2.15(b) hereof, or, with the prior written consent of the Borrower, which shall not be unreasonably withheld, the provisions of clause (B) of subsection 2.15(b) hereof (and, in either case, with all of the other provisions of subsection 2.15(b) hereof). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the 91 remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (f) of this subsection, the consent of the Borrower shall not be required for any assignment which occurs at any time when any of the events described in clause (f) of Section 8 shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and Commitments of and principal amounts of the Loans of each Type owing to each Lender from time to time and the registered owners of the Obligations evidenced by the Notes and the Loan Accounts. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan, a Note or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan, Commitment or other obligation evidenced by a Note or a Loan Account shall be effective only upon appropriate entries with respect thereto being made in the Register, and prior to such recordation, all amounts owing to the assignor with respect thereto shall remain owing to the assignor. Any assignment or transfer of all or part of an Obligation evidenced by a Note shall be registered in the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Obligation, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the holder thereof, and thereupon one or more new Notes shall be issued to the designated Assignee, if requested, and the old Note shall be returned by the Administrative Agent to the Borrower marked "canceled." (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower the Administrative Agent, the Syndication Agent and each Applicable Issuing Lender) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (provided that no such payment shall be required whenever LCPI or BOA is the assigning Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. Following the effective date of any such Assignment and Acceptance, the Administrative Agent shall be entitled to update Schedule I hereto to reflect the then outstanding Commitments of each Lender whereupon such amended Schedule I shall be substituted for the pre-existing Schedule I and be deemed a part of this Agreement without any further 92 action or consent of any party and the Administrative Agent shall promptly deliver a copy of such amended Schedule I to each Lender and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 10.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) If, pursuant to this subsection 10.6, any interest in this Agreement or any Loan is transferred to any Transferee which would be a Non-U.S. Lender upon the effectiveness of such transfer, the assigning Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the assigning Lender (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) that under applicable law and treaties no U.S. Taxes will be required to be withheld by the Administrative Agent, the Borrower or the assigning Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the assigning Lender (and, in the case of any Assignee registered in the Register, the Administrative Agent and the Borrower such Internal Revenue Service Forms required to be furnished pursuant to subsection 2.15(b) and (iii) to agree (for the benefit of the assigning Lender, the Administrative Agent and the Borrower) to be bound by the provisions of subsection 2.15(b). (h) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. (i) Notwithstanding any other provision contained in this Agreement or any other Credit Document to the contrary, (x) any Lender may assign all or any portion of the Loans held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans made by the Borrower to or for the account of the assigning or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect to such assigned Loans to the extent of such payments and (y) with the consent of the Administrative Agent (not to be unreasonably withheld), any Lender which is an Investment Fund may pledge all or any portion of its Loans to its trustee in support of its obligations to its trustee. No such assignment shall release the assigning Lender from its obligations hereunder. 93 10.7 Adjustments; Set-off. (a) At any time that an Event of Default has occurred and is continuing, if any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in clause (f) of Section 8, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, Facility A Lender or Facility C Lender (if Facility C exists) (any such affected Lender, Facility A Lender or Facility C Lender (if Facility C exists), hereinafter, an "Affected Lender"), if any, in respect of the Borrower's obligations owing to such other Affected Lender, whether under this Agreement, the Facility A Credit Agreement or Facility C Credit Agreement (if Facility C exists), including any interest thereon, such benefited Lender shall purchase for cash from each other Affected Lender a participating interest in such portion of each such other Affected Lender's Loans or the Reimbursement Obligations owing to it, Facility A Loans or Facility A Reimbursement Obligations and/or Facility C Loans or Facility C Reimbursement Obligations (if Facility C exists) owing to it, or shall provide such other Affected Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Affected Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest unless the benefited Lender is required by court order to pay interest thereon, in which case each Lender returning funds to such benefited Lender shall pay its pro rata share of such interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and Borrower also agree that all proceeds of any such set-off shall be subject to the ratable sharing provisions of subsections 94 2.12 and 10.7(a) hereof to the same extent as if an Event of Default had occurred and was then continuing. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY 95 THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; (d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND (e) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 10.13 Acknowledgments. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) none of the Arrangers, the Agents nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between any of the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS, THE ARRANGERS, THE LENDERS AND THE OTHER PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 10.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the Borrower in writing as confidential (excluding any such information already in the possession of such Lender or provided to such Lender by a third party not in violation of this Agreement which, in either case, is not, to the knowledge of such Lender, subject to a confidentiality agreement); provided that nothing herein shall prevent any Lender from disclosing any such information (i) to any Agent or any other Lender or any of its Affiliates, (ii) to any Transferee or prospective Transferee or to any direct or indirect contractual counterparties in swap agreements 96 or such contractual counterparties' professional advisors which receives such information and agrees to be bound by the confidentiality provisions hereof, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. 10.16 Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the date on which final judgment is given. (b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this subsection 10.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. 10.17 Existing Agreements Superseded. As set forth in subsection 1.3 hereof, the Original Credit Agreement is superseded by this Credit Agreement, which has been executed in renewal, amendment, restatement and modification, but not in novation or extinguishment of, the obligations under the Original Credit Agreement. 10.18 Closing Date Loans and Assignments. (a) On and as of the Closing Date, each of the Departing Lenders, Continuing Lenders and Additional Lenders shall sell, assign and transfer, or purchase and assume, as the case may be, such interests in (i) the Commitments (as defined in the Original Credit Agreement, the "Existing Commitments") and (ii) the Loan Exposure (as defined in the Original Credit Agreement, the "Existing Loan Exposure") of the Departing Lenders and Continuing Lenders immediately 97 prior to the Closing Date, as shall be necessary in order that, after giving effect to all such assignments and purchases, the Existing Commitments and the Existing Loan Exposure will be held by the Continuing Lenders and Additional Lenders as set forth in Schedule I to this Agreement. Each Additional Lender and Continuing Lender purchasing interests of any type under this Section shall be deemed to have purchased such interests from each Departing Lender and Continuing Lender selling interests of such type ratably in accordance with the amounts of such interests sold by such Departing Lenders and Continuing Lenders. The assignments and purchases provided for in this Section shall be without recourse, warranty or representation, except that each Departing Lender and Continuing Lender assigning any interests shall be deemed to have represented that it is the legal and beneficial owner of the interests assigned by it and that such interests are free and clear of any adverse claim, and the purchase price for each such assignment and purchase shall equal the principal amount of the Loans purchased. All accrued but unpaid interest and fees due and owing thereon through but not including the Closing Date shall be paid to such Departing Lender by Borrower on or as of the Closing Date. Concurrently with the effectiveness of the assignments and purchases provided for above, the Departing Lenders shall cease to be parties to the Original Credit Agreement and shall be released from all further obligations thereunder and shall have no further rights to or interest in any of the Collateral (as defined in the Original Credit Agreement); provided, however, that the Departing Lenders shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16, 9.7, 10.5 and 10.16 of the Original Loan Agreement as in effect immediately prior to the Closing Date. (b) On the Closing Date, (i) each Additional Lender and Continuing Lender that is purchasing interests in the Existing Loan Exposure and Existing Commitments pursuant to subsection (a) above shall pay the purchase price for the interests purchased by it pursuant to such subsection (a) by wire transfer of immediately available funds to the Administrative Agent not later than 1:00 p.m. (New York time), and (ii) the Administrative Agent shall pay to each Departing Lender and Continuing Lender that is assigning interests in Existing Loan Exposure and Existing Commitments pursuant to subsection (a) above, out of the amounts received by the Administrative Agent from each Additional Lender and Continuing Lender pursuant to clause (i) of this subsection (b), the purchase price for the interests assigned by it pursuant to such subsection (a) by wire transfer of immediately available funds not later than 3:00 p.m. (New York time). (c) Each of the parties hereto hereby consents to the assignments and purchases provided for in subsections (a) and (b) above and agrees that (i) each Additional Lender and Continuing Lender that is purchasing or accepting interests in the Existing Commitments, the Existing Loan Exposure pursuant to subsection (a) above are assignees of the Departing Lenders and certain Continuing Lenders permitted under Section 10.6 of the Original Loan Agreement and (ii) each Additional Lender and each Continuing Lender shall have all the 98 rights and obligations of a Lender under this Agreement with respect to the interests purchased by it pursuant to such subsections. [SIGNATURE PAGES FOLLOW] 99 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By:__________________________________________ Title: BANK OF AMERICA, N.A. as Administrative Agent By:__________________________________________ Title: BANK OF AMERICA, N.A. as a Lender and Swing Line Lender By:__________________________________________ Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By:__________________________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT THE BANK OF NEW YORK By:__________________________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT BANK ONE, N.A. By:________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT FLEET NATIONAL BANK By:____________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT CREDIT LYONNAIS By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT FIRST UNION COMMERCIAL CORPORATION By:_________________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT THE FUJI BANK, LIMITED By:_____________________________- Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT HSBC BANK USA By:_____________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ________________________________ Title: By: ________________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT BANK OF TOKYO-MITSUBISHI TRUST COMPANY By:______________________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT COMERICA BANK By:____________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT CREDIT INDUSTRIEL ET COMMERCIAL By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT THE DAI-ICHI KANGYO BANK, LTD. By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT BARCLAYS BANK PLC By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT RZB FINANCE LLC By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT ERSTE BANK, NEW YORK By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT GENERAL ELECTRIC CAPITAL CORPORATION By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT THE INDUSTRIAL BANK OF JAPAN, LIMITED By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT MITSUBISHI TRUST AND BANKING CORPORATION By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT SOCIETE GENERALE By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT SUNTRUST BANK By:_______________________________ Title: SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT DEPARTING LENDER: The undersigned Departing Lender hereby consents to the amendment and restatement of the Original Credit Agreement and agrees to be bound by Section 10.18 of this Agreement. THE BANK OF NOVA SCOTIA By:_____________________________________ Name: _______________________________ Title: ______________________________ Address: One Liberty Plaza New York, NY 10006 Attn: Ben Sileo Facsimile No.: (212) 225-5099 SIGNATURE PAGES TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT Schedule I To Credit Agreement Lenders/Address for Notices Revolving 364-Day Commitment LEHMAN COMMERCIAL PAPER INC. $17,500,000.00 3 World Financial Center, 11th Floor New York, New York 10285 Attention:________Andrew Keith Fax :________(212) 526-0242 Tel :________(212) 526-4059 BANK OF AMERICA, N.A. $17,500,000.00 335 Madison Avenue New York, New York 10017 Attention: Steve Aronowitz Fax: (212) 503-7066 Tel: (212) 503-7950 with a copy to other parties listed inss.10.2 for BOA. CREDIT LYONNAIS $15,000,000.00 1301 Avenue of the Americas New York, NY 10019-6022 Attention:________Judy Domkowski Fax: _________(212) 459-3179 Tel: _________(212) 261-7341 FLEET NATIONAL BANK $15,000,000.00 100 Federal Street MA DE 10010A Boston, MA 02110 Attention:________Roger Boucher Fax: _________(617) 434-0601 Tel: _________(617) 434-3951 BARCLAYS BANK PLC $15,000,000.00 222 Broadway New York, NY 10038 Attention:________L. Peter Yetman Fax: _________(212) 412-7683 Tel: _________(212) 412-4000 I-1 BANK ONE, N.A. $8,333,333.33 153 West 51st Street New York, NY 10019-6025 Attention:________Andrea Kantor Fax: _________(212) 373-1180 Tel: _________(212) 373-1023 THE BANK OF NEW YORK $15,000,000.00 One Wall Street New York, NY 10286 Attention:________Ken Sneider Fax: _________(212) 635-6999 Tel: _________(212) 635-6863 SOCIETE GENERALE $8,333,333.33 181 West Madison Chicago, IL 60602 Attention:________John Root Fax: _________(312) 578-5099 Tel: _________(312) 578-5158 HSBC BANK USA $8,333,333.33 452 Fifth Ave. New York, NY 10018 Attention:________Bruce Wicks Fax: _________(212) 525-2556 Tel: _________(212) 525-2534 FIRST UNION COMMERCIAL CORPORATION $15,000,000.00 301 S. College Street Charlotte, NC 28288-0860 Attention:________Barbara VanMeerten Fax: _________(704) 374-4793 Tel: _________(704) 374-7115 THE FUJI BANK LIMITED $5,000,000.00 Two World Trade Center, 79th Floor New York, NY 10048-0001 Attention:________David Manheim Fax: _________(212) 898-2399 Tel: _________(212) 898-2723 I-2 BANK OF TOKYO - MITSUBISHI TRUST COMPANY $5,000,000.00 1251 Avenue of the Americas, 18th Floor New York, NY 10020 Attention:________Hidekazu Kojima Fax: _________(212) 782-4981 Tel: _________(212) 782-4795 COMERICA BANK $6,666,666.67 500 Woodward Avenue, 9th Floor, MC 3280 Detroit, MI 48275-3280 Attention:________Joel S. Gordon Fax: _________(313) 222-3330 Tel: _________(313) 222-3647 CREDIT INDUSTRIEL ET COMMERCIAL $8,333,333.33 520 West Madison Avenue, 37th Floor New York, NY 10022 Attention:________Brian O'Leary Fax: _________(212) 715-4535 Tel: _________(212) 715-4422 THE DAI-ICHI KANGYO BANK, LTD. $5,000,000.00 One World Trade Center, 48th Floor New York, NY 10048 Attention:________Nicholas A. Fiore Fax: _________(212) 912-1879 Tel: _________(212) 432-6784 RZB FINANCE LLC $1,666,666.68 1133 Avenue of the Americas New York, NY 10036 Attention:________Klaus D. Hein Fax: _________(212) Tel: _________(212) 845-4100 ERSTE BANK, NEW YORK $5,000,000.00 280 Park Avenue, 32nd Floor, West Building New York, NY 10017 Attention:________John Fay Fax: _________(212) 984-5627 Tel: _________(212) 984-5636 I-3 GE CAPITAL COMMERCIAL FINANCE, INC. $5,000,000.00 60 Long Ridge Road Stamford, CT 06927-5100 Attention:________Andrew Santacroce Fax: _________(203) 316-7978 Tel: _________(203) 961-2577 THE INDUSTRIAL BANK OF JAPAN, LIMITED $5,000,000.00 1251 Avenue of the Americas New York, NY 10020 Attention:________Wayne Wright Fax: _________(212) 282-4488 Tel: _________(212) 282-3462 THE MITSUBISHI TRUST AND BANKING CORPORATION $5,000,000.00 520 Madison Avenue New York, NY 10022 Attention:________Rosetta Conti Fax: _________(212) 644-6825 Tel: _________(212) 891-8268 THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND $5,000,000.00 LaTouche House, I.F.S.C. Custom House Docks Dublin 1 Ireland Attention:________Brendan McLoughlin Fax: _________011-353-1-829-0129 Tel: _________011-353-1-609-3513 SUNTRUST BANK $8,333,333.33 711 Fifth Avenue, 16th Floor New York, NY 10022 Attention:________Armen Karozichian Fax: _________(212) 371-9386 Tel: _________(212) 583-2604 I-4 Schedule II to Credit Agreement PRICING GRID*
REVOLVING 364 DAY FACILITY REVOLVING 364 DAY FACILITY AND TERM LOAN APPLICABLE AND TERM LOAN APPLICABLE REVOLVING 364 DAY DEBT RATIO MARGIN-EURODOLLAR RATE** MARGIN-BASE RATE** COMMITMENT FEE** - ---------------- ---------------------------- ------------------------------ ----------------------- >4.25x 300.0 200.0 45 >3.75x 250.0 150.0 45 >3.25x 200.0 100.0 40 >2.75x 175.0 75.0 35 <2.75x 150.0 50.0 30
- --------------------------- * Pricing Grid (except for Debt Ratios) reflects basis points. ** Notwithstanding the foregoing Pricing Grid, the Applicable Margins and the Commitment Fee Rate for the Revolving 364 Day Facility for the period following the Closing Date through but excluding the Adjustment Date related to the fiscal quarter ending as of September 30, 2001 will be no lower in cost to Borrower than the pricing level applicable if the Debt Ratio is greater than 3.25x but not greater than 3.75x; provided, however, nothing contained herein shall limit the effect of any increase in the pricing level on any Adjustment Date occurring after the Closing Date if the Debt Ratio exceeds 3.75x. I-1 EX-10.42 5 file004.txt THIRD AMENDED AND RESTATED CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of October 17, 2001 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Third Amended and Restated Credit Agreement dated as of May 16, 2001 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to an amendment of certain provisions of the Credit Agreement and related Credit Documents to, inter alia, (i) allow Holdings to issue certain convertible debt securities and (ii) make certain related amendments; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 2 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 1.1 The following defined terms in Subsection 1.1 of the Credit Agreement are hereby amended and restated as follows: "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of Borrower and its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Interest Expense of Borrower and its Subsidiaries and all Consolidated Interest Expense of Holdings with respect to the Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of Borrower and its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, payable in cash, of Borrower and its Subsidiaries and the amount of interest expense, payable in cash, of Holdings with respect to the Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries, for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Total Debt": at any date, the sum of (i) all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g) and (ii) the outstanding amount of Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries. 1.2 Subsection 2.6(b)(i) of the Credit Agreement is hereby amended by inserting the phrase "and the issuance of Permitted Convertible Securities by Holdings" after the phrase "(other than Indebtedness permitted pursuant to subsection 7.2" in the first sentence of subsection 2.6(b)(i). 1.3 Subsection 7.4(g) of the Credit Agreement is hereby amended and restated in their entirety to read as follows: "(g) Guarantee Obligations in respect of Convertible Securities issued by Holdings (the "Permitted Convertible Securities"); and" SECTION 2. CONDITIONS TO EFFECTIVENESS FOR SECTION 1. The provisions of Section 1 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "AMENDMENT EFFECTIVE DATE"): 2.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 2.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 2.3 The representations and warranties contained in Section 3 hereof shall be true and correct in all respects; 2 2.4 All conditions to effectiveness set forth in Section 2 in the First Amendment to the Second Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 3.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 3.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date, to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 3.3 Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 4. MISCELLANEOUS. 4.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 4.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent 3 and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 4.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 4.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 4.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Section 1 hereof (which shall only become effective on the Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: --------------------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By: --------------------------------- Title: BANK OF AMERICA, N.A., as a Lender By: --------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: -------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Date: October 17, 2001 L-3 COMMUNICATIONS HOLDINGS, INC. By: ------------------------------------ Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: ------------------------------------ Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: ------------------------------------ Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: ------------------------------------ Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT AND CONSENT TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: ------------------------------------ Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: ------------------------------------ Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT AND CONSENT TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF NEW YORK By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BANK ONE, N.A. (Main Office Chicago) By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] FLEET NATIONAL BANK By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] HSBC BANK USA By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ------------------------------------ Title: By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] COMERICA BANK By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT INDUSTRIEL ET COMMERCIAL By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE DAI-ICHI KANGYO BANK, LTD. By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BARCLAYS BANK PLC By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] RZB FINANCE LLC By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] ERSTE BANK, NEW YORK By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] GENERAL ELECTRIC CAPITAL CORPORATION By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE MITSUBISHI TRUST AND BANKING CORPORATION By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] SOCIETE GENERALE By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] SUNTRUST BANK By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] WEBSTER BANK By: ------------------------------------ Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] EX-10.43 6 file005.txt SECOND AMD. AND RESTATED 364 DAY CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT This FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of October 17, 2001 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Second Amended and Restated 364 Day Credit Agreement dated as of May 16, 2001 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to an amendment of certain provisions of the Credit Agreement and related Credit Documents to, inter alia, (i) allow Holdings to issue certain convertible debt securities and (ii) make certain related amendments; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 2 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 1.1 The following defined terms in Subsection 1.1 of the Credit Agreement are hereby amended and restated as follows: "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of Borrower and its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Interest Expense of Borrower and its Subsidiaries and all Consolidated Interest Expense of Holdings with respect to the Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of Borrower or its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, payable in cash, of Borrower and its Subsidiaries and the amount of interest expense, payable in cash, of Holdings with respect to the Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries, for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Total Debt": at any date, the sum of (i) all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g) and (ii) the outstanding amount of Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries. 1.2 Subsection 2.6(b)(i) of the Credit Agreement is hereby amended by inserting the phrase "and the issuance of Permitted Convertible Securities by Holdings" after the phrase "(other than Indebtedness permitted pursuant to subsection 7.2" in the first sentence of subsection 2.6(b)(i). 1.3 Subsection 7.4(g) of the Credit Agreement is hereby amended and restated in their entirety to read as follows: "(g) Guarantee Obligations in respect of Convertible Securities issued by Holdings (the "Permitted Convertible Securities"); and" SECTION 2. CONDITIONS TO EFFECTIVENESS FOR SECTION 1. The provisions of Section 1 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "AMENDMENT EFFECTIVE DATE"): 2.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 2 2.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 2.3 The representations and warranties contained in Section 3 hereof shall be true and correct in all respects; and 2.4 All conditions to effectiveness set forth in Section 2 in the First Amendment to the Third Amended and Restated Credit Agreement of even date herewith shall have been satisfied. SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 3.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 3.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date, to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 3.3 Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 4. MISCELLANEOUS. 4.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The 3 execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 4.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 4.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 4.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 4.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Section 1 hereof (which shall only become effective on the Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: --------------------------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By: --------------------------------------- Title: BANK OF AMERICA, N.A., as a Lender By: --------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Date: October 17, 2001 L-3 COMMUNICATIONS HOLDINGS, INC. By: --------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: --------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: --------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: --------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: --------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: --------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTORS' ACKNOWLEDGMENT AND CONSENT TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE BANK OF NEW YORK By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] BANK ONE, N.A. (Main Office Chicago) By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] FLEET NATIONAL BANK By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] HSBC BANK USA By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: --------------------------------- Title: By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: ----------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] COMERICA BANK By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] CREDIT INDUSTRIEL ET COMMERCIAL By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE DAI-ICHI KANGYO BANK, LTD. By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] BARCLAYS BANK PLC By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] RZB FINANCE LLC By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] ERSTE BANK, NEW YORK By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] GENERAL ELECTRIC CAPITAL CORPORATION By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ---------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE MITSUBISHI TRUST AND BANKING CORPORATION By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] SOCIETE GENERALE By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] SUNTRUST BANK By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] WEBSTER BANK By: --------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] L-3 COMMUNICATIONS CORPORATION FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of October 17, 2001 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") and certain financial institutions named as co-agents, LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT"). All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Third Amended and Restated Credit Agreement dated as of May 16, 2001 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to an amendment of certain provisions of the Credit Agreement and related Credit Documents to, inter alia, (i) allow Holdings to issue certain convertible debt securities and (ii) make certain related amendments; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 2 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 1.1 The following defined terms in Subsection 1.1 of the Credit Agreement are hereby amended and restated as follows: "Consolidated EBITDA": as of the last day of any fiscal quarter, Consolidated Net Income of Borrower and its Subsidiaries and, without duplication, the Acquired Businesses (excluding, without duplication, (x) extraordinary gains and losses in accordance with GAAP, (y) gains and losses in connection with asset dispositions whether or not constituting extraordinary gains and losses and (z) gains or losses on discontinued operations) for the four fiscal quarters ended on such date, plus (i) Consolidated Interest Expense of Borrower and its Subsidiaries and all Consolidated Interest Expense of Holdings with respect to the Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries and, without duplication, the Acquired Businesses for such period, plus (ii) to the extent deducted in computing such Consolidated Net Income of Borrower and its Subsidiaries and, without duplication, the Acquired Businesses, the sum of income taxes, depreciation and amortization for such period. "Consolidated Cash Interest Expense": as of the last day of any fiscal quarter, the amount of interest expense, payable in cash, of Borrower and its Subsidiaries and the amount of interest expense, payable in cash, of Holdings with respect to the Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries, for the four fiscal quarters ended on such date, determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Total Debt": at any date, the sum of (i) all Indebtedness of the Borrower and its Subsidiaries outstanding on such date for borrowed money or the deferred purchase price of property, including, without limitation, in respect of Financing Leases but excluding Indebtedness permitted pursuant to subsection 7.2(g) and (ii) the outstanding amount of Permitted Convertible Securities guaranteed by the Borrower or its Subsidiaries. 1.2 Subsection 2.6(b)(i) of the Credit Agreement is hereby amended by inserting the phrase "and the issuance of Permitted Convertible Securities by Holdings" after the phrase "(other than Indebtedness permitted pursuant to subsection 7.2" in the first sentence of subsection 2.6(b)(i). 1.3 Subsection 7.4(g) of the Credit Agreement is hereby amended and restated in their entirety to read as follows: "(g) Guarantee Obligations in respect of Convertible Securities issued by Holdings (the "Permitted Convertible Securities"); and" SECTION 2. CONDITIONS TO EFFECTIVENESS FOR SECTION 1. The provisions of Section 1 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "AMENDMENT EFFECTIVE DATE"): 2.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 2.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 2.3 The representations and warranties contained in Section 3 hereof shall be true and correct in all respects; 2 2.4 All conditions to effectiveness set forth in Section 2 in the First Amendment to the Second Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 3.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 3.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date, to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 3.3 Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 4. MISCELLANEOUS. 4.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 4.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent 3 and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 4.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 4.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 4.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Section 1 hereof (which shall only become effective on the Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: -------------------------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------------------- Title: BANK OF AMERICA, N.A., as a Lender By: -------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: -------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee. Date: October 17, 2001 L-3 COMMUNICATIONS HOLDINGS, INC. By: ---------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: ---------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: ---------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: ---------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT AND CONSENT TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT AND CONSENT TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF NEW YORK By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BANK ONE, N.A. (Main Office Chicago) By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] FLEET NATIONAL BANK By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] HSBC BANK USA By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: --------------------------------------- Title: By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] COMERICA BANK By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT INDUSTRIEL ET COMMERCIAL By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE DAI-ICHI KANGYO BANK, LTD. By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BARCLAYS BANK PLC By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] RZB FINANCE LLC By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] ERSTE BANK, NEW YORK By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] GENERAL ELECTRIC CAPITAL CORPORATION By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE INDUSTRIAL BANK OF JAPAN, LIMITED By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE MITSUBISHI TRUST AND BANKING CORPORATION By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] SOCIETE GENERALE By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] SUNTRUST BANK By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] WEBSTER BANK By: --------------------------------------- Title: [SIGNATURE PAGES TO FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] EX-10.44 7 file006.txt THIRD AMENDED AND RESTATED CREDIT AGREEMENT L-3 COMMUNICATIONS CORPORATION SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT This SECOND AMENDMENT TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of February 25, 2002 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT") , LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT") and certain financial institutions named as co-agents. All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Third Amended and Restated Credit Agreement dated as of May 16, 2001 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders provide a limited waiver of compliance with Section 7.10(a) of the Credit Agreement and amend certain provisions of the Credit Agreement to, inter alia, (i) allow the Borrower to refinance certain subordinated debt, (ii) increase the amount of certain permitted Indebtedness, (iii) amend the Debt Ratio, and (iv) make other related amendments; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. LIMITED WAIVER FOR EQUITY PROCEEDS APPLICATION. Borrower has advised the Lenders that Borrower will issue Additional Subordinated Indebtedness not to exceed $500,000,000 in principal amount at or about the time of the consummation of the AIS Acquisition by Borrower to finance a portion of the purchase price of the AIS Acquisition (the "SUBORDINATED BRIDGE INDEBTEDNESS"). Borrower has advised the Lenders that Borrower desires to refund, refinance and/or repay the Subordinated Bridge Indebtedness with the proceeds of an issuance of Additional Subordinated Indebtedness and/or an issuance of common stock or preferred stock of Holdings which issuance of such preferred stock requires no cash redemption or other principal payment prior to the date that is one year after the Termination Date (any such issuance of common or preferred stock, a "SPECIAL EQUITY Issuance"). To permit Borrower to repay the Subordinated Bridge Indebtedness with the proceeds of a Special Equity Issuance, Borrower requests that the Required Lenders grant a limited waiver of compliance with the terms of Section 7.10(a) for such purpose. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 3 of this Amendment, the Required Lenders hereby waive compliance with Section 7.10(a) of the Credit Agreement solely for the purpose of permitting Borrower to repay the Subordinated Bridge Indebtedness with the proceeds of a Special Equity Issuance. The foregoing waiver shall be limited as written and shall not be deemed to operate as a waiver of compliance with Section 7.10(a) for any Additional Subordinated Indebtedness issued to refund, refinance and/or repay the Subordinated Bridge Indebtedness or for any other purpose. SECTION 2. AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 3 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 2.1 The following defined terms are hereby added to Subsection 1.1 of the Credit Agreement in proper alphabetical order: "AIS Acquisition": shall mean the acquisition by Borrower of certain assets of the Aircraft Integration Systems operating segment of Raytheon Company. "Lender Fee Letter": shall mean that certain Lender Fee Letter for $750 Million Senior Credit Facilities between the Administrative Agent, BAS and the Borrower dated on or about February 8, 2002. 2.2 The following defined terms in Subsection 1.1 of the Credit Agreement are hereby amended and restated as follows: "Credit Documents": this Agreement, the Notes, the Applications, the Guarantees, the Fee Letter, the Lender Fee Letter and the Pledge Agreements. "Revolving Credit Commitment": the commitment of a Lender, as set forth on Schedule I hereto as amended from time to time pursuant to this Agreement, to make Revolving Credit Loans to the Borrower pursuant to subsection 2.1(a) and to issue and/or purchase participations in Letters of Credit pursuant to Section 3; and "Revolving Credit Commitments" means the Commitments of all Lenders in the aggregate set forth on Schedule I hereto as amended from time to time pursuant to this Agreement. 2.3 The term "Consolidated EBITDA" in Subsection 1.1 of the Credit Agreement is amended by adding the following new language at the end thereof: "For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters occurring after the AIS Acquisition (each, a "Reference Period") pursuant to any determination of the Debt Ratio, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect to (i) exclude from costs the positive difference, if any, between (A) the amount of annual corporate overhead costs attributed to the operations associated with the business comprising the AIS Acquisition by Raytheon Company prior to such acquisition by the Borrower and (B) the amount of annual corporate overhead costs that will be attributed by the Borrower 2 to the operations associated with the business comprising the AIS Acquisition from and after such acquisition by the Borrower, (ii) exclude any losses or gains associated with any contract estimate at completion ("EAC"), unrecoverable inventories and uncollectable receivables adjustment included in the historical results of operations associated with the business comprising the AIS Acquisition within the 12 months prior to the effective date of the AIS Acquisition for accounting purposes, if such contract EAC, unrecoverable inventories or uncollectible receivable adjustments pertained to contracts or assets excluded from the business comprising the AIS Acquisition, and (iii) exclude any losses or gains, up to a maximum amount of $16,000,000, associated with any contract EAC, unrecoverable inventories and uncollectable receivables adjustment included in the historical results of operations associated with the Sea Sentinel contract within the 12 months prior to the effective date of the AIS Acquisition for accounting purposes; provided, however, that such adjustments to Consolidated EBITDA are demonstrated by appropriate footnotes to the audited financial statements of the business comprising the AIS Acquisition or appropriate schedules and other materials prepared and certified by the Borrower and delivered to the Administrative Agent no more than 15 days after the completion of the audit of the financial statements of the business comprising the AIS Acquisition for the fiscal year ended prior to the consummation of AIS Acquisition." 2.4 Subsection 7.1(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (a) Debt Ratio. Permit the Debt Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite the date on which such fiscal quarter ends: Fiscal Quarter Ending Ratio --------------------- ----- June 30, 2001 4.50 September 30, 2001 4.50 December 31, 2001 4.50 March 31, 2002 4.85 June 30, 2002 4.85 September 30, 2002 4.50 December 31, 2002 4.25 March 31, 2003 4.25 June 30, 2003 4.25 September 30, 2003 4.25 December 31, 2003 4.00 March 31, 2004 4.00 June 30, 2004 4.00 September 30, 2004 4.00 December 31, 2004 and thereafter 3.50 3 2.5 Subsection 7.2(e) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(e) Indebtedness of the Borrower or any Subsidiary in respect of any Subordinated Debt, and refundings or refinancings thereof, provided that the Indebtedness being incurred to accomplish such refunding or refinancing shall qualify as Additional Subordinated Indebtedness;" 2.6 Schedule 7.2(f) to the Credit Agreement is hereby amended by deleting therefrom each reference to any Subordinated Debt and Convertible Securities appearing therein. 2.7 Subsection 7.2(j) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(j) Indebtedness of the Borrower or any of its Subsidiaries (other than as described under subsection 7.2(a) above) incurred in connection with the issuance of any surety bonds, performance letters of credit or other similar performance bonds required pursuant to any Contractual Obligation or Requirement of Law to which Borrower or any of its Subsidiaries are subject in an aggregate principal amount not exceeding $200,000,000 at any time outstanding; and" 2.8 Subsection 7.10(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(a) Except pursuant to a refinancing or refunding permitted by subsection 7.2(e) hereof, make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, any Subordinated Debt or amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any such Subordinated Debt Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon)." SECTION 3. CONDITIONS TO EFFECTIVENESS FOR SECTIONS 1 AND 2 The provisions of Sections 1 and 2 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "SECOND AMENDMENT EFFECTIVE DATE"): 3.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 4 3.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 3.3 The Administrative Agent shall have received a secretary's or assistant secretary's certificate of the Borrower certifying board resolutions authorizing the execution, delivery and performance of this Amendment by the Borrower; 3.4 The representations and warranties contained in Section 4 hereof shall be true and correct in all respects; and 3.5 All conditions to effectiveness set forth in Sections 5.1, 5.2, 5.3 and 5.4 in the Consent and Second Amendment to the Second Amended and Restated 364 Day Credit Agreement of even date herewith shall have been satisfied. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 4.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 4.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Second Amendment Effective Date, to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 4.3 Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 5. MISCELLANEOUS. 5 5.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 5.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 5.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 5.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 5.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Except for the terms of Sections 1 and 2 hereof (which shall only become effective on the Second Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. 5.6 Acknowledgement Regarding Pricing. Borrower acknowledges and agrees that notwithstanding anything to the contrary contained in this Amendment or the Credit Agreement, for period following the date the Borrower consummates the AIS Acquisition through but not including the Adjustment Date related to the fiscal quarter ending as of March 31, 2002, the Applicable Margin and the Commitment Fee Rate will be equal to the pricing level applicable to a Debt Ratio of >4.25x. 5.7 Amendment Fee. Subject to the occurrence of the Second Amendment Effective Date, Borrower hereby agrees to pay to each Lender submitting to the Administrative Agent an executed counterpart to the Second Amendment on or before 12:00 (noon) (New York time) on February 25, 2002 (a "Second Amendment Lender") a non-refundable amendment fee (the "Second Amendment Fee") in the amount set forth in the Lender Fee Letter. The Second Amendment Fee owing to each Second Amendment Lender pursuant to the terms of the Lender Fee Letter shall be paid in immediately available funds by the Borrower to the Administrative 6 Agent for the benefit of such Second Amendment Lenders not later than noon (New York time) on the first Business Day following the occurrence of the Second Amendment Effective Date. [SIGNATURE PAGES FOLLOW] 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: --------------------------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By: --------------------------------------- Title: BANK OF AMERICA, N.A., as a Lender By: --------------------------------------- Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: --------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee and any applicable Pledge Agreement of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee or any applicable Pledge Agreement. Date: February 25, 2002 L-3 COMMUNICATIONS HOLDINGS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary COLEMAN RESEARCH CORPORATION By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary EER SYSTEMS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary ELECTRODYNAMICS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary HENSCHEL, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] INTERSTATE ELECTRONICS CORPORATION By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary KDI PRECISION PRODUCTS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS DBS MICROWAVE, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ESSCO, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] MPRI, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary PAC ORD, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary POWER PARAGON, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary SOUTHERN CALIFORNIA MICROWAVE INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary SPD ELECTRICAL SYSTEMS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] SPD HOLDINGS, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary SPD SWITCHGEAR, INC. By: -------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTOR'S ACKNOWLEDGMENT TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE BANK OF NEW YORK By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BANK ONE, N.A. (Main Office Chicago) By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] FLEET NATIONAL BANK By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE FUJI BANK, LIMITED By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] HSBC BANK USA By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ---------------------------------------- Title: By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] COMERICA BANK By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] CREDIT INDUSTRIEL ET COMMERCIAL By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE DAI-ICHI KANGYO BANK, LTD. By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] BARCLAYS BANK PLC By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] RZB FINANCE LLC By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] ERSTE BANK, NEW YORK By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] GENERAL ELECTRIC CAPITAL CORPORATION By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] THE MITSUBISHI TRUST AND BANKING CORPORATION By: ----------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] SOCIETE GENERALE By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] SUNTRUST BANK By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] WEBSTER BANK By: ---------------------------------------- Title: [SIGNATURE PAGES TO SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT] EX-10.45 8 file007.txt CONSENT AND SECOND AMENDMENT L-3 COMMUNICATIONS CORPORATION CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT This CONSENT AND SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT (this "AMENDMENT") is dated as of February 25, 2002 and entered into by and among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the "BORROWER") which is wholly owned by L-3 COMMUNICATIONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), the Lenders party to the Credit Agreement referred to below on the date hereof (the "LENDERS"), BANK OF AMERICA, N.A., ("BOA"), as administrative agent for the Agents (as defined below) and the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"), LEHMAN COMMERCIAL PAPER, INC. ("LCPI") as syndication agent and documentation agent (in such capacity, the "SYNDICATION AGENT" and the "DOCUMENTATION AGENT") and certain financial institutions named as co-agents. All capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders, the Syndication Agent, the Documentation Agent, the Administrative Agent and certain other parties have entered into the Second Amended and Restated 364 Day Credit Agreement dated as of May 16, 2001 (as amended, supplemented, restated or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, the Borrower desires that the Lenders consent to an extension of the Revolving 364 Day Termination Date, provide a limited waiver of compliance with Section 7.10(a) of the Credit Agreement and amend certain provisions of the Credit Agreement to, inter alia, (i) allow the Borrower to refinance certain subordinated debt, (ii) facilitate the extension of the Revolving 364 Day Termination Date, (iii) increase the amount of certain permitted Indebtedness, (iv) amend the Debt Ratio, and (v) make certain other amendments. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. CONSENT AND WAIVER FOR EXTENSION. 1.1 Extension of Revolving 364 Day Termination Date. Borrower has requested that each Lender consent to the extension of the Revolving 364 Day Termination Date for an additional 364 day period commencing on the "Extension Effective Date" (as defined below) (the "REQUESTED EXTENSION"). The Borrower has also requested that each Lender waive the requirements in subsection 2.5(a) of the Credit Agreement that (i) the Borrower's request for the proposed Requested Extension be made no earlier than 60 days prior to the scheduled Revolving 364 Day Termination Date (the "NOTICE LIMITATION"), (ii) each Lender shall advise the Administrative Agent and the Borrower whether such Lender consents to the Requested Extension not later than 30 days after receipt of notice of the proposed Requested Extension (the "RESPONSE PERIOD") and (iii) the Borrower provide the Administrative Agent with no less than 5 day's prior written notice (the "FIVE DAY PERIOD") of the Borrower's election to exercise the Extension Option with only those Lenders constituting Extending Lenders in accordance with subsection 2.5(a) of the Credit Agreement (the "EXERCISE NOTICE"). In addition, the Borrower has been advised by certain Lender(s) (each a "NONCONSENTING LENDER") that such Nonconsenting Lender(s) do not desire to consent to the Requested Extension. Solely in connection with the Requested Extension, Borrower requests that the 5 Business Day prior notice requirement for replacing such a Nonconsenting Lender in subsection 2.17 of the Credit Agreement be waived (the "NONCONSENTING LENDER NOTICE PERIOD"). Subject to the satisfaction of the conditions precedent to this Amendment set forth in Section 4 hereof, (i) each Lender executing this Amendment hereby consents to the Requested Extension and agrees to waive the Notice Limitation, the Response Period and the Nonconsenting Lender Notice Period solely with respect to the Requested Extension and (ii) each Lender agrees to waive the delivery of the Exercise Notice in the Five Day Period, provided that such Exercise Notice shall be delivered to the Administrative Agent on or prior to the Extension Effective Date. SECTION 2. LIMITED WAIVER FOR EQUITY PROCEEDS APPLICATION. Borrower has advised the Lenders that Borrower will issue Additional Subordinated Indebtedness not to exceed $500,000,000 in principal amount at or about the time of the consummation of the AIS Acquisition by Borrower to finance a portion of the purchase price of the AIS Acquisition (the "SUBORDINATED BRIDGE INDEBTEDNESS"). Borrower has advised the Lenders that Borrower desires to refund, refinance and/or repay the Subordinated Bridge Indebtedness with the proceeds of an issuance of Additional Subordinated Indebtedness and/or an issuance of common stock or preferred stock of Holdings which issuance of such preferred stock requires no cash redemption or other principal payment prior to the date that is one year after the "Termination Date" (as such term is defined in the Facility A Credit Agreement) (any such issuance of common or preferred stock, a "SPECIAL EQUITY ISSUANCE"). To permit Borrower to repay the Subordinated Bridge Indebtedness with the proceeds of a Special Equity Issuance, Borrower requests that the Required Lenders grant a limited waiver of compliance with the terms of Section 7.10(a) for such purpose. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 5 of this Amendment, the Required Lenders hereby waive compliance with Section 7.10(a) of the Credit Agreement solely for the purpose of permitting Borrower to repay the Subordinated Bridge Indebtedness with the proceeds of a Special Equity Issuance. The foregoing waiver shall be limited as written and shall not be deemed to operate as a waiver of compliance with Section 7.10(a) for any Additional Subordinated Indebtedness issued to refund, refinance and/or repay the Subordinated Bridge Indebtedness or for any other purpose. SECTION 3. GENERAL AMENDMENTS. Subject to the satisfaction of each of the conditions to effectiveness set forth in Section 5 of this Amendment, the Borrower and the Required Lenders hereby agree to amend the Credit Agreement as follows: 3.1 The following defined terms are hereby added to Subsection 1.1 of the Credit Agreement in proper alphabetical order: 2 "AIS Acquisition": shall mean the acquisition by Borrower of certain assets of the Aircraft Integration Systems operating segment of Raytheon Company. "Lender Fee Letter": shall mean that certain Lender Fee Letter for $750 Million Senior Credit Facilities between the Administrative Agent, BAS and the Borrower dated on or about February 8, 2002. 3.2 The following defined term in Subsection 1.1 of the Credit Agreement is hereby amended and restated as follows: "Credit Documents": this Agreement, the Notes, the Applications, the Guarantees, the Fee Letter, the Lender Fee Letter and the Pledge Agreements. 3.3 The term "Consolidated EBITDA" in Subsection 1.1 of the Credit Agreement is amended by adding the following new language at the end thereof: "For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters occurring after the AIS Acquisition (each, a "Reference Period") pursuant to any determination of the Debt Ratio, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect to (i) exclude from costs the positive difference, if any, between (A) the amount of annual corporate overhead costs attributed to the operations associated with the business comprising the AIS Acquisition by Raytheon Company prior to such acquisition by the Borrower and (B) the amount of annual corporate overhead costs that will be attributed by the Borrower to the operations associated with the business comprising the AIS Acquisition from and after such acquisition by the Borrower, (ii) exclude any losses or gains associated with any contract estimate at completion ("EAC"), unrecoverable inventories and uncollectable receivables adjustment included in the historical results of operations associated with the business comprising the AIS Acquisition within the 12 months prior to the effective date of the AIS Acquisition for accounting purposes, if such contract EAC, unrecoverable inventories or uncollectible receivable adjustments pertained to contracts or assets excluded from the business comprising the AIS Acquisition, and (iii) exclude any losses or gains, up to a maximum amount of $16,000,000, associated with any contract EAC, unrecoverable inventories and uncollectable receivables adjustment included in the historical results of operations associated with the Sea Sentinel contract within the 12 months prior to the effective date of the AIS Acquisition for accounting purposes; provided, however, that such adjustments to Consolidated EBITDA are demonstrated by appropriate footnotes to the audited financial statements of the business comprising the AIS Acquisition or appropriate schedules and other materials prepared and certified by the Borrower and delivered to the Administrative Agent no more than 15 days after the completion of the audit of the financial statements of the business comprising the AIS Acquisition for the fiscal year ended prior to the consummation of AIS Acquisition." 3.4 The following defined term in Subsection 1.1 of the Credit Agreement is hereby amended and restated as follows: 3 "Revolving 364 Day Commitment": the commitment of a Lender, as set forth on Schedule I hereto as amended from time to time pursuant to this Agreement, to make Revolving 364 Day Loans to the Borrower pursuant to Subsection 2.1(a)(i) and to issue and/or purchase participations in Letters of Credit pursuant to Section 3; and "Revolving 364 Day Commitments" means the Revolving 364 Day Commitments of all Lenders in the aggregate set forth on Schedule I hereto, as amended from time to time pursuant to this Agreement. 3.5 Subsection 7.1(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (a) Debt Ratio. Permit the Debt Ratio at the last day of any fiscal quarter to be greater than the ratio set forth below opposite the date on which such fiscal quarter ends: Fiscal Quarter Ending Ratio June 30, 2001 4.50 September 30, 2001 4.50 December 31, 2001 4.50 March 31, 2002 4.85 June 30, 2002 4.85 September 30, 2002 4.50 December 31, 2002 4.25 March 31, 2003 4.25 June 30, 2003 4.25 September 30, 2003 4.25 December 31, 2003 4.00 March 31, 2004 4.00 June 30, 2004 4.00 September 30, 2004 4.00 December 31, 2004 and thereafter 3.50 3.6 Subsection 7.2(e) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(e) Indebtedness of the Borrower or any Subsidiary in respect of any Subordinated Debt, and refundings or refinancings thereof, provided that the Indebtedness being incurred to accomplish such refunding or refinancing shall qualify as Additional Subordinated Indebtedness;" 3.7 Schedule 7.2(f) to the Credit Agreement is hereby amended by deleting therefrom each reference to any Subordinated Debt and Convertible Securities appearing therein. 4 3.8 Subsection 7.2(j) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(j) Indebtedness of the Borrower or any of its Subsidiaries (other than as described under subsection 7.2(a) above) incurred in connection with the issuance of any surety bonds, performance letters of credit or other similar performance bonds required pursuant to any Contractual Obligation or Requirement of Law to which Borrower or any of its Subsidiaries are subject in an aggregate principal amount not exceeding $200,000,000 at any time outstanding; and" 3.9 Subsection 7.10(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(a) Except pursuant to a refinancing or refunding permitted by subsection 7.2(e) hereof, make any optional payment or prepayment on or redemption or purchase of, or deliver any funds to any trustee for the prepayment, redemption or defeasance of, any Subordinated Debt or amend, modify or change, or consent or agree to any amendment, modification or change to any of the material terms of any such Subordinated Debt Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon)." SECTION 4. CONDITIONS TO EFFECTIVENESS FOR SECTION 1. The provisions of Section 1 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "EXTENSION EFFECTIVE DATE"): 4.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; provided that if not all of the Lenders shall have complied with the condition set forth in Section 4.2 below, the Borrower shall have provided the Administrative Agent with the Exercise Notice; 4.2 The Required Lenders, each of which shall be an Extending Lender, shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment and, solely with respect to the waiver of the Nonconsenting Lender Notice Period, each Nonconsenting Lender shall have delivered to the Administrative Agent an executed original or facsimile counterpart of its signature page to this Amendment as a Nonconsenting Lender; 4.3 The Administrative Agent shall have received a secretary's or assistant secretary's certificate of the Borrower certifying board resolutions authorizing the execution, delivery and performance of this Amendment by the Borrower. 5 4.4 The representations and warranties contained in Section 6 hereof shall be true and correct in all respects; and 4.5 All conditions to effectiveness set forth in Sections 3.1, 3.2, 3.3 and 3.4 in the Second Amendment to the Third Amended and Restated Credit Agreement of even date herewith shall have been satisfied. SECTION 5. CONDITIONS TO EFFECTIVENESS FOR SECTIONS 2 AND 3. The provisions of Sections 2 and 3 of this Amendment shall be deemed effective as of the date when each of the following conditions have been satisfied (such effective date occurring upon satisfaction of such conditions being referred to herein as the "SECOND AMENDMENT EFFECTIVE DATE"): 5.1 The Borrower shall have delivered to Administrative Agent executed copies of this Amendment and each of the other Credit Parties shall have delivered to the Administrative Agent executed copies of the Guarantors' Consent and Acknowledgment to this Amendment in the form attached hereto; 5.2 The Required Lenders shall have delivered to the Administrative Agent an executed original or facsimile of a counterpart of this Amendment; 5.3 The Administrative Agent shall have received a secretary's or assistant secretary's certificate of the Borrower certifying board resolutions authorizing the execution, delivery and performance of this Amendment by the Borrower; 5.4 The representations and warranties contained in Section 6 hereof shall be true and correct in all respects; and 5.5 All conditions to effectiveness set forth in Sections 3.1, 3.2, 3.3 and 3.4 in the Second Amendment to the Third Amended and Restated Credit Agreement of even date herewith shall have been satisfied. SECTION 6. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 6.1 Authorization and Enforceability. (a) The Borrower has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"), (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of the Borrower and (c) this Amendment and the Amended Agreement have been duly executed and delivered by the Borrower and, when executed and delivered, will be the legally valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally, (ii) general equitable principles 6 (whether considered in a proceeding, in equity or at law) and (iii) an implied covenant of good faith and fair dealing. 6.2 Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Second Amendment Effective Date and/or Extension Effective Date (as applicable), to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. 6.3 Absence of Default and Setoff. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a potential Event of Default and no defense, setoff or counterclaim of any kind, nature or description exists to the payment and performance of the obligations owing by Borrower to the Agents and the Lenders. SECTION 7. MISCELLANEOUS. 7.1 Effect on the Credit Agreement and the other Credit Documents. Except as specifically amended by this Amendment, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or any Lender under, the Credit Agreement or any of the other Credit Documents. 7.2 Fees and Expenses. The Borrower acknowledges that all costs, fees and expenses as described in Section 10.5 of the Credit Agreement incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of the Borrower. 7.3 GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 7.4 SUBMISSION TO JURISDICTION; WAIVERS; WAIVER OF JURY TRIAL; ACKNOWLEDGMENTS; CONFIDENTIALITY. Each of the terms and conditions set forth in Sections 10.12, 10.13, 10.14 and 10.15 of the Credit Agreement are hereby incorporated into this Amendment as if set forth fully herein except that each reference to "Agreement" therein shall be deemed to be a reference to "Amendment" herein. 7.5 Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together 7 shall constitute but one and the same instrument. Except for the terms of Section 1 hereof (which shall only become effective on the Extension Effective Date) and the terms of Sections 2 and 3 hereof (which shall only become effective on the Second Amendment Effective Date), this Amendment shall become effective upon the execution of a counterpart hereof by the Borrower and the Required Lenders and receipt by the Borrower and the Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. 7.6 Acknowledgement Regarding Pricing. Borrower acknowledges and agrees that notwithstanding anything to the contrary contained in this Amendment or the Credit Agreement, for period following the date the Borrower consummates the AIS Acquisition through but not including the Adjustment Date related to the fiscal quarter ending as of March 31, 2002, the Applicable Margin and the Commitment Fee will be equal to the pricing level applicable to a Debt Ratio of >4.25x. 7.7 Rollover Fee. Subject to the occurrence of the Extension Effective Date, the Borrower hereby agrees to pay to each Lender consenting to the Requested Extension and the waiver of the Notice Limitation (each such Lender, a "Consenting Lender") a non-refundable fee (the "Rollover Fee") in the amount set forth in the Lender Fee Letter. The Rollover Fee owing to each Consenting Lender pursuant to the terms of the Lender Fee Letter shall be paid in immediately available funds by the Borrower to the Administrative Agent for the benefit of such Consenting Lenders not later than noon (New York time) on the first Business Day following the occurrence of the Extension Effective Date. [SIGNATURE PAGES FOLLOW] 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. L-3 COMMUNICATIONS CORPORATION By: ___________________________________________ Title: BANK OF AMERICA, N.A., as Administrative Agent By: ___________________________________________ Title: BANK OF AMERICA, N.A., as a Lender By: ___________________________________________ Title: LEHMAN COMMERCIAL PAPER INC., as Documentation Agent, Syndication Agent and as a Lender By: ___________________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] Guarantors' Acknowledgment and Consent Each of the undersigned hereby acknowledges receipt of the attached Amendment and consents to the execution and performance thereof by L-3 Communications Corporation. Each of the undersigned hereby also reaffirms that the guarantee and any applicable Pledge Agreement of such undersigned in favor of the Administrative Agent for the ratable benefit of the Lenders and the Agents remains in full force and effect and acknowledges and agrees that there is no defense, setoff or counterclaim of any kind, nature or description to obligations arising under such guarantee or any applicable Pledge Agreement. Date: February 25, 2002 L-3 COMMUNICATIONS HOLDINGS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President-General Counsel and Secretary HYGIENETICS ENVIRONMENTAL SERVICES, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ILEX SYSTEMS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS SPD TECHNOLOGIES INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTORS' ACKNOWLEDGMENT TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] L-3 COMMUNICATIONS AYDIN CORPORATION By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary MICRODYNE CORPORATION By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary COLEMAN RESEARCH CORPORATION By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary EER SYSTEMS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary ELECTRODYNAMICS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary HENSCHEL, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTORS' ACKNOWLEDGMENT TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] INTERSTATE ELECTRONICS CORPORATION By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary KDI PRECISION PRODUCTS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS DBS MICROWAVE, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS ESSCO, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTORS' ACKNOWLEDGMENT TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] MPRI, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary PAC ORD, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary POWER PARAGON, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary SOUTHERN CALIFORNIA MICROWAVE INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary SPD ELECTRICAL SYSTEMS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTORS' ACKNOWLEDGMENT TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] SPD HOLDINGS, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary SPD SWITCHGEAR, INC. By: __________________________________________ Name: Christopher C. Cambria Title: Vice President and Secretary [SIGNATURE PAGES TO GUARANTORS' ACKNOWLEDGMENT TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE BANK OF NEW YORK By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] BANK ONE, N.A. (Main Office Chicago) By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] FLEET NATIONAL BANK By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] CREDIT LYONNAIS NEW YORK BRANCH By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] FIRST UNION COMMERCIAL CORPORATION By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE FUJI BANK, LIMITED By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] HSBC BANK USA By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By:_________________________________ Title: By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] COMERICA BANK By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] CREDIT INDUSTRIEL ET COMMERCIAL By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE DAI-ICHI KANGYO BANK, LTD. By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] BARCLAYS BANK PLC By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] RZB FINANCE LLC By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] ERSTE BANK, NEW YORK By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] GENERAL ELECTRIC CAPITAL CORPORATION By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE INDUSTRIAL BANK OF JAPAN, LIMITED By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] THE MITSUBISHI TRUST AND BANKING CORPORATION By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] SOCIETE GENERALE By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] SUNTRUST BANK By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] WEBSTER BANK By:_________________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] NONCONSENTING LENDER: The undersigned Nonconsenting Lender hereby consents only to the waiver of the Nonconsenting Lender Notice Period set forth in Section 1.1 of this Amendment, but does not consent to any other term of this Amendment. BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: ______________________________ Name: ____________________________ Title: [SIGNATURE PAGES TO CONSENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED 364 DAY CREDIT AGREEMENT] EX-10.50 9 file008.txt BRIDGE LOAN AGREEMENT ================================================================================ BRIDGE LOAN AGREEMENT dated as of March 8, 2002 among L-3 COMMUNICATIONS CORPORATION, as Borrower, the Guarantors listed on the signature pages hereto, as Guarantors, L-3 COMMUNICATIONS HOLDINGS, INC., the LENDERS named herein, LEHMAN BROTHERS INC. and BANC OF AMERICA BRIDGE LLC, as Joint Book-Running Managers and Joint Lead Arrangers, CREDIT SUISSE FIRST BOSTON CORPORATION, as an Arranger and LEHMAN COMMERCIAL PAPER INC., as Administrative Agent ------------------------------ ================================================================================ TABLE OF CONTENTS PAGE
ARTICLE I DEFINITIONS.............................................................................................1 SECTION 1.1. DEFINED TERMS.................................................................................1 SECTION 1.2. INTERPRETATION...............................................................................20 ARTICLE II THE BRIDGE FACILITY...................................................................................20 SECTION 2.1. BRIDGE LOANS COMMITMENTS; PROCEDURE FOR BORROWING............................................20 SECTION 2.2. MANDATORY EXCHANGE OF BRIDGE LOANS FOR EXCHANGE NOTES........................................21 SECTION 2.3. INTEREST AND DEFAULT INTEREST................................................................22 SECTION 2.4. MANDATORY PREPAYMENT.........................................................................22 SECTION 2.5. OPTIONAL PREPAYMENT..........................................................................23 SECTION 2.6. BREAKAGE COSTS; INDEMNITY....................................................................23 SECTION 2.7. PAYMENTS.....................................................................................23 SECTION 2.8. TAXES........................................................................................24 SECTION 2.9. RIGHT OF SET OFF, SHARING OF PAYMENTS, ETC...................................................28 SECTION 2.10. CERTAIN FEES.................................................................................29 SECTION 2.11. EVIDENCE OF DEBT.............................................................................29 SECTION 2.12. REQUIREMENTS OF LAW..........................................................................29 SECTION 2.13. REPLACEMENT OF LENDERS.......................................................................31 SECTION 2.14. CERTAIN RULES RELATING TO THE PAYMENT OF ADDITIONAL AMOUNTS..................................31 SECTION 2.15. INABILITY TO DETERMINE INTEREST RATE.........................................................32 SECTION 2.16. ILLEGALITY...................................................................................32 ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................................................32 SECTION 3.1. FINANCIAL CONDITION..........................................................................32 SECTION 3.2. NO CHANGE....................................................................................33 SECTION 3.3. CORPORATE EXISTENCE; COMPLIANCE WITH LAW.....................................................33 SECTION 3.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS......................................33 SECTION 3.5. NO LEGAL BAR.................................................................................33 SECTION 3.6. NO MATERIAL LITIGATION.......................................................................34 SECTION 3.7. NO DEFAULT...................................................................................34 SECTION 3.8. OWNERSHIP OF PROPERTY; LIENS.................................................................34 SECTION 3.9. INTELLECTUAL PROPERTY........................................................................34 SECTION 3.10. TAXES........................................................................................34 SECTION 3.11. FEDERAL REGULATIONS..........................................................................34 SECTION 3.12. ERISA........................................................................................34 SECTION 3.13. INVESTMENT COMPANY ACT; OTHER REGULATIONS....................................................35 SECTION 3.14. FULL DISCLOSURE..............................................................................35 SECTION 3.15. PRIVATE OFFERING; RULE 144A MATTERS..........................................................35 SECTION 3.16. FINANCIAL CONDITION; SOLVENCY................................................................36 SECTION 3.17. SUBSIDIARIES.................................................................................36 SECTION 3.18. PURPOSE OF THE BRIDGE LOAN...................................................................36 SECTION 3.19. ENVIRONMENTAL MATTERS........................................................................36 SECTION 3.20. ACCURACY AND COMPLETENESS OF INFORMATION.....................................................37 SECTION 3.21. LABOR MATTERS................................................................................37 ARTICLE IV COVENANTS.............................................................................................38 SECTION 4.1. PAYMENT OF NOTES.............................................................................38
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SECTION 4.2. REPORTS......................................................................................38 SECTION 4.3. COMPLIANCE CERTIFICATE.......................................................................39 SECTION 4.4. TAXES........................................................................................39 SECTION 4.5. RESTRICTED PAYMENTS..........................................................................39 SECTION 4.6. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES...............................41 SECTION 4.7. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK...................................42 SECTION 4.8. ASSET SALES..................................................................................45 SECTION 4.9. TRANSACTIONS WITH AFFILIATES.................................................................46 SECTION 4.10. LIENS........................................................................................46 SECTION 4.11. FUTURE SUBSIDIARY GUARANTEES.................................................................46 SECTION 4.12. CORPORATE EXISTENCE..........................................................................47 SECTION 4.13. CHANGE OF CONTROL............................................................................47 SECTION 4.14. NO SENIOR SUBORDINATED DEBT..................................................................48 SECTION 4.15. PAYMENTS FOR CONSENT.........................................................................48 SECTION 4.16. NO REDEMPTION OF EXISTING SENIOR SUBORDINATED INDEBTEDNESS...................................48 SECTION 4.17. MERGER, CONSOLIDATION, OR SALE OF ASSETS.....................................................48 ARTICLE V CONDITIONS.............................................................................................49 SECTION 5.1. CONDITIONS PRECEDENT.........................................................................49 ARTICLE VI TRANSFER OF THE BRIDGE LOANS..........................................................................51 SECTION 6.1. TRANSFER OF THE BRIDGE LOANS.................................................................51 SECTION 6.2. REGISTRATION OF TRANSFER OR EXCHANGE.........................................................52 SECTION 6.3. REGISTER.....................................................................................52 ARTICLE VII EVENTS OF DEFAULT....................................................................................53 SECTION 7.1. EVENTS OF DEFAULT............................................................................53 SECTION 7.2. ACCELERATION.................................................................................54 SECTION 7.3. RIGHTS AND REMEDIES CUMULATIVE...............................................................55 SECTION 7.4. DELAY OR OMISSION NOT WAIVER.................................................................55 SECTION 7.5. RIGHTS OF LENDERS TO RECEIVE PAYMENT.........................................................55 SECTION 7.6. WAIVER OF PAST DEFAULTS......................................................................55 ARTICLE VIII PERMANENT SECURITIES................................................................................55 SECTION 8.1. PERMANENT SECURITIES.........................................................................55 ARTICLE IX SUBORDINATION.........................................................................................56 SECTION 9.1. AGREEMENT TO SUBORDINATE.....................................................................56 SECTION 9.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY.........................................................56 SECTION 9.3. DEFAULT ON DESIGNATED SENIOR DEBT............................................................56 SECTION 9.4. ACCELERATION OF BRIDGE LOANS.................................................................57 SECTION 9.5. WHEN DISTRIBUTION MUST BE PAID OVER..........................................................57 SECTION 9.6. NOTICE BY BORROWER...........................................................................57 SECTION 9.7. SUBROGATION..................................................................................58 SECTION 9.8. RELATIVE RIGHTS..............................................................................58 SECTION 9.9. SUBORDINATION MAY NOT BE IMPAIRED BY BORROWER................................................58 SECTION 9.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.....................................................58 SECTION 9.11. RIGHTS OF ADMINISTRATIVE AGENT...............................................................59 SECTION 9.12. AUTHORIZATION TO EFFECT SUBORDINATION........................................................59 ARTICLE X GUARANTEE..............................................................................................59
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SECTION 10.1. AGREEMENT TO GUARANTEE.......................................................................59 SECTION 10.2. EXECUTION AND DELIVERY OF GUARANTEES.........................................................59 SECTION 10.3. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS............................................60 SECTION 10.4. RELEASES.....................................................................................62 SECTION 10.5. NO RECOURSE AGAINST OTHERS...................................................................63 SECTION 10.6. SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING........................................63 ARTICLE XI THE ADMINISTRATIVE AGENT..............................................................................63 SECTION 11.1. APPOINTMENT..................................................................................63 SECTION 11.2. DELEGATION OF DUTIES.........................................................................63 SECTION 11.3. EXCULPATORY PROVISIONS.......................................................................63 SECTION 11.4. RELIANCE BY THE ADMINISTRATIVE AGENT.........................................................64 SECTION 11.5. NOTICE OF DEFAULT............................................................................64 SECTION 11.6. NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER LENDERS...................................64 SECTION 11.7. INDEMNIFICATION..............................................................................65 SECTION 11.8. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY..............................................65 SECTION 11.9. SUCCESSOR ADMINISTRATIVE AGENT...............................................................65 SECTION 11.10. LIMITATION OF DUTIES.........................................................................66 ARTICLE XII MISCELLANEOUS........................................................................................66 SECTION 12.1. EXPENSES; DOCUMENTARY TAXES..................................................................66 SECTION 12.2. NOTICES......................................................................................66 SECTION 12.3. CONSENT TO AMENDMENTS AND WAIVERS............................................................67 SECTION 12.4. PARTIES......................................................................................69 SECTION 12.5. NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL...............................69 SECTION 12.6. REPLACEMENT NOTES............................................................................69 SECTION 12.7. LIMITATION OF LIABILITY......................................................................69 SECTION 12.8. INDEPENDENCE OF COVENANTS....................................................................69 SECTION 12.9. CURRENCY INDEMNITY...........................................................................69 SECTION 12.10. SUCCESSORS AND ASSIGNS.......................................................................70 SECTION 12.11. INTEGRATION CLAUSE...........................................................................70 SECTION 12.12. SEVERABILITY CLAUSE..........................................................................70 SECTION 12.13. SURVIVAL OF CERTAIN PROVISIONS...............................................................70
iii EXHIBITS -------- EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE EXHIBIT B FORM OF NOTE EXHIBIT C FORM OF ESCROW AGREEMENT EXHIBIT D FORM OF EXCHANGE NOTE INDENTURE EXHIBIT E-1 OPINION OF SPECIAL NEW YORK COUNSEL TO THE BORROWER AND THE GUARANTORS (FUNDING DATE) EXHIBIT E-2 OPINION OF GENERAL COUNSEL OF THE BORROWER AND THE GUARANTORS (FUNDING DATE) EXHIBIT F FORM OF DEBT REGISTRATION RIGHTS AGREEMENT EXHIBIT G FORM OF EXEMPTION CERTIFICATE SCHEDULES --------- SCHEDULE 3.4 CONSENTS SCHEDULE 3.5 VIOLATIONS SCHEDULE 3.6 LITIGATION SCHEDULE 3.9 INTELLECTUAL PROPERTY SCHEDULE 3.10 TAXES SCHEDULE 3.17 SUBSIDIARIES iv THIS BRIDGE LOAN AGREEMENT, dated as of March 8, 2002 (as amended, restated and/or otherwise modified from time to time, this "AGREEMENT"), is by and among: (a) L-3 Communications Corporation, a Delaware corporation (the "BORROWER"), (b) the Guarantors listed on the signature pages hereto, as Guarantors (each a "GUARANTOR" and, collectively, the "GUARANTORS"), (c) L-3 Communications Holdings, Inc. ("HOLDINGS"), (d) the Lenders (as defined in Article I), (e) Lehman Commercial Paper Inc., as Administrative Agent, (f) Lehman Brothers Inc. and Banc of America Bridge LLC, as joint book-running managers and joint lead arrangers, and (g) Credit Suisse First Boston Corporation, as an arranger. W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Borrower proposes to acquire all of the assets of Aircraft Integration Systems ("AIS"), an operating segment of Raytheon Company (the "ACQUIRED BUSINESS"); WHEREAS, in that connection, the Borrower has requested loans (i) to provide a portion of funds required by the Borrower to make the Acquisition (as defined in Article I) and (ii) to pay fees and expenses in connection with herewith and therewith; WHEREAS, the Lenders are willing to make such loans available upon and subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Section 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "1997 INDENTURE" means the indenture, dated as of April 30, 1997, among The Bank of New York, as trustee, and the Borrower, with respect to the 1997 Notes. "1997 NOTES" means the $225,000,000 in aggregate principal amount of the Borrower's 10 3/8% Senior Subordinated Notes due 2007, issued pursuant to the 1997 Indenture on April 30, 1997. "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's merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "ACQUISITION" means the acquisition of the Acquired Business by the Borrower. "ACQUIRED BUSINESS" has the meaning specified in the preamble to this Agreement. "ACQUISITION DOCUMENTS" means the Asset Purchase Agreement and any other material instrument or document executed in connection therewith. "ADMINISTRATIVE AGENT" means LCPI, acting as agent pursuant to Article XI or any successor or replacement Administrative Agent, acting in such capacity. "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. "AFFILIATE TRANSACTION" has the meaning specified in Section 4.9. "AGREEMENT" has the meaning specified in the preamble to this Agreement. "ARRANGERS" means Lehman Brothers Inc. and Banc of America Bridge LLC, as joint lead book-running managers and joint lead arrangers hereunder, and Credit Suisse First Boston Corporation, as an arranger hereunder. "ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement, dated as of January 11, 2002, among Raytheon Company, Raytheon Australia Pty Ltd. and L-3 Communications Corporation, as amended, supplemented or otherwise modified from time to time. "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 sales of inventory 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 Borrower and its Restricted Subsidiaries taken as a whole shall be governed by the covenant contained in Section 4.13 and not by the covenant contained in Section 4.8), and (ii) the issue or sale by the Borrower or any of its Subsidiaries of Equity Interests of any of the Borrower'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 $1.0 million or (B) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the Borrower to a Restricted Subsidiary or by a Restricted Subsidiary to the Borrower or to another Restricted Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to the Borrower or to another Restricted Subsidiary, (iii) a Restricted Payment that is permitted by the covenant contained in Section 4.5 and (iv) a disposition of Cash Equivalents in the ordinary course of business shall not be deemed to be an Asset Sale. "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of Exhibit A or such other form as shall be approved by the Administrative Agent. -2- "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 LAW" means (i) Title 11 of the U.S. Code or (ii) any other law of the United States, any political subdivision thereof or any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors. "BASE RATE" means, for any day, the higher of: (a) 0.50% per annum above the last Federal Funds Effective Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BOA in Charlotte, North Carolina, as its "reference rate." (The "reference rate" is a rate set by BOA based upon various factors including BOA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) "BENEFICIAL OWNER" and "BENEFICIAL OWNERSHIP" each has the meaning as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act. "BOA" means Bank of America, N.A. "BOARD" means the Board of Governors of the Federal Reserve System of the United States or any successor. "BOARD OF DIRECTORS" means the Board of Directors of the Borrower, or any authorized committee of the Board of Directors. "BORROWER" has the meaning specified in the preamble to this Agreement. "BRIDGE LOAN" means a loan made by any Lender to the Borrower pursuant to Section 2.1. "BUSINESS" has the meaning specified in Section 3.19. "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco, California are authorized or required by law to close. "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 or membership interests (whether general or limited) 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. -3- "CASH EQUIVALENTS" means (i) United States dollars, (ii) 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, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic financial institution to the Senior Credit Facilities or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's or S&P and in each case maturing within six months after the date of acquisition, (vi) investment funds investing 95% of their assets in securities of the types described in clauses (i)-(v) above, and (vii) readily marketable direct obligations issued by any State of the United States of America or any political subdivision thereof having maturities of not more than one year from the date of acquisition and having one of the two highest rating categories obtainable from either Moody's or S&P. "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Borrower and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties, (ii) the adoption of a plan relating to the liquidation or dissolution of the Borrower, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of the Borrower (measured by voting power rather than number of shares) or (iv) the first day on which a majority of the members of the Board of Directors of the Borrower are not Continuing Directors. "CHANGE OF CONTROL PAYMENT" has the meaning specified in Section 4.13(a). "CHANGE OF CONTROL PAYMENT DATE" has the meaning specified in Section 4.13(a). "CODE" means the Internal Revenue Code of 1986, as amended, and any regulation promulgated thereunder. "COMMITMENT" means, with respect to any Lender, the amount set forth opposite such Lender's signature on the signature pages of this Agreement. "COMMITMENT LETTER" means the Interim Loan Commitment Letter (including all exhibits and annexes thereto) among Lehman Commercial Paper Inc., Lehman Brothers Inc., Banc of America Bridge LLC, Banc of America Securities LLC, Credit Suisse First Boston Corporation, Credit Suisse First Boston, Cayman Islands Branch, Holdings and the Borrower, dated March 4, 2002, as the same may be amended, supplemented, replaced or otherwise modified from time to time in accordance with the terms thereof. "COMMONLY CONTROLLED ENTITY" means an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414(b) or (c) of the Code. -4- "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) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (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, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill, debt issuance costs and other intangibles but excluding amortization of other prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (v) non-cash items (excluding any items that were accrued in the ordinary course of business) increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. "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 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 thereof 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, (iv) the cumulative effect of a change in accounting principles shall be excluded, (v) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the Borrower or one of its Restricted Subsidiaries, and (vi) the Net Income of any Restricted Subsidiary shall be calculated after deducting preferred stock dividends payable by such Restricted Subsidiary to Persons other than the Borrower and its other Restricted Subsidiaries. "CONSOLIDATED TANGIBLE ASSETS" means, with respect to the Borrower, the total consolidated assets of the Borrower and its Restricted Subsidiaries, less the total intangible assets of the Borrower and its Restricted Subsidiaries, as shown on the most recent internal consolidated balance sheet of the Borrower and such Restricted Subsidiaries calculated on a consolidated basis in accordance with GAAP. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors who (i) was a member of such Board of Directors on the Funding Date or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the -5- Continuing Directors who were members of such Board of Directors at the time of such nomination or election. "CONTRACTUAL OBLIGATION" means as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "CONTROL INVESTMENT AFFILIATE" means, as to any Lender, an investment fund that is regularly engaged in making, purchasing or investing in loans or securities and is under common management with such Lender. "CREDIT FACILITIES" means, with respect to the Borrower, one or more debt facilities (including, without limitation, the Senior Credit Facilities) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) 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. "CREDIT PARTIES" means each of the Borrower and the Guarantors. "CUSTODIAN" means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. "DEBT REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement, dated as of the Funding Date, among the Borrower, the Guarantors and the Administrative Agent pursuant to which the Exchange Notes are required to be registered for public sale, in the form attached as Exhibit F. "DECEMBER 1998 NOTES" means the $200,000,000 in aggregate principal amount of the Borrower's 8% Senior Subordinated Notes due 2008, issued pursuant to the December 1998 Indenture on December 11, 1998. "DECEMBER 1998 INDENTURE" means the indenture, dated as of December 11, 1998, among The Bank of New York, as trustee, and the Borrower, with respect to the December 1998 Notes. "DEFAULT" means any event that is, or with the passage of time the giving of notice or both would be, an Event of Default. "DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the Senior Credit Facilities and (ii) any other Senior Debt permitted to be incurred under this Agreement the principal amount of which is $25.0 million or more and that has been designated by the Borrower as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Bridge Loans mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Borrower to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Borrower may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such -6- repurchase or redemption complies with Section 4.5 hereof; and provided further, that if such Capital Stock is issued to any plan for the benefit of employees of the Borrower or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Borrower in order to satisfy applicable statutory or regulatory obligations. "DOLLARS" or "$" shall mean dollars, the lawful currency of the United States of America. "ENGAGEMENT LETTER" means the Engagement Letter among Lehman Brothers Inc., Banc of America Securities LLC, BOA, Credit Suisse First Boston Corporation, Holdings and the Borrower, dated March 4, 2002, as the same may be amended, supplemented, replaced or otherwise modified from time to time in accordance with the terms thereof. "ENVIRONMENTAL LAWS" means any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, or other legally enforceable requirement (including, without limitation, common law) of any foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or of human health as affected by the environment as has been, is now, or may at any time hereafter be, in effect, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.ss.ss. 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C.ss.ss.9601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.ss.ss.1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.ss.ss.6901 et seq.; the Clean Water Act; 33 U.S.C.ss.ss.1251 et seq.; the Clean Air Act, 42 U.S.C.ss.ss. 7401 et seq.; or other similar federal and/or state environmental laws. "ENVIRONMENTAL PERMITS" means any and all permits, licenses, registrations, approvals, notifications, exemptions and any other authorization required under any Environmental Law. "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). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any regulation promulgated thereunder. "ESCROW AGENT" means The Bank of New York, a New York banking corporation, in its capacity as escrow agent pursuant to the Escrow Agreement. "ESCROW AGREEMENT" means the escrow agreement, dated as of the Funding Date, among the Borrower, the Administrative Agent, the Arrangers and the Escrow Agent, in the form attached as Exhibit C. "EURODOLLAR BUSINESS DAY" means any Business Day on which commercial banks are open in London for the transaction of international business, including dealings in Dollar deposits in the international interbank markets. "EVENT OF DEFAULT" means any of the events specified in Section 7.1, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition has been satisfied. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. -7- "EXCHANGE DATE" means the date on which the Bridge Loans convert to Exchange Notes in accordance with Section 2.2. "EXCHANGE NOTE INDENTURE" means the indenture relating to the Exchange Notes, among the Borrower, as issuer, the Guarantors, as guarantors, and the Exchange Note Trustee, in the form attached as Exhibit D. "EXCHANGE NOTE TRUSTEE" means, on any date of determination, the trustee under the Exchange Note Indenture. "EXCHANGE NOTES" means those certain Senior Subordinated Notes of the Borrower, guaranteed by the Guarantors and placed into escrow on the Funding Date, to be issued in exchange for the Bridge Loans pursuant to Section 2.2, in the form attached as an exhibit to the Exchange Note Indenture. "EXISTING INDEBTEDNESS" means any Indebtedness of the Borrower and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facilities and the Bridge Loans) in existence on the date of the Agreement, until such amounts are repaid. "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)." If on any relevant day the appropriate rate for such previous day is not yet published in H.15(519), the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of federal funds transactions in New York City selected by the Administrative Agent. "FEE LETTER" means the Interim Loan Fee Letter among Lehman Commercial Paper Inc., Lehman Brothers Inc., Banc of America Bridge LLC, Banc of America Securities LLC, Credit Suisse First Boston Corporation, Credit Suisse First Boston, Cayman Islands Branch, and the Borrower, dated March 4, 2002, as amended, supplemented, replaced or otherwise modified from time to time in accordance with the terms thereof. "FOREIGN SUBSIDIARY" means a Restricted Subsidiary of the Borrower that was not organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof or that has not guaranteed or otherwise provided direct credit support for any Indebtedness of the Borrower. "FIXED CHARGES" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense 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, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations, but excluding amortization of debt issuance costs) and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) 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 -8- Equity Interests payable solely in Equity Interests of the Borrower, 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. "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 and its Restricted Subsidiaries for such period. In the event that the Borrower or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) 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 Borrower 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, and (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. "FUNDING DATE" means the date on which the Bridge Loans are funded and the conditions set forth in Section 5.1 are satisfied or waived in accordance with Section 12.3. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the date hereof. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "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. "GUARANTORS" means each Person listed on the signature pages to this Agreement and each Subsidiary of the Borrower that executes a Subsidiary Guarantee in accordance with the provisions of the Agreement, and their respective successors and assigns. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or interest rates. -9- "HOLDINGS" means L-3 Communications Holdings, Inc., a Delaware corporation. "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 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. "INSOLVENCY" means, with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "INSOLVENT" means that which is pertaining to a condition of Insolvency. "INTELLECTUAL PROPERTY" has the meaning specified in Section 3.9. "INTEREST PAYMENT DATE" means (i) the last day of each Interest Period, (ii) the date of any prepayment or exchange of all or any portion of the principal of the Bridge Loans and (iii) the date, if any, on which the Bridge Loans are converted into Exchange Notes. "INTEREST PERIOD" means, with respect to any Bridge Loan: (a) initially, the period commencing on the Funding Date with respect to such Bridge Loan and ending one or three months thereafter, as selected by the Borrower in its notice of borrowing with respect thereto; and (b) thereafter, each period commencing on the last day of the preceding Interest Period applicable to such Bridge Loan and ending one or three months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Eurodollar Business Days prior to the last day of the then current Interest Period with respect thereto; or (c) any other period agreed to by the Borrower and each Lender; provided that, the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to a Bridge Loan would otherwise end on a day that is not a Eurodollar Business Day, such Interest Period shall be extended to the next succeeding Eurodollar Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day; -10- (ii) any Interest Period for any Bridge Loan that would otherwise extend beyond the one-year anniversary of the Funding Date shall otherwise end on the one-year anniversary of the Funding Date; (iii) any Interest Period for any Bridge Loan that would otherwise extend beyond the Maturity Date shall end on the Maturity Date; and (iv) any Interest Period pertaining to a Bridge Loan that begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period would otherwise be scheduled to end) shall end on the last Eurodollar Business Day of the appropriate calendar month. "INTEREST RATE" means the sum of (a) the LIBOR plus (b) 350 basis points. "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 or capital contributions (excluding commission, travel, moving and similar loans or advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Borrower or any Subsidiary of the Borrower sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Borrower such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Borrower, the Borrower 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 Subsidiary not sold or disposed of in an amount determined as provided in the last paragraph of the covenant contained in Section 4.5. "LCPI" means Lehman Commercial Paper Inc. "LENDERS" shall mean (a) each financial institution that has executed a counterpart to this Agreement (other than any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance. "LIBOR" means, as to any Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period quoted on the second Eurodollar Business Day prior to the first day of such Interest Period, as such rate appears on Page 3750 as of 11:00 A.M. (London time) on such date, as determined by the Administrative Agent and notified to the Lenders and the Borrower on such second prior Eurodollar Business Day. If LIBOR cannot be determined based on Page 3750, LIBOR means the rate per annum, as supplied to the Administrative Agent, quoted by BOA's London Branch to prime banks in the London interbank market for deposits in Dollars at approximately 11:00 A.M. (London time) two Eurodollar Business Days prior to the first day of such Interest Period in an amount approximately equal to the principal amount of the Bridge Loans to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "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 and any filing of -11- or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "LOAN DOCUMENTS" means this Agreement, the Notes and the Related Documents. "MAJORITY LENDERS" means, at any time, Lenders holding at least a majority of the then aggregate principal balance of the Bridge Loans then outstanding, or, if no such principal amount is then outstanding, Lenders having at least a majority of the total Commitments; provided that, for purposes hereof, neither the Borrower nor any of its Affiliates shall be included in (i) the Lenders holding such amount of the Bridge Loans or having such amount of the Commitments or (ii) determining the aggregate unpaid principal amount of the Bridge Loans or the total Commitments. "MARKETABLE SECURITIES" means, with respect to any Asset Sale, any readily marketable equity securities that are (i) traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market; and (ii) issued by a corporation having a total equity market capitalization of not less than $300.0 million; provided that the excess of (A) the aggregate amount of securities of any one such corporation held by the Borrower and any Restricted Subsidiary over (B) ten times the average daily trading volume of such securities during the 20 immediately preceding trading days shall be deemed not to be Marketable Securities, as determined on the date of the contract relating to such Asset Sale. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, assets, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement, any of the other Loan Documents, the Exchange Note Indenture, the Exchange Notes or the rights or remedies of the Agents or the Lenders hereunder or thereunder. "MATERIALS OF ENVIRONMENTAL CONCERN" means any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could give rise to liability under, any applicable Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products. "MATURITY DATE" means May 15, 2009. "MAY 1998 NOTES" means the $180,000,000 in aggregate principal amount of the Borrower's 8 1/2% Senior Subordinated Notes due 2008, issued pursuant to the May 1998 Indenture on May 22, 1998. "MAY 1998 INDENTURE" means the indenture, dated as of May 22, 1998, among The Bank of New York, as trustee, and the Borrower, with respect to the May 1998 Notes. "MOODY'S" means Moody's Investors Service, Inc. "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "NET CASH PROCEEDS" means (i) in the case of an Asset Sale, the aggregate cash proceeds received (including any cash and Cash Equivalents and cash payments received by way of deferred payment of principal pursuant to a note, an installment receivable or otherwise, but only as and when received) in connection with such Asset Sale, net of attorneys' fees, accountants' fees, investment banking fees, brokers' and underwriters' discounts and commissions paid to third parties, amounts -12- required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is sold or otherwise disposed of in connection with the Asset Sale, the aggregate amount of reserves that is required or appropriate in the reasonable judgment of the Borrower to pay contingent liabilities with respect to the Asset Sale (provided that amounts deducted from aggregate proceeds pursuant to this clause and not actually paid by the Borrower or any of its Subsidiaries in liquidation of such contingent liabilities shall be deemed to be Net Cash Proceeds and shall be applied in accordance with Section 2.4(a) at such time as the Borrower shall reasonably determine that such amounts are not required to pay contingent liabilities with respect to the Asset Sale) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements with any Person other than the Borrower and its Subsidiaries) and (ii) in connection with any issuance or sale of Capital Stock or debt securities or instruments or the incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, brokers' and underwriting discounts and commissions paid to third parties and other customary fees and expenses actually incurred in connection therewith net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements with any Person other than the Borrower and its Subsidiaries) and (iii) in connection with any capital contribution from Holdings made pursuant to Section 2.4(b), the cash proceeds received from such contribution, net of attorney's fees and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements with any Person other than the Borrower and its Subsidiaries). "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 or loss, together with any related provision for taxes thereon, 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 or loss, together with any related provision for taxes on such extraordinary gain or loss and (iii) the cumulative effect of a change in accounting principles. "NET PROCEEDS" means the aggregate cash proceeds received by the Borrower or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NONCONSENTING LENDER" has the meaning specified in Section 2.13. "NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Borrower nor any of its Restricted Subsidiaries (A) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (B) is directly or indirectly liable (as a guarantor or otherwise), or (C) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other -13- than Indebtedness incurred under Credit Facilities) of the Borrower or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Borrower or any of its Restricted Subsidiaries. "NON-U.S. LENDER" has the meaning specified in Section 2.8(g). "NOTES" or "BRIDGE NOTES" means the promissory notes of the Borrower substantially in the form attached as Exhibit B hereto evidencing the Bridge Loans. "OBLIGATIONS" means any principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto. "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, any Assistant Secretary or any Vice President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Borrower by two Officers of the Borrower, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Borrower. "OTHER TAXES" has the meaning specified in Section 2.8(b). "OUTSTANDING SENIOR SUBORDINATED NOTES" means the 10M% Senior Subordinated Notes due 2007, 8 1/2% Senior Subordinated Notes due 2008 and 8% Senior Subordinated Notes due 2008 issued by the Borrower and guaranteed by certain of its Subsidiaries. "PAGE 3750" means the display designated as page "3750" on the Dow Jones Market Service (formerly known as the Telerate Service) or such other page as may replace the "3750" page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for Dollar deposits. "PARTICIPANT" has the meaning specified in Section 6.1(b). "PAYMENT BLOCKAGE NOTICE" has the meaning specified in Section 9.3. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any of its functions under ERISA. "PERMANENT SECURITIES" shall mean any debt securities issued by the Borrower or any of its Subsidiaries during the term of the Engagement Letter, whether sold in connection with an underwritten offering or a private placement. "PERMITTED INDEBTEDNESS" means Indebtedness permitted to be incurred by the Borrower or any Subsidiary of the Borrower pursuant to Section 4.7. -14- "PERMITTED INVESTMENTS" means (i) any Investment in the Borrower or in a Restricted Subsidiary of the Borrower that is a Guarantor; (ii) any Investment in cash or Cash Equivalents; (iii) any Investment by the Borrower or any Restricted Subsidiary of the Borrower in a Person, if as a result of such Investment (A) such Person becomes a Restricted Subsidiary of the Borrower and a Guarantor or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Borrower or a Restricted Subsidiary of the Borrower that is a Guarantor; (iv) any Restricted 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 4.5 or any disposition of assets not constituting an Asset Sale; (v) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Borrower; (vi) advances to employees not to exceed $2.5 million at any one time outstanding; (vii) any Investment acquired in connection with or as a result of a workout or bankruptcy of a customer or supplier; (viii) Hedging Obligations permitted to be incurred under Section 4.7; (ix) any Investment in a Similar Business that is not a Restricted Subsidiary; provided that the aggregate fair market value of all Investments outstanding pursuant to this clause (ix) (valued on the date each such Investment was made and without giving effect to subsequent changes in value) may not at any one time exceed 10% of the Consolidated Tangible Assets of the Borrower; and (x) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (x) that are at the time outstanding, not to exceed $15.0 million. "PERMITTED JOINT VENTURE" means any joint venture, partnership or other Person designated by the Board of Directors (until designation by the Board of Directors to the contrary); provided that (i) at least 25% of the Capital Stock thereof 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 Borrower and/or by one or more Restricted Subsidiaries of the Borrower and (ii) such joint venture, partnership or other Person is engaged in a Similar Business. Any such designation or designation to the contrary shall be evidenced to the Administrative Agent by promptly filing with the Administrative Agent a copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "PERMITTED LIENS" means (i) Liens securing Senior Debt of the Borrower or any Guarantor that was permitted by the terms of this Agreement to be incurred; (ii) Liens in favor of the Borrower or any Guarantor; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Restricted Subsidiary of the Borrower; 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 Borrower; (iv) Liens on property existing at the time of acquisition thereof by the Borrower or any Subsidiary of the Borrower; provided, that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any other assets of the Borrower or any of its Restricted Subsidiaries; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of the second paragraph of Section 4.7 covering only the assets acquired with such Indebtedness; (vii) Liens existing on the Funding Date; (viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (ix) Liens incurred in the ordinary course of business of the Borrower or any Restricted Subsidiary of the Borrower with respect to obligations that do not exceed $5.0 million at any one time outstanding; (x) Liens on assets of Guarantors to secure Senior Debt of such Guarantors that was -15- permitted by this Agreement to be incurred; (xi) Liens securing Permitted Refinancing Indebtedness; provided, that any such Lien does not extend to or cover any property, shares or debt other than the property, shares or debt securing the Indebtedness so refunded, refinanced or extended; (xii) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return of money bonds and other obligations of a like nature, in each case incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (xiii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business; (xiv) Liens encumbering customary initial deposits and margin deposits, and other Liens incurred in the ordinary course of business that are within the general parameters customary in the industry, in each case securing Indebtedness under Hedging Obligations; and (xv) Liens encumbering deposits made in the ordinary course of business to secure nondelinquent obligations arising from statutory or regulatory, contractual or warranty requirements of the Borrower or its Subsidiaries for which a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Borrower or any of its 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 Borrower or any of its Restricted Subsidiaries; 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 interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses and prepayment premiums incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date no earlier 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 Bridge Loans, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Bridge Loans on terms at least as favorable to the Lenders 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 Borrower or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERMITTED SECURITIES" means, with respect to any Asset Sale, Voting Stock of a Person primarily engaged in one or more Similar Businesses; provided, that after giving effect to the Asset Sale such Person shall becomes a Restricted Subsidiary and a Guarantor. "PERSON" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "PLAN" means at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity maintains, administers, contributes to or is under which the Borrower or any Commonly Controlled Entity may incur any liability. "PREPAYMENT TRANSACTION" has the meaning specified in Section 2.4(a). -16- "PRINCIPALS" means Lehman Brothers Holdings, Inc. and any of its Affiliates, Lockheed Martin Corporation, Frank C. Lanza and Robert V. LaPenta. "PROPERTIES" has the meaning specified in Section 3.19. "REGISTER" means the register maintained by the Administrative Agent on behalf of the Borrower pursuant to Section 6.3. "REGULATION D" means Regulation D of the Securities Act as the same may be amended or supplemented from time to time. "RELATED DOCUMENTS" means the Escrow Agreement; the Debt Registration Rights Agreement; the Engagement Letter; and the Fee Letter. "RELATED PARTY" with respect to any Principal means (i) any controlling stockholder, 50% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding a more than 50% controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (i). "REORGANIZATION" means, with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "REPORTABLE EVENT" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under the regulations of the PBGC. "REPRESENTATIVE" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "REQUIREMENT OF LAW" means as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its Property is subject. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED PAYMENTS" has the meaning specified in Section 4.5. "RESTRICTED SUBSIDIARY" means, with respect to any Person, each Subsidiary of such Person that is not an Unrestricted Subsidiary. "S&P" means Standard & Poor's Rating Service, a division of The McGraw-Hill Companies. "SEC" means the Securities and Exchange Commission (or successors thereto or an analogous Governmental Authority). "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR CREDIT FACILITIES" means the Second Amended and Restated 364 Day Credit Agreement, dated as of May 16, 2001, among the Borrower and a syndicate of banks and other financial -17- institutions led by BOA, as administrative agent, and Lehman Commercial Paper Inc., as syndication agent and documentation agent, and the Third Amended and Restated Credit Agreement, dated as of May 16, 2001, among the Borrower and a syndicate of banks and other financial institutions led by BOA, as administrative agent, and Lehman Commercial Paper Inc., as syndication agent and documentation agent, and any related notes, collateral documents, letters of credit and guarantees, including any appendices, exhibits or schedules to any of the foregoing (as the same may be in effect from time to time), in each case, as such agreements may be amended, modified, supplemented or restated from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid or extended from time to time (whether with the original agents and lenders or other agents and lenders or otherwise, and whether provided under the original credit agreements or other credit agreements or otherwise). "SENIOR DEBT" means (i) all Indebtedness of the Borrower or any of its Restricted Subsidiaries outstanding under Credit Facilities and all Hedging Obligations with respect thereto, (ii) any other Indebtedness permitted to be incurred by the Borrower or any of its Restricted Subsidiaries under the terms of the Agreement, in each case, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Bridge Loans and (iii) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (i) any liability for federal, state, local or other taxes owed or owing by the Borrower, (ii) any Indebtedness of the Borrower to any of its Subsidiaries or other Affiliates, (iii) any trade payables or (iv) any Indebtedness that is incurred in violation of this Agreement. "SIGNIFICANT SUBSIDIARY" means any Subsidiary which is a "significant subsidiary" within the meaning of Rule 405 under the Securities Act, as such Regulation is in effect on the date hereof. "SIMILAR BUSINESS" means a business, a majority of whose revenues in the most recently ended calendar year were derived from (i) the sale of defense products, electronics, communications systems, aerospace products, avionics products and/or communications products, (ii) any services related thereto, (iii) any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, and (iv) any combination of any of the foregoing. "SINGLE EMPLOYER PLAN" means any Plan which is covered by Title IV of ERISA but is not a Multiemployer Plan. "SOLVENT" means, when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise," as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim," and (ii) "claim" means any (x) 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 (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "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 -18- 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. "SUBSIDIARY" means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "SUBSIDIARY GUARANTEE" means, as to any Guarantor, the Guarantee of the Bridge Loans given by such Guarantor, whether evidenced by its execution of this Agreement or a separate instrument. "TAXES" has the meaning specified in Section 2.8(a). "TRANSACTIONS" means, collectively, the Acquisition, the related financing transactions and each of the other transactions contemplated by the Transaction Documents. "TRANSACTION DOCUMENTS" means the Loan Documents and the Acquisition Documents. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended. "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement, contract, arrangement or understanding with the Borrower or any Restricted Subsidiary of the Borrower unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Borrower or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Borrower; (iii) is a Person with respect to which neither the Borrower nor any of its Restricted Subsidiaries has any direct or indirect obligation (A) to subscribe for additional Equity Interests or (B) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (iv) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Borrower or any of its Restricted Subsidiaries; and (v) has at least one director on its board of directors that is not a director or executive officer of the Borrower or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Borrower or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Administrative Agent by filing with the Administrative Agent a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.5. 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 Agreement and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Borrower as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.7, the Borrower shall be in default of such covenant). The Board of Directors of the Borrower may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Borrower of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such -19- Indebtedness is permitted under Section 4.7, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "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" means, when used with respect to any Subsidiary or Restricted Subsidiary of a Person, a Subsidiary (or Restricted Subsidiary, as appropriate) of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries (or Wholly Owned Restricted Subsidiaries, as appropriate) of such Person and one or more Wholly Owned Subsidiaries (or Wholly Owned Restricted Subsidiaries, as appropriate) of such Person. Section 1.2 INTERPRETATION. In this Agreement, the singular includes the plural and the plural includes the singular; words implying any gender include the other genders; references to any section, exhibit or schedule are to sections, exhibits or schedules hereto unless otherwise indicated; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; references to "writing" include printing, typing, lithography and other means of reproducing words in a visible form; "including" following a word or phrase shall not be construed to limit the generality of such word or phrase; and an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP. ARTICLE 2 THE BRIDGE FACILITY Section 2.1 BRIDGE LOANS COMMITMENTS; PROCEDURE FOR BORROWING. (a) In reliance upon the representations and warranties of the Borrower herein and subject to the terms and conditions hereof, each of the Lenders severally (but not jointly) agrees to make a Bridge Loan to the Borrower on the Funding Date in an amount not to exceed the amount of such Lender's Commitment. The Commitments shall automatically terminate upon the earliest of (i) the funding of the Bridge Loans on the Funding Date in accordance with this Section 2.1, (ii) the termination of the Asset Purchase Agreement in accordance with its terms, (iii) the consummation of the Acquisition without the funding of the Bridge Loans and (iv) 5:00 p.m., New York City time, on April 15, 2002. (b) The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 noon, New York City time, three Eurodollar Business Days prior to the anticipated Funding Date) requesting that the Lenders make the Bridge Loans on the Funding Date and specifying the amount to be borrowed. Upon receipt of such notice the Administrative Agent shall promptly notify each Lender thereof. Not later than 12:00 Noon, New York City time, on the Funding Date each Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the Bridge Loan to be made by such Lender. The Administrative Agent shall make available to the Borrower the aggregate of the amounts -20- made available to the Administrative Agent by the Lenders in like funds as received by the Administrative Agent. (c) The Commitment of each Lender shall be reduced to zero immediately after the making of a Bridge Loan by such Lender on the Funding Date. The unpaid principal amount of the Bridge Loans, together with all accrued and unpaid interest thereon, shall become due and payable on the Maturity Date. For Bridge Loans outstanding after the Maturity Date, interest will be payable on demand at the rate provided in Section 2.3(c). (d) The Borrower agrees to pay the original Lenders named on the signature pages to this Agreement (in proportion to the aggregate amount funded by such Lender on the Funding Date), for their own accounts, a funding fee based upon the principal amount of Bridge Loans outstanding on the dates set forth below, payable as follows: Basis Points Due Date ------ -------- 25 90 days after the Funding Date 25 180 days after the Funding Date 25 270 days after the Funding Date Section 2.2 MANDATORY EXCHANGE OF BRIDGE LOANS FOR EXCHANGE NOTES. (a) If the Bridge Loans are not repaid in full on or prior to the one-year anniversary of the Funding Date, then on such anniversary date, following payment by the Company of all interest and fees accrued on or in respect of the Bridge Loans to such date (including the fees contemplated by Section 2.1), each Bridge Loan will be automatically converted into an Exchange Note having a principal amount equal to the principal amount of that Bridge Loan (the "EXCHANGE DATE"). From and after the Exchange Date, all outstanding Notes will be converted into the right to receive a like principal amount of Exchange Notes. Each Lender will deliver its Notes to the Administrative Agent on the Exchange Date (or as soon thereafter as practicable), and the Administrative Agent will deliver all such Notes to the Escrow Agent on the Exchange Date (or as soon thereafter as practicable). The Exchange Notes will be governed by and construed in accordance with the provisions of the Exchange Note Indenture. The Exchange Notes will be dated the Exchange Date and will be guaranteed by all of the Guarantors. (b) The Exchange Notes will be authenticated and released from escrow on the terms and pursuant to the procedures provided in the Escrow Agreement. (c) Each Exchange Note issued pursuant to this Section 2.2 shall bear interest from and after the Exchange Date at a fixed rate equal to the yield-to-maturity (as calculated by the Administrative Agent) on the Borrower's highest yielding Existing Senior Subordinated Indebtedness as of 5:00 p.m. (New York City time) on the Business Day immediately preceding the Exchange Date, plus 100 basis points. -21- Section 2.3 INTEREST AND DEFAULT INTEREST. (a) INTEREST RATE APPLICABLE TO BRIDGE LOANS. Subject to Section 2.3(c), the unpaid principal balance of each Bridge Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Interest Rate then in effect. (b) BASIS OF COMPUTATION OF INTEREST; PAYMENT OF INTEREST. All interest (including default interest, if any) shall be calculated on the basis of the actual number of days elapsed and a 360-day year and shall be payable in arrears by the Borrower not later than 12:00 noon (New York City time) on each Interest Payment Date by wire transfer of immediately available funds in accordance with Section 2.7. (c) DEFAULT INTEREST. (i) If the Borrower shall default in the payment of the principal of or interest on any Bridge Loan by acceleration or otherwise, until such amount (plus all accrued and unpaid interest) is paid in full, the Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount to but excluding the date of actual payment (after as well as before judgment) to the extent lawful, at a rate per annum equal to 200 basis points in excess of the then current Interest Rate on the Loans. The Borrower shall pay such default interest in cash on demand from time to time. Section 2.4 MANDATORY PREPAYMENT. (a) The Borrower shall prepay the Bridge Loans ratably in accordance with the aggregate outstanding principal balances thereof with the Net Cash Proceeds of: (i) any direct or indirect public offering or private placement of the Permanent Securities, or any other debt securities of the Borrower or any of its Subsidiaries or any Equity Interests of the Borrower or any direct or indirect parent holding company of the Borrower, including, without limitation, Holdings; (ii) the incurrence of any other Indebtedness by the Borrower or any Subsidiary of the Borrower or any direct or indirect parent holding company of the Borrower, including, without limitation, Holdings (other than under the Senior Credit Facilities as in effect on the date hereof and Permitted Indebtedness); and (iii) any future issuance or sale of stock of Subsidiaries or any Asset Sale by the Borrower or any Subsidiary of the Borrower after the Funding Date (each of the transactions in the foregoing clauses (i), (ii) and (iii), a "PREPAYMENT TRANSACTION"). Notwithstanding the foregoing sentence, the Borrower shall not be required to prepay the Bridge Loans with the Net Cash Proceeds received by the Borrower or any Subsidiary from an Asset Sale (a) if the Borrower is required to apply such Net Cash Proceeds to prepay loans and permanently reduce commitments pursuant to the Senior Credit Facilities (and does so apply such Net Cash Proceeds) or (b) in the case of any sale of assets of PerkinElmer, Inc. for Net Cash Proceeds aggregating up to $75.0 million since the date of this Agreement; provided that such Net Cash Proceeds are re-invested in the Borrower and its Subsidiaries in accordance with the provisions of the Senior Credit Facilities as in effect on the date of this Agreement. Subject to the preceding sentence, the Borrower shall, not later than the third Business Day following the receipt of Net Cash Proceeds with respect to any Prepayment Transaction, apply such Net Cash Proceeds to prepay the Bridge Loans pursuant to this Section 2.4, without premium or penalty, by paying to each Lender an amount equal to 100% of such Lender's pro rata share of the aggregate principal amount of the Bridge Loans to be prepaid, plus all accrued fees and all accrued and unpaid interest thereon to the date of prepayment. (b) Holdings hereby agrees to be bound by the foregoing provision and agrees to contribute the net proceeds of any issuance of its Equity Interests to the Borrower as common equity capital promptly upon the receipt of such net proceeds. -22- Section 2.5 OPTIONAL PREPAYMENT. The Borrower may, upon three Business Days' prior written notice to the Administrative Agent, prepay the Bridge Loans at any time, in whole or in part, on a pro rata basis, by paying to each applicable Lender an amount equal to 100% of such Lender's pro rata share of the aggregate principal amount of Bridge Loans to be prepaid, plus accrued and unpaid interest thereon to the prepayment date. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender thereof. Once such notice is sent or mailed, the Bridge Loans to be prepaid shall become due and payable on the prepayment date set forth in such notice. Such notice may not be conditional. Section 2.6 BREAKAGE COSTS; INDEMNITY. The Borrower agrees to indemnify and hold each Lender harmless from and against any loss or expense which such Lender sustains or incurs as a consequence of: (a) the failure by the Borrower to borrow Bridge Loans on the Funding Date after the Borrower has given a notice with respect thereof in accordance with Section 2.1; (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of Section 2.4 or 2.5, as applicable; or (c) the mandatory or optional prepayment of Bridge Loans on a day that is not the last day of an Interest Period (but excluding loss of margin). Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, for the period from the date of such prepayment or of such failure to borrow to the last day of such Interest Period (or, in the case of a failure to borrow, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (but excluding loss of margin) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Each Lender claiming any payment pursuant to this Section 2.6 shall do so by giving notice thereof to the Borrower and the Administrative Agent (showing calculation of the amount claimed in reasonable detail) within 60 Business Days after a failure to borrow, or to prepay, after notice or after a prepayment of Bridge Loans on a day which is not the last day of an Interest Period therefor. This covenant shall survive the termination of this Agreement and the payment of all of the Bridge Loans and all other amounts payable hereunder. Section 2.7 PAYMENTS. (a) WIRE TRANSFER. The principal of, fees, premium, if any, and interest on each Bridge Loan and all other Obligations arising under the Loan Documents shall be payable by wire transfer in immediately available funds (in United States dollars) to the Administrative Agent for the respective accounts of the Lenders set forth below their signatures on the signature pages of this Agreement or otherwise designated in the Register from time to time to the Borrower by the Administrative Agent at least three Business Days prior to the due date therefor. (b) PAYMENTS ON BUSINESS DAYS. If any payment to be made hereunder or under any Bridge Loan shall be due on a day other than a Eurodollar Business Day, such payment shall be made on the next succeeding Eurodollar Business Day (and such extension of time shall be included in computing interest in connection with such payment); provided, however, that if such succeeding Eurodollar Business Day falls in the next calendar month or quarter, as applicable, such payment shall be made on the next preceding Eurodollar Business Day. -23- (c) NO DEFENSE. To the fullest extent permitted by law, the Borrower and the Guarantors shall make all payments hereunder and under the Notes regardless of any defense (other than the defense of payment) or counterclaim. (d) ALLOCATION. Any money paid to, received by, or collected by the Administrative Agent or any Lender pursuant to this Agreement or any other Loan Document, shall be applied in the following order, at the date or dates fixed by the Administrative Agent: FIRST: to any unpaid fees and reimbursement or unpaid expenses of the Administrative Agent hereunder and under the Fee Letter; SECOND: to the payment of all costs, expenses, other fees, commissions and taxes owing to any Lender hereunder; THIRD: to the indefeasible payment of all accrued interest to the date of such payment or collection; and FOURTH: to the indefeasible payment of the amounts then due and unpaid under this Agreement, the Notes or any other Loan Document for principal, in respect of which or for the benefit of which such money has been paid or collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal. Section 2.8 TAXES. (a) TAXES. Any and all payments by the Borrower and each Guarantor hereunder or under the Bridge Loans or any other Loan Document shall be made, in accordance with Section 2.7 or the other applicable provision of the applicable Loan Document, free and clear of and without deduction or withholding for or on account of any and all present or future taxes, levies, imposts, deductions, charges or withholdings now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income, franchise or similar taxes imposed or levied on the Administrative Agent or the Lenders as a result of a present or former connection between the Administrative Agent or the Lenders and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lenders having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings being hereinafter referred to as "TAXES"). If the Borrower or any Guarantor shall be required by law to deduct or withhold any Taxes from, or in respect of, any sum payable hereunder or under the Notes or any other Loan Document to the Administrative Agent or the Lenders: (i) the sum payable thereunder shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section 2.8) the Administrative Agent or the Lenders receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) the Borrower or such Guarantor, as the case may be, shall make such deductions or withholdings; and (iii) the Borrower or such Guarantor, as the case may be, shall pay the full amount deducted to the relevant tax authority or other authority in accordance with applicable laws; provided that the Borrower and the Guarantors shall not be required to increase such payments, or pay such amounts to any Non-U.S. Lender with respect to deductions or withholding that are imposed on amounts payable to such Non-U.S. Lender at the time such Lender becomes a party to this Agreement (except, in the case of a Non-U.S. Lender becoming a party to this Agreement as a result of an assignment, to the extent such Non-U.S. Lender's assignor is entitled to a greater payment or additional amount from the Borrower pursuant to this Section 2.8 at the time of the -24- assignment) or that are attributable to such Non-U.S. Lender's failure to comply with Section 2.8(g). Whenever any Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Administrative Agent for its own account or for the account of a Lender, as the case may be, a certified copy of an original official receipt, if any, received by the Borrower showing payment thereof, or, if such receipt is not available, any other proof of payment reasonably satisfactory to the Administrative Agent. (b) OTHER TAXES. In addition, the Borrower and each of the Guarantors agrees to pay any present or future stamp, mortgage recording or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Note, other Loan Documents or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the other Loan Documents (hereinafter referred to as "OTHER TAXES") and hold the Administrative Agent and each Lender 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 Other Taxes. (c) INDEMNITY. The Borrower and the Guarantors will indemnify the Administrative Agent and any Lender for the full amount of Taxes or Other Taxes arising in connection with payments made under this Agreement or any other Loan Document (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.8) paid by the Administrative Agent or any Lender and any liability (including penalties, additions to tax interest and expenses) arising therefrom or with respect thereto. Payment under this indemnification shall be made within 30 days from the date the Administrative Agent or any Lender makes written demand therefor; provided, however, that the Borrower and the Guarantors shall not be obligated to make payment to the Lender or the Administrative Agent (as the case may be) pursuant to this Section 2.8(c) in respect of penalties, interest and other liabilities attributable to any Taxes or Other Taxes, if written demand therefor has not been made by such Lender or the Administrative Agent within 60 days from the date on which such Lender or the Administrative Agent received written notice of the imposition of Taxes or Other Taxes by the relevant taxing or Governmental Authority, but only to the extent such penalties, interest and other similar liabilities are attributable to such failure or delay by the Administrative Agent or the Lender in making such written demand; provided, further, that the Borrower and the Guarantors shall not be required to indemnity pursuant to this Section 2.8(c) any Non-U.S. Lender that fails to comply with Section 2.8(g). After the Lender or the Administrative Agent (as the case may be) receive written notice of the imposition of the Taxes or Other Taxes which are subject to this Section 2.8(c), such Lender and Administrative Agent will promptly notify the Borrower and the Guarantors of their obligations hereunder; provided, however, that the failure to so act shall not, standing alone, affect the rights of the Administrative Agent or the Lenders under this Section 2.8(c). (d) FURNISH EVIDENCE TO ADMINISTRATIVE AGENT. The Borrower will make reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any Taxes deducted or withheld from each taxing authority imposing such Taxes. The Borrower will furnish to the Administrative Agent, within 60 days after the date the payment of any Taxes so deducted or withheld are due pursuant to applicable law, original or certified copies of tax receipts evidencing such payment by the Borrower or, if such receipts are not obtainable, other evidence of such payments by the Borrower reasonably satisfactory to the Administrative Agent. (e) SURVIVAL. Without prejudice to the survival of any other agreement of the Borrower or any Guarantor hereunder, the agreements and obligations of the Borrower and the Guarantors contained in this Section 2.8 shall survive the payment in full of all amounts due hereunder and under the Notes. -25- (f) MITIGATION. If the Borrower or any Guarantor (as the case may be) is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.8 as a result of a change in any Requirement of Law or the interpretation or application thereof occurring after such Lender first became a party to this Agreement, then such Lender will, at the request of the Borrower or such Guarantor, change the jurisdiction in which its Bridge Loans are maintained if such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is, in such Lender's, reasonable discretion, determined not to be disadvantageous to such Lender. (g) NON-U.S. LENDERS. Each Lender (or transferee) that is not a corporation or partnership created or organized in or under the laws of the United States, any estate that is subject to U.S. U.S. federal income taxation regardless of the source of its income or any trust which is subject to the primary supervision of a court within the United States and one or more United States persons has the authority to control all substantial decisions of the trust as described in section 7701(a)(30) of the Code (a "NON-U.S. LENDER") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) on or before the date on which it becomes a party to this Agreement (or, in the case of a Participant, on or before the date on which such Participant purchases the related participation) either: (A) two duly completed and signed copies of either Internal Revenue Service Form W-8 BEN (relating to such Non-U.S. Lender and entitling it to a complete exemption from withholding of United States Taxes on all amounts to be received by such Non-U.S. Lender pursuant to this Agreement, the other Loan Documents under an applicable treaty) or Form W-8 ECI (relating to all amounts to be received by such Non-U.S. Lender pursuant to this Agreement, the other Loan Documents), or successor and related applicable forms, as the case may be; or (B) in the case of a Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that does not comply with the requirements of clause (A) hereof, (x) a statement in the form of Exhibit G (or such other form of statement as shall be reasonably requested by the Borrower or the Administrative Agent from time to time) to the effect that such Non-U.S. Lender is eligible for a complete exemption from withholding of U.S. Taxes under Code Section 871(h) or 881(c), and (y) two duly completed and signed copies of Internal Revenue Service Form W-8 BEN (relating to its status as a non-United States person) or successor and related applicable form (it being understood that no Participant and, without the prior written consent of the Borrower described in Section 6.1(a), no Assignee shall be entitled to deliver any forms or statements under this clause (B), but rather shall be required to deliver forms pursuant to clause (A) of this Section 2.8(g)). Further, each Non-U.S. Lender agrees (i) to deliver to the Borrower and the Administrative Agent, and if applicable, the assigning Lender (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two further duly completed and signed copies of such Forms W-8 BEN or W-8 ECI, as the case may be, or successor and related applicable forms, on or before the date that any such form expires or becomes obsolete and promptly after the occurrence of any event requiring a change from the most recent form(s) previously delivered by it to the Borrower or the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) in accordance with applicable United States laws and regulations and (ii) in the case of a Non-U.S. Lender that delivers a statement in the form of Exhibit G (or such other form of statement as shall have been requested by the Borrower), to deliver to the Borrower and the Administrative Agent, and, if applicable, the assigning Lender, such statement on an annual basis on the anniversary of the date on which such Non-U.S. Lender became a party to this Agreement and to deliver promptly to the Borrower and the Administrative Agent, and, if applicable, the assigning Lender, such additional statements and forms as shall be reasonably requested by the Borrower from time to time; unless, in any such case, any -26- change in law or regulation has occurred subsequent to the date such Lender became a party to this Agreement (or in the case of a Participant, the date on which such Participant purchased the related Participation) which renders all such forms inapplicable or which would prevent such Lender (or Participant) from properly completing and executing any such form with respect to it and such Lender promptly notifies the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which the related participation shall have been purchased) if it is no longer able to deliver, or if it is required to withdraw or cancel, any form or statement previously delivered by it pursuant to this Section 2.8(g). Each Non-U.S. Lender agrees to indemnify and hold harmless the Borrower as a result of the failure of the Borrower to comply with its obligations to deduct or withhold any Taxes from any payments made pursuant to this Agreement to such Non-U.S. Lender or the Administrative Agent, which failure resulted from the Borrower's reliance on any form, statement, certificate or other information provided to it by such Non-U.S. Lender pursuant to clause (B) or clause (ii) of this Section 2.8(g). A Non-U.S. Lender shall not be required to deliver any form or statement pursuant to the immediately preceding sentences in this Section 2.8(g) that such Non-U.S. Lender is not legally able to deliver (it being understood and agreed that the Borrower shall withhold or deduct such amounts from any payments made to such Non-U.S. Lender that the Borrower reasonably determines are required by law and that withholding or deduction resulting from a failure to comply with this paragraph (g) shall not be subject to payment or indemnity by the Borrower pursuant to this Section 2.8; provided, however, that if a Non-U.S. Lender's failure to so comply is caused by a change in law (or interpretation thereof) that becomes effective after the Funding Date, any withholding or deduction resulting therefrom shall be subject to payment and indemnity by the Borrower under this Section 2.8); provided, further, however, that if such change in law provides that such Non-U.S. Lender is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or the other Loan Documents, such Non-U.S. Lender shall deliver to the Borrower, at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. If the Guarantor makes any payment to any Non-U.S. Lender under any Loan Document, the foregoing provisions of this Section 2.8(g) shall apply to such Non-U.S. Lender and such Guarantor as if such Guarantor were the Borrower (but a Non-U.S. Lender shall not be required to provide any form or make any statement to any such Guarantor unless such Non-U.S. Lender has received a request to do so from such Guarantor and has a reasonable time to comply with such request). Nothing in this Section 2.8 shall oblige any Lender to disclose to the Borrower or any other person any information regarding its tax affairs or tax computations (except to the extent any such information may be contained in the forms described in clauses (A) and (B) of this Section 2.8(g)) or interfere with the right of any Lender to arrange its tax affairs in whatever manner it thinks fit and, in particular, no Lender shall be under any obligation to claim relief from its corporate profits or similar tax liability in credits or deductions available to it and, if it does claim, the extent, order and manner in which it does so shall be at its absolute discretion. (h) If a Lender shall become aware that it is entitled to receive a refund (whether by way of a direct payment or by offset) in respect of any Taxes paid by the Borrower, which refund, in the good faith judgment of such Lender, is allocable to such payment made pursuant to this Section 2.8 and can be applied for without prejudice to such Lender, it shall promptly notify the Borrower of the availability of such refund and shall, within 30 days after the receipt of a request from the Borrower, apply for such refund at the Borrower's sole expense. If any Lender receives such refund (as described in the previous sentence), it shall repay the amount of such refund (together with any interest received thereon) to the Borrower if all the payments due under this Section 2.8 have been paid in full. -27- Section 2.9 RIGHT OF SET OFF, SHARING OF PAYMENTS, ETC. (a) RIGHT OF SET-OFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default or if the Borrower becomes insolvent, however evidenced, the Borrower authorizes each Lender at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower 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, time or demand, provisional or final, whether or not collected or available) in any currency and any other indebtedness at any time held or owing by such Lender or any of its Affiliates (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations of the Borrower to such Lender or its Affiliates under this Agreement, the other Loan Documents including, without limitation, all interests in or participations in the Obligations purchased by such Lender, and all other claims of any nature or description arising out of or in connection with this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand therefor. A Lender may exercise such rights notwithstanding that the amounts concerned may be expressed in different currencies and each Lender is authorized to effect any necessary conversions at a market rate of exchange selected by it in good faith. A Lender exercising its rights under this Section 2.9(a) shall provide prompt notice to the Borrower and the Administrative Agent following such exercise. (b) SHARING. If any Lender shall obtain from the Borrower payment of any principal of or interest on any Bridge Loan owing to it or payment of any other amount under this Agreement, any Loan Document or any Notes held by it through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from the Administrative Agent as provided herein) and, as a result of such payment, such Lender shall have received a greater percentage of the principal of or interest on the Bridge Loans or such other amounts then due to such Lender by the Borrower than the percentage received by any other Lenders, it shall promptly purchase from such other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Bridge Loans or such other amounts, respectively, owing to such other Lenders (or any interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Bridge Loans or such other amounts, respectively, owing to each of the Lenders. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) NO REQUIREMENT. Nothing in this Agreement shall require any Lender to exercise any right described in this Section 2.9 or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 2.9 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 2.9 to share in the benefits of any recovery on such secured claim. -28- Section 2.10 CERTAIN FEES. The Borrower and each of the Guarantors hereby jointly and severally agree to pay to each of the Lenders, for their own accounts, the fees and expenses specified in the Fee Letter on the terms described therein with respect to the Bridge Loans, the Exchange Notes and the transactions contemplated by the Fee Letter and the Commitment Letter (including, without limitation, the rollover fee and the refinancing fee described therein). Section 2.11 EVIDENCE OF DEBT (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Bridge Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (b) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 6.3, and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Bridge Loan made hereunder and any Note evidencing such Bridge Loan and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (c) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.11(a) shall, to the extent permitted by applicable law, and in the absence of any manifest error, be conclusive evidence of the existence and amounts of the obligations of the Borrower therein recorded. In the event of a discrepancy between the Register and any Lender's books relating to such matters, the Register shall be controlling in the absence of manifest error. (d) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a Note of the Borrower evidencing any Bridge Loan, substantially in the form of Exhibit B, with appropriate insertions as to date and principal amount. Section 2.12 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Note, or change the basis of taxation of payments to such Lender in respect thereof (except for Taxes covered by Section 2.8 and changes in the rate of net income taxes, franchise taxes, branch profits taxes, minimum taxes or similar taxes of such Lender and any other taxes that are excluded from the definition of Taxes in Section 2.8); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Interest Rate hereunder; or (iii) shall impose on such Lender any other condition; -29- and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making or maintaining the Bridge Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender upon written demand such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable; provided that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, in its reasonable discretion, in any legal, economic or regulatory manner) to designate a different lending office if the making of such designation would allow the Lender or its lending office to continue to perform its obligations to make Bridge Loans or to maintain Bridge Loans and avoid the need for, or reduce the amount of, such increased cost. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such costs; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a prompt written request therefor, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each Lender shall notify the Borrower within 120 days after it becomes aware of the imposition of such additional amount or amounts; provided that if such Lender fails to so notify the Borrower within such 120-day period, such Lender shall not be entitled to claim any additional amount or amounts pursuant to this subsection for any period ending on a date which is prior to 120 days before such notification. (c) If any Lender becomes entitled to claim any additional amounts pursuant to this Section 2.12, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection, showing the calculation thereof in reasonable detail, submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this Section 2.12 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (d) If the Borrower or any Guarantor (as the case may be) is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.12 as a result of a change in any Requirement of Law or the application or interpretation thereof occurring after such Lender first became a party to this Agreement, then such Lender will, at the request of the Borrower or such Guarantor, change the jurisdiction in which its Bridge Loans are maintained if such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is, in such Lender's reasonable discretion, determined not to be disadvantageous to such Lender. -30- Section 2.13 Replacement of Lenders. If at any time (a) the Borrower becomes obligated to pay additional amounts pursuant to Section 2.8, 2.12 or 2.16 as a result of any condition described in those sections, (b) any Lender ceases to make Bridge Loans pursuant to Section 2.16, (c) any Lender becomes insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or other Person having similar powers or (d) any Lender becomes a Nonconsenting Lender (as defined below), then the Borrower may, on five Business Days' prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall) assign pursuant to Section 6.1 all of its rights and obligations under this Agreement to a Lender or other entity selected by the Borrower and acceptable to the Administrative Agent for a purchase price equal to the outstanding principal amount of such Lender's Loans and all accrued interest and fees and other amounts payable hereunder (including amounts payable under Section 2.6 as though such Loans were being paid instead of being purchased); provided that (i) the Borrower shall have no right to replace the Administrative Agent, (ii) neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender, (iii) in the event of a replacement of a Nonconsenting Lender or a Lender to which the Borrower becomes obligated to pay additional amounts under Section 2.8, 2.12 or 2.16, in order for the Borrower to be entitled to replace such a Lender, such replacement must take place no later than 180 days after (A) the date the Nonconsenting Lender shall have notified the Borrower and the Administrative Agent of its failure to agree to any requested consent, waiver or amendment or (B) the Lender shall have demanded payment of additional amounts under Section 2.8, 2.12 or 2.16, and (iv) in no event shall the Lender hereby replaced be required to pay or surrender to its replacement Lender or other entity any of the fees received by such Lender hereby replaced pursuant to this Agreement. In the case of a replacement of a Lender to which the Borrower becomes obligated to pay additional amounts under this Section 2.13, the Borrower shall pay such additional amounts to such Lender prior to such Lender being replaced and the payment of such additional amounts shall be a condition to the replacement of such Lender. In the event that (x) the Borrower or the Administrative Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Loan Documents, the Exchange Notes or the Exchange Note Indenture or to agree to any amendment thereto, (y) the consent, waiver or amendment in question requires the agreement of all Lenders in accordance with the terms of Section 12.3 and (z) the Majority Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a "NONCONSENTING LENDER." Section 2.14 CERTAIN RULES RELATING TO THE PAYMENT OF ADDITIONAL AMOUNTS. (a) Upon request, and at the expense, of the Borrower, each Lender to which the Borrower is required to pay any additional amount pursuant to Section 2.8 or 2.12 shall reasonably afford the Borrower the opportunity to contest, and reasonably cooperate with the Borrower in contesting, the imposition of any Taxes or other amounts giving rise to such payment; provided, that (i) such Lender shall not be required to afford the Borrower the opportunity to so contest unless the Borrower shall have confirmed in writing to such Lender its obligation to pay such amounts pursuant to this Agreement and (ii) the Borrower shall reimburse such Lender for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with the Borrower in contesting the imposition of such Taxes or other amounts. (b) Each Lender agrees that if it makes any demand for payment under subsection 2.8 or 2.12(a), or if any adoption or change of the type described in subsection 2.16 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its reasonable discretion) to designate a different lending office if the making of such a designation would allow the Lender to continue to make and maintain Bridge Loans and would reduce or obviate the need for the Borrower to make payments under subsection 2.8 or 2.12(a), or would eliminate or reduce the effect of any adoption or change described in subsection 2.16. -31- Section 2.15 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the eurodollar market, adequate and reasonable means do not exist for ascertaining the Interest Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Majority Lenders that the Interest Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Bridge Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given, any outstanding Bridge Loans shall bear interest at the Base Rate until such notice has been withdrawn in writing by the Administrative Agent (which the Administrative Agent agrees to do when the Administrative Agent has determined, or has been instructed by the Majority Lenders that, the circumstances that prompted the delivery of such notice no longer exist). Section 2.16 ILLEGALITY. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Bridge Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Bridge Loans and continue Bridge Loans as such shall forthwith be canceled and (b) such Lender's Bridge Loans then outstanding shall, on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law, bear interest at the Base Rate. If any such change in the rate of interest to the Base Rate occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.6. If circumstances subsequently change so that any affected Lender shall determine that it is no longer so affected, such Lender will promptly notify the Borrower and the Administrative Agent, and upon receipt of such notice, the obligations of such Lender to make or continue Bridge Loan Loans at the Interest Rate shall be reinstated. ARTICLE III REPRESENTATIONS AND WARRANTIES As of the date hereof and as of the Funding Date, the Borrower and each of the Guarantors and, as applicable, Holdings, hereby jointly and severally represent and warrant to the Lenders, the Arrangers and the Administrative Agent that each of the following representations and warranties is true and will be true after giving effect to the Transactions: Section 3.1 FINANCIAL CONDITION. The audited consolidated balance sheets at December 31, 2000 and the related statements of income and cash flows of Borrower and its Subsidiaries for the fiscal year then ended, certified by PricewaterhouseCoopers LLP, and the unaudited consolidated balance sheets at September 30, 2001 and the related statements of income and cash flows of Borrower and its Subsidiaries for the three quarters then ended, have been delivered to the Administrative Agent and the Lenders and have been prepared in accordance with GAAP consistently applied throughout the -32- periods covered (except as disclosed therein and except, with respect to unaudited financial statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. Section 3.2 NO CHANGE. There has not occurred any event, development or circumstance since September 30, 2001 that has caused or could reasonably be expected to cause a material adverse condition or material adverse change in or affecting: (i) the Acquisition, (ii) the business, assets, results of operations, management, prospects, property or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (iii) the business, assets, results of operations, prospects, property or condition (financial or otherwise) of the Acquired Business and its subsidiaries, taken as a whole, or (iv) the validity or enforceability of any of the Loan Documents, the Exchange Note Indenture or the Exchange Notes or the rights and remedies of the Administrative Agent and the Lenders thereunder. Section 3.3 Corporate Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Section 3.4 Corporate Power; Authorization; Enforceable Obligations. Each of the Borrower and its Subsidiaries has the corporate power and authority, and the legal right, to make, deliver and perform the Transaction Documents, the Exchange Note Indenture and the Exchange Notes to which it is a party and, in the case of the Borrower, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of such Transaction Documents, the Exchange Note Indenture and the Exchange Notes. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Transaction Documents, the Exchange Note Indenture or the Exchange Notes to which the Borrower and each other Credit Party is a party, except those set forth in Schedule 3.4. This Agreement has been, and each other Transaction Document will be, duly executed and delivered on behalf of the Borrower and each other Credit Party. This Agreement constitutes, and each other Transaction Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Credit Party thereto enforceable against each such Credit Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. Section 3.5 NO LEGAL BAR. Except as set forth on Schedule 3.5 or as could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of each Transaction Document, the borrowing and use of the proceeds of the Bridge Loans and the consummation of the transactions contemplated by the Transaction Documents, the Exchange Notes and the Exchange Note Indenture: (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon Holdings, the Borrower or any Subsidiary of the -33- Borrower or any of their respective properties or assets and (b) will not result in the creation or imposition of any Lien on any of its properties or assets pursuant to any Requirement of Law applicable to it or any of its Contractual Obligations. Section 3.6 NO MATERIAL LITIGATION. Except as set forth on Schedule 3.6, no litigation by, investigation by, or proceeding of or before any arbitrator or any Governmental Authority is pending or, to the knowledge of the Borrower, overtly threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues with respect to any Transaction Document or any of the transactions contemplated hereby or thereby or which could reasonably be expected to have a Material Adverse Effect. Section 3.7 NO DEFAULT. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. Section 3.8 OWNERSHIP OF PROPERTY; LIENS. Each of Holdings, the Borrower and its Subsidiaries (i) has good record and insurable title in fee simple to, or a valid leasehold interest in, all its material real property, (ii) has good title to, or a valid leasehold interest in, all its other material property and (iii) none of such property in clauses (i) and (ii) is or shall be subject to any Lien except as permitted by Section 4.10. Section 3.9 INTELLECTUAL PROPERTY. Holdings, the Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). To the best of the Borrower's knowledge, and except as set forth on Schedule 3.9, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim which could reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by Holdings, the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 3.10 TAXES. Except as set forth on Schedule 3.10, each of Holdings, the Borrower and its Subsidiaries has filed or caused to be filed all material tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Holdings, the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. Section 3.11 FEDERAL REGULATIONS. None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds of the Bridge Loans) will violate or result in a violation of Section 7 of the Exchange Act or any regulation issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board. Section 3.12 ERISA. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no Reportable Event has occurred with respect to any -34- Single Employer Plan, all contributions required to be made with respect to a Plan have been timely made; none of the Borrower or any of its Subsidiaries nor any Commonly Controlled Entity has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or expects to incur any liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan; no termination of, or institution of proceedings to terminate or appoint a trustee to administer, a Single Employer Plan has occurred; and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code (except that with respect to any Multiemployer Plan, such representation is deemed made only to the knowledge of the Borrower); no "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA), extension of any amortization period (within the meaning of Section 412 of the Code) or Lien in favor of the PBGC or a Plan has arisen or has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Single Employer Plan. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan for which there is any outstanding liability, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made in an amount which would be reasonably likely to have a Material Adverse Effect. To the best knowledge of the Borrower, no such Multiemployer Plan is in Reorganization or Insolvent. Section 3.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. None of the Borrower or 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. None of the Borrower or any of its Subsidiaries is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board, which is not applicable to the transactions contemplated by this Agreement) which limits its ability to incur Indebtedness. Section 3.14 FULL DISCLOSURE. No information, report, financial statement or certificate delivered or to be delivered to the Lenders in connection with the Transactions, with all such information, reports, financial statements and certificates taken as a whole, contains or will contain as of the date delivered any untrue statement of material fact or omitted or omits or will omit to state a material fact necessary to make such statements, taken as a whole, not misleading in the light of the circumstances under which such statements were made; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized assumptions believed to be reasonable at the time of preparation and due care in the preparation of such information, report, financial statement, exhibit or schedule. Section 3.15 PRIVATE OFFERING; RULE 144A MATTERS. (a) Based in part on the accuracy of the representations and warranties of, and compliance with the covenants and agreements by, the Lenders in Section 6.1, and by the Administrative Agent and the Lenders in writing to the Borrower, the making of the Bridge Loans hereunder and the issuance of the instruments evidencing such Bridge Loans and the issuance of the Exchange Notes in the manner contemplated by this Agreement and the Exchange Note Indenture, respectively, are and will be exempt from the registration and prospectus delivery requirements of the Securities Act. Neither the Borrower nor any Guarantor has issued or sold Bridge Loans, the instruments evidencing such Bridge Loans or the Exchange Notes to anyone other than the Lenders. No securities of the same class as the Bridge Loans, the instruments evidencing such Bridge Loans or the Exchange Notes have been issued or sold by the Borrower or any Guarantor within the six-month period immediately prior to the date hereof. -35- The Borrower and each Guarantor agrees that neither it, nor anyone acting on its behalf, will (i) offer the Bridge Loans, the instruments evidencing such Bridge Loans or the Exchange Notes so as to subject the making, issuance and/or sale of the Bridge Loans, the instruments evidencing such Bridge Loans or the Exchange Notes to the registration or prospectus delivery requirements of the Securities Act or (ii) offer any similar securities for issuance or sale to, or solicit any offer to acquire any of the same from, or otherwise approach or negotiate with respect to the same with, anyone if the issuance or sale of the Bridge Loans, the instruments evidencing such Bridge Loans, the Exchange Notes and any such securities would be integrated as a single offering for the purposes of the Securities Act, including without limitation, Regulation D thereunder, in such a manner as would require registration under the Securities Act thereof. Each Note, and (subject to the terms of the Exchange Note Indenture and the Escrow Agreement) each of the Exchange Notes shall have a legend setting forth the restrictions on the transferability thereof imposed by the Securities Act for so long as such restrictions apply. (b) In the case of each offer, sale or issuance of the Bridge Loans or the Exchange Notes, no form of general solicitation or general advertising was or will be used by the Borrower or any Guarantor or their representatives, 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. (c) The Exchange Notes will be eligible for resale pursuant to Rule 144A under the Securities Act. When the Exchange Notes are issued and delivered pursuant to the Transaction Documents and the Exchange Note Indenture, they will not be of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as any other security of the Borrower or any Guarantor that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated interdealer quotation system. Neither the issuance of the Exchange Notes nor the execution, delivery and performance of the Transaction Documents or the Exchange Note Indenture will require the qualification of an indenture under the Trust Indenture Act. Section 3.16 FINANCIAL CONDITION; SOLVENCY. The Borrower and its Subsidiaries, taken as a whole, are, and after giving effect to the consummation of the Transactions will be, Solvent. Section 3.17 SUBSIDIARIES. The Subsidiaries of the Borrower and their respective jurisdictions of incorporation shall be as set forth on Schedule 3.17, and all the Subsidiaries of the Borrower are Restricted Subsidiaries unless otherwise identified. Section 3.18 PURPOSE OF THE BRIDGE LOAN. The Borrower shall use the proceeds of the Bridge Loans to finance the Acquisition and the fees and expenses incurred in connection therewith. Section 3.19 ENVIRONMENTAL MATTERS. Except insofar as any exception to any of the following, or any aggregation of such exceptions, is not reasonably likely to result in a Material Adverse Effect: (a) The facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "PROPERTIES") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any applicable Environmental Law. (b) None of Holdings, the Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the -36- Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or, to the knowledge of the Borrower, will be named as a party or with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (e) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under any applicable Environmental Laws. (f) The Properties and all operations at the Properties are in compliance, and have in the last 3 years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Environmental Law with respect to the Properties or the business operated by Holdings, the Borrower or any of its Subsidiaries (the "BUSINESS") which could materially interfere with the continued operation of the Properties or materially impair the fair saleable value thereof. (g) Holdings, the Borrower and its Subsidiaries hold and are in compliance with all Environmental Permits necessary for their operations. Section 3.20 ACCURACY AND COMPLETENESS OF INFORMATION. No fact is known to Holdings, the Borrower or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been disclosed to the Lenders by Holdings, the Borrower or its Subsidiaries in writing prior to the date hereof. Neither Holdings, the Borrower nor any Subsidiary of the Borrower is aware of any material liability of the Borrower or any of its Subsidiaries which is not fully disclosed in the most recent financial statements delivered to the Agents and Lenders pursuant to Section 3.1 hereto. Section 3.21 LABOR MATTERS. There are no strikes pending or, to the Borrower's knowledge, overtly threatened against Holdings, the Borrower or any of its Subsidiaries which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and payments made to employees of Holdings, the Borrower and each of its Subsidiaries (and their predecessors) have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations could not, or in the aggregate, be reasonably expected to have a Material Adverse Effect. -37- ARTICLE IV COVENANTS Section 4.1 PAYMENT OF NOTES. The Borrower 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 this Agreement. Principal, premium, if any, and interest shall be considered paid on the date due if the Administrative Agent holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Borrower in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Borrower shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 2% 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 any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.2 REPORTS. Notwithstanding that the Borrower may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, the Borrower shall file with the SEC (and provide the Administrative Agent and Lenders with copies thereof), without cost to the Lenders, within 15 days after it files them with the SEC: (a) within 90 days after the end of each fiscal year, annual reports on Form 10-K (or any successor or comparable form) containing the information required to be contained therein (or required in such successor or comparable form); (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, reports on Form 10-Q (or any successor or comparable form); (c) promptly from time to time after the occurrence of an event required to be therein reported, such other reports on Form 8-K (or any successor or comparable form); and (d) any other information, documents and other reports which the Borrower would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act; provided, however, the Borrower shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Borrower will make available such information to the Administrative Agent and Lenders within 15 days after the time the Borrower would be required to file such information with the SEC, if it were subject to Sections 13 or 15(d) of the Exchange Act. In addition to the foregoing, the Borrower shall provide to the Administrative Agent, with copies for the Lenders, any financial or other report or notice delivered by the Borrower to, or received from, any holder of Senior Debt, including, without limitation, any lender under the Senior Credit Facilities, each such report or notice to be provided to the Administrative Agent, with copies for the Lenders, promptly upon delivery to or receipt from any holder of Senior Debt of such notice or report. Delivery of such reports, information and documents to the Administrative Agent and Lenders is for informational purposes only and the receipt of such by the Administrative Agent and Lenders shall not constitute constructive notice of any information contained therein or determinable from -38- information contained therein, including the Borrower's compliance with any of its covenants hereunder (as to which the Administrative Agent and Lenders are entitled to rely exclusively on Officers' Certificates). Section 4.3 COMPLIANCE CERTIFICATE. (a) The Borrower shall deliver to the Administrative Agent, with copies for each Lender, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Borrower 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 Borrower has kept, observed, performed and fulfilled its obligations under this Agreement and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Borrower has kept, observed, performed and fulfilled each and every covenant contained in this Agreement and is not in default in the performance or observance of any of the terms, provisions and conditions of this Agreement (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 Borrower 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 Bridge Loans is prohibited or if such event has occurred, a description of the event and what action the Borrower 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 4.3(a) above shall be accompanied by a written statement of the Borrower'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 Borrower has violated any provisions of Article IV 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 failure to obtain knowledge of any such violation. (c) The Borrower shall, so long as any of the Bridge Loans are outstanding, deliver to the Administrative Agent and the Lenders, as soon as possible and in any event within five Business Days after any Officer becomes aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Borrower is taking or proposes to take with respect thereto. Section 4.4 TAXES. The Borrower 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 Lenders. Section 4.5 RESTRICTED PAYMENTS. The Borrower 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 Borrower's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Borrower) or to the direct or indirect holders of the Borrower's or any of its Restricted Subsidiaries' Equity Interests in their capacity -39- as such (other than (A) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Borrower or (B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly Owned Restricted Subsidiary, the Borrower or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Borrower) any Equity Interests of the Borrower or any direct or indirect parent of the Borrower; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Bridge Loans 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 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 Borrower would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.7; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Borrower and its Restricted Subsidiaries since April 30, 1997 (excluding Restricted Payments permitted by clauses (ii) through (vii) of the next succeeding paragraph or of the kind contemplated by such clauses that were made prior to the date of this Agreement), is less than the sum of (i) 50% of the Consolidated Net Income of the Borrower for the period (taken as one accounting period) from July 1, 1997 to the end of the Borrower'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 Borrower since April 30, 1997 from a contribution to its common equity capital or the issue or sale of Equity Interests of the Borrower (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Borrower that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Borrower and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after April 30, 1997 is sold for cash or otherwise liquidated or repaid for cash, the amount of cash received in connection therewith (or from the sale of Marketable Securities received in connection therewith), plus (iv) to the extent not already included in such Consolidated Net Income of the Borrower for such period and without duplication, (A) 100% of the aggregate amount of cash received as a dividend from an Unrestricted Subsidiary, (B) 100% of the cash received upon the sale of Marketable Securities received as a dividend from an Unrestricted Subsidiary, and (C) 100% of the net assets of any Unrestricted Subsidiary on the date that it becomes a Restricted 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 Agreement; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Borrower in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Borrower) of, other Equity Interests of the Borrower (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, -40- 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 Indebtedness (other than intercompany Indebtedness) in exchange for, or with the net cash proceeds from an incurrence of, Permitted Refinancing Indebtedness; (iv) the repurchase, retirement or other acquisition or retirement for value of common Equity Interests of the Borrower or Holdings held by any future, present or former employee, director or consultant of the Borrower or any Subsidiary or Holdings issued pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate amount of Restricted Payments made under this clause (iv) does not exceed $1.5 million in any calendar year and provided, further, that cancellation of Indebtedness owing to the Borrower from members of management of the Borrower or any of its Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Borrower shall not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of this Agreement; (v) repurchases of Equity Interests deemed to occur upon exercise of stock options upon surrender of Equity Interests to pay the exercise price of such options; (vi) payments to Holdings (A) in amounts equal to the amounts required for Holdings to pay franchise taxes and other fees required to maintain its legal existence and provide for other operating costs of up to $500,000 per fiscal year and (B) in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing; provided that the aggregate amount paid under this clause (B) does not exceed the amount that the Borrower would be required to pay in respect of the income of the Borrower and its Subsidiaries if the Borrower were a stand alone entity that was not owned by Holdings; and (vii) other Restricted Payments in an aggregate amount since May 22, 1998 not to exceed $20.0 million. The Board of Directors of the Borrower may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Borrower and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted Payments at the time of such designation and shall reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments shall be deemed to constitute Investments in an amount equal to the fair market value of such Investments at the time of such designation. Such designation shall only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. 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 Borrower or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Administrative Agent. Not later than the date of making any Restricted Payment, the Borrower shall deliver to the Administrative Agent an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.5 were computed. Section 4.6 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Borrower 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 to (i)(A) pay dividends or make any other distributions to the Borrower 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 (B) pay any indebtedness owed to the Borrower or any of its Restricted Subsidiaries, (ii) make loans or advances to the Borrower or any of its Restricted Subsidiaries, or (iii) transfer any of its properties or assets to the Borrower or any of -41- its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (A) the provisions of security agreements that restrict the transfer of assets that are subject to a Lien created by such security agreements, (B) the provisions of agreements governing Indebtedness incurred pursuant to clause (v) of the second paragraph of Section 4.7, (C) the Senior Credit Facilities, this Agreement, the Notes, the 1997 Indenture, the 1997 Notes, the May 1998 Indenture, the May 1998 Notes, the December 1998 Indenture and the December 1998 Notes, in each case as the same are in effect on the date of this Agreement, (D) applicable law, (E) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Borrower 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 Agreement to be incurred, (F) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (G) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in this clause (iii) on the property so acquired, (H) 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, (I) contracts for the sale of assets, including, without limitation, customary restrictions with respect to a 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 Subsidiary, (J) agreements relating to secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.7 and 4.10 that limit the right of the debtor to dispose of the assets securing such Indebtedness, (K) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, or (L) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business. Section 4.7 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Borrower shall not, and shall not permit any of its 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 Borrower shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Borrower and any Restricted Subsidiary may incur Indebtedness (including Acquired Debt) or issue shares of preferred stock if the Fixed Charge Coverage Ratio for the Borrower'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 preferred 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 preferred 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 Section 4.7 shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "PERMITTED INDEBTEDNESS"): (i) the incurrence by the Borrower of additional Indebtedness under Credit Facilities (and the guarantee thereof by the Guarantors) in an aggregate principal amount outstanding pursuant to this clause (i) at any one time (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Borrower and its Restricted Subsidiaries thereunder), including all Permitted Refinancing Indebtedness then outstanding incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (i), not to -42- exceed $375.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied since December 11, 1998 to repay any such Indebtedness pursuant to Section 4.8; (ii) the incurrence by the Borrower and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Borrower and the Guarantors of $500.0 million in aggregate principal amount of the Bridge Loans and the Guarantees thereof; (iv) the incurrence by the Borrower 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 Borrower or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness then outstanding incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (iv), not to exceed $30.0 million at any time outstanding; (v) the incurrence by the Borrower or any of its Restricted Subsidiaries of Indebtedness in connection with the acquisition of assets or a new Restricted Subsidiary; provided that such Indebtedness was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the Borrower or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by the Borrower or one of its Restricted Subsidiaries; and provided further that the principal amount (or accreted value, as applicable) of such Indebtedness, together with any other outstanding Indebtedness incurred pursuant to this clause (v), does not exceed $10.0 million; (vi) the incurrence by the Borrower or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace, Indebtedness that was permitted by this Agreement to be incurred (other than intercompany Indebtedness or Indebtedness incurred pursuant to clause (i) above); (vii) Indebtedness incurred by the Borrower or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement-type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (viii) Indebtedness arising from agreements of the Borrower or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that (A) such Indebtedness is not reflected on the balance sheet of the Borrower or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet shall not be deemed to be reflected on such balance sheet for purposes of this clause (A)) and (B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds, including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving -43- effect to any subsequent changes in value), actually received by the Borrower and its Restricted Subsidiaries in connection with such disposition; (ix) the incurrence by the Borrower or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Borrower and any of its Restricted Subsidiaries; provided, however, that (A) if the Borrower is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Bridge Loans and (B)(1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Borrower or one of its Restricted Subsidiaries and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Borrower or one of its Restricted Subsidiaries shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Borrower or such Restricted Subsidiary, as the case may be; (x) the incurrence by the Borrower or any of the Guarantors of Hedging Obligations that are incurred for the purpose of (A) fixing, hedging or capping interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Agreement to be outstanding or (B) protecting the Borrower and its Restricted Subsidiaries against changes in currency exchange rates; (xi) the guarantee by the Borrower or any of the Guarantors of Indebtedness of the Borrower or a Restricted Subsidiary of the Borrower that was permitted to be incurred by another provision of this Section 4.7; (xii) the incurrence by the Borrower's Unrestricted Subsidiaries of Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Borrower that was not permitted by this clause (xii), and the issuance of preferred stock by Unrestricted Subsidiaries; (xiii) obligations in respect of performance and surety bonds and completion guarantees provided by the Borrower or any Restricted Subsidiaries in the ordinary course of business; and (xiv) the incurrence by the Borrower or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness then outstanding incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xiv), not to exceed $50.0 million. For purposes of determining compliance with this Section 4.7, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xiv) above or is entitled to be incurred pursuant to the first paragraph of this Section 4.7, the Borrower shall, in its sole discretion, classify, or later reclassify, such item of Indebtedness in any manner that complies with this covenant. Accrual of interest, the accretion of accreted 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 4.7. -44- Section 4.8 ASSET SALES. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Borrower (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by an Officers' Certificate delivered to the Administrative Agent which will include a resolution of the Board of Directors with respect to such fair market value in the event such Asset Sale involves aggregate consideration in excess of $5.0 million) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 80% of the consideration therefor received by the Borrower or such Restricted Subsidiary, as the case may be, consists of cash, Cash Equivalents and/or Marketable Securities; provided, however, that (A) the amount of any Senior Debt of the Borrower or such Restricted Subsidiary that is assumed by the transferee in any such transaction and (B) any consideration received by the Borrower or such Restricted Subsidiary, as the case may be, that consists of (1) all or substantially all of the assets of one or more Similar Businesses, (2) other long-term assets that are used or useful in one or more Similar Businesses and (3) Permitted Securities shall be deemed to be cash for purposes of this provision. The Net Cash Proceeds from any Asset Sale shall be applied in accordance with Section 2.4. Subject to Section 2.4, within 365 days after the receipt of any Net Proceeds from any Asset Sale, the Borrower may apply such Net Proceeds, at its option, (i) to repay Indebtedness under a Credit Facility, or (ii) to acquire Permitted Securities, all or substantially all of the assets of one or more Similar Businesses, or the making of a capital expenditure or the acquisition of other long-term assets in a Similar Business. Pending the final application of any such Net Proceeds, the Borrower may temporarily reduce Indebtedness under a Credit Facility or otherwise invest such Net Proceeds in any manner that is not prohibited by this Agreement. 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 Borrower shall make an offer to all holders of 1997 Notes (an "ASSET SALE OFFER") to purchase the maximum principal amount of 1997 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 to the date of purchase, in accordance with the procedures set forth in the 1997 Indenture. To the extent that the aggregate amount of 1997 Notes tendered pursuant to an Asset Sale Offer is less than the remaining Excess Proceeds ("REMAINING EXCESS PROCEEDS") and the sum of (A) such amount of Remaining Excess Proceeds and (B) the Remaining Excess Proceeds from any subsequent Asset Sale Offers exceeds $3.0 million, the Borrower will be required to make an offer to repay the Bridge Loans and any other Indebtedness that ranks pari passu with the Bridge Loans (including, without limitation, the May 1998 Notes and the December 1998 Notes) that, by its terms, requires the Borrower to offer to repay or repurchase such Indebtedness with such Remaining Excess Proceeds (a "SECONDARY ASSET SALE OFFER") to repay the maximum principal amount of Bridge Loans and purchase the maximum principal amount of pari passu Indebtedness that may be repaid or purchased out of such Remaining 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 repayment or purchase, in accordance with the procedures set forth in this Agreement. To the extent that the aggregate amount of Bridge Loans and pari passu Indebtedness tendered pursuant to a Secondary Asset Sale Offer is less than the Remaining Excess Proceeds, the Borrower may use any Remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Bridge Loans or pari passu Indebtedness surrendered by holders thereof exceeds the amount of Remaining Excess Proceeds in a Secondary Asset Sale Offer, the Borrower shall repay or repurchase such Indebtedness on a pro rata basis and the Administrative Agent shall select the Bridge Loans and Notes to be repaid on a pro rata basis. Upon completion of such offer to repay or purchase, the amount of Excess Proceeds shall be reset at zero. -45- Section 4.9 TRANSACTIONS WITH AFFILIATES. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Borrower or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Borrower or such Restricted Subsidiary with an unrelated Person and (ii) the Borrower delivers to the Administrative Agent (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the 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 the Board of Directors and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, an opinion as to the fairness to the Lenders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The foregoing provisions shall not prohibit: (i) any employment agreement entered into by the Borrower or any of its Restricted Subsidiaries in the ordinary course of business; (ii) any transaction with Lehman Brothers Holdings, Inc. or any of its Affiliates; (iii) any transaction between or among the Borrower and/or its Restricted Subsidiaries; (iv) transactions between the Borrower or any of its Restricted Subsidiaries, on the one hand, and Lockheed Martin Corporation or any of its Subsidiaries or a Permitted Joint Venture, on the other hand, on terms that are not materially less favorable to the Borrower or the applicable Restricted Subsidiary of the Borrower than those that could have been obtained from an unaffiliated third party; provided that (A) in the case of any such transaction or series of related transactions pursuant to this clause (iv) involving aggregate consideration in excess of $5.0 million but less than $25.0 million, such transaction or series of transactions (or the agreement pursuant to which the transactions were executed) was approved by the Borrower's Chief Executive Officer or Chief Financial Officer and (B) in the case of any such transaction or series of related transactions pursuant to this clause (iv) involving aggregate consideration equal to or in excess of $25.0 million, such transaction or series of related transactions (or the agreement pursuant to which the transactions were executed) was approved by a majority of the disinterested members of the Board of Directors; (v) any transaction pursuant to and in accordance with the provisions of the Transaction Documents as the same are in effect on the date of this Agreement; and (vi) any Restricted Payment that is permitted by the provisions of Section 4.5. Section 4.10 LIENS. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. Section 4.11 FUTURE SUBSIDIARY GUARANTEES. If the Borrower or any of its Subsidiaries shall acquire or create a Subsidiary (other than a Foreign Subsidiary or an Unrestricted Subsidiary) after the date of this Agreement, then such Subsidiary shall promptly and, in any event, within 30 days become a Guarantor and execute a supplemental agreement in form and substance satisfactory to the Administrative Agent, and deliver an opinion of counsel to the Administrative Agent as to the validity of such Subsidiary Guarantee. The Subsidiary -46- Guarantee of each Guarantor will be subordinated to the prior payment in full of all Senior Debt of such Guarantor, which would include the guarantees of amounts borrowed under the Senior Credit Facilities. The obligations of each Guarantor under its Subsidiary Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. Section 4.12 CORPORATE EXISTENCE. Subject to Section 4.17 hereof, the Borrower 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 Borrower or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Borrower and its Restricted Subsidiaries; provided, however, that the Borrower 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 Borrower and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Lenders. Section 4.13 CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each Lender shall have the right to require the Borrower to prepay all or any part of the principal amount of such Lender's Bridge Loans pursuant to that described below at a prepayment price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, to the date of prepayment (the "CHANGE OF CONTROL PAYMENT"). Within ten days following any Change of Control, the Borrower shall mail a notice to each Lender describing the transaction or transactions that constitute the Change of Control and offering to repay the Bridge Loans 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 set forth below. Prior to the prepayment of any Bridge Loans following a Change of Control, but in any event within 90 days following a Change of Control, the Borrower shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing such Indebtedness to permit the prepayment of such Bridge Loans pursuant to this Section 4.13. (b) Notice of a Change of Control shall be mailed by the Borrower to the Lenders at their addresses set forth in the Register. The Change of Control offer shall remain open from the time of mailing until five Business Days prior to the Change of Control Payment Date. The notice shall contain all instructions and materials necessary to enable such Lenders to elect to be prepaid pursuant to the Change of Control offer. (c) On the Change of Control Payment Date, the Borrower shall (i) repay in accordance with Section 2.7 all Bridge Loans or portions thereof of each Lender that properly elected repayment thereof pursuant to the Change of Control offer, (ii) pay the Change of Control Payment for each such Bridge Loan (or portion thereof) elected to be repaid and (iii) deliver to each such Lender a new Note equal in principal amount (excluding premiums, if any) to the unpurchased portion of the corresponding Notes surrendered, if any. The Borrower will notify the remaining Lenders of the results of the Change of Control offer on or as soon as practicable after the Change of Control Payment Date. -47- Section 4.14 NO SENIOR SUBORDINATED DEBT. The Borrower shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Credit Facilities or any other Senior Debt and senior in any respect in right of payment to the Bridge Loans. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Credit Facilities or any other Senior Debt of a Guarantor and senior in any respect in right of payment to any of the Subsidiary Guarantees. Section 4.15 PAYMENTS FOR CONSENT. Neither the Borrower nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Lender for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement or the Notes unless such consideration is offered to be paid or is paid to all Lenders 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 4.16 NO REDEMPTION OF EXISTING SENIOR SUBORDINATED INDEBTEDNESS. Notwithstanding anything contained in this Agreement to the contrary, neither the Borrower nor any of its Subsidiaries will voluntarily purchase, redeem, defease or otherwise retire for value any of its existing senior subordinated Indebtedness (including, without limitation, the 1997 Notes, the December 1998 Notes, the May 1998 Notes, the 5.25% Convertible Senior Subordinated Notes due 2009 issued by Holdings and the 4.00% Senior Subordinated Convertible Contingent Debt Securities due 2011 issued by Holdings), prior to such Indebtedness' stated maturity, until the Bridge Loans and all related Obligations have been paid in full in cash; provided that Holdings, the Borrower and the Borrower's Subsidiaries may purchase, redeem, defease or otherwise retire for value any of the outstanding 5.25% Convertible Senior Subordinated Notes due 2009 issued by Holdings or the 4.00% Senior Subordinated Convertible Contingent Debt Securities due 2011 issued by Holdings with Equity Interests (other than Disqualified Stock) of Holdings or the Borrower. In the event that the Borrower or Holdings is required to purchase, redeem, defease or otherwise retire for value any of its existing senior subordinated Indebtedness (including, without limitation, the 1997 Notes, the December 1998 Notes, the May 1998 Notes, the 5.25% Convertible Senior Subordinated Notes due 2009 issued by Holdings and the 4.00% Senior Subordinated Convertible Contingent Debt Securities due 2011 issued by Holdings), it will repay in full, in cash, all Obligations with respect to the Bridge Loans at least two Business Days prior to such purchase, redemption, defeasance or retirement. Section 4.17 MERGER, CONSOLIDATION, OR SALE OF ASSETS. (a) The Borrower may not consolidate or merge with or into (whether or not the Borrower 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 Borrower is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Borrower) 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, 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 Borrower) 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 Borrower under the Notes and this Agreement pursuant to an amendment to this Agreement in a form reasonably satisfactory to the -48- Administrative Agent; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Borrower with or into a Wholly Owned Restricted Subsidiary of the Borrower, the Borrower or the entity or Person formed by or surviving any such consolidation or merger (if other than the Borrower), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made, after giving pro forma effect to such transaction as if such transaction had occurred at the beginning of the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding such transaction either (A) would 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 4.7 or (B) would have a pro forma Fixed Charge Coverage Ratio that is greater than the actual Fixed Charge Coverage Ratio for the same four-quarter period without giving pro forma effect to such transaction. (b) Notwithstanding clause (iv) in the immediately foregoing paragraph, (i) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Borrower and (ii) the Borrower may merge with an Affiliate that has no significant assets or liabilities and was incorporated solely for the purpose of reincorporating the Borrower in another State of the United States so long as the amount of Indebtedness of the Borrower and its Restricted Subsidiaries is not increased thereby. (c) 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 Borrower in accordance with Section 4.17 hereof, the successor corporation formed by such consolidation or into or with which the Borrower 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 Agreement referring to the "Borrower" shall refer instead to the successor corporation and not to the Borrower), and may exercise every right and power of the Borrower under this Agreement with the same effect as if such successor Person had been named as the Borrower herein; provided, however, that the predecessor Borrower shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Borrower's assets that meets the requirements of Section 4.17 hereof. ARTICLE V CONDITIONS Section 5.1 CONDITIONS PRECEDENT. The obligations of the Lenders to make the Bridge Loans shall be subject to the satisfaction (or waiver in accordance with Section 12.3) of each of the following conditions: (a) The representations and warranties of the Company, Holdings and each of the Guarantors in Article III shall be true, accurate and correct as of the date given and as of the Funding Date. (b) Holdings, the Company and each of the Guarantors shall have complied in all material respects with all of their agreements contained in any of the Loan Documents that were required to be complied with on or prior to the Funding Date. (c) The Company shall have furnished to the Administrative Agent a certificate, dated the Funding Date and delivered on behalf of the Company, of its Chairman of the Board, its President or a Vice President and its chief financial officer, in form and substance satisfactory to the Administrative Agent, to the effect of 5.1(a) and 5.1(b). -49- (d) Each Credit Party shall have executed and delivered counterparts to each of the Loan Documents and the Exchange Note Indenture, and the Borrower and the Guarantors shall have executed the Exchange Notes and the related authentication order, delivered such authentication order to the trustee under the Exchange Note Indenture and placed the Exchange Notes into escrow pursuant to the Escrow Agreement. (e) There shall not exist (pro forma for the Acquisition and the financing thereof) any Default or Event of Default hereunder, under the Senior Credit Facilities or any other material Indebtedness or agreement of the Borrower or the Acquired Business. (f) Funds needed to finance the Acquisition will be provided as follows: (i) approximately $215.0 million of cash on hand; (ii) approximately $415.0 million of borrowings by the Borrower under the existing Credit Facilities; and (iii) $500.0 million in Bridge Loans provided hereunder. On the Funding Date, neither the Borrower nor any of its Subsidiaries will have any Indebtedness or Equity Interests outstanding except that which are outstanding as of the date on which the Commitment Letter was executed and Indebtedness incurred to finance the Acquisition as described above. (g) The Acquisition shall have been consummated for an aggregate purchase price not exceeding $1.13 billion (not including fees and expenses not exceeding $30 million in the aggregate) and subject to the post-closing adjustments provided in the Asset Purchase Agreement pursuant to the Asset Purchase Agreement and the exhibits thereto and no material provision thereof shall have been waived, amended, supplemented or otherwise modified. (h) There shall not have occurred any event, development or circumstance since September 30, 2001 that has caused or could reasonably be expected to cause a material adverse condition or material adverse change in or affecting (i) the Acquisition, (ii) the business, assets, results of operations, management, prospects, property or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (iii) the business, assets, results of operations, prospects, property or condition (financial or otherwise) of the Acquired Business and its subsidiaries, taken as a whole, or (iv) the validity or enforceability of any of the Loan Documents, the Exchange Note Indenture or the Exchange Notes or the rights and remedies of the Administrative Agent and the Lenders thereunder. (i) The Arrangers shall not have become aware after the date hereof of any information or other matter affecting the Borrower, the Acquired Business or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any such information or other matter disclosed to the Lenders prior to the date hereof. (j) There shall not have occurred any material disruption or adverse change, as determined by the Arrangers in their sole discretion, in the financial or capital markets generally, or in the markets for bank loan or bridge loan syndication, high yield debt or equity securities in particular, or affecting the syndication or funding of bank loans or bridge loans (or the refinancing thereof), that has had or could reasonably be expected to have a material adverse impact on the ability to sell or place the Permanent Securities. (k) All material governmental and third party approvals necessary in connection with the Acquisition and the financing contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the Acquisition or the financing thereof. -50- (l) The Arrangers shall have received satisfactory pro forma financial statements of the Borrower reflecting the completion of the Acquisition and all other completed or probable acquisitions, all in form and substance reasonably satisfactory to the Arrangers in their sole discretion. Such financial statements shall show pro forma Consolidated Cash Flow of the Borrower (calculated in good faith and including only those adjustments the Administrative Agent agrees are appropriate) for the twelve-month period ended December 31, 2001 of not less than $500.0 million. (m) The Lenders shall have received such legal opinions (including opinions (i) from counsel to the Borrower and its Subsidiaries and (ii) from such special and local counsel as may be reasonably required by the Administrative Agent) including without limitation those represented by Exhibits E-1 and E-2 hereto. (l) The Senior Credit Facilities shall have been amended so that they permit the transactions contemplated by the Loan Documents, the Exchange Notes and the Exchange Note Indenture, including without limitation, the payments required by Section 2.4. ARTICLE VI TRANSFER OF THE BRIDGE LOANS Section 6.1 TRANSFER OF THE BRIDGE LOANS. (a) ASSIGNMENT BY LENDERS. Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement without the consent of the Borrower, any Guarantor or any other Lender, but in compliance with all applicable laws; provided, however, that except in the case of an assignment to a Lender, an Affiliate or a Control Investment Affiliate thereof, no interest in any Bridge Loans may be pledged to any commercial bank or other institutional lender or sold, assigned or otherwise transferred to any third party except with the prior consent of the Administrative Agent (which consent shall not unreasonably be withheld). Except in the case of an assignment to a Lender, an Affiliate of a Lender, or an assignment of the entire remaining amount of the assigning Lender's Bridge Loans, the amount of the Bridge Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless the Borrower otherwise consents. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement. Each assignee that is a Non-U.S. Lender shall comply with the provisions of clause (A) of Section 2.8(g) or, with the prior written consent of the Borrower, which shall not be unreasonably withheld, the provisions of clause (B) of Section 2.8(g). The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance. Upon recording thereof pursuant to Section 6.3, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.6, 2.8 and 2.9). (b) PARTICIPATIONS. Any Lender may, without the consent of any Person, in accordance with applicable law, sell participations to one or more banks or other entities (a "PARTICIPANT") in all or a portion of such Lender's rights and obligations under this Agreement, but in such event (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the -51- Guarantors, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Transaction Documents, the Exchange Notes and the Exchange Note Indenture and to approve any amendment, modification or waiver of any provision of the Transaction Documents, the Exchange Note Indenture and the Exchange Notes, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Bridge Loans or any fees payable hereunder, or postpone the date of the final maturity of the Bridge Loans, in each case to the extent subject to such participation. The Borrower agrees that if amounts outstanding under this Agreement and the Bridge Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 2.9(b) as fully as if it were a Lender hereunder. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.6 and 2.8 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 6.1(a); provided that, in the case of Section 2.8(g), such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) The provisions of this Section concerning assignments of Bridge Loans and Notes relate only to absolute assignments; such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Bridge Loan or Note to any Federal Reserve Bank in accordance with applicable law. Section 6.2 REGISTRATION OF TRANSFER OR EXCHANGE. Against receipt of evidence of cancellation, discharge or surrender of any Notes by a Lender for registration of transfer or exchange, the Borrower will execute and deliver in exchange therefor a new Note or Notes of the same aggregate tenor and principal amount, registered in such names and in such denominations as such Lender may request. The Borrower will pay any stamp tax or governmental charge imposed in respect of any such transfer. Section 6.3 REGISTER. The Administrative Agent shall, on behalf of the Borrower, maintain a register of the names and addresses of each Lender and the principal amount of the Bridge Loans owing to it pursuant to the terms hereof from time to time (the "REGISTER"). Upon its receipt of an Assignment Acceptance executed by an assigning Lender and an assignee together with payment by the assigning Lender or the assignee to the Administrative Agent of a registration and processing fee of $3,500 (provided that no such payment shall be required with respect to assignments involving LCPI as assignor or assignee), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Borrower. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 6.3. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the applicable Lenders one or more new Notes. The entries in the Register shall conculsive, absent manifest error, and the Administrative Agent, the Arrangers, the Borrower, the Guarantors and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Any assignment or transfer of all or part of a Bridge Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the -52- Note evidencing such Bridge Loan, accompanied by a duly executed Assignment and Acceptance; thereupon one or more new Notes in the same aggregate principal amount shall be issued to the designated assignee, and the old Notes shall be returned by the Administrative Agent to the Borrower marked "canceled." The Register shall be available for inspection by the Borrower or any Lender (with respect to any entry to such Lender's Bridge Loans), at any reasonable time and from time to time upon reasonable prior notice. ARTICLE VII EVENTS OF DEFAULT Section 7.1 EVENTS OF DEFAULT. If any of the following events shall occur and be continuing: (a) the Borrower shall fail to pay any principal of any Bridge Loan when due in accordance with the terms hereof, whether or not prohibited by the terms of Article IX; or the Borrower shall fail to pay any interest on any Bridge Loan, or any other amount payable hereunder or under any other Loan Document, within 15 days after any such interest or other amount becomes due in accordance with the terms hereof, whether or not prohibited by the terms of Article IX; or (b) the Borrower shall fail to comply with any of the provisions of Section 4.8 or 4.13 hereof; or (c) the Borrower shall fail to observe or perform any other covenant or other agreement in this Agreement or the Notes for 60 days after notice to the Borrower by the Administrative Agent; or (d) 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 Borrower or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Borrower or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Agreement, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness, the maturity of which has been so accelerated, aggregates $10.0 million or more; or (e) the Borrower or any of its Restricted Subsidiaries is subject to a final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; or (f) the Borrower or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (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 -53- (v) generally is not paying its debts as they become due; or (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Borrower or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints a custodian of the Borrower or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Borrower or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Borrower or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (h) except as permitted herein, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid; or (i) any representation or warranty made or deemed made by the Borrower or any Guarantor herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by any of them at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (j) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Majority Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Majority Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan that is not in the ordinary course; or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect. Section 7.2 ACCELERATION If any Event of Default occurs and is continuing, with the consent of the Lenders holding at least 33% in aggregate principal amount of the then outstanding Notes the Administrative Agent may, or upon request of the Lenders holding at least 33% in aggregate principal amount of the then outstanding Notes the Administrative Agent shall, by notice to the Borrower, declare all the Bridge Loans to be due -54- and payable immediately; provided, however, that so long as any Designated Senior Debt is outstanding, such declaration shall not become effective until the earlier of (i) the day which is five Business Days after receipt by the Representatives of Designated Senior Debt of such notice of acceleration or (ii) the date of acceleration of any Designated Senior Debt. Notwithstanding the foregoing, in the case of an Event of Default specified in Section 7.1(f) or 7.1(g) with respect to the Borrower or any Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Bridge Loans (with accrued interest thereon) will become due and payable without further action or notice. Section 7.3 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Lenders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent assertion or employment of any other appropriate right or remedy. Section 7.4 DELAY OR OMISSION NOT WAIVER. No delay or omission by any Lender to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VII or by law to the Lenders may be exercised from time to time, and as often as may be deemed expedient, by the Lenders. Section 7.5 RIGHTS OF LENDERS TO RECEIVE PAYMENT. Notwithstanding anything to the contrary contained in this Agreement but subject to the provisions of Article IX, the right of any Lender to receive payment of principal of, premium, if any, and interest on the Bridge Loans and Notes held by such Lender, on or after the respective due dates expressed in this Agreement or the Notes, 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 Lender. Sectin 7.6 WAIVER OF PAST DEFAULTS.Subject to Section 12.3, the Majority Lenders, by written notice to the Borrower, may 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 or interest that has become due solely because of the acceleration) have been cured or waived. ARTICLE VIII PERMANENT SECURITIES Section 8.1 PERMANENT SECURITIES. Commencing upon the execution hereof, the Borrower will take all action reasonably required in the opinion of Lehman Brothers, after consultation with Banc of America Securities LLC, in connection with any underwritten offering(s) or private placement(s) (including, without limitation, the purchase and resale of securities pursuant to Rule 144A under the Securities Act) of any debt securities issued by the Borrower or any of its Subsidiaries during the term of the Engagement Letter (for purposes of this Agreement, the term "PERMANENT SECURITIES" shall include all such debt securities). In connection with the sale of Permanent Securities, (i) the Borrower will prepare and deliver to Lehman Brothers Inc., Banc of America Securities LLC and Credit Suisse First Boston Corporation preliminary offering documents, (ii) if requested by Lehman Brothers Inc. or Banc of America Securities LLC, the Borrower will make appropriate Officers of the Borrower available for meetings with rating agencies, and obtain a rating for the Permanent Securities from S&P and Moody's and (iii) the Borrower will cooperate with Lehman Brothers Inc., Banc of America Securities LLC and Credit Suisse First Boston Corporation in -55- preparing "road show" materials as reasonably requested by Lehman Brothers Inc., Banc of America Securities LLC and Credit Suisse First Boston Corporation in customary form for high yield transactions. The Borrower will also make its senior executives available for "road show" presentations in the United States at reasonable times to be mutually agreed as is customary for similar high yield offerings and otherwise cooperate as reasonably requested by Lehman Brothers Inc., Banc of America Securities LLC and Credit Suisse First Boston Corporation in marketing the Permanent Securities. All of the above described actions will be taken with a view to refinancing the Bridge Loans as soon as possible after the Funding Date.Additionally, the Borrower agrees to comply with all of its obligations under the Engagement Letter. ARTICLE IX SUBORDINATION Section 9.1 AGREEMENT TO SUBORDINATE. The Borrower and Lenders agree that the Bridge Loans and the Indebtedness evidenced by the Notes are subordinated in right of payment, to the extent and in the manner provided in this Article IX, to the prior payment in full in cash of the Senior Credit Facilities and all other 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 lenders under the Senior Credit Facilities and the holders of all other Senior Debt. Notwithstanding anything to the contrary contained herein, the Indebtedness evidenced by the Notes and the Subsidiary Guarantees shall rank pari passu with all of the Borrowers' outstanding senior subordinated Indebtedness, including, without limitation, the Outstanding Senior Subordinated Notes. Section 9.2 LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Borrower in a liquidation or dissolution of the Borrower or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Borrower or its property, an assignment for the benefit of creditors or any marshalling of the Borrower's assets and liabilities, the holders of Senior Debt shall be entitled to receive payment in full in cash 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 in any such proceeding) before any Lender will be entitled to receive any payment with respect to its Bridge Loan, and until all Obligations with respect to Senior Debt are paid in full in cash, any distribution to which any Lender would be entitled shall be made to the holders of Senior Debt. Section 9.3 DEFAULT ON DESIGNATED SENIOR DEBT. The Borrower may not make any payment or distribution to the Administrative Agent or any Lender in respect of Obligations with respect to the Bridge Loans and may not acquire from the Administrative Agent or any Lender any Bridge Loans for cash or property (other than securities that are subordinated to at least the same extent as the Bridge Loans to (a) Senior Debt and (b) any securities issued in exchange for Senior Debt) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing; 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 to accelerate its maturity and the Administrative Agent receives a notice of the default (a "PAYMENT BLOCKAGE NOTICE") from the Borrower or a Representative with respect to such Designated Senior Debt. If the Administrative Agent receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (i) at least 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage -56- Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Bridge Loans 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 Administrative Agent shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived or cured for a period of not less than 90 days. The Borrower may and shall resume payments on and distributions in respect of the Bridge Loans and may acquire them upon the earlier of: (1) the date upon which the default is cured or waived, or (2) in the case of a default referred to in Section 9.3(ii) hereof, 179 days pass after notice is received if the maturity of such Designated Senior Debt has not been accelerated, if this Article otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 9.4 ACCELERATION OF BRIDGE LOANS. If payment of the Bridge Loans is accelerated because of an Event of Default, the Borrower shall promptly notify holders of Senior Debt of the acceleration. Section 9.5 WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Administrative Agent or any Lender receives any payment of any Obligations with respect to the Bridge Loans at a time when the Administrative Agent or such Lender, as applicable, has actual knowledge that such payment is prohibited by Article IX hereof, such payment shall be held by the Administrative Agent or such Lender, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Administrative Agent undertakes to perform only such obligations on the part of the Administrative Agent as are specifically set forth in this Article IX, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Agreement against the Administrative Agent. The Administrative Agent shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Administrative Agent shall pay over or distribute to or on behalf of the Lenders or the Borrower or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article IX, except if such payment is made as a result of the willful misconduct or negligence of the Administrative Agent. Section 9.6 NOTICE BY BORROWER. The Borrower shall promptly notify the Administrative Agent of any facts known to the Borrower that would cause a payment of any Obligations with respect to the Bridge Loans to violate this Article IX, but failure to give such notice shall not affect the subordination of the Bridge Loans to the Senior Debt as provided in this Article IX. The Administrative Agent shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Debt (or a trustee or agent on behalf of such holder) to establish that such notice has been given by a holder of Senior Debt (or a trustee or agent on behalf of any such holder). In the event that the Administrative Agent determines in good faith that -57- further evidence is required with respect to the right of any person as holder of Senior Debt to participate in any payment or distribution pursuant to this Article IX, the Administrative Agent may request such person to furnish evidence to the reasonable satisfaction of the Administrative Agent as to the amount of Senior Debt held by such person and the extent to which such person is entitled to participate in such payment or distribution if such person does not furnish such evidence, the Administrative Agent may defer any payment which it may be required to make for the benefit of such person pursuant to the terms of this Agreement pending judicial determination as to the rights of such person to receive such payment. Section 9.7 SUBROGATION. After all Senior Debt is paid in full in cash and until the Bridge Loans are paid in full, the Lenders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Bridge Loans) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Lenders have been applied to the payment of Senior Debt. A distribution made under this Article IX to holders of Senior Debt that otherwise would have been made to the Lenders is not, as between the Borrower and the Lenders, a payment by the Borrower on the Bridge Loans. Section 9.8 RELATIVE RIGHTS. This Article IX defines the relative rights of the Lenders and holders of Senior Debt. Nothing in this Agreement shall: (1) impair, as between the Borrower and the Lenders, the obligation of the Borrower, which is absolute and unconditional, to pay principal of and interest on the Bridge Loans in accordance with their terms; (2) affect the relative rights of the Lenders and creditors of the Borrower other than their rights in relation to holders of Senior Debt; or (3) prevent the Administrative Agent or any Lender 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 the Lenders. If the Borrower fails because of this Article IX to pay principal of or interest on a Bridge Loan on the due date, the failure is still a Default or Event of Default. Section 9.9 SUBORDINATION MAY NOT BE IMPAIRED BY BORROWER. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Bridge Loans shall be impaired by any act or failure to act by the Borrower or any Lender or by the failure of the Borrower or any Lender to comply with this Agreement. Section 9.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Borrower referred to in this Article IX, the Administrative Agent and the Lenders 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 Administrative Agent or to the Lenders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Borrower, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article IX. -58- Section 9.11 RIGHTS OF ADMINISTRATIVE AGENT. Notwithstanding the provisions of this Article IX or any other provision of this Agreement, the Administrative Agent shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Administrative Agent, and the Administrative Agent may continue to make payments on the Bridge Loans, unless the Administrative Agent shall have received at the address set forth in Section 12.2 at least three Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Bridge Loans to violate this Article IX. Only the Borrower or a Representative may give the notice. The Administrative Agent in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not the Administrative Agent. Any agent may do the same with like rights. Section 9.12 AUTHORIZATION TO EFFECT SUBORDINATION. Each Lender, by the Lender's acceptance thereof, authorizes and directs the Administrative Agent on such Lender's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article IX, and appoints the Administrative Agent to act as such Lender's attorney-in-fact for any and all such purposes. ARTICLE X GUARANTEE Section 10.1 AGREEMENT TO GUARANTEE. Each of the Guarantors hereby agrees as follows: (a) The Guarantors, jointly and severally with all other Guarantors, if any, unconditionally guarantee to each Lender and to the Administrative Agent and each of their respective successors and assigns, regardless of the validity and enforceability of the Agreement, the Notes or the Obligations of the Borrower under the Agreement or the Notes, that: (i) the principal of, premium and interest on the Bridge Loans will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, and premium, if any, and interest on the Bridge Loans, to the extent lawful, and all other Obligations of the Borrower to the Lenders or the Administrative Agent thereunder or under the Agreement will be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Bridge Loans or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (b) Notwithstanding the foregoing, in the event that this Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Guarantors under this Agreement shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. Section 10.2 EXECUTION AND DELIVERY OF GUARANTEES. To evidence their Guarantees set forth in this Agreement, the Guarantors hereby agree that a notation of such Guarantee shall be endorsed by an Officer of each Guarantor on any Note authenticated and delivered by the Administrative -59- Agent on or after the date hereof. The form of such notation is included in the Form of Note attached as Exhibit B to this Agreement. (a) Notwithstanding the foregoing, the Guarantors hereby agree that their Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. (b) The Guarantors hereby waive diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Borrower, any right to require a proceeding first against the Borrower, protest, notice and all demands whatsoever, and each Guarantor covenants that its Guarantee made pursuant to this Agreement will not be discharged except by complete performance of the obligations contained in the Notes and the Agreement. (c) If any Lender or the Administrative Agent is required by any court or otherwise to return to the Borrower or the Guarantors, or any Custodian, Administrative Agent, liquidator or other similar official acting in relation to either the Borrower or the Guarantors, any amount paid by either to the Administrative Agent or such Lender, the Guarantee made pursuant to this Agreement, to the extent theretofore discharged, shall be reinstated in full force and effect. (d) The Guarantors hereby agree that their obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Agreement, the absence of any action to enforce the same, any waiver or consent by any Lender with respect to any provisions of the Notes or the Agreement, the recovery of any judgment against the Borrower, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (e) The Guarantors agree that they shall not be entitled to any right of subrogation in relation to the Lenders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. The Guarantors further agree that, as between the Guarantors, on the one hand, and the Lenders and the Administrative Agent, on the other hand: (i) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VII of this Agreement for the purposes of the Guarantee made pursuant to this Agreement, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; (ii) in the event of any declaration of acceleration of such Obligations as provided in Article VII of this Agreement, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of the Guarantee made pursuant to this Agreement; and (iii) the Guarantors shall have the right to seek contribution from any other non-paying Guarantor so long as the exercise of such right does not impair the rights of the Lenders or the Administrative Agent under the Guarantee made pursuant to this Agreement. Section 10.3 GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Nothing contained in this Agreement or in the Notes shall prevent (a) any consolidation or merger of any of the Guarantors with or into the Borrower or any other Guarantor, (b) any transfer, sale or conveyance of the property of any of the Guarantors as an entirety or substantially as an entirety to the Borrower or any other Guarantor or (c) any merger of a Guarantor with or into an -60- Affiliate of that Guarantor that has no significant assets or liabilities and was incorporated solely for the purpose of reincorporating such Guarantor in another State of the United States so long as the amount of Indebtedness of the Borrower and its Restricted Subsidiaries is not increased thereby. (b) No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person (except the Borrower or another Guarantor) unless: (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of such Guarantor pursuant to a supplemental agreement in form and substance reasonably satisfactory to the Administrative Agent under the Notes and this Agreement; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Borrower (A) would be permitted by virtue of the Borrower'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 Section 4.7 or (B) would have a pro forma Fixed Charge Coverage Ratio that is greater than the actual Fixed Charge Coverage Ratio for the same four-quarter period without giving pro forma effect to such transaction. Notwithstanding the foregoing paragraph, (i) any Guarantor may consolidate with, merge into or transfer all or part of its properties and assets to the Borrower and (ii) any Guarantor may merge with an Affiliate that has no significant assets or liabilities and was incorporated solely for the purpose of reincorporating such Guarantor in another State of the United States so long as the amount of Indebtedness of the Borrower and its Restricted Subsidiaries is not increased thereby. (c) 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 Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of Section 4.8. (d) In case of any such consolidation, merger, sale or conveyance and upon the assumption by a successor corporation, by a supplemental agreement, executed and delivered to the Administrative Agent and satisfactory in form to the Administrative Agent, of the Guarantee made pursuant to this Agreement and the due and punctual performance of all of the covenants and conditions of this Agreement to be performed by the Guarantors, such successor corporation shall succeed to and be substituted for the Guarantors with the same effect as if it had been named herein as one of the Guarantors. Such successor corporation thereupon may cause to be signed any or all of the Guarantees to be endorsed upon the Notes issuable under this Agreement which theretofore shall not have been signed by the Borrower and delivered to the Administrative Agent. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Agreement as the Guarantees theretofore and -61- thereafter issued in accordance with the terms of this Agreement as though all of such Guarantees had been issued at the date of the execution hereof. Section 10.4 RELEASES. (a) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of the Guarantors), all Liens, if any, in favor of the Administrative Agent in the assets sold thereby shall be released. If the assets sold in such sale or other disposition include all or substantially all of the assets of the Guarantors or all of the Capital Stock of the Guarantors, then the Guarantors (in the event of a sale or other disposition of all of the Capital Stock of any of the Guarantors) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of any of the Guarantors) shall be released from and relieved of its obligations under this Agreement and its Guarantee made pursuant hereto ; provided, that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with Sections 2.4 and 4.8. Upon delivery by the Borrower to the Administrative Agent of an Officers' Certificate to the effect that such sale or other disposition was made by the Borrower or the Guarantors, as the case may be, in accordance with the provisions of this Agreement, including without limitation, Sections 2.4 and 4.8, the Administrative Agent shall execute any documents reasonably required in order to evidence the release of the Guarantors from their obligations under this Agreement and their Guarantee made pursuant hereto. If the Guarantors are not released from their obligations under their Guarantees, they shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of the Guarantors under this Agreement. (b) Upon the designation of any of the Guarantors as an Unrestricted Subsidiary in accordance with the terms of this Agreement, such Guarantor shall be released and relieved of all of its obligations under this Agreement. Upon delivery by the Borrower to the Administrative Agent of an Officers' Certificate and an opinion of counsel to the effect that such designation of such Guarantor as an Unrestricted Subsidiary was made by the Borrower in accordance with the provisions of this Agreement, the Administrative Agent shall execute any documents reasonably required in order to evidence the release of such Guarantor from its obligations under its Guarantee. Any of the Guarantors not released from their obligations under the Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any of the Guarantors under this Agreement as provided in this Article X. -62- Section 10.5 NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guarantors, as such, shall have any liability for any obligations of the Borrower or any Guarantor, any Subsidiary Guarantee, this Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Lender by making a Bridge Loan waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 10.6 SUBORDINATION OF SUBSIDIARY GUARANTEES; ANTI-LAYERING. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to any of the Guarantees. Notwithstanding the foregoing sentence, the Guarantee of each Guarantor shall be subordinated to the prior payment in full of all Senior Debt of that Guarantor (in the same manner and to the same extent that the Notes are subordinated to Senior Debt), which shall include all guarantees of Senior Debt. ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement, the other Loan Documents, the Exchange Note Indenture and the Exchange Notes, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement, the other Loan Documents, the Exchange Note Indenture and the Exchange Notes and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, the other Loan Documents, the Exchange Note Indenture and the Exchange Notes, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Section 11.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement, the other Loan Documents, the Exchange Note Indenture and the Exchange Notes by or through agents or attorneys-in-fact and shall be entitled to the advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 11.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent, nor any of its officers, directors, employees, agents, advisors, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted solely from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement, opinion or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower or any of its Subsidiaries to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or -63- conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. Section 11.4 RELIANCE BY THE ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, facsimile, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of its Subsidiaries), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of the Notes as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement, the other Loan Documents, the Exchange Notes and the Exchange Note Indenture in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Bridge Loans. Section 11.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender, the Borrower or any of its Subsidiaries referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. Section 11.6 NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Administrative Agent nor the Arrangers, or any of their officers, directors, employees, agents, advisors, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent or Arrangers hereafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent or Arrangers to any Lender. Each Lender represents to the Administrative Agent and the Arrangers that it has, independently and without reliance upon the Administrative Agent, and the Arrangers or any other Lenders, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition, prospects and creditworthiness of the Borrower and its Subsidiaries and made its own decision to make its Bridge Loans hereunder and enter into this Agreement. Each Lender confirms that it is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent, the Arrangers or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, the other Loan Documents, the Exchange Notes and the Exchange Note Indenture, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition, prospects and creditworthiness of the Borrower and its Subsidiaries. Except for notices, reports and other -64- documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent and the Arrangers shall have no any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial or other condition, prospects or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent, the Arrangers or any of their respective officers, directors, employees, agents, advisors, attorneys-in-fact or Affiliates. Section 11.7 INDEMNIFICATION. The Lenders agree to indemnify the Arrangers and the Administrative Agent in their respective capacities as such (to the extent not reimbursed by the Borrower or any of its Subsidiaries and without limiting the obligation of the Borrower and any of its Subsidiaries to do so), ratably according to their respective Commitments in effect on the date on which indemnification is sought (or, if indemnification is sought after the date upon which the Commitments shall have terminated, ratably in accordance with the aggregate principal amount of Bridge Loans held by each Lender on such date, or, if indemnification is sought after the date upon which the Bridge Loans have been paid in full, ratably in accordance with the aggregate principal amount of Bridge Loans held by each Lender immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Bridge Loans) be imposed on, incurred by or asserted against the Arrangers or the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any other Loan Document or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted solely from the Administrative Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Bridge Loans and all other Obligations payable hereunder. Section 11.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not acting in such capacities hereunder and under the other Loan Documents, the Exchange Notes and the Exchange Note Indenture. With respect to the Bridge Loans made or renewed by it and the Notes issued to it, the Administrative Agent shall have the same rights and powers under this Agreement, the other Loan Documents the Exchange Notes and the Exchange Note Indenture as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. Section 11.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default shall have occurred and be continuing) be subject to approval by the Borrower, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, hereunder. Effective upon such appointment and approval, the term "Administrative Agent" shall mean and include such successor agent, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent any of the parties to this Agreement or any holders of the Bridge Loans. If no successor agent has accepted appointment to replace such resigning Agent by the date that is 30 days following such Agent's notice of resignation, such Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all -65- of the duties of such Agent hereunder until such time, if any, as the Majority Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent the provisions of this Article XI shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. Section 11.10 LIMITATION OF DUTIES. Except as expressly set forth herein, the Arrangers, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement, the other Loan Documents, the Exchange Notes or the Exchange Note Indenture. ARTICLE XII MISCELLANEOUS Section 12.1 EXPENSES; DOCUMENTARY TAXES. The Borrower and the Guarantors hereby jointly and severally agree (a) to pay or reimburse the Administrative Agent and the Arrangers for all their reasonable out-of-pocket costs and expenses incurred in connection with the syndication of the Facilities (other than fees payable to syndicate members, but including, without limitation, expenses incurred in connection with due diligence) and the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement, the other Loan Documents the Exchange Note, the Exchange Note Indenture and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of a single counsel to the Administrative Agent (in addition to any local counsel), (b) to pay or reimburse each Lender, the Administrative Agent and each of the Arrangers for all their costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents, the Exchange Notes, the Exchange Note Indenture and any such other documents, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to the Administrative Agent, and (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, other Loan Documents, the Exchange Notes and the Exchange Note Indenture and any such other documents; provided, that such amounts shall only be payable to the extent that they are not due and payable by the Borrower under any other provision herein. Section 12.2 NOTICES. All notices and other communications pertaining to this Agreement or any Notes shall be in writing and shall be delivered (a) in Person, (b) by facsimile, (c) by registered or certified mail, return receipt requested, postage prepaid, or (d) by overnight courier, addressed as follows: (i) If to the Administrative Agent, to it at: Lehman Commercial Paper Inc. 790 Seventh Avenue New York, New York 10019 Attention: Andrew Keith Facsimile No.: (212) 526-0242 -66- with a copy to: Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attention: Kirk A. Davenport II Facsimile No.: (212) 751-4864 (ii) If to any Lender, to it at its address set forth on the signature pages hereto; (iii) If to the Borrower or any Guarantor, to it at: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, New York 10016 Attention: Senior Vice President--Finance Facsimile No.: (212) 805-5440 with copies to: L-3 Communications Corporation 600 Third Avenue, 34th Floor New York, New York 10016 Attention: Senior Vice President, Secretary and General Counsel Facsimile No.: (212) 805-5494 Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attn: Marissa C. Wesely Facsimile No.: (212) 455-2502 or to such other Person or address as shall be furnished in writing delivered to the other parties in compliance with this Section. Section 12.3 CONSENT TO AMENDMENTS AND WAIVERS. (a) Except as provided in Section 12.3(b), this Agreement and the Notes may be amended, supplemented or modified with the consent of the Borrower, each Guarantor and the Majority Lenders and any existing Default or Event of Default and its consequences or compliance with any provision of this Agreement or the Notes may be waived with the consent of the Majority Lenders. (b) Notwithstanding the provisions of Section 12.3(a), without the consent of each Lender affected thereby, no amendment, change, modification or waiver may: (i) extend the maturity of or time of payment of principal or interest on any Bridge Loan or alter or waive any of the provisions with respect to the mandatory prepayment of any Bridge Loan, (ii) reduce the rate of interest, including default interest, or the principal amount of any Bridge Loan, (iii) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Bridge Loans (except a rescission of acceleration of the Notes by the Majority Lenders and a waiver of the payment default that resulted from such acceleration), (iv) make any Bridge Loan payable in money other than that stated in this Agreement, -67- (v) make any change in the provisions of this Agreement relating to waivers of past Defaults set forth in Section 7.5 and 7.6 or the rights of Lenders to receive payments of principal or interest on the Bridge Loans, (vi) change the subordination provisions in a manner that would adversely affect the Lenders, (vii) reduce the percentage of Lenders necessary to amend, modify, supplement or change the Loan Documents, including, without limitation, this Section 12.3, (viii) reduce or extend the date of payment of fees to be paid in connection with the Loan Documents, (ix) release any Guarantor from its Guarantee except as provided in this Agreement or (x) change the mandatory exchange provisions set forth in this Agreement. Notwithstanding the provisions of Section 12.3(a), the provisions of Article XII shall not be amended or supplemented without the consent of the Administrative Agent. (c) Any waiver or amendment, supplement or modification pursuant to this Section 12.3 shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent, the Arrangers and all future holders of the Bridge Loans. In the case of any waiver, the Borrower, the Lenders, the Administrative Agent and the Arrangers shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing. No such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. -68- Section 12.4 PARTIES. This Agreement shall inure to the benefit of and be binding upon the Borrower, each Guarantor, the Lenders, the Administrative Agent, the Arrangers and each of their respective successors and assigns. Except as expressly in this Agreement, nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other Person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. Section 12.5 New York Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY (EACH, A "NEW YORK COURT") FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTES, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, THE EXCHANGE NOTES, THE EXCHANGE NOTE INDENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE NOTES, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, THE EXCHANGE NOTES, THE EXCHANGE NOTE INDENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 12.6 REPLACEMENT NOTES. If any Note becomes mutilated and is surrendered by the applicable Lender to the Borrower, or if any Lender claims that any of its Notes has been lost, destroyed or wrongfully taken, the Borrower shall execute and deliver to such Lender a replacement Notes, upon the delivery by such Lender evidence to the Borrower's reasonable satisfaction of such Lender's ownership thereof and of an indemnity to the Borrower to save it and any agent of it harmless in respect of such loss, destruction or wrongful taking with respect to such Notes. Section 12.7 LIMITATION OF LIABILITY. No claim may be made by the Borrower, any Guarantor or any other Person against the Administrative Agent, the Arrangers or any Lender or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any theory of liability arising out of or related to the transactions contemplated by this Agreement, the other Loan Documents, the Exchange Notes or the Exchange Note Indenture or any act, omission or event occurring in connection therewith; and the Borrower and each Guarantor hereby waive, release and agree not to sue and shall cause each of its respective Subsidiaries to waive, release or agree not to sue (if required), upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 12.8 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken or condition exists. Section 12.9 CURRENCY INDEMNITY. The Borrower acknowledges and agrees that this is a credit transaction where specification of Dollars is of the essence and Dollars shall be the currency of -69- account and payment in all events. If, pursuant to a judgment or for any other reason, payment shall be made in another currency and such payment, after prompt conversion to Dollars and transfer to New York City in accordance with normal banking procedures, falls short of the sum due the Lenders in Dollars, the Borrower shall pay the Lender such shortfall and the Lenders shall have a separate cause of action for such amount. If the amount of Dollars so purchased exceeds the sum due the Lenders in Dollars, the Lenders shall remit promptly to the Borrower such excess. Section 12.10 SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants and agreements of the Borrower and each Guarantor in this Agreement shall bind their respective successors and assigns. Neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder without the prior written consent of all of the Lenders. Section 12.11 INTEGRATION CLAUSE. This Agreement, the Exchange Note Indenture, the Escrow Agreement and the other documents executed in connection therewith constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements among the parties relating to the subject matter hereof, except for those provisions in the Fee Letter and the Engagement Letter that are in addition to the provisions contained herein. Section 12.12 SEVERABILITY CLAUSE. In case any provision in this Agreement or any Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective in such jurisdiction only to the extent of such invalidity, illegality or unenforceability. Section 12.13 SURVIVAL OF CERTAIN PROVISIONS. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Bridge Loans hereunder. In addition, whether or not the transactions contemplated by this Agreement are consummated, (i) the Obligations of the Borrower and the Guarantors to reimburse the Lenders for all of their out-of-pocket expenses pursuant to Section 12.1 and the Engagement Letter and (ii) the indemnity provisions contained in Sections 2.6, 2.8 and 11.7 shall, in each case, remain operative and in full force and effect. [signature pages follow] -70- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. L-3 COMMUNICATIONS CORPORATION By: ------------------------------------ Name: Title: COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL, INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AIS GP CORPORATION L-3 COMMUNICATIONS ANALYTICS CORPORATION L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS INVESTMENTS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD, INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR, INC. as the Guarantors By: ------------------------------------------- Name: Christopher C. Cambria Title: Vice President and Secretary -71- L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P. By: L-3 Communications AIS GP Corporation, as general partner By: ------------------------------------- Name: Title: Authorized Person Accepted and agreed to with respect to Sections 2.4, 3.7, 3.8, 3.9, 3.10, 3.20 and 3.21 only: L-3 COMMUNICATIONS HOLDINGS, INC. By: -------------------------------- Name: Title: -72- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. LEHMAN COMMERCIAL PAPER INC., as Administrative Agent By: -------------------------- Name: Title: LEHMAN BROTHERS INC., as Joint Book-Running Manager and Joint Lead Arranger By: -------------------------- Name: Title: BANC OF AMERICA BRIDGE LLC as Joint Book-Running Manager and Joint Lead Arranger By: -------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON CORPORATION as an Arranger By: -------------------------- Name: Title: -73- LENDERS: Commitment Amount: $250,000,000.00 LEHMAN COMMERCIAL PAPER INC. By: ----------------------------------------- Name: Title: Wire Transfer Instructions Name of Bank: Bankers Trust Company Address: 4 Albany Street New York, New York 10006 ABA#: 021001033 For the account of NYLTD Loan Services Omnibus Account Account No.: 01-422-898 FOR FURTHER CREDIT TO LEHMAN COMMERCIAL PAPER INC. Reference: Attention: Telephone: 212- Fax: 212- -74- Commitment Amount: $125,000,000.00 BANC OF AMERICA BRIDGE LLC By: ------------------------------------ Name: Title: Wire Transfer Instructions Name of Bank: Address: ABA#: For the account of Account No.: FOR FURTHER CREDIT TO BANC OF AMERICA BRIDGE LLC Reference: Attention: Telephone: 212- Fax: 212- -75- Commitment Amount: $125,000,000.00 CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH By: ------------------------------- Name: Title: Wire Transfer Instructions Name of Bank: Address: ABA#: For the account of Account No.: FOR FURTHER CREDIT TO CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH Reference: Attention: Telephone: 212- Fax: 212- -76- EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Bridge Loan Agreement, dated as of March 8, 2002 (as amended, supplemented or otherwise modified from time to time, the "BRIDGE LOAN AGREEMENT"), by and among L-3 Communications Corporation, a Delaware corporation (the "BORROWER"), L-3 Communications Holdings, Inc., the Guarantors party thereto, the Lenders party thereto, Lehman Brothers Inc. and Banc of America Bridge LLC, as joint book-running managers and joint lead arrangers, Credit Suisse First Corporation, as an arranger, and Lehman Commercial Paper Inc., as Administrative Agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). Unless otherwise defined herein, terms defined in the Bridge Loan Agreement and used herein shall have the meanings given to them in the Bridge Loan Agreement. 1. The Assignor identified on Schedule I hereto (the "ASSIGNOR") and the Assignee identified on Schedule I hereto (the "ASSIGNEE") agree as follows:The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the percentage interest described in Schedule 1 hereto (the "ASSIGNED INTEREST") in and to the Assignor's rights and obligations under the Bridge Loan Agreement, in a principal amount as set forth on Schedule I hereto. 2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Bridge Loan Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Bridge Loan Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Bridge Loan Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any Notes held by it evidencing the Assigned Interest and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached Notes for a new Note or Notes payable to the Assignee and (ii) if the Assignor has retained any interest under the Bridge Loan Agreement, requests that the Administrative Agent exchange the attached Notes for a new Note or Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which are effective on the Effective Date). 3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Bridge Loan Agreement, and all schedules and exhibits thereto together with copies of the financial information delivered pursuant to Section 4.2 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Bridge Loan Agreement, the other Loan Documents, the Exchange Notes, the Exchange Note Indenture or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Bridge Loan Agreement, the other Loan Documents, the Exchange Notes, the Exchange Note Indenture or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; (e) agrees that it will be bound by the provisions of the Bridge Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of the Bridge Loan Agreement are required to be performed by it as a Lender; and (f) agrees that it shall have no recourse against the Assignor with respect to any matters relating to the Bridge Loan Agreement, the other Loan Documents, the Exchange Notes, the Exchange Note Indenture or any other instruments or documents furnished pursuant hereto or thereto. 4. The Assignor hereby assigns to Assignee all of its rights and obligations under the Fee Letter with respect to the Assigned Interest. 5. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule I hereto (the "EFFECTIVE DATE"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to Section 6.3 of the Bridge Loan Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). 6. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 7. From and after the Effective Date, (a) the Assignee shall be a party to the Bridge Loan Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder, under the other Loan Documents, the Exchange Notes and the Exchange Note Indenture and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Bridge Loan Agreement. 8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 2 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule I hereto. 3 Schedule I to Assignment and Acceptance Name of Assignor: ______________________________ Name of Assignee: ______________________________ Effective Date of Assignment: __________________ Principal Commitment or Bridge Loan Commitment or Bridge Loan Percentage Amount Assigned Assigned(1) ----------------------- ------------------------------------ $ ----------------- ----- . -----------% - ---------- 1 Calculate the Commitment Percentage that is assigned to at least 9 decimal places and show as a percentage of the aggregate commitments of all Lenders. [Name of Assignee] [Name of Assignor] By:_______________________________ By: ______________________________ Name: Name: Title: Title: Accepted: LEHMAN COMMERCIAL PAPER INC., as Administrative Agent By:_______________________________ Name: Title: EX-10.51 10 file009.txt INDENTURE EXECUTION COPY ================================================================================ L-3 COMMUNICATIONS CORPORATION, As Issuer SENIOR SUBORDINATED NOTES DUE 2009 --------------------------- INDENTURE Dated as of March 8, 2002 --------------------------- --------------------------- The Bank of New York, As Trustee --------------------------- ================================================================================
TABLE OF CONTENTS ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1 - ----------------------------------------------------- SECTION 1.01 DEFINITIONS.................................................................................1 ------------ ------------ SECTION 1.02 OTHER DEFINITIONS..........................................................................18 ------------ ------------------ SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT..........................................19 ------------ -------------------------------------------------- SECTION 1.04 RULES OF CONSTRUCTION......................................................................19 ------------ ---------------------- ARTICLE 2. THE NOTES.............................................................................................20 - -------------------- SECTION 2.01 FORM AND DATING............................................................................20 ------------ ---------------- SECTION 2.02 EXECUTION AND AUTHENTICATION...............................................................20 ------------ ----------------------------- SECTION 2.03 REGISTRAR AND PAYING AGENT.................................................................21 ------------ --------------------------- SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST........................................................21 ------------ ------------------------------------ SECTION 2.05 HOLDER LISTS...............................................................................22 ------------ ------------- SECTION 2.06 TRANSFER AND EXCHANGE......................................................................22 ------------ ---------------------- SECTION 2.07 REPLACEMENT NOTES..........................................................................34 ------------ ------------------ SECTION 2.08 OUTSTANDING NOTES..........................................................................34 ------------ ------------------ SECTION 2.09 TREASURY NOTES.............................................................................35 ------------ --------------- SECTION 2.10 TEMPORARY NOTES............................................................................35 ------------ ---------------- SECTION 2.11 CANCELLATION...............................................................................35 ------------ ------------- SECTION 2.12 DEFAULTED INTEREST.........................................................................35 ------------ ------------------- SECTION 2.13 CUSIP NUMBERS..............................................................................36 ------------ -------------- ARTICLE 3. REDEMPTION AND PREPAYMENT.............................................................................36 - ------------------------------------ SECTION 3.01 [RESERVED].................................................................................36 ------------ ----------- SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED..........................................................36 ------------ ---------------------------------- SECTION 3.03 NOTICE OF REDEMPTION.......................................................................37 ------------ --------------------- SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION.............................................................37 ------------ ------------------------------- SECTION 3.05 DEPOSIT OF REDEMPTION PRICE................................................................38 ------------ ---------------------------- SECTION 3.06 NOTES REDEEMED IN PART.....................................................................38 ------------ ----------------------- SECTION 3.07 [RESERVED].................................................................................38 ------------ ----------- SECTION 3.08 MANDATORY REDEMPTION.......................................................................38 ------------ --------------------- SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS........................................38 ------------ ---------------------------------------------------- ARTICLE 4. COVENANTS.............................................................................................40 - -------------------- SECTION 4.01 PAYMENT OF NOTES...........................................................................40 ------------ ----------------- SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY............................................................40 ------------ -------------------------------- SECTION 4.03 REPORTS....................................................................................41 ------------ -------- SECTION 4.04 COMPLIANCE CERTIFICATE.....................................................................42 ------------ ----------------------- SECTION 4.05 TAXES......................................................................................42 ------------ ------ SECTION 4.06 [INTENTIONALLY OMITTED]....................................................................43 ------------ ----------------------- SECTION 4.07 RESTRICTED PAYMENTS........................................................................43 ------------ -------------------- SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.............................45 ------------ --------------------------------------------------------------- SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.................................46 ------------ ----------------------------------------------------------- SECTION 4.10 ASSET SALES................................................................................49 ------------ ------------ SECTION 4.11 TRANSACTIONS WITH AFFILIATES...............................................................50 ------------ ----------------------------- SECTION 4.12 LIENS......................................................................................51 ------------ ------ i SECTION 4.13 FUTURE SUBSIDIARY GUARANTEES...............................................................51 ------------ ----------------------------- SECTION 4.14 CORPORATE EXISTENCE........................................................................52 ------------ -------------------- SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.................................................52 ------------ ------------------------------------------- SECTION 4.16 NO SENIOR SUBORDINATED DEBT................................................................53 ------------ ---------------------------- SECTION 4.17 PAYMENTS FOR CONSENT.......................................................................53 ------------ --------------------- SECTION 4.18 NO REDEMPTION OF EXISTING SENIOR SUBORDINATED INDEBTEDNESS.................................53 ------------ ----------------------------------------------------------- ARTICLE 5. SUCCESSORS............................................................................................54 - --------------------- SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS...................................................54 ------------ ----------------------------------------- SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED..........................................................55 ------------ ---------------------------------- ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................55 - -------------------------------- SECTION 6.01 EVENTS OF DEFAULT..........................................................................55 ------------ ------------------ SECTION 6.02 ACCELERATION...............................................................................57 ------------ ------------- SECTION 6.03 OTHER REMEDIES.............................................................................57 ------------ --------------- SECTION 6.04 WAIVER OF PAST DEFAULTS....................................................................57 ------------ ------------------------ SECTION 6.05 CONTROL BY MAJORITY........................................................................58 ------------ -------------------- SECTION 6.06 LIMITATION ON SUITS........................................................................58 ------------ -------------------- SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT..............................................58 ------------ ---------------------------------------------- SECTION 6.08 COLLECTION SUIT BY TRUSTEE.................................................................58 ------------ --------------------------- SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM...........................................................59 ------------ --------------------------------- SECTION 6.10 PRIORITIES.................................................................................59 ------------ ----------- SECTION 6.11 UNDERTAKING FOR COSTS......................................................................60 ------------ ---------------------- ARTICLE 7. TRUSTEE...............................................................................................60 - ------------------ SECTION 7.01 DUTIES OF TRUSTEE..........................................................................60 ------------ ------------------ SECTION 7.02 RIGHTS OF TRUSTEE..........................................................................61 ------------ ------------------ SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE...............................................................62 ------------ ----------------------------- SECTION 7.04 TRUSTEE'S DISCLAIMERS......................................................................62 ------------ ---------------------- SECTION 7.05 NOTICE OF DEFAULTS.........................................................................62 ------------ ------------------- SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.................................................62 ------------ ------------------------------------------- SECTION 7.07 COMPENSATION AND INDEMNITY.................................................................63 ------------ --------------------------- SECTION 7.08 REPLACEMENT OF TRUSTEE.....................................................................64 ------------ ----------------------- SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC...........................................................65 ------------ --------------------------------- SECTION 7.10 ELIGIBILITY; DISQUALIFICATION..............................................................65 ------------ ------------------------------ SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..........................................65 ------------ -------------------------------------------------- ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................65 - --------------------------------------------------- SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE...................................65 ------------ --------------------------------------------------------- SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.............................................................65 ------------ ------------------------------- SECTION 8.03 COVENANT DEFEASANCE........................................................................66 ------------ -------------------- SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.................................................66 ------------ ------------------------------------------- SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS ------------ ---------------------------------------------------------------------------------- PROVISIONS............................................................................67 ----------- SECTION 8.06 REPAYMENT TO COMPANY.......................................................................68 ------------ --------------------- SECTION 8.07 REINSTATEMENT..............................................................................68 ------------ -------------- ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................69 - ------------------------------------------- SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES........................................................69 ------------ ------------------------------------ ii SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES...........................................................69 ------------ --------------------------------- SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT........................................................71 ------------ ------------------------------------ SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS..........................................................71 ------------ ---------------------------------- SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES...........................................................71 ------------ --------------------------------- SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC............................................................71 ------------ -------------------------------- ARTICLE 10. SUBORDINATION........................................................................................72 - ------------------------- SECTION 10.01 AGREEMENT TO SUBORDINATE...................................................................72 ------------- ------------------------- SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.......................................................72 ------------- ------------------------------------- SECTION 10.03 DEFAULT ON DESIGNATED SENIOR DEBT..........................................................72 ------------- ---------------------------------- SECTION 10.04 ACCELERATION OF SECURITIES.................................................................73 ------------- --------------------------- SECTION 10.05 WHEN DISTRIBUTION MUST BE PAID OVER........................................................73 ------------- ------------------------------------ SECTION 10.06 NOTICE BY COMPANY..........................................................................73 ------------- ----------------- SECTION 10.07 SUBROGATION................................................................................74 ------------- ------------ SECTION 10.08 RELATIVE RIGHTS............................................................................74 ------------- ---------------- SECTION 10.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY...............................................75 ------------- --------------------------------------------- SECTION 10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE...................................................75 ------------- ----------------------------------------- SECTION 10.11 RIGHTS OF TRUSTEE AND PAYING AGENT.........................................................75 ------------- ----------------------------------- SECTION 10.12 AUTHORIZATION TO EFFECT SUBORDINATION......................................................75 ------------- -------------------------------------- SECTION 10.13 AMENDMENTS.................................................................................76 ------------- ----------- ARTICLE 11. MISCELLANEOUS........................................................................................76 - ------------------------- SECTION 11.01 TRUST INDENTURE ACT CONTROLS...............................................................76 ------------- ----------------------------- SECTION 11.02 NOTICES....................................................................................76 ------------- -------- SECTION 11.03 COMMUNICATIONS BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.............................77 ------------- --------------------------------------------------------------- SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.........................................77 ------------- --------------------------------------------------- SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..............................................77 ------------- ---------------------------------------------- SECTION 11.06 RULE BY TRUSTEE AND AGENTS.................................................................78 ------------- --------------------------- SECTION 11.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS...................78 ------------- ------------------------------------------------------------------------- SECTION 11.08 GOVERNING LAW..............................................................................78 ------------- -------------- SECTION 11.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS..............................................78 ------------- ---------------------------------------------- SECTION 11.10 SUCCESSORS.................................................................................78 ------------- ----------- SECTION 11.11 SEVERABILITY...............................................................................78 ------------- ------------- SECTION 11.12 COUNTERPART ORIGINALS......................................................................79 ------------- ---------------------- SECTION 11.13 TABLE OF CONTENTS, HEADINGS, ETC...........................................................79 ------------- --------------------------------- SECTION 11.14 HOLDERS OF NOTES PRIOR TO THEIR ISSUANCE...................................................79 ------------- -----------------------------------------
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 FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTORS EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE EXHIBIT F FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE iv CROSS-REFERENCE TABLE* Trust Indenture Indenture Act Section 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).................................................. 11.03 (c).................................................. 11.03 313 (a).................................................. 7.06 (b)(1)............................................... 10.03 (b)(2)............................................... 7.07 (c).................................................. 7.06;11.02 (d).................................................. 7.06 314 (a).................................................. 4.03;11.02 (b).................................................. 10.02 (c)(1)............................................... 11.04 (c)(2)............................................... 11.04 (c)(3)............................................... N.A. (d).................................................. 10.03, 10.04, 10.05 (e).................................................. 11.05 (f).................................................. N.A. 315 (a).................................................. 7.01 (b).................................................. 7.05, 11.02 (c).................................................. 7.01 (d).................................................. 7.01 (e).................................................. 6.11 316 (a)(last sentence)................................... 2.09 (a)(1)(A)............................................ 6.05 (a)(1)(B)............................................ 6.04 (a)(2)............................................... N.A. (b).................................................. 6.07 (c).................................................. 2.12 317 (a)(1)............................................... 6.08 - ---------- *This Cross-Reference Table is not part of the Indenture. v (a)(2)............................................... 6.09 (b).................................................. 2.04 318 (a).................................................. 11.01 (b).................................................. N.A. (c).................................................. 11.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. vi This INDENTURE dated as of March 8, 2002, among L-3 Communications Corporation, a Delaware corporation (the "Company"), Hygienetics Environmental Services, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, L-3 Communications DBS Microwave, Inc., a California corporation, SPD Electrical Systems Inc., a Delaware corporation, SPD Switchgear Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Henschel Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, MPRI, Inc., a Delaware corporation, Electrodynamics, Inc., an Arizona corporation, Interstate Electronics Corporation, a California corporation, Microdyne Corporation, a Maryland corporation, L-3 Communications Integrated Systems L.P., a Delaware limited partnership, L-3 Communications Analytics Corporation, a California corporation, L-3 Communications AIS GP Corporation, a Delaware corporation, L-3 Communications Investments Inc., a Deleware corporation, Coleman Research Corporation, a Florida corporation, KDI Precision Products, Inc., a Delaware corporation and EER Systems, Inc., a Virginia corporation (collectively, the "Guarantors"), and The Bank of New York, as trustee (the "Trustee"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Senior Subordinated Notes due 2009 (the "Series A Notes") and the Senior Subordinated Notes due 2009 (the "Exchange Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "144A Global Note" means the global note in the form of Exhibit A 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. "1997 Indenture" means the indenture, dated as of April 30, 1997, among The Bank of New York, as trustee, and the Company, with respect to the 1997 Notes. "1997 Notes" means the $225,000,000 in aggregate principal amount of the Company's 10 3/8% Senior Subordinated Notes due 2007, issued pursuant to the 1997 Indenture on April 30, 1997. "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 Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Additional Amounts" means all additional amounts then owing pursuant to Section 3 of the Registration Rights Agreement. "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 Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means (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 sales of inventory 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 the covenant contained in Section 4.15 and/or the covenant contained in Section 5.01 and not by the covenant contained in Section 4.10), and (ii) the issue or sale by the Company or any of its 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 $1.0 million or (B) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii) a Restricted Payment that is permitted by the covenant contained in Section 4.07 and (iv) a disposition of Cash Equivalents in the ordinary course of business shall not be deemed to be an Asset Sale. "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 Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. 2 "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Bridge Loan Agreement" means the Bridge Loan Agreement, dated as of March 8, 2002, among the Company as the borrower thereunder, L-3 Communications Holdings, Inc., the guarantors party thereto, Lehman Brothers Inc., Banc of America Bridge LLC, Credit Suisse First Boston Corporation and Lehman Commercial Paper Inc., including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, restated, supplemented, modified, renewed, refunded, replaced or refinanced from time to time. "Bridge Loans" means up to $500.0 million in aggregate principal amount of Indebtedness under the Bridge Loan Agreement. "Bridge Notes" means the promissory notes of the Company issued under the Bridge Loans. "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 or membership interests (whether general or limited) 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. "Cash Equivalents" means (i) United States dollars, (ii) 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, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic financial institution to the Senior Credit Facilities or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's or S&P and in each case maturing within six months after the date of acquisition, (vi) investment funds investing 95% of their assets in securities of the types described in clauses (i)-(v) above, and (vii) readily marketable direct obligations issued by any State of the United States of America or any political subdivision thereof having maturities of not more than one year from the date of acquisition and having one of the two highest rating categories obtainable from either Moody's or S&P. 3 "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties (as defined below), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares) or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Clearstream" means Clearstream Banking, societe anonyme (formerly Cedelbank). "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) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (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, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill, debt issuance costs and other intangibles but excluding amortization of other prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (v) non-cash items (excluding any items that were accrued in the ordinary course of business) increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. "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 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 thereof that is a Guarantor, (ii) the Net 4 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, (iv) the cumulative effect of a change in accounting principles shall be excluded, (v) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the Company or one of its Restricted Subsidiaries, and (vi) the Net Income of any Restricted Subsidiary shall be calculated after deducting preferred stock dividends payable by such Restricted Subsidiary to Persons other than the Company and its other Restricted Subsidiaries. "Consolidated Tangible Assets" means, with respect to the Company, the total consolidated assets of the Company and its Restricted Subsidiaries, less the total intangible assets of the Company and its Restricted Subsidiaries, as shown on the most recent internal consolidated balance sheet of the Company and such Restricted Subsidiaries calculated on a consolidated basis in accordance with GAAP. "Continuing Directors" 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. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 11.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Facilities" means, with respect to the Company, one or more debt facilities (including, without limitation, the Senior Credit Facilities) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) 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. "December 1998 Notes" means the $200,000,000 in aggregate principal amount of the Company's 8% Senior Subordinated Notes due 2008, issued pursuant to the December 1998 Indenture. "December 1998 Indenture" means the indenture, dated as of December 11, 1998, among The Bank of New York, as trustee, and the Company, with respect to the December 1998 Notes. 5 "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 Article 2 hereof, substantially in the form of Exhibit A 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, until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and, thereafter, "Depositary" shall mean or include such successor. "Designated Senior Debt" means (i) any Indebtedness outstanding under the Senior Credit Facilities and (ii) any other Senior Debt permitted under the Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt". "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, 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; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof; and provided further, that if such Capital Stock is issued to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy applicable statutory or regulatory obligations. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any public or private sale of equity securities (excluding Disqualified Stock) of the Company or Holdings, other than any private sales to an Affiliate of the Company or Holdings. "Escrow Agreement" means the escrow agreement dated the date hereof among the Company, Lehman Brothers Inc., Lehman Commercial Paper Inc., Banc of America Bridge LLC, Credit Suisse First Boston Corporation and The Bank of New York relating to this Indenture and the Notes. 6 "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). "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means any Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facilities and the Notes) in existence on the date of the Indenture, until such amounts are repaid. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense 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, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations, but excluding amortization of debt issuance costs) and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) 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, 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. "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 and its Restricted Subsidiaries 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) 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 7 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, and (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. "Foreign Subsidiary" means a Restricted Subsidiary of the Company that was not organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof or that has not guaranteed or otherwise provided direct credit support for any Indebtedness of the Company. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which were in effect April 30, 1997. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto issued in accordance with Article 2 hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii) to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee 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. "Guarantors" means each Person listed in the preamble to the Indenture and each Subsidiary of the Company that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or interest rates. 8 "Holder" means a Person in whose name a Note is registered. "Holdings" means L-3 Communications Holdings, Inc., a Delaware corporation. "IAI Global Note" means the global Note in the form of Exhibit A 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 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 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. "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. "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 or capital contributions (excluding commission, travel, moving and similar loans or advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company 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 Subsidiary not sold or disposed of in an amount determined as provided in the last paragraph of the covenant contained in Section 4.07. "Issue Date" means March 8, 2003. 9 "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in The City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Lehman Investor" means Lehman Brothers Holdings Inc. and any of its Affiliates. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Series A 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 and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Marketable Securities" means, with respect to any Asset Sale, any readily marketable equity securities that are (i) traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market; and (ii) issued by a corporation having a total equity market capitalization of not less than $300.0 million; provided that the excess of (A) the aggregate amount of securities of any one such corporation held by the Company and any Restricted Subsidiary over (B) ten times the average daily trading volume of such securities during the 20 immediately preceding trading days shall be deemed not to be Marketable Securities; as determined on the date of the contract relating to such Asset Sale. "May 1998 Notes" means the $180,000,000 in aggregate principal amount of the Company's 8 1/2% Senior Subordinated Notes due 2008, issued pursuant to the May 1998 Notes Indenture on May 22, 1998. "May 1998 Notes Indenture" means the indenture, dated as of May 22, 1998, among The Bank of New York, as trustee, and the Company, with respect to the May 1998 Notes. "Moody's" means Moody's Investors Services, Inc. "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 or loss, together with any related provision for taxes thereon, 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 or loss, together with any related provision for taxes on such extraordinary gain or loss and (iii) the cumulative effect of a change in accounting principles. 10 "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (A) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (B) is directly or indirectly liable (as a guarantor or otherwise), or (C) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than Indebtedness incurred under Credit Facilities) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a person who is not a U.S. Person. "Note Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Obligations" means any principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including Additional Amounts), guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto. "Offering" means the offering of the Notes by the Company. "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, any Assistant 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 11.05 hereof. 11 "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 11.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to DTC, Euroclear or Clearstream, a Person who has an account with DTC, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Permitted Investments" means (i) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Guarantor; (ii) any Investment in cash or Cash Equivalents; (iii) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (A) such Person becomes a Restricted Subsidiary of the Company and a Guarantor or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor; (iv) any Restricted 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 4.07 or any disposition of assets not constituting an Asset sale; (v) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (vi) advances to employees not to exceed $2.5 million at any one time outstanding; (vii) any Investment acquired in connection with or as a result of a workout or bankruptcy of a customer or supplier; (viii) Hedging Obligations permitted to be incurred under Section 4.09; (ix) any Investment in a Similar Business that is not a Restricted Subsidiary; provided that the aggregate fair market value of all Investments outstanding pursuant to this clause (ix) (valued on the date each such Investment was made and without giving effect to subsequent changes in value) may not at any one time exceed 10% of the Consolidated Tangible Assets of the Company; and (x) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (x) that are at the time outstanding, not to exceed $15.0 million. "Permitted Joint Venture" means any joint venture, partnership or other Person designated by the Board of Directors (until designation by the Board of Directors to the contrary); provided that (i) at least 25% of the Capital Stock thereof 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 (ii) such joint venture, partnership or other Person is engaged in a Similar 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 and the Subsidiary Guarantees are subordinated to Senior Debt pursuant to Article 10 of this Indenture. 12 "Permitted Liens" means (i) Liens securing Senior Debt of the Company or any Guarantor that was permitted by the terms of this Indenture to be incurred; (ii) Liens in favor of the Company or any Guarantor; (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 Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any other assets of the Company or any of its Restricted Subsidiaries; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of the second paragraph of Section 4.09 covering only the assets acquired with such Indebtedness; (vii) Liens existing on the date of this Indenture; (viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (ix) 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 $5.0 million at any one time outstanding; (x) Liens on assets of Guarantors to secure Senior Debt of such Guarantors that was permitted by this Indenture to be incurred; (xi) Liens securing Permitted Refinancing Indebtedness, provided that any such Lien does not extend to or cover any property, shares or debt other than the property, shares or debt securing the Indebtedness so refunded, refinanced or extended; (xii) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return of money bonds and other obligations of a like nature, in each case incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (xiii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business; (xiv) Liens encumbering customary initial deposits and margin deposits, and other Liens incurred in the ordinary course of business that are within the general parameters customary in the industry, in each case securing Indebtedness under Hedging Obligations; and (xv) Liens encumbering deposits made in the ordinary course of business to secure nondelinquent obligations arising from statutory or regulatory, contractual or warranty requirements of the Company or its Subsidiaries for which a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its 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; 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 interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses and prepayment premiums incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a 13 final maturity date no earlier 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 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 by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Permitted Securities" means, with respect to any Asset Sale, Voting Stock of a Person primarily engaged in one or more Similar Businesses; provided that after giving effect to the Asset Sale such Person shall become a Restricted Subsidiary and a Guarantor. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Principals" means any Lehman Investor, Lockheed Martin Corporation, Frank C. Lanza and Robert V. LaPenta. "Private Placement Legend" means the legend set forth in Section 2.07(g)(i) to be placed on all Notes issued under this Indenture except as otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Debt Registration Rights Agreement, dated as of the date hereof, 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, relating to rights given by the Company to the purchasers of Notes to register such Notes under the Securities Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a global Note bearing 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 Regulation S. "Related Party" with respect to any Principal means (i) any controlling stockholder, 50% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding a more than 50% controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (i). 14 "Representative" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "Responsible Officer" when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Notes" means the 144A Global Note, the IAI Global Note and the Regulation S Global Note, each of which shall bear the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" means, with respect to any Person, each Subsidiary of such Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 under the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "Rule 903" means Rule 903 under the Securities Act. "Rule 904" means Rule 904 under the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Credit Facilities" means the Second Amended and Restated 364 Day Credit Agreement, dated as of May 16, 2001, as in effect on the date of this Indenture among the Company, the lenders party thereto, Banc of America, N.A., as administrative agent, and Lehman Commercial Paper Inc., as syndication agent and documentation agent, and the Third Amended and Restated Credit Agreement, dated as of May 16, 2001, as in effect on the date of this Indenture among the Company, the lenders party thereto, Banc of America, N.A., as administrative agent, and Lehman Commercial Paper Inc., as syndication agent and documentation agent, and any related notes, collateral documents, letters of credit and guarantees, including any appendices, exhibits or schedules to any of the foregoing (as the same may be in effect from time to time), in each case, as such agreements may be amended, modified, supplemented or restated from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid or extended from time to time (whether with the original agents and 15 lenders or other agents and lenders or otherwise, and whether provided under the original credit agreement or other credit agreements or otherwise). "Senior Debt" means (i) all Indebtedness of the Company or any of its Restricted Subsidiaries outstanding under Credit Facilities and all Hedging Obligations with respect thereto, (ii) any other Indebtedness permitted to be incurred by the Company or any of its Restricted Subsidiaries under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes and (iii) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (i) any liability for federal, state, local or other taxes owed or owing by the Company, (ii) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (iii) any trade payables or (iv) any Indebtedness that is incurred in violation of the Indenture. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary which is a "significant subsidiary" within the meaning of Rule 405 under the Securities Act. "Similar Business" means a business, a majority of whose revenues in the most recently ended calendar year were derived from (i) the sale of defense products, electronics, communications systems, aerospace products, avionics products and/or communications products, (ii) any services related thereto, (iii) any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, and (iv) any combination of any of the foregoing. "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. "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 or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (A) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (B) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "S&P" means Standard and Poor's Corporation. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under TIA. 16 "Transaction Documents" means the Indenture, the Notes, the Bridge Loan Agreement and the Registration Rights Agreement. "Transfer Restricted Securities" means securities that bear or are required to bear the Private Placement Legend set forth in Section 2.06(g)(i) hereof. "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 Global Note" means one or more global Notes, in the form of Exhibit A attached hereto, that do not and are not required to bear the Private Placement Legend and are deposited with and registered in the name of the Depositary or its nominee. "Unrestricted Definitive Note" means one or more Definitive Notes that do not and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (iii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (A) to subscribe for additional Equity Interests or (B) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (iv) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (v) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.07. 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 by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four- 17 quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(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" means, when used with respect to any Subsidiary or Restricted Subsidiary of a Person, a Subsidiary (or Restricted Subsidiary, as appropriate) of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries (or Wholly Owned Restricted Subsidiaries, as appropriate) of such Person and one or more Wholly Owned Subsidiaries (or Wholly Owned Restricted Subsidiaries, as appropriate) of such Person. Section 1.02 Other Definitions. Defined in Term Section "Affiliate Transaction"...............................4.11 "Asset Sale Offer"....................................3.09 "Bankruptcy Law"......................................4.01 "Change of Control Offer".............................4.15 "Change of Control Payment"...........................4.15 "Change of Control Payment Date"......................4.15 "Covenant Defeasance".................................8.03 "DTC".................................................2.03 "Event of Default"....................................6.01 "Excess Proceeds".....................................4.10 "Exchange Notes"...................................preamble "Global Note Legend"..................................2.06 "incur"...............................................4.09 "Legal Defeasance"....................................8.02 "Notes"............................................preamble "Offer Amount"........................................3.09 "Offer Period"........................................3.09 "Paying Agent"........................................2.03 18 "Purchase Date".......................................3.09 "Registrar"...........................................2.03 "Remaining Excess Proceeds"...........................4.10 "Restricted Payments".................................4.07 "Secondary Asset Sale Offer"..........................4.10 "Series A Notes"...................................preamble 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; "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 19 (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. 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 be issued in the form of Definitive Notes or Global Notes, as specified by the Company. 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 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 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. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream Banking shall be applicable to interests in the Regulation S Global Notes that are held by the Agent Members through Euroclear or Clearstream Banking. Section 2.02 Execution and Authentication. Two Officers shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. 20 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 the receipt of both: (a) a non-revocable written order of the Company signed by two Officers and (b) a written order, substantially in the form of Exhibit A to the Escrow Agreement, authenticate Notes provided to the Trustee by the escrow agent under the Escrow Agreement for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 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 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 Additional Amounts, 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 21 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 ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA ss. 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 or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. 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 made available for delivery 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 made available for delivery 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 procedures of the Depositary therefor. 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. The Trustee shall have no obligation to ascertain the Depositary's compliance with any such restrictions on transfer. 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 22 thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred 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 transfers of beneficial interests in a Global Note to Persons who take 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 either (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 the specified 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 shall be registered to effect the transfer or exchange referred to in (1) above. 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. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in another Restricted Global Note if the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a 23 certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver (x) a certificate in the form of Exhibit B hereto, including the certifications in item (3) thereof, (y) to the extent required by item 3(d) of Exhibit B hereto, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act and such beneficial interest is being transferred in compliance with any applicable blue sky securities laws of any State of the United States and (z) if the transfer is being made to an Institutional Accredited Investor and effected pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A under the Securities Act, Rule 144 under the Securities Act or Rule 904 under the Securities Act, a certificate from the transferee in the form of Exhibit D hereto. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. Beneficial interests in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in the Unrestricted Global Note or transferred to Persons who take delivery thereof in the form of a beneficial interest in the Unrestricted Global 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 beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest 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 )(a) 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 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; 24 (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, 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 beneficial interest is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. 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 any 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 (all of which may be submitted by facsimile): (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 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) 25 through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(d) thereof, a certificate from the transferee to the effect set forth in Exhibit D hereof and, to the extent required by item 3(d) of Exhibit B, an Opinion of Counsel from the transferee or the transferor reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act and such beneficial interest is being transferred in compliance with any applicable blue sky securities laws of any State of the United States; (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 (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. Definitive Notes issued in exchange for beneficial interests in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such names and in such authorized denominations as the holder 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. Definitive Notes 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 2.06(c)(i), 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, 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 26 (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 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 beneficial interest in a Restricted Global Note is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. (iii) 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), 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. Definitive Notes issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such names and in such authorized denominations as the holder 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. Definitive Notes issued in exchange for a beneficial interest pursuant to this section 2.06(c)(iii) shall not bear the Private Placement Legend. Beneficial interests 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 or Exchange of Definitive Notes for Beneficial Interests. (i) If any Holder of Restricted Definitive Notes proposes to exchange such Notes 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 (all of which may be submitted by facsimile): 27 (A) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes 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 Notes are 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 Notes are being transferred to a Non-U.S. Person in an offshore transaction in accordance with 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 Notes are 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 Notes are 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 in item (3)(d) thereof, a certificate from the transferee to the effect set forth in Exhibit D hereof and, to the extent required by item 3(d) of Exhibit B, an Opinion of Counsel from the transferee or the transferor reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act and such Definitive Notes are being transferred in compliance with any applicable blue sky securities laws of any State of the United States; (F) if such Definitive Notes are being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Definitive Notes are 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 Notes, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) A Holder of Restricted Definitive Notes may exchange such Notes for a beneficial interest in the Unrestricted Global Note or transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in the Unrestricted Global Note only if: 28 (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 Unrestricted Definitive Notes may exchange such Notes for a beneficial interest in the Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in the Unrestricted Global Note. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the Unrestricted Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. 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 29 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. 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 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 (x) a certificate in the form of Exhibit B hereto, including the certifications in item (3) thereof, (y) to the extent required by item 3(d) of Exhibit B hereto, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act and such beneficial interest is being transferred in compliance with any applicable blue sky securities laws of any State of the United States and (z) if the transfer is being made to an Institutional Accredited Investor and effected pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A under the Securities Act, Rule 144 under the Securities Act or Rule 904 under the Securities Act, a certificate from the transferee in the form of Exhibit D hereto. (ii) Restricted Definitive Notes may be exchanged by any Holder thereof for an Unrestricted Definitive Note or transferred to 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; 30 (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)(a) thereof; (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 an authentication order in accordance with Section 2.02, 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 make available for delivery to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. 31 (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 SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY 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, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to 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: 32 "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 SECTION 2.07 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." (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 of or exchange 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 33 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. 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. 34 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. 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 destroy canceled Notes (subject to the record retention requirement of the Exchange Act). 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 35 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. Section 2.13 CUSIP Numbers. The Company in issuing the Notes may use CUSIP numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01 [Reserved]. 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 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 shall 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. 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 that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. 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. 36 Section 3.03 Notice Of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed (including CUSIP Numbers, if any) 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. 37 Section 3.05 Deposit Of Redemption Price. Prior to 11:00 a.m. on the Business Day prior to the redemption date, 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. If the Company complies with the provisions of the preceding paragraph, 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 [Reserved]. Section 3.08 Mandatory Redemption. Except as set forth under Sections 4.10 and 4.15, the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09 Offer To Purchase By Application Of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company 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. 38 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 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 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). 39 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 3.02 through 3.06 hereof. ARTICLE 4. COVENANTS The covenants contained in this Article 4 shall be suspended until such time as the Notes are Issued and released from escrow pursuant to the Escrow Agreement, at which time such covenants shall be deemed to have been in full force and effect since the date of this Indenture. 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 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 Additional Amounts, 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 any Bankruptcy Law) on overdue principal at the rate equal to 2.0% 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 any Bankruptcy Law) on overdue installments of interest and Additional Amounts (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, 40 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. Section 4.03 Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, the Company shall file with the SEC (and provide the Trustee and Holders with copies thereof), without cost to each Holder, within 15 days after it files them with the SEC: (a) within 90 days after the end of each fiscal year, annual reports on Form 10-K (or any successor or comparable form) containing the information required to be contained therein (or required in such successor or comparable form); (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, reports on Form 10-Q (or any successor or comparable form); (c) promptly from time to time after the occurrence of an event required to be therein reported, such other reports on Form 8-K (or any successor or comparable form); and (d) any other information, documents and other reports which the Company would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act; provided, however, the Company shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Company will make available such information to prospective purchasers of Notes, in addition to providing such information to the Trustee and the Holders, in each case within 15 days after the time the Company would be required to file such information with the SEC, if it were subject to Sections 13 or 15(d) of the Exchange Act. 41 Subject to the provisions of Article 7, delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). 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 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 failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, as soon as possible and in any event within five Business Days after 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. 42 Section 4.06 [Intentionally Omitted] 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 (A) dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or (B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly Owned Restricted Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities); (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; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes 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 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 Section 4.09; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since April 30, 1997 (excluding Restricted Payments permitted by clauses (ii) through (vii) of the next succeeding paragraph or of the kind contemplated by such clauses that were made prior to the date of the Indenture), 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 July 1, 1997 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 since April 30, 1997 as a contribution to its common equity capital or the issue or sale 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 43 Interests (or Disqualified Stock or convertible debt securities) sold to a 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 that any Restricted Investment that was made after April 30, 1997 is sold for cash or otherwise liquidated or repaid for cash, the amount of cash received in connection therewith (or from the sale of Marketable Securities received in connection therewith), plus (iv) to the extent not already included in such Consolidated Net Income of the Company for such period and without duplication, (A) 100% of the aggregate amount of cash received as a dividend from an Unrestricted Subsidiary, (B) 100% of the cash received upon the sale of Marketable Securities received as a dividend from an Unrestricted Subsidiary, and (C) 100% of the net assets of any Unrestricted Subsidiary on the date that it becomes a Restricted 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 Indebtedness 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 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 Indebtedness (other than intercompany Indebtedness) in exchange for, or with the net cash proceeds from an incurrence of, Permitted Refinancing Indebtedness; (iv) the repurchase, retirement or other acquisition or retirement for value of common Equity Interests of the Company or Holdings held by any future, present or former employee, director or consultant of the Company or any Subsidiary or Holdings issued pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate amount of Restricted Payments made under this clause (iv) does not exceed $1.5 million in any calendar year and provided further that cancellation of Indebtedness owing to the Company from members of management of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Company shall not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of this Indenture; (v) repurchases of Equity Interests deemed to occur upon exercise of stock options upon surrender of Equity Interests to pay the exercise price of such options; (vi) payments to Holdings (A) in amounts equal to the amounts required for Holdings to pay franchise taxes and other fees required to maintain its legal existence and provide for other operating costs of up to $500,000 per fiscal year and (B) in amounts equal to amounts required for Holdings to pay federal, state and local income taxes to the extent such income taxes are actually due and owing; provided that the aggregate amount paid under this clause (B) does not exceed the amount that the Company would be required to pay in respect of the income of the Company and its Subsidiaries if the Company were a stand alone entity that was not owned by Holdings; and (vii) other Restricted Payments in an aggregate amount since May 22, 1998 not to exceed $20.0 million. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of 44 making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted Payments at the time of such designation and shall reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments shall be deemed to constitute Investments in an amount equal to the fair market value of such Investments at the time of such designation. Such designation shall only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. 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 Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment, 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 Section 4.07 were computed. Section 4.08 Dividend And Other Payment Restrictions Affecting 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 to (i)(A) 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 (B) 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) the provisions of security agreements that restrict the transfer of assets that are subject to a Lien created by such security agreements, (B) the provisions of agreements governing Indebtedness incurred pursuant to clause (v) of the second paragraph of Section 4.09, (C) the Senior Credit Facilities, this Indenture, the Notes, the 1997 Indenture, the 1997 Notes, the May 1998, Indenture, the May 1998 Notes, the December 1998 Indenture and the December 1998 Notes, (D) applicable law, (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 and consistent with past practices, (G) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in this clause (iii) on the property so acquired, (H) 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, (I) contracts for the sale of assets, 45 including, without limitation, customary restrictions with respect to a 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 Subsidiary, (J) agreements relating to secured Indebtedness otherwise permitted to be incurred pursuant to 4.09 and 4.12 that limit the right of the debtor to dispose of the assets securing such Indebtedness, (K) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, or (L) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business. Section 4.09 Incurrence Of Indebtedness And Issuance Of Preferred Stock. The Company shall not, and shall not permit any of its 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 Subsidiaries to issue any shares of preferred stock; provided, however, that the Company and any Restricted Subsidiary may incur Indebtedness (including Acquired Debt) or issue shares of preferred stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such preferred 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 preferred 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 Section 4.09 shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of additional Indebtedness under Credit Facilities (and the guarantee thereof by the Guarantors) in an aggregate principal amount outstanding pursuant to this clause (i) at any one time (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), including all Permitted Refinancing Indebtedness then outstanding incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (i), not to exceed $375.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied since December 11, 1998 to repay any such Indebtedness pursuant to Section 4.10; (ii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company and the Guarantors of $500.0 million in aggregate principal amount of the Notes and the Subsidiary Guarantees thereof in exchange for the Bridge Loans; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase 46 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 then outstanding incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (iv), not to exceed $30.0 million at any time outstanding; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in connection with the acquisition of assets or a new Restricted Subsidiary; provided that such Indebtedness was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the Company or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by the Company or one of its Restricted Subsidiaries; and provided further that the principal amount (or accreted value, as applicable) of such Indebtedness, together with any other outstanding Indebtedness incurred pursuant to this clause (v), does not exceed $10.0 million; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace, Indebtedness that was permitted by this Indenture to be incurred (other than intercompany Indebtedness or Indebtedness incurred pursuant to clause (i) above); (vii) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (viii) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that (A) such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet shall not be deemed to be reflected on such balance sheet for purposes of this clause (A)) and (B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; 47 (ix) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that (A) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (B)(1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or one of its Restricted Subsidiaries and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or one of its Restricted Subsidiaries 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; (x) the incurrence by the Company or any of the Guarantors of Hedging Obligations that are incurred for the purpose of (A) fixing, hedging or capping interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or (B) protecting the Company and its Restricted Subsidiaries against changes in currency exchange rates; (xi) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (xii) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (xii), and the issuance of preferred stock by Unrestricted Subsidiaries; (xiii) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiaries in the ordinary course of business; and (xiv) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness then outstanding incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xiv), not to exceed $50.0 million. 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, or later reclassify, such item of Indebtedness in any manner that complies with this covenant. Accrual of interest, the accretion of accreted 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. 48 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 the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by an Officers' Certificate delivered to the Trustee which will include a resolution of the Board of Directors with respect to such fair market value in the event such Asset Sale involves aggregate consideration in excess of $5.0 million) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 80% of the consideration therefor received by the Company or such Restricted Subsidiary, as the case may be, consists of cash, Cash Equivalents and/or Marketable Securities; provided, however, that (A) the amount of any Senior Debt of the Company or such Restricted Subsidiary that is assumed by the transferee in any such transaction and (B) any consideration received by the Company or such Restricted Subsidiary, as the case may be, that consists of (1) all or substantially all of the assets of one or more Similar Businesses, (2) other long-term assets that are used or useful in one or more Similar Businesses and (3) Permitted Securities 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 may apply such Net Proceeds, at its option, (i) to repay Indebtedness under a Credit Facility, or (ii) to the acquisition of Permitted Securities, all or substantially all of the assets of one or more Similar Businesses, or the making of a capital expenditure or the acquisition of other long-term assets in a Similar Business. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Indebtedness under a 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 $10.0 million, the Company shall make an offer to all holders of 1997 Notes (an "Asset Sale Offer") to purchase the maximum principal amount of 1997 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 to the date of purchase, in accordance with the procedures set forth in the 1997 Indenture. To the extent that the aggregate amount of 1997 Notes tendered pursuant to an Asset Sale Offer is less than the remaining Excess Proceeds ("Remaining Excess Proceeds") and the sum of (A) such amount of Remaining Excess Proceeds and (B) the Remaining Excess Proceeds from any subsequent Asset Sale Offers exceeds $3.0 million, the Company will be required to make an offer to all Holders of Notes and any other Indebtedness that ranks pari passu with the Notes (including, without limitation, the May 1998 Notes and the December 1998 Notes) that, by its terms, requires the Company to offer to repurchase such Indebtedness with such Remaining Excess Proceeds (a "Secondary Asset Sale Offer") to purchase the maximum principal amount of Notes and pari passu Indebtedness that may be purchased out of such Remaining 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 this Indenture. To the extent that the aggregate amount of Notes or pari passu Indebtedness tendered pursuant to a Secondary Asset Sale Offer is less than the Remaining Excess Proceeds, the Company may use any Remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes or pari passu Indebtedness surrendered by Holders thereof exceeds the amount of 49 Remaining Excess Proceeds in a Secondary Asset Sale Offer, the Company shall repurchase such Indebtedness on a pro rata basis and 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. Section 4.11 Transactions With Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (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 (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the 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 the Board of Directors and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The foregoing provisions shall not prohibit: (i) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business; (ii) any transaction with a Lehman Investor; (iii) any transaction between or among the Company and/or its Restricted Subsidiaries; (iv) transactions between the Company or any of its Restricted Subsidiaries, on the one hand, and Lockheed Martin or any of its Subsidiaries or a Permitted Joint Venture, on the other hand, on terms that are not materially less favorable to the Company or the applicable Restricted Subsidiary of the Company than those that could have been obtained from an unaffiliated third party; provided that (A) in the case of any such transaction or series of related transactions pursuant to this clause (iv) involving aggregate consideration in excess of $5.0 million but less than $25.0 million, such transaction or series of transactions (or the agreement pursuant to which the transactions were executed) was approved by the Company's Chief Executive Officer or Chief Financial Officer and (B) in the case of any such transaction or series of related transactions pursuant to this clause (iv) involving aggregate consideration equal to or in excess of $25.0 million, such transaction or series of related transactions (or the agreement pursuant to which the transactions were executed) was approved by a majority of the disinterested members of the Board of Directors; (v) any transaction pursuant to and in accordance with the provisions of the Transaction Documents as the same are in effect on the date of this Indenture; and (vi) any Restricted Payment that is permitted by the provisions of Section 4.07. 50 Section 4.12 Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. Section 4.13 Future Subsidiary Guarantees. If the Company or any of its Subsidiaries shall acquire or create a Subsidiary (other than a Foreign Subsidiary or an Unrestricted Subsidiary) after the date of the Indenture, then such Subsidiary shall execute a Subsidiary Guarantee, in the form of the Supplemental Indenture attached hereto as Exhibit E, and the Form of Notation on Senior Subordinated Note, attached hereto as Exhibit F, and deliver an opinion of counsel as to the validity of such Subsidiary Guarantee, in accordance with the terms of this Indenture. The Subsidiary Guarantee of each Guarantor will be subordinated to the prior payment in full of all Senior Debt of such Guarantor, which would include the guarantees of amounts borrowed under the Senior Credit Facilities. The obligations of each Guarantor under its Subsidiary Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person (except the Company or another Guarantor) unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made 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 this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; (iii) the Company (A) 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 Section 4.09 or (B) would have a pro forma Fixed Charge Coverage Ratio that is greater than the actual Fixed Charge Coverage Ratio for the same four-quarter period without giving pro forma effect to such transaction. Notwithstanding the foregoing paragraph, (i) any Guarantor may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (ii) any Guarantor may merge with an Affiliate that has no significant assets or liabilities and was incorporated solely for the purpose of reincorporating such Guarantor in another State of the United States so long as the amount of Indebtedness of the Company and its Restricted Subsidiaries is not increased thereby. 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 51 of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of Section 4.10. Section 4.14 Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (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 shall 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 Additional Amounts thereon, if any, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company shall 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"). Such notice, which shall govern the terms of the Change of Control offer, shall state: (i) 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; (ii) the purchase price and the purchase date; (iii) that any Note not tendered will continue to accrue interest; (iv) 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; (v) 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 third Business Day preceding the Change of Control Payment Date; (vi) 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 (vii) 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 52 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 in connection with a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) 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 (iii) 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 mailing a Change of Control Offer, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or offer to repay all Senior Debt and terminate all commitments thereunder of each lender who has accepted such offer or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Section 4.16 No Senior Subordinated Debt. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to any of the Subsidiary Guarantees. Section 4.17 Payments For Consent. Neither the Company nor any of its Subsidiaries shall, 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 4.18 No Redemption of Existing Senior Subordinated Indebtedness. Notwithstanding anything contained in this Indenture to the contrary, neither the Company nor any of its Subsidiaries will voluntarily purchase, redeem, defease or otherwise retire for value any of its existing senior subordinated Indebtedness (including, without 53 limitation, the 1997 Notes, the December 1998 Notes, the May 1998 Notes, the 5.25% Convertible Senior Subordinated Notes due 2009 issued by Holdings and the 4.00% Senior Subordinated Convertible Contingent Debt Securities due 2011 issued by Holdings), prior to such Indebtedness' stated maturity, until the Notes and all related Obligations have been paid in full in cash; provided that the Company and its Subsidiaries may purchase, redeem, defease or otherwise retire for value with Equity Interests of Holdings, the Company or any of the Guarantors, other than Disqualified Stock, any of the outstanding 5.25% Convertible Senior Subordinated Notes due 2009 issued by Holdings or the 4.00% Senior Subordinated Convertible Contingent Debt Securities due 2011 issued by Holdings. In the event that the Company is required to purchase, redeem, defease or otherwise retire for value any of its existing senior subordinated Indebtedness (including, without limitation, the 1997 Notes, the December 1998 Notes, the May 1998 Notes, the 5.25% Convertible Senior Subordinated Notes due 2009 issued by Holdings and the 4.00% Senior Subordinated Convertible Contingent Debt Securities due 2011 issued by Holdings), it will repay in full, in cash, all Obligations with respect to the Notes at least two Business Days prior to such purchase, redemption, defeasance or retirement ARTICLE 5. SUCCESSORS Section 5.01 Merger, Consolidation, Or Sale Of Assets. The Company may 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, 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 Registration Rights Agreement, the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned 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, after giving pro forma effect to such transaction as if such transaction had occurred at the beginning of the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding such transaction either (A) would 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 or (B) would have a pro forma Fixed Charge Coverage Ratio that is greater than the actual Fixed Charge Coverage Ratio for the same four-quarter period without giving pro forma effect to such transaction. 54 Notwithstanding clause (iv) in the immediately foregoing paragraph, (i) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (ii) the Company may merge with an Affiliate that has no significant assets or liabilities and was incorporated solely for the purpose of reincorporating the Company in another State of the United States so long as the amount of Indebtedness of the Company and its Restricted Subsidiaries is not increased thereby. 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; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. 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 Additional Amounts, if any, with respect to, the Notes and such default continues for a period of 30 days (whether or not prohibited by the subordination provisions of this Indenture); (b) the Company defaults in the payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of this Indenture); (c) the Company fails to comply with any of the provisions of Section 4.10, 4.15, or 5.01 hereof; (d) the Company 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; (e) 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 55 guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness, the maturity of which has been so accelerated, aggregates $10.0 million or more; (f) the Company or any of its Restricted Subsidiaries is subject to a final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (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; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (i) except as permitted herein, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid. 56 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. 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; provided, however, that so long as any Designated Senior Debt is outstanding, such declaration shall not become effective until the earlier of (i) the day which is five Business Days after receipt by the Representatives of Designated Senior Debt of such notice of acceleration or (ii) the date of acceleration of any Designated Senior Debt. 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 or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce this Indenture or the Notes except as provided in this 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. 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. Section 6.04 Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Additional Amounts, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount at maturity of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such 57 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 Additional Amounts, 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) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust 58 against the Company for the whole amount of principal of, premium and Additional Amounts, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 Trustee May File Proofs Of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor 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 Additional Amounts, 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 Additional Amounts, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. 59 The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, 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. 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 person would exercise or use under the circumstances in the conduct of such person's affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith or negligence 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 (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (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 60 (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 such 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 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. 61 (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. (i) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. 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 Disclaimers. 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 62 Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 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 ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07 Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for its acceptance of this Indenture and services hereunder. 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 or any predecessor 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. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. 63 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 any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. 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 30 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, 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. 64 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 $50 million 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 ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 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. 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"). 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 65 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 Sections 2.06, 2.07, 2.10 and 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 Sections 4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15 and 4.16 and Article 5 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(d) through 6.01(f) 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 United States 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 and Additional Amounts, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (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 66 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 incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) 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 Restricted Subsidiaries is a party or by which the Company or any of its Restricted 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; 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 67 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. 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 United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's 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. 68 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, 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; (c) to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger or consolidation pursuant to Article 5 hereof; (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 Section 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 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). 69 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. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 180 days after such record date, any such consent previously given shall automatically and without further action by any Holder be canceled and of no further effect. 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): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 4.10 and 4.15 hereof; (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); 70 (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or interest on the Notes; or (g) waive a redemption payment with respect to any Note (other than a payment required by Sections 3.09, 4.10 and 4.15 hereof). (h) 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 executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) 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. 71 ARTICLE 10. SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by 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 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, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior Debt shall be entitled to receive payment in full in cash 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 in any such proceeding) 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, any distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except, in each case, that Holders of Notes may receive Permitted Junior Securities and payments made from the trust described under Article 8). Section 10.03 Default on Designated Senior Debt. The Company may not make any payment 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) securities that are subordinated to at least the same extent as the Notes to (a) Senior Debt and (b) any securities issued in exchange for Senior Debt and (ii) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing; 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 to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from the Company or a Representative with respect to such Designated Senior Debt. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (i) at least 360 days shall 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 72 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 or cured 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 the earlier of: (1) the date upon which the default is cured or waived, or (2) in the case of a default referred to in Section 10.03(ii) hereof, 179 days pass after notice is received if the maturity of such Designated Senior Debt has not been accelerated, if this Article otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 10.04 Acceleration of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. Section 10.05 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Article 10 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or negligence of the Trustee. Section 10.06 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 73 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. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Debt (or a trustee or agent on behalf of such holder) to establish that such notice has been given by a holder of Senior Debt (or a trustee or agent on behalf of any such holder). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as holder of Senior Debt to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such person, the extent to which such person is entitled to participate in such evidence is not furnish, the Trustee may defer any payment which it may be required to make for the benefit of such person pursuant to the terms of this Indenture pending judicial determination as to the rights of such person to receive such payment. Section 10.07 Subrogation. After all Senior Debt is paid in full in cash 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) 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 10.08 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 is still a Default or Event of Default. 74 Section 10.09 Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes 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 10.10 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes 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 10.11 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 three Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 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 10.12 Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the credit agents are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. 75 Section 10.13 Amendments. The provisions of this Article 10 shall not be amended or modified without the written 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. ARTICLE 11. MISCELLANEOUS Section 11.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.318(c), the imposed duties shall control. Section 11.02 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), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: L-3 Communications Corporation 600 Third Avenue, 34th Floor, New York, New York 10016 Attention: Vice President-Finance (Fax: 212-805-5470) With a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attention: Vincent Pagano Jr. (Fax: 212-455-2502) If to the Trustee: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attention: Corporate Trust Administration (Fax: 212-896-7299) 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 receipt 76 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 ss. 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 11.03 Communications By Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA ss. 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 ss. 312(c). Section 11.04 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 11.05 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 (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 11.05 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 ss. 314(a)(4)) shall comply with the provisions of TIA ss. 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; 77 (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 11.06 Rule 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 11.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes or the Subsidiary Guarantees and this 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 Commission that such a waiver is against public policy. Section 11.08 Governing Law. THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Section 11.09 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 11.10 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. Section 11.11 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. 78 Section 11.12 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 11.13 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. Section 11.14 Holders of Notes Prior to their Issuance. The holders of the Bridge Notes will be deemed to be the Holders of Notes equal in principal amount to such holder's Bridge Notes until the Notes are issued and released from escrow pursuant to the terms of the Escrow Agreement. [Signatures on following pages] 79 SIGNATURES Dated as of March 8, 2002 L-3 COMMUNICATIONS CORPORATION By:__________________________________ Name: Title: GUARANTORS: HYGIENETICS ENVIROMENTAL SERVICES, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. L-3 COMMUNICATIONS DBS MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD SWITCHGEAR , INC. PAC ORD, INC HENSCHEL, INC. SPD HOLDINGS, INC. POWER PARAGON, INC. L-3 COMMUNICATIONS AYDIN CORPORATION MPRI, INC. ELECTRODYNAMICS, INC. INTERSTATE ELECTRONICS CORPORATION MICRODYNE CORPORATION L-3 COMMUNICATIONS ANALYTICS CORPORATION L-3 COMMUNICATIONS AIS GP CORPORATION L-3 COMMUNICATIONS INVESTMENTS INC. COLEMAN RESEARCH CORPORATION KDI PRECISION PRODUCTS, INC. EER SYSTEMS, INC. as Guarantors By: ______________________________________ Name: Christopher C. Cambria Title: Vice President S-1 L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P. as Guarantor By: L-3 COMMUNICATIONS AIS GP CORPORATION, as General Partner By: _________________________________ Name: Title: Authorized Person S-2 THE BANK OF NEW YORK, as Trustee By: ______________________________________ Name: Title: S-3 EXHIBIT A (Face of Note) ================================================================================ CUSIP/CINS __________ Senior Subordinated Notes due 2009 No. ___ $_________ L-3 COMMUNICATIONS CORPORATION promises to pay to __________________________________________ or registered assigns, the principal sum of ________________________________________ Dollars on May 15, 2009. Interest Payment Dates: May 15 and November 15. Record Dates: May 1 and November 1. Dated: March 8, 2002 L-3 Communications Corporation By:________________________________ Name: Title: By:________________________________ Name: Title: This is one of the [Global] Notes referred to in the (SEAL) within-mentioned Indenture: Dated: March 8, 2003 THE BANK OF NEW YORK, as Trustee By:________________________________ Name: Title: ================================================================================ A-1 (Back of Note) Senior Subordinated Notes due 2009 [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 SECTION 2.07 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.](1) [THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHOM 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, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.](2) - ---------- (1) This paragraph should be included only if the Note is issued in global form. (2) This paragraph should be included only if applicable pursuant to the terms of the Indenture. A-2 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. A-3 1. INTEREST. L-3 Communications Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at ___% per annum from March 8, 2003 until maturity and shall pay the Additional Amounts payable pursuant to Section 3 of the Registration Rights Agreement referred to below. The Company will pay interest and Additional Amounts, if any, semi-annually 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"), with the same force and effect as if made on the date for such payment. 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 _______ p.m. March 8, 2003; 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 November 15, 2003. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 2% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Amounts (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 Additional Amounts to the Persons who are registered Holders of Notes at the close of business on the May 1 or November 1 next (whether or not a Business Day) 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 Additional Amounts, 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 Additional Amounts may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Amounts 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 if such Holders shall be registered Holders of at least $250,000 in principal amount of the Notes. 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, The Bank of New York, 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. The Company issued the Notes under an Indenture dated as of March 8, 2002 ("Indenture") among the Company, the Guarantors named therein 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 ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and A-4 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 issuable under the Indenture are obligations of the Company limited to $500.0 million in aggregate principal amount, plus amounts, if any, issued to pay Additional Amounts on outstanding Notes as set forth in Paragraph 2 hereof. 5. OPTIONAL REDEMPTION. (a) The Notes shall not be redeemable at the Company's option prior to maturity. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (in either case, the "Change of Control Payment"). Within 10 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 required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, within five Business Days of each date on which the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall commence an offer to all holders of 1997 Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of 1997 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 to the date of purchase, in accordance with the procedures set forth in the 1997 Indenture. To the extent that the aggregate amount of 1997 Notes tendered pursuant to an Asset Sale Offer is less than the remaining Excess Proceeds ("Remaining Excess Proceeds") and the sum of (A) such amount of Remaining Excess Proceeds and (B) the Remaining Excess Proceeds from any subsequent Asset Sale Offers exceeds $3.0 million, the Company will be required to make an offer to all Holders of Notes and any other Indebtedness that ranks pari passu with the Notes (including the May 1998 Notes and the December 1998 Notes) that, by its terms, requires the Company to offer to repurchase such Indebtedness with such Remaining Excess Proceeds (a "Secondary Asset Sale Offer") to purchase the maximum principal amount of Notes and pari passu Indebtedness that may be purchased out of such Remaining 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 or pari passu Indebtedness tendered pursuant to a Secondary Asset Sale Offer is less than the Remaining Excess Proceeds, the Company may use any Remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes or pari passu Indebtedness surrendered by Holders thereof exceeds the amount of A-5 Remaining Excess Proceeds in a Secondary Asset Sale Offer, the Company shall repurchase such Indebtedness on a pro rata basis and 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. 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. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, 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. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. 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, 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 Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. DEFAULTS AND REMEDIES. An "Event of Default" occurs if: (i) default for 30 days in the payment when due of interest on, or Additional Amounts 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 to A-6 comply with the covenants contained in sections 4.10, 4.15 or 5.10 of the Indenture; (iv) failure by the Company for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default 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 the maturity of which has been so accelerated, aggregates $10.0 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid. 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; provided, however, that so long as any Designated Senior Debt is outstanding, such declaration shall not become effective until the earlier of (i) the day which is five Business Days after receipt by the Representatives of Designated Senior Debt of such notice of acceleration or (ii) the date of acceleration of any Designated Senior Debt. 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 or any group of Subsidiaries that, taken as a whole, would constitute a 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. 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. 13. 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. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, or the Indenture or the Subsidiary A-7 Guarantees 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. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. 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). 17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transferred Restricted Securities shall have all the rights set forth in the Registration Rights Agreement dated as of March 8, 2002, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 18. 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. 19. GOVERNING LAW. This Note shall be governed by, and construed in accordance with, the laws of the State of New York. 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: L-3 Communications Corporation 600 Third Avenue, 34th Floor, New York, New York 10016 Attention: Vice President-Finance (Fax: 212-805-5470) A-8 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. A-9 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 Note) Tax Identification No.: ------------------ Signature Guarantee. A-10 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(3) 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 Note Signature of Amount of decrease Amount of increase in following such authorized officer in Principal Amount Principal Amount of decrease of Trustee or Note Date of Exchange of this Global Note this Global Note (or increase) Custodian ---------------- ------------------- ---------------- ------------- ---------
- ---------- (3) This should be included only if the Note is issued in global form. A-11 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER L-3 Communications Corporation 600 Third Avenue, 34th Floor, New York, New York 10016 [Registrar address block] Re: Senior Subordinated Notes due 2009. ---------------------------------- Reference is hereby made to the Indenture, dated as of March 8, 2002 (the "Indenture"), among L-3 Communications Corporation, as issuer (the "Company"), the Guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF BOOK-ENTRY INTERESTS IN THE 144A GLOBAL NOTE OR DEFINITIVE NOTES 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 Book-Entry Interests or Definitive Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Book-Entry Interests or Definitive Notes 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 Book-Entry 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 BOOK-ENTRY INTERESTS IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR DEFINITIVE NOTES 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 B-1 securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act 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 Book-Entry Interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF BOOK-ENTRY INTERESTS IN THE IAI GLOBAL NOTE OR DEFINITIVE NOTES 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 Book-Entry Interests in Restricted Global Notes and Definitive Notes bearing the Private Placement Legend 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; 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 Book-Entry Interests in a Restricted Global Note or Definitive Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by (x) if such Transfer is in respect of a principal amount of Notes at the time of Transfer of $250,000 or more, a certificate executed by the Transferee in the form of Exhibit D to the Indenture, or (y) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) 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 (1) such Transfer is in compliance with the Securities Act and (2) such Transfer complies 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 B-2 Indenture, the transferred Book-Entry 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 BOOK-ENTRY INTERESTS IN THE UNRESTRICTED GLOBAL NOTE OR IN DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE PLACEMENT LEGEND. (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 Book-Entry Interests or Definitive Notes will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Definitive Notes bearing the Private Placement Legend 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 Book-Entry Interests or Definitive Notes will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Definitive Notes bearing the Private Placement Legend 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 Book-Entry Interests or Definitive Notes will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Definitive Notes bearing the Private Placement Legend 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] B-3 By: -------------------------------- Name: Title: Dated: ____________, ____ B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] Book-Entry Interests in the: (i) [ ] 144A Global Note (CUSIP _______), or (ii) [ ] Regulation S Global Note (CUSIP ______), or (iii) [ ] IAI Global Note (CUSIP ________); or (b) [ ] Restricted Definitive Notes. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] Book-Entry Interests 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) [ ] Restricted Definitive Notes; or (c) [ ] Definitive Notes that do not bear the Private Placement Legend, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE L-3 Communications Corporation 600 Third Avenue, 34th Floor, New York, New York 10016 Attention: Vice President-Finance (Fax: 212-805-5470) Re: Senior Subordinated Notes due 2009 ---------------------------------- (CUSIP ____________) Reference is hereby made to the Indenture, dated as of March 8, 2002 (the "Indenture"), among L-3 Communications Corporation, as issuer (the "Company"), the Guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "Holder") 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 Holder hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR RESTRICTED BOOK-ENTRY INTERESTS FOR DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE PLACEMENT LEGEND OR UNRESTRICTED BOOK-ENTRY INTERESTS (a) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED BOOK-ENTRY INTEREST TO UNRESTRICTED BOOK-ENTRY Interest. In connection with the Exchange of the Holder's Restricted Book-Entry Interest for Unrestricted Book-Entry Interests in an equal principal amount, the Holder hereby certifies (i) the Unrestricted Book-Entry Interests are being acquired for the Holder'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 Unrestricted Book-Entry Interests are being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED BOOK-ENTRY INTEREST TO DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE PLACEMENT LEGEND. In connection with the Exchange of the Holder's Restricted Book-Entry Interests for Definitive Notes that do not bear the Private Placement Legend, the Holder hereby certifies (i) the Definitive Notes are being acquired for the Holder'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 C-1 Securities Act and (iv) the Definitive Notes are 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 NOTES TO UNRESTRICTED BOOK-ENTRY INTERESTS. In connection with the Holder's Exchange of Restricted Definitive Notes for Unrestricted Book-Entry Interests, (i) the Unrestricted Book-Entry Interests are being acquired for the Holder'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 Book-Entry Interests are 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 NOTES TO DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE PLACEMENT LEGEND. In connection with the Holder's Exchange of a Restricted Definitive Note for Definitive Notes that do not bear the Private Placement Legend, the Holder hereby certifies (i) the Definitive Notes that do not bear the Private Placement Legend are being acquired for the Holder'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 Notes are 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 RESTRICTED BOOK-ENTRY INTERESTS FOR RESTRICTED DEFINITIVE NOTES OR RESTRICTED BOOK-ENTRY INTERESTS (a) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED BOOK-ENTRY INTERESTS TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Holder's Restricted Book-Entry Interest for Restricted Definitive Notes with an equal principal amount, (i) the Restricted Definitive Notes are being acquired for the Holder'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 Restricted Definitive Notes issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Notes and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTES TO RESTRICTED BOOK-ENTRY INTERESTS. In connection with the Exchange of the Holder's Restricted Definitive Note for Restricted Book-Entry Interests in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global Note with an equal principal amount, (i) the Definitive Notes are being acquired for the Holder's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Definitive Note 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 C-2 consummation of the proposed Exchange in accordance with the terms of the Indenture, the Book-Entry Interests issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ----------------------------------- [Insert Name of Transferor] By: ------------------------------- Name: Title: Dated: ____________, ____ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR L-3 Communications Corporation 600 Third Avenue, 34th Floor, New York, New York 10016 Attention: Vice President-Finance (Fax: 212-805-5470) Re: Senior Subordinated Notes due 2009 ---------------------------------- Reference is hereby made to the Indenture, dated as of March 8, 2002 (the "Indenture"), among L-3 Communications Corporation, as issuer (the "Company"), the Guarantors named therein and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount at maturity of: (a) [ ] Book-Entry Interests, or (b) [ ] Definitive Notes, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144 under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Notes or Book-Entry D-1 Interests from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or Book-Entry Interests, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Notes or Book-Entry Interests therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or Book-Entry Interests purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ----------------------------------- [Insert Name of Accredited Investor] By: -------------------------------- Name: Title: Dated: ____________, ____ D-2 EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTEEING SUBSIDIARY SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of _________________, between ____________________ (the "Guaranteeing Subsidiary"), a subsidiary of L-3 Communications Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of March 8, 2002 providing for the issuance of an aggregate principal amount of up to $500,000,000 of Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 4.13 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) The Guaranteeing Subsidiary, jointly and severally with all other Guaranteeing Subsidiaries, if any, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company under the Indenture or the Notes, that: (i) the principal of, premium and interest on the Notes will be promptly paid in full when due, whether at maturity, by E-1 acceleration, redemption or otherwise, and interest on the overdue principal of, premium and interest on the Notes, to the extent lawful, and all other Obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (b) Notwithstanding the foregoing, in the event that this Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Guaranteeing Subsidiary under this Supplemental Indenture and its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. (a) To evidence its Subsidiary Guarantee set forth in this Supplemental Indenture, the Guaranteeing Subsidiary hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit F to the Indenture shall be endorsed by an officer of such Guaranteeing Subsidiary on each Note authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, the Guaranteeing Subsidiary hereby agrees that its Subsidiary Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. (c) If an Officer whose signature is on this Supplemental Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. (d) The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of the Guaranteeing Subsidiary. (e) The Guaranteeing Subsidiary hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions of the Notes or the Indenture, the recovery of any E-2 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. (f) The Guaranteeing Subsidiary 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 its Subsidiary Guarantee made pursuant to this Supplemental Indenture will not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (g) If any Holder or the Trustee is required by any court or otherwise to return to the Company or the Guaranteeing Subsidiary, or any custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guaranteeing Subsidiary, any amount paid by either to the Trustee or such Holder, the Subsidiary Guarantee made pursuant to this Supplemental Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect. (h) The Guaranteeing Subsidiary agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. The Guaranteeing Subsidiary further agrees that, as between the Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand: (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Subsidiary Guarantee made pursuant to this Supplemental Indenture, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; and (ii) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guaranteeing Subsidiary for the purpose of the Subsidiary Guarantee made pursuant to this Supplemental Indenture. (i) The Guaranteeing Subsidiary shall have the right to seek contribution from any other non-paying Guaranteeing Subsidiary so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Subsidiary Guarantee made pursuant to this Supplemental Indenture. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. E-3 (a) Except as set forth in Articles 4 and 5 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of the Guaranteeing Subsidiary with or into the Company or any other Guaranteeing Subsidiary or shall prevent any transfer, sale or conveyance of the property of the Guaranteeing Subsidiary as an entirety or substantially as an entirety, to the Company or any other Guaranteeing Subsidiary. (b) Except as set forth in Article 4 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of the Guaranteeing Subsidiary with or into a corporation or corporations other than the Company or any other Guaranteeing Subsidiary (in each case, whether or not affiliated with the Guaranteeing Subsidiary), or successive consolidations or mergers in which a Guaranteeing Subsidiary or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of a Guaranteeing Subsidiary as an entirety or substantially as an entirety, to a corporation other than the Company or any other Guaranteeing Subsidiary (in each case, whether or not affiliated with the Guaranteeing Subsidiary) authorized to acquire and operate the same; provided, however, that the Guaranteeing Subsidiary hereby covenants and agrees that (i) subject to the Indenture, upon any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by such Guaranteeing Subsidiary, shall be expressly assumed (in the event that the Guaranteeing Subsidiary is not the surviving corporation in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which the Guaranteeing Subsidiary shall have been merged, or by the corporation which shall have acquired such property and (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists. (c) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee made pursuant to this Supplemental Indenture and the due and punctual performance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by the Guaranteeing Subsidiary, such successor corporation shall succeed to and be substituted for the Guaranteeing Subsidiary with the same effect as if it had been named herein as the Guaranteeing Subsidiary. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary E-4 Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Supplemental Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this Supplemental Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. 5. RELEASES. (a) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of the Guaranteeing Subsidiary), all Liens, if any, in favor of the Trustee in the assets sold thereby shall be released; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. If the assets sold in such sale or other disposition include all or substantially all of the assets of the Guaranteeing Subsidiary or all of the Capital Stock of the Guaranteeing Subsidiary, then the Guaranteeing Subsidiary (in the event of a sale or other disposition of all of the Capital Stock of such Guaranteeing Subsidiary) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guaranteeing Subsidiary) shall be released from and relieved of its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect that such sale or other disposition was made by the Company or the Guaranteeing Subsidiary, as the case may be, in accordance with the provisions of the Indenture and this Supplemental Indenture, including without limitation, Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of the Guaranteeing Subsidiary from its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto. If the Guaranteeing Subsidiary is not released from its obligations under its Subsidiary Guarantee, it shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of such Guaranteeing Subsidiary under the Indenture as provided in this Supplemental Indenture. (b) Upon the designation of a Guaranteeing Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the Supplemental Indenture, such Guaranteeing Subsidiary shall be released and relieved of its obligations under its Subsidiary Guarantee and this Supplemental Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such designation of such Guaranteeing Subsidiary as an Unrestricted Subsidiary was made by the Company in accordance with the provisions of this Supplemental E-5 Indenture, also including without limitation Section 4.07 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guaranteeing Subsidiary from its obligations under its Subsidiary Guarantee. Any Guaranteeing Subsidiary not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guaranteeing Subsidiary under the Indenture as provided in Article 10. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. New York Law To Govern. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws Of The State Of New York. 8. 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. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. E-6 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: ______________, ______ [GUARANTEEING SUBSIDIARY] By: -------------------------- Name: Title: L-3 COMMUNICATIONS CORPORATION By: ----------------------------------- Name: Title: GUARANTORS: HYGIENETICS ENVIROMENTAL SERVICES, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. L-3 COMMUNICATIONS DBS MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD SWITCHGEAR , INC. PAC ORD, INC HENSCHEL, INC. SPD HOLDINGS, INC. POWER PARAGON, INC. L-3 COMMUNICATIONS AYDIN CORPORATION MPRI, INC. ELECTRODYNAMICS, INC. INTERSTATE ELECTRONICS CORPORATION MICRODYNE CORPORATION L-3 COMMUNICATIONS ANALYTICS CORPORATION L-3 COMMUNICATIONS AIS GP CORPORATION L-3 COMMUNICATIONS INVESTMENTS INC. COLEMAN RESEARCH CORPORATION KDI PRECISION PRODUCTS, INC. EER SYSTEMS, INC. as Guarantors E-7 By: ______________________________________ Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P. as Guarantor By: L-3 COMMUNICATIONS AIS GP CORPORATION, as General Partner By: _________________________________ Name: Title: Authorized Person Dated: ______________, ______ THE BANK OF NEW YORK, as Trustee By: ______________________________________ Name: Title: E-8 EXHIBIT F FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE Pursuant to the Indenture (the "Indenture") dated as of March 8, 2002 among L-3 Communications Corporation, the Guarantors named therein and The Bank of New York, as trustee (the "Trustee"), each Guarantor (i) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, and premium, interest and Additional Amounts on the Notes, whether at maturity or an interest payment date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest and Additional Amounts on the Notes, and (c) 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 in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee. Notwithstanding the foregoing, in the event that the Subsidiary Guarantee of any Guarantor would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guarantor under its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. No past, present or future director, officer, employee, agent, incorporator, stockholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantee, the Indenture, any supplemental indenture delivered pursuant to the Indenture by such Guarantor or any Subsidiary Guarantees, 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. This Subsidiary Guarantee shall be binding upon each Guarantor and its successors and assigns 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 Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the meaning assigned to them in the Indenture. 1 HYGIENETICS ENVIROMENTAL SERVICES, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. L-3 COMMUNICATIONS DBS MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD SWITCHGEAR , INC. PAC ORD, INC HENSCHEL, INC. SPD HOLDINGS, INC. POWER PARAGON, INC. L-3 COMMUNICATIONS AYDIN CORPORATION MPRI, INC. ELECTRODYNAMICS, INC. INTERSTATE ELECTRONICS CORPORATION MICRODYNE CORPORATION L-3 COMMUNICATIONS ANALYTICS CORPORATION L-3 COMMUNICATIONS AIS GP CORPORATION L-3 COMMUNICATIONS INVESTMENTS INC. COLEMAN RESEARCH CORPORATION KDI PRECISION PRODUCTS, INC. EER SYSTEMS, INC. as Guarantors By: ______________________________________ Name: Christopher C. Cambria Title: Vice President L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P. as Guarantor By: L-3 COMMUNICATIONS AIS GP CORPORATION, as General Partner By: _________________________________ Name: Title: Authorized Person 2 EX-10.52 11 file010.txt DEBT REGISTRATION RIGHTS AGREEMENT EXECUTION COPY DEBT REGISTRATION RIGHTS AGREEMENT among L-3 COMMUNICATIONS CORPORATION LEHMAN BROTHERS INC. BANC OF AMERICA BRIDGE LLC BANC OF AMERICA SECURITIES LLC CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH THE GUARANTORS listed on the signature pages hereto as Guarantors and LEHMAN COMMERCIAL PAPER INC. Dated as of March 8, 2002 1 DEBT REGISTRATION RIGHTS AGREEMENT This DEBT REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered into as of March 8, 2002, among L-3 Communications Corporation, a Delaware corporation (the "COMPANY"), Lehman Brothers Inc., Banc of America Bridge LLC, Banc of America Securities LLC, Credit Suisse First Boston Corporation (collectively, the "ARRANGERS"), Credit Suisse First Boston, Cayman Islands Branch, the Guarantors listed on signature pages hereto (the "GUARANTORS") and Lehman Commercial Paper Inc., as Administrative Agent ("ADMINISTRATIVE AGENT"). RECITALS This Agreement is made pursuant to the Bridge Loan Agreement, dated as of March 8, 2002 (the "BRIDGE LOAN AGREEMENT"), among the Company, the Guarantors, the Lenders referred to therein (the "LENDERS"), the Arrangers and the Administrative Agent. In order to induce the Lenders to enter into the Bridge Loan Agreement, the Company and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the effectiveness of the Bridge Loan Agreement. AGREEMENT The parties agree as follows: 1. Definitions Capitalized terms used herein without definition have the meanings assigned to them in the Bridge Loan Agreement. As used in this Agreement, the following capitalized terms shall have the following meanings: ADDITIONAL AMOUNTS: See Section 3(b) hereof. ------------ CLOSING DATE: The date of this Agreement. ESCROW AGENT: The Bank of New York, a New York banking corporation, in its capacity as escrow agent pursuant the Escrow Agreement dated as of March 8, 2002, among the Company, Lehman Brothers Inc., Lehman Commercial Paper Inc., Banc of America Bridge LLC, Credit Suisse First Boston Corporation and The Bank of New York, as escrow agent. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE NOTE INDENTURE: The Indenture, dated as of March 8, 2002, among the Company, the Guarantors, as guarantors and The Bank of New York, as trustee, pursuant to which the Exchange Notes are issued, as the same may be amended from time to time in accordance with the terms thereof. EXCHANGE NOTES: The Exchange Notes issued pursuant to the Exchange Note Indenture in the form attached as Exhibit A to the Exchange Note Indenture. 2 LOANS: As defined in the Bridge Loan Agreement. NASD: National Association of Securities Dealers, Inc. PERSON: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. PROSPECTUS: The prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. REGISTRABLE SECURITIES: All Exchange Notes; provided that an Exchange Note ceases to be a Registrable Security when it is no longer a Transfer Restricted Security. REGISTRANTS: The Company and the Guarantors. REGISTRATION DEFAULT: See Section 3(b) hereof. REGISTRATION EXPENSES: See Section 6 hereof. REGISTRATION STATEMENT: Any registration statement of the Registrants which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. RULE 144: Rule 144 promulgated under the Securities Act. SEC: The Securities and Exchange Commission. SECURITIES ACT: The Securities Act of 1933, as amended. SHELF REGISTRATION: See Section 3(a) hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Exchange Note Indenture. TRANSFER RESTRICTED SECURITIES: The Registrable Securities beginning upon original issuance thereof, and with respect to any particular Registrable Security, until such Registrable Security is sold to the public or may be sold or transferred pursuant to Rule 144 under the Securities Act without regard to the volume limitations thereof. UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. Holders of Registrable Securities 3 A Person is deemed to be a holder of Registrable Securities whenever such Person owns, beneficially or otherwise, Registrable Securities. 3. Shelf Registration (a) Filing of Shelf Registration. The Registrants shall use its best efforts to file a "shelf" registration statement on any appropriate form pursuant to Rule 415 (or similar rule that may be adopted by the SEC) under the Securities Act (a "SHELF REGISTRATION") on or prior to the one-year anniversary of the Closing Date (the "FILING DATE") to permit resales of all of the Registrable Securities. The Registrants agree to use all commercially reasonable efforts to cause such Shelf Registration to become effective as promptly as possible after the filing thereof, but in no event later than 120 days after the Filing Date (the "EFFECTIVE DATE"), and thereafter to keep it continuously effective for the period that will terminate upon the earlier of the date on which (1) all the Registrable Securities covered by the Shelf Registration have been sold pursuant to such Shelf Registration or are able to be sold to the public without restriction pursuant to the volume limitation provisions of Rule 144 or any successor rule thereto or (2) no Registrable Securities or Loans remain outstanding. (b) Additional Amounts. If (i) the Registration Statement has not been declared effective by the SEC on or prior to the Effective Date or (ii) the Registration Statement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose at any time within the time period required for effectiveness in subsection (a) above without being succeeded within 5 business days by a post-effective amendment to the Registration Statement that cures such failure and that is itself immediately declared effective or (iii) prior to or on the 45th or 60th day, as the case may be, of any Suspension Period (as defined below), such suspension has not been terminated (each such event referred to in clauses (i), (ii) and (iii), a "REGISTRATION DEFAULT"), the Registrants jointly and severally agree to pay Additional Amounts ("ADDITIONAL AMOUNTS") to each holder of Transfer Restricted Securities with respect to the first 12-week period immediately following the occurrence of such Registration Default, in the form of increased interest of 25 basis points on the principal amount of Transfer Restricted Securities. The amount of the Additional Amounts shall increase by 25 basis points after the first 12-week period until all Registration Defaults have been cured; provided that the Company shall in no event be required to pay Additional Amounts for more than one Registration Default at any given time; provided, further, that in no event shall the Additional Amounts accrue at a rate per year exceeding 0.50% of the principal amount of the Exchange Notes. In addition, unless and until the Company has cured all Registration Defaults, the holders of Transfer Restricted Securities will have the right to "piggy-back" in the registration of any debt or preferred equity securities (subject to customary scale-back provisions) that are registered by the Company pursuant to a registration statement filed subsequent to the time of the Registration Default (other than on a Form S-4) unless all the Exchange Notes will be redeemed or repaid from the proceeds of such securities. Following the cure of all Registration Defaults relating to any particular Registrable Security, the accrual of Additional Amounts with respect to such Registration Default will cease. All obligations of the Registrants 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 have been paid or 4 satisfied in full, provided, however, that the Additional Amounts shall cease to accrue on the day immediately prior to the date such Transfer Restricted Securities cease to be Transfer Restricted Securities. Any holder of Registrable Securities may notify the Exchange Note Indenture trustee (and any paying agent under the Exchange Note Indenture) and the Administrative Agent under the Bridge Loan Agreement immediately after the occurrence of each and every event which pursuant to this Section 3(b) results in the accrual of Additional Amounts with respect to such Registrable Securities. 4. Hold-Back Agreements (a) Restrictions on Public Sale by Holder of Registrable Securities. Each holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement filed pursuant to Section 3 hereof agrees, if requested by the managing underwriters in an underwritten offering, not to effect any public sale or distribution of securities of the Registrants of the same class as the securities included in such Registration Statement, including a sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten registration), during the 10-day period prior to, and during the 90-day period beginning on, the closing date of each underwritten offering made pursuant to such Registration Statement, to the extent timely notified in writing by the Registrants or the managing underwriters; provided, however, that each holder of Registrable Securities shall be subject to the hold-back restrictions of this Section 4(a) only once during the term of this Agreement. The foregoing provisions shall not apply to any holder of Registrable Securities if such holder is prevented by applicable statute or regulation from entering into any such agreement; provided, however, that any such holder shall undertake, in its request to participate in any such underwritten offering, not to effect any public sale or distribution of any Registrable Securities held by such holder and covered by a Registration Statement commencing on the date of sale of the Registrable Securities covered by such Registration Statement unless it has provided 90 days prior written notice of such sale or distribution to the underwriter or underwriters. (b) Restrictions on Sale of Securities by the Registrants and Others. The Registrants agree not to effect any public or private offer, sale or distribution of any of their debt securities or any class or series of their capital stock having a preference in liquidation or with respect to dividends, including a sale pursuant to Regulation D under the Securities Act, during the 10-day period prior to, and during the 90-day period beginning with, the effectiveness of a Registration Statement filed under Section 3 hereof to the extent timely notified in writing by a holder of Registrable Securities or the managing underwriters in an underwritten offering. 5. Registration Procedures In connection with the Registrants' Shelf Registration obligations set forth in Section 3 hereof, each of the Registrants will use all reasonable efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Registrants will, as expeditiously as possible: (a) prepare and file with the SEC, within the time period provided in Section 3 hereof, a Registration Statement or Registration Statements relating to the Shelf Registration on 5 any appropriate form under the Securities Act, which form shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution thereof and shall include or incorporate by reference (i) all financial statements (including, if applicable, financial statements of any Person which shall have guaranteed any indebtedness of the Registrants) required by the SEC to be filed therewith and (ii) if the sale is by means of an underwritten offering, any other information that the managing underwriter(s) may reasonably request to have included therein, including, without limitation: (A) information relating to the "Plan of Distribution" of the Transfer Restricted Securities, (B) information with respect to the principal amount of Exchange Notes being sold to such underwriter(s), (C) the purchase price being paid therefor and (D) any other terms of the offering of the Transfer Restricted Securities to be sold in such offering, cooperate and assist in any filings required to be made with the NASD and in the performance of any 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 all reasonable efforts to cause such Registration Statement to become effective; provided that before filing a Registration Statement or any amendments or supplements thereto, the Registrants will furnish to the holders of the Registrable Securities covered by such Registration Statement and the underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the review by such holders and underwriters, and the Registrants will not file any Registration Statement or any amendments or supplements thereto to which the holders of a majority in aggregate principal amount of such Registrable Securities or such managing underwriters, if any, shall reasonably object within 14 days; (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period, or such shorter period as will terminate when all Registrable Securities covered by such Registration Statement have been sold or are no longer Transfer Restricted Securities; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; comply with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all Registrable 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. Notwithstanding the foregoing, the Registrants may suspend the effectiveness of the Registration Statement by written notice to the holders of Registrable Securities for a period not to exceed an aggregate of 45 days in any 90-day period (each such period, a "Suspension Period") if: (i) an event occurs and is continuing as a result of which the Registration Statement would, in the Registrants' reasonable judgment, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (ii) the Registrants reasonably determine that the disclosure of such event at such time would have a material adverse effect on the business of the Registrants (and their subsidiaries, if any, taken as a whole); 6 provided, however, that in the event the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede the Registrants' ability to consummate such transaction, the Registrants may extend a Suspension Period from 45 days to 60 days; provided, however, that Suspension Periods shall not exceed an aggregate of 90 days in any 360-day period; (c) notify the selling holders of Registrable Securities and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such advice in writing, (1) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (3) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (4) if at any time the representations and warranties of the Registrants contemplated by paragraph (o) below cease to be true and correct, (5) of the receipt by the Registrants of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (6) of the happening of any event or the existence of any fact which makes any statement made in the Registration Statement, the Prospectus or any document incorporated therein by reference untrue or which requires the making of any changes in the Registration Statement, the Prospectus or any document incorporated therein by reference in order to make the statements therein 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 Registrants shall use their reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment; (e) if reasonably requested by the managing underwriter or underwriters or a holder of Registrable Securities being sold in connection with an underwritten offering, promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters or the holders of a majority in aggregate principal amount of the Registrable Securities being sold agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, including, without limitation, information with respect to the principal amount of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment promptly following notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (f) furnish to each selling holder of Registrable Securities and each managing underwriter, if any, without charge, if requested, at least one signed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and 7 schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (g) deliver to each selling holder of Registrable Securities and the underwriters, if any, without charge, if requested, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Registrants consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (h) prior to any public offering of Registrable Securities, register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such seller or underwriter reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities; provided that the Registrants will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject or would subject the Registrants to taxation in any jurisdiction if they are not now so subject; (i) cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing such Registrable Securities to be sold and not bearing any restrictive legends (unless required by applicable securities laws); and enable such Registrable Securities to be in such denominations and registered in such names as such managing underwriters may request at least two business days prior to any sale of such Registrable Securities to the underwriters; (j) use all reasonable efforts to cause the Registrable Securities covered by the applicable 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 underwriters, if any, to consummate the disposition of such Registrable Securities; (k) subject to Section 5(b) hereof, upon the occurrence of any event contemplated by paragraph (c)(6) above, use all reasonable efforts to prepare a supplement or post-effective amendment to the related Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the holders of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (l) use their reasonable best efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which similar securities issued by the Registrants are then listed; 8 (m) cause the Registrable Securities covered by a Registration Statement to be rated with such rating agencies as the holders of a majority in aggregate principal amount of such Registrable Securities or the managing underwriters, if any, may designate; (n) not later than the effective date of the Shelf Registration, provide a CUSIP number for all Registrable Securities and provide the Exchange Note Indenture trustee or transfer agent with printed certificates for the Registrable Securities which are in a form eligible for deposit with The Depository Trust Company; (o) enter into such agreements (including an underwriting agreement) and take all such other actions in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration (1) make such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (2) obtain opinions of counsel to the Registrants and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of such Registrable Securities) addressed to each selling holder and the underwriters, if any, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such holders and underwriters; (3) obtain "comfort" letters and updates thereof from the Registrants' independent certified public accountants addressed to such holders and underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "comfort" letters by underwriters in connection with primary underwritten offerings; (4) if an underwriting agreement is entered into, the same shall set forth in full the indemnification provisions and procedures of Section 7 hereof with respect to all parties to be indemnified pursuant to Section 7; and (5) deliver such documents and certificates as may be requested by the holders of a majority of the Registrable Securities being sold and the managing underwriters, if any, to evidence compliance with clause (k) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Registrants. The above shall be done at each closing under such underwriting or similar agreement or as and to the extent required thereunder; (p) make available at reasonable times for inspection by one or more representatives of the selling holders of Registrable Securities, designated in writing by a majority of such selling holders, any underwriter participating in any distribution of such Registrable Securities pursuant to a Shelf Registration, and any attorney or accountant retained by such selling holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Registrants as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the Registrant's officers, directors, managers and employees to supply all information reasonably requested by any such representative or representatives of the selling holders, underwriter, attorney or accountant in connection with the Shelf Registration after the filing thereof and before its effectiveness; provided, however, that any information designated by the Registrants as confidential at the time of delivery of such information shall be kept confidential by the recipient thereof; provided further, that in no event shall the Registrants be required to furnish any material nonpublic information pursuant to this subsection (p). 9 (q) otherwise use their best efforts to comply with all applicable rules and regulations of the SEC; (r) cause the Exchange Note Indenture to be qualified under the TIA, provide an indenture trustee for each of the Registrable Securities not later than the effective date of the Shelf Registration, and in connection therewith, cooperate with the trustee under the Exchange Note Indenture and the holders of the Exchange Notes to effect such changes to the Exchange Note Indenture as may be required for the Exchange Note Indenture to be so qualified in accordance with the terms of the TIA and execute, and use all reasonable efforts to cause such trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Exchange Note Indenture to be so qualified in a timely manner; and (s) if reasonably requested by the underwriters, make appropriate officers of the Registrants reasonably available to the underwriters for meetings with prospective purchasers of the Registrable Securities and prepare and present to potential investors "roadshow" material in a manner consistent with other new issuances of high yield debt securities. The Registrants may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Registrants such information regarding the distribution of such securities as the Registrants may from time to time reasonably request in writing. Each holder of Registrable Securities agrees by acceptance of such Registrable Securities that, upon receipt of any notice from the Registrants of the happening of any event of the kind contemplated by Section 5(c)(6) hereof, such holder will and will use its reasonable best efforts to cause any underwriter to forthwith discontinue disposition of Registrable Securities until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until such holder is advised in writing (the "Advice") by the Registrants that the use of such Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in such Prospectus, and, if so directed by the Registrants, such holder will deliver to the Registrants (at the Registrants' expense) all copies, other than permanent file copies then in such holder's possession, of such Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Registrants shall give any such notice, the time periods regarding the maintenance of the Shelf Registration and the filing and maintenance of the Shelf Registration in Section 3 hereof 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 5(c)(6) hereof to and including the date when each seller of Registrable Securities covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or the Advice. 6. Registration Expenses (a) All expenses incident to the Registrants' performance of or compliance with this Agreement, including without limitation all (i) registration and filing fees, fees and expenses associated with filings required to be made with the NASD (including, if applicable, the fees and expenses of any "qualified independent underwriter" and their counsel as may be required by the 10 rules and regulations of the NASD), (ii) fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel for the underwriters or selling holders in connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or holders of a majority in aggregate principal amount of the Registrable Securities being sold may designate), (iii) printing expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses), messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Registrants and for the sellers of the Registrable Securities (subject to the provisions of Section 6(b) hereof), of all independent certified public accountants (including the expenses of any special audit and "comfort" letters required by or incident to such performance), (v) the cost of securities acts liability insurance if the Registrants so desires, (vi) "roadshow" travel and other expenses incurred in connection with the marketing and sale of the Registrable Securities, (vii) fees and expenses in connection with the rating of the Registrable Securities by rating agencies, if any, and (viii) fees and expenses of other Persons retained by the Registrants (all such expenses being herein called "REGISTRATION EXPENSES") will be borne by the Registrants, regardless of whether the Registration Statement becomes effective. The Registrants, in any event, will pay their own internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Registrants are then listed, rating agency fees and the fees and expenses of any Person, including special experts, retained by the Registrants. (b) In connection with the Shelf Registration hereunder, the Registrants will reimburse the selling holders of Registrable Securities being registered in such registration for the reasonable fees and disbursements not to exceed the amount of $50,000 of not more than one law firm, which shall be Latham & Watkins, or such other counsel as may be chosen by the selling holders of a majority in principal amount of such Registrable Securities. 7. Indemnification (a) Indemnification by the Registrants. The Registrants jointly and severally agree to indemnify and hold harmless, to the full extent permitted by law, each holder of Registrable Securities, their officers, directors and employees and each Person who controls such holder (within the meaning of the Securities Act) (the "INDEMNIFIED PARTIES") against all losses, claims, damages, liabilities and expenses incurred by such party in connection with any actual or threatened action arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus 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, and the Registrants agree to reimburse such Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss or action or proceeding in respect thereof, except insofar as the same arise out of or are based upon any such untrue statement or omission made in reliance on and in conformity with any information furnished in writing to the Registrants by such holder or its counsel expressly for use therein or out of the failure by the Indemnified Parties to furnish to any purchaser of Registrable Securities of the Prospectus and any 11 supplement or amendment thereto in the form provided to such Indemnified Parties by the Registrants. The Registrants shall also indemnify underwriters, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Indemnified Parties, if requested. (b) Indemnification by Holder of Registrable Securities. In connection with the Shelf Registration, each holder of Registrable Securities will furnish to the Registrants in writing such information and affidavits as the Registrants reasonably request for use in connection with any Registration Statement or Prospectus and agrees to indemnify and hold harmless, to the full extent permitted by law, the Registrants, their directors and officers and each Person who controls the Registrants (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of a material fact contained in any Registration Statement or Prospectus or any omission of a material fact required to be stated in the Registration Statement or Prospectus or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, to the extent, but only to the extent, that such untrue statement or omission relates to such holder and is made in reliance on and in conformity with any information or affidavit furnished in writing by such holder to the Registrants specifically for inclusion in such Registration Statement or Prospectus. In no event shall the liability of any selling holder of Registrable Securities hereunder be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. The Registrants shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution of such Registrable Securities to the same extent above with respect to information or affidavit furnished writing by such Persons as provided specifically for any Prospectus or Registration Statement. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (i) give prompt written notice to the Registrants or holder of Registrable Securities, as the case may be (in either case, as applicable, an "INDEMNIFYING PARTY"), of any claim with respect to which it seeks indemnification and (ii) permit such Indemnifying Party to assume the defense of such claim with counsel reasonably satisfactory to such Person; provided, however, that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (a) the Indemnifying Party has agreed to pay such fees or expenses, (b) the Indemnifying Party has failed to assume the defense of such claim or (c) if holders of 50% in aggregate principal amount of Registrable Securities shall have reasonably concluded that there may be one or more legal defenses available to them and their respective officers, employees and controlling persons that are different from or additional to those available to the Registrants and any of their respective directors, officers, employees and controlling persons. If such defense is not assumed by the Indemnifying Party, the Indemnifying Party will not be subject to any liability for any settlement made without its prior written consent (but such consent will not be unreasonably withheld). No Indemnifying Party will consent to entry of any judgment or enter into any settlement without the consent of the Indemnified Party which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party a release from all liability in respect to such claim or litigation. 12 (d) Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to a Person entitled to indemnification or is insufficient to hold it harmless as contemplated by the preceding paragraphs (a) and (b), then the Indemnifying Party shall contribute to the amount paid or payable by such Person as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of such Person and the Indemnifying Party, as well as any other relevant equitable considerations, provided that no holder of Registrable Securities shall be required to contribute an amount greater than the dollar amount of the proceeds received by such holder of Registrable Securities with respect to the sale of any securities. The relative fault 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 Indemnifying Party or the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the first sentence of this paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 8. Rule 144. The Registrants covenant that they will file the reports required to be filed by them under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if any of them is not required to file such reports, the applicable party will, upon the written request of any holder of Registrable Securities made after the two year anniversary of the making of the Loans, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 under the Securities Act), and they will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the written request of any holder of Registrable Securities, the Registrants will deliver to such holder a written statement as to whether they have complied with such information and filing requirements. 9. CUSIP Number. Prior to the one-year anniversary of the Closing Date and the issuance of the Exchange Notes, the Company agrees to obtain a CUSIP number for the Exchange Notes, and to notify the Escrow Agent of the same for addition to the Exchange Notes. 10. Selection of Underwriters. The holders of Transfer Restricted Securities covered by the Shelf Registration who desire to do so may sell such Transfer Restricted Securities in an underwritten offering. In any such underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by a majority of holders whose Transfer Restricted Securities are included in such offering; provided, however, that such investment bankers and managers must be reasonably satisfactory to the Company. 11. Miscellaneous 13 (a) Remedies. Each holder of Registrable Securities in addition to being entitled to exercise all rights provided herein, in the Exchange Note Indenture or granted by law, including recovery of damages, in connection with the breach by the Registrants of their obligations to register the Registrable Securities will be entitled to specific performance of its rights under this Agreement. The Registrants agree that monetary damages (including the Additional Amounts contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by any of them of the provisions of this Agreement and each agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Registrants will not on or after the date of this Agreement enter into any Agreement, with respect to their securities which (i) interferes with the rights granted to the holders of Transfer Restricted Securities in this Agreement, (ii) grants to the holders of any securities issued or to be issued by the Company the right to participate in any registration of Registrable Securities pursuant to this Agreement or (iii) otherwise conflicts with the provisions hereof. The rights granted to the holders of Registrable Securities hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Registrants' respective securities under any other agreements. (c) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions of this Agreement may not be given unless the Registrants have obtained the written consent of holders of at least a majority of the principal amount of (x) the outstanding Registrable Securities and (y) the outstanding Loans (excluding Registrable Securities held by the Company, the Guarantors or one of their respective affiliates); provided that provisions hereunder relating to Additional Amounts and the payment thereof may not be amended, modified or supplemented, and waivers or consents to departures from such provisions may not be given unless the Registrants have obtained the written consent of holders of at least 66-2/3% of the principal amount of (x) the outstanding Registrable Securities and (y) the outstanding Loans (excluding Registrable Securities held by the Company, the Guarantors or one of their respective affiliates). (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, facsimile or air courier guaranteeing overnight delivery: (i) if to a holder of Registrable Securities, at the most current address given by such holder to the Registrants in accordance with the provisions of this Section 9(d), which address initially is, with respect to the Administrative Agent to it at the address set forth in the Bridge Loan Agreement, with a copy to: Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attn: Kirk A. Davenport II Facsimile No.: (212) 751-4864 14 (ii) if to the Registrants, initially to them at the address set forth in the Bridge Loan Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 9(d), with copies to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY, 10017 Attention: Vincent Pagano Jr. Facsimile No.: 212-455-2502 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 answered back, if delivered by facsimile; 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 under the Exchange Note Indenture at the address specified in the Exchange Note Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including without limitation and without the need for an express assignment, all subsequent holders of Registrable Securities or Loans. (f) 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. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) New York Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY 15 JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. (i) 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 in any jurisdiction, the validity, legality and enforceability of any such provision in such Jurisdiction in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement with respect to the subject matter contained herein 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 by the Registrants with respect to the securities sold pursuant to the Bridge Loan Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 16 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. L-3 COMMUNICATIONS CORPORATION, as the Company By:_______________________________ Name: Christopher C. Cambria Title: Senior Vice President, Secretary and General Counsel COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL, INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION L-3 COMMUNICATIONS ANALYTICS CORPORATION L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. KDI PRECISION PRODUCTS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD, INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD HOLDINGS, INC. SPD ELECTRICAL SYSTEMS, INC. SPD SWITCHGEAR, INC. L-3 COMMUNICATIONS AIS GP CORPORATION L-3 COMMUNICATIONS INVESTMENTS, INC. By: ______________________________________ Name: Christopher C. Cambria Title: Vice President 17 L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P. By: L-3 Communications AIS GP Corporation, as general partner By: ______________________________________ Name: Title: Authorized Person 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. LEHMAN BROTHERS INC. By: ------------------------------------- Name: Title: BANK OF AMERICA BRIDGE LLC By: ------------------------------------- Name: Title: BANK OF AMERICA SECURITIES LLC By: ------------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON CORPORATION By: ------------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH By: ------------------------------------- Name: Title: LEHMAN COMMERCIAL PAPER INC., as Administrative Agent By: ------------------------------------- Name: Title: 19 EX-10.54 12 file011.txt DELIVERED BY GUARANTORS SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of November 9, 2001, among Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Corporation, a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation, (each, a "Guarantor," and collectively, the "Guarantors"), each an indirect subsidiary of L-3 Communications Holdings, Inc. (or its permitted successor), a Delaware corporation (the "Company"), the Company and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of November 21, 2000 providing for the issuance of an aggregate principal amount of up to $300,000,000 of 5 1/4% Convertible Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guarantors shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guarantors shall unconditionally guarantee all of the Company"s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Guarantee"); and WHEREAS, pursuant to Section 14.7 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 Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 2 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. Each Guarantor hereby agrees as follows: (a) Each Guarantor, jointly and severally with all other current and future guarantors of the Notes (collectively, the "Guaranteeing Subsidiaries" and each, a "Guaranteeing Subsidiary"), unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company under the Indenture or the Notes, that: (i) the principal of, premium, interest and additional amounts, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, interest and Liquidated Damages, if any, on the Notes, to the extent lawful, and all other Obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (b) Notwithstanding the foregoing, in the event that this Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of each Guarantor under this Supplemental Indenture and its Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. EXECUTION AND DELIVERY OF GUARANTEES. (a) To evidence its Guarantee set forth in this Supplemental Indenture, each Guarantor hereby agrees that a notation of such Guarantee, the form of which is included in the Form of Security attached as Exhibit A to the Indenture, shall be endorsed by an officer of such Guarantor on each Note authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, each Guarantor hereby agrees that its Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. 3 (c) If an Officer whose signature is on this Supplemental 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. (d) The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Guarantee set forth in this Supplemental Indenture on behalf of each Guarantor. (e) Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions of the Notes or the Indenture, 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. (f) 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 its Guarantee made pursuant to this Supplemental Indenture will not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (g) If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guarantor, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or such Guarantor, any amount paid by either to the Trustee or such Holder, the Guarantee made pursuant to this Supplemental Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect. (h) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand: (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 4 of the Indenture for the purposes of the Guarantee made pursuant to this Supplemental Indenture, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; 4 (ii) in the event of any declaration of acceleration of such obligations as provided in Article 4 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of the Guarantee made pursuant to this Supplemental Indenture; and (iii) each Guarantor shall have the right to seek contribution from any other non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Guarantee made pursuant to this Supplemental Indenture. 4. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Except as set forth in Articles 6 and 9 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent (a) any consolidation or merger of any Guarantor with or into the Company or any other Guaranteeing Subsidiary, (b) any transfer, sale or conveyance of the property of any Guarantor as an entirety or substantially as an entirety, to the Company or any other Guaranteeing Subsidiary or (c) any merger of a Guarantor with or into an Affiliate of that Guarantor in another State of the United States so long as the amount of Indebtedness of the Company and the domestic non-Guarantor subsidiaries is not increased thereby. (b) Except as set forth in Article 9 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guarantor with or into a corporation or corporations other than the Company or any other Guaranteeing Subsidiary (in each case, whether or not affiliated with the Guarantor), or successive consolidations or mergers in which a Guarantor or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of any Guarantor as an entirety or substantially as an entirety, to a corporation other than the Company or any other Guaranteeing Subsidiary (in each case, whether or not affiliated with the Guarantor) authorized to acquire and operate the same; provided, however, that each Guarantor hereby covenants and agrees that (i) subject to the Indenture, upon any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by such Guarantor, shall be expressly assumed (in the event that such Guarantor is not the surviving corporation in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which such Guarantor shall have been merged, or by the corporation which shall have acquired such property, (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists, and (iii) such transaction will only be 5 permitted under the Indenture and this Supplemental Indenture if it would be permitted under the terms of all of the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of these notes continue to be outstanding). (c) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee made pursuant to this Supplemental Indenture and the due and punctual performance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by each Guarantor, such successor corporation shall succeed to and be substituted for such Guarantor with the same effect as if it had been named herein as one of the Guarantors. Such successor corporation thereupon may cause to be signed any or all of the Guarantees to be endorsed upon the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Supplemental Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this Supplemental Indenture as though all of such Guarantees had been issued at the date of the execution hereof. 5. RELEASES. (a) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of a Guarantor), all Liens, if any, in favor of the Trustee in the assets sold thereby shall be released. If the assets sold in such sale or other disposition include all or substantially all of the assets of a Guarantor or all of the Capital Stock of a Guarantor, then the Guarantor (in the event of a sale or other disposition of all of the Capital Stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released from and relieved of its obligations under this Supplemental Indenture and its Guarantee made pursuant hereto. Upon delivery by the Company to the Trustee of an Officers" Certificate to the effect that such sale or other disposition was made by the Company or the Guarantor, as the case may be, in accordance with the provisions of the Indenture and this Supplemental Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of the Guarantor from its obligations under this Supplemental Indenture and its Guarantee made pursuant hereto. If the Guarantor is not released from its obligations under its Guarantee, it shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of such Guarantor under the Indenture as provided in this Supplemental Indenture. 6 (b) Upon the designation of a Guarantor as an Excluded Subsidiary in accordance with the terms of the Indenture and the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of those notes continue to be outstanding), such Guarantor shall be released and relieved of its obligations under the Indenture and this Supplemental Indenture. Upon delivery by the Company to the Trustee of an Officers" Certificate and an Opinion of Counsel to the effect that such designation of such Guarantor as an Excluded Subsidiary was made by the Company in accordance with the provisions of the Indenture and the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified, terminated or expired and whether or not any of those notes continue to be outstanding), the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its obligations under its Guarantee. Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided herein. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder 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 of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. SUBORDINATION OF GUARANTEES; ANTI-LAYERING. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to any of the Guarantees. Notwithstanding the foregoing sentence, the Guarantee of each Guarantor shall be subordinated to the prior payment in full of all Senior Debt of that Guarantor, which shall include all guarantees of Senior Debt. 8. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 9. 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. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 7 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guarantors and the Company. 8 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: November 9, 2001 L-3 COMMUNICATIONS HOLDINGS, INC. By: ______________________________________ Name: Title: COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS CORPORATION L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ______________________________________ Name: Title: 9 Dated: November 9, 2001 THE BANK OF NEW YORK as Trustee By: ______________________________________ Name: Title: NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO GUARANTEE Pursuant to the Supplemental Indenture (the "Supplemental Indenture") dated as of November 9, 2001 among L-3 Communications Holdings, Inc., a Delaware corporation, Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Corporation, a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation, and The Bank of New York, each Guarantor (i) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, and premium, interest and Liquidated Damages on the Notes, whether at maturity or an interest payment date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest and Liquidated Damages on the Notes, and (c) 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 in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and all costs and expenses (including reasonable attorneys" fees) incurred by the Trustee or any Holder in enforcing any rights under this Guarantee. Notwithstanding the foregoing, in the event that the Guarantee of any Guarantor would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guarantor under its Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. No past, present or future director, officer, employee, agent, incorporator, stockholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Guarantee, the Indenture, any supplemental indenture delivered pursuant to the Indenture by such Guarantor or any Guarantees, 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. This Guarantee shall be binding upon each Guarantor and its successors and assigns 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 Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guarantee is noted have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the meaning assigned to them in the Indenture. COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ______________________________________ Name: Title: EX-10.55 13 file012.txt DELIVERED BY GUARANTORS SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of November 9, 2001, among Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Corporation, a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation, (each, a "Guarantor," and collectively, the "Guarantors"), each a subsidiary of L-3 Communications Holdings, Inc. (or its permitted successor), a Delaware corporation (the "Company"), the Company and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as October 24, 2001 providing for the issuance of an aggregate principal amount of up to $420,000,000 of 4.00% Senior Subordinated Convertible Contingent Debt Securities (CODES) due 2011 (the "Securities"); WHEREAS, the Indenture provides that under certain circumstances the Guarantors shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guarantors shall unconditionally guarantee all of the Company"s Obligations under the Securities and the Indenture on the terms and conditions set forth herein (the "Guarantee"); and WHEREAS, pursuant to Section 14.7 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 Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows: 2 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. Each Guarantor hereby agrees as follows: (a) Each Guarantor, jointly and severally with all other current and future guarantors of the Securities (collectively, the "Guaranteeing Subsidiaries" and each, a "Guaranteeing Subsidiary"), unconditionally guarantees to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Securities or the Obligations of the Company under the Indenture or the Securities, that: (i) the principal of, premium, interest (including Contingent Interest, if any) and Additional Amounts, if any, on the Securities will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, interest (including Contingent Interest, if any) and Additional Amounts, if any, on the Securities, to the extent lawful, and all other Obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Securities or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (b) Notwithstanding the foregoing, in the event that this Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of each Guarantor under this Supplemental Indenture and its Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. EXECUTION AND DELIVERY OF GUARANTEES. (a) To evidence its Guarantee set forth in this Supplemental Indenture, each Guarantor hereby agrees that a notation of such Guarantee, substantially in the form included as Exhibit B to the Indenture, shall be endorsed by an Officer of such Guarantor on each Security authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, each Guarantor hereby agrees that its Guarantee set forth herein shall remain in full force and effect 3 notwithstanding any failure to endorse on each Security a notation of such Guarantee. (c) If an Officer whose signature is on this Supplemental Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Security on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. (d) The delivery of any Security by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Guarantee set forth in this Supplemental Indenture on behalf of each Guarantor. (e) Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Securities or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions of the Securities or the Indenture, 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. (f) 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 its Guarantee made pursuant to this Supplemental Indenture will not be discharged except by complete performance of the obligations contained in the Securities and the Indenture. (g) If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guarantor, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or such Guarantor, any amount paid by either to the Trustee or such Holder, the Guarantee made pursuant to this Supplemental Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect. (h) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand: (i) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 4 of the Indenture for the purposes of the Guarantee made pursuant to this Supplemental Indenture, notwithstanding any stay, injunction or other prohibition 4 preventing such acceleration in respect of the Obligations guaranteed hereby; (ii) in the event of any declaration of acceleration of such Obligations as provided in Article 4 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of the Guarantee made pursuant to this Supplemental Indenture; and (iii) each Guarantor shall have the right to seek contribution from any other non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Guarantee made pursuant to this Supplemental Indenture. 4. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Except as set forth in Articles 6 and 9 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Securities shall prevent (a) any consolidation or merger of any Guarantor with or into the Company or any Guaranteeing Subsidiary, (b) any transfer, sale or conveyance of the property of any Guarantor as an entirety or substantially as an entirety, to the Company or any other Guaranteeing Subsidiary or (c) any merger of a Guarantor with or into an Affiliate of that Guarantor in another State of the United States so long as the amount of Indebtedness of the Company and the domestic non-Guarantor subsidiaries is not increased thereby. (b) Except as set forth in Article 9 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Securities shall prevent any consolidation or merger of any Guarantor with or into a corporation or corporations other than the Company or any other Guaranteeing Subsidiary (in each case, whether or not affiliated with the Guarantor), or successive consolidations or mergers in which a Guarantor or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of any Guarantor as an entirety or substantially as an entirety, to a corporation other than the Company or any other Guaranteeing Subsidiary (in each case, whether or not affiliated with the Guarantor) authorized to acquire and operate the same; provided, however, that each Guarantor hereby covenants and agrees that (i) subject to the Indenture, upon any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by such Guarantor, shall be expressly assumed (in the event that such Guarantor is not the surviving corporation in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which such Guarantor shall have been merged, or by the 5 corporation which shall have acquired such property, (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists, and (iii) such transaction will only be permitted under the Indenture and this Supplemental Indenture if it would be permitted under the terms of all of the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of these Securities continue to be outstanding). (c) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee made pursuant to this Supplemental Indenture and the due and punctual performance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by each Guarantor, such successor corporation shall succeed to and be substituted for such Guarantor with the same effect as if it had been named herein as one of the Guarantors. Such successor corporation thereupon may cause to be signed any or all of the Guarantees to be endorsed upon the Securities issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Supplemental Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this Supplemental Indenture as though all of such Guarantees had been issued at the date of the execution hereof. 5. RELEASES. (a) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of a Guarantor), all Liens, if any, in favor of the Trustee in the assets sold thereby shall be released. If the assets sold in such sale or other disposition include all or substantially all of the assets of a Guarantor or all of the Capital Stock of a Guarantor, then the Guarantor (in the event of a sale or other disposition of all of the Capital Stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released from and relieved of its obligations under this Supplemental Indenture and its Guarantee made pursuant hereto. Upon delivery by the Company to the Trustee of an Officers" Certificate to the effect that such sale or other disposition was made by the Company or the Guarantor, as the case may be, in accordance with the provisions of the Indenture and this Supplemental Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of the Guarantor from its obligations under this Supplemental Indenture and its Guarantee made 6 pursuant hereto. If the Guarantor is not released from its obligations under its Guarantee, it shall remain liable for the full amount of principal of and interest (including Contingent Interest, if any) and Additional Amounts, if any, on the Securities and for the other obligations of such Guarantor under the Indenture as provided herein. (b) Upon the designation of a Guarantor as an Excluded Subsidiary in accordance with the terms of the Indenture and the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified or terminated or expire and whether or not any of those Securities continue to be outstanding), such Guarantor shall be released and relieved of its obligations under the Indenture and this Supplemental Indenture. Upon delivery by the Company to the Trustee of an Officers" Certificate and an Opinion of Counsel to the effect that such designation of such Guarantor as an Excluded Subsidiary was made by the Company in accordance with the provisions of the Indenture and the indentures governing the Outstanding Senior Subordinated Notes as the same are in effect on the date hereof (whether or not those indentures are subsequently amended, waived, modified, terminated or expire and whether or not any of those Securities continue to be outstanding), the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its obligations under its Guarantee. Any Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Securities and for the other obligations of any Guarantor under the Indenture as provided herein. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Securities, 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 of the Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Securities and Exchange Commission that such a waiver is against public policy. 7. SUBORDINATION OF GUARANTEES; ANTI-LAYERING. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of a Guarantor and senior in any respect in right of payment to any of the Guarantees. Notwithstanding the foregoing sentence, the Guarantee of each Guarantor shall be subordinated to the prior payment in full of all Senior Debt of that Guarantor (in the same manner and to the same extent that the Securities are subordinated to Senior Debt), which shall include all guarantees of Senior Debt. 7 8. THIS SUPPLEMENTAL INDENTURE, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 9. 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. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guarantors and the Company. 8 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: November 9, 2001 L-3 COMMUNICATIONS HOLDINGS, INC. By: ______________________________________ Name: Title: COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS CORPORATION L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ______________________________________ Name: Title: 9 Dated: November 9, 2001 THE BANK OF NEW YORK as Trustee By: ______________________________________ Name: Title: NOTATION ON SENIOR SUBORDINATED CONVERTIBLE CONTINGENT DEBT SECURITY RELATING TO GUARANTEE Pursuant to the Supplemental Indenture (the "Supplemental Indenture") dated as of November 9, 2001 among L-3 Communications Holdings, Inc., a Delaware corporation, Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Corporation, a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation, and The Bank of New York, each Guarantor (i) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, and premium, interest (including Contingent Interest, if any) and Additional Amounts, if any, on the Security, whether at maturity or an interest payment date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest (including Contingent Interest, if any) and Additional Amounts, if any, on the Security, and (c) in case of any extension of time of payment or renewal of any Security or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and all costs and expenses (including reasonable attorneys" fees) incurred by the Trustee or any Holder in enforcing any rights under this Guarantee. Notwithstanding the foregoing, in the event that the Guarantee of any Guarantor would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guarantor under its Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. No past, present or future director, officer, employee, agent, incorporator, stockholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Security, any Guarantee, the Indenture, any supplemental indenture delivered pursuant to the Indenture by such Guarantor or any Guarantees, or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. This Guarantee shall be binding upon each Guarantor and its successors and assigns 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 Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Security upon which this Guarantee is noted have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the meaning assigned to them in the Indenture. COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS CORPORATION L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ______________________________________ Name: Title: EX-10.56 14 file013.txt DELIVERED BY GUARANTEEING SUBSIDIARIES SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTEEING SUBSIDIARIES SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of November 9, 2001, among Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation (each, a "Guaranteeing Subsidiary," and collectively, the "Guaranteeing Subsidiaries"), each a subsidiary of L-3 Communications Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H: WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of December 11, 1998 providing for the issuance of an aggregate principal amount of up to $300,000,000 of 8% Senior Subordinated Notes due 2008 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company"s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 4.13 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 2 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees as follows: (a) Each Guaranteeing Subsidiary, jointly and severally with all other current and future guarantors of the Notes (collectively, the "Guarantors" and each, a "Guarantor"), unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company under the Indenture or the Notes, that: (i) the principal of, premium and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium and interest on the Notes, to the extent lawful, and all other Obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (b) Notwithstanding the foregoing, in the event that this Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of each Guaranteeing Subsidiary under this Supplemental Indenture and its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. (a) To evidence its Subsidiary Guarantee set forth in this Supplemental Indenture, each Guaranteeing Subsidiary hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit F to the Indenture shall be endorsed by an officer of such Guaranteeing Subsidiary on each Note authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, each Guaranteeing Subsidiary hereby agrees that its Subsidiary Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 3 (c) If an Officer whose signature is on this Supplemental Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. (d) The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of each Guaranteeing Subsidiary. (e) Each Guaranteeing Subsidiary hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions of the Notes or the Indenture, 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. (f) Each Guaranteeing Subsidiary 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 its Subsidiary Guarantee made pursuant to this Supplemental Indenture will not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (g) If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guaranteeing Subsidiary, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or such Guaranteeing Subsidiary, any amount paid by either to the Trustee or such Holder, the Subsidiary Guarantee made pursuant to this Supplemental Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect. (h) Each Guaranteeing Subsidiary agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guaranteeing Subsidiary further agrees that, as between such Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand: (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Subsidiary Guarantee made pursuant to this Supplemental Indenture, notwithstanding any stay, injunction or 4 other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; and (ii) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by such Guaranteeing Subsidiary for the purpose of the Subsidiary Guarantee made pursuant to this Supplemental Indenture. (i) Each Guaranteeing Subsidiary shall have the right to seek contribution from any other non-paying Guaranteeing Subsidiary so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Subsidiary Guarantee made pursuant to this Supplemental Indenture. 4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Except as set forth in Articles 4 and 5 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into the Company or any other Guarantor or shall prevent any transfer, sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to the Company or any other Guarantor. (b) Except as set forth in Article 4 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into a corporation or corporations other than the Company or any other Guarantor (in each case, whether or not affiliated with such Guaranteeing Subsidiary), or successive consolidations or mergers in which a Guaranteeing Subsidiary or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to a corporation other than the Company or any other Guarantor (in each case, whether or not affiliated with such Guaranteeing Subsidiary) authorized to acquire and operate the same; provided, however, that each Guaranteeing Subsidiary hereby covenants and agrees that (i) subject to the Indenture, upon any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by such Guaranteeing Subsidiary, shall be expressly assumed (in the event that such Guaranteeing Subsidiary is not the surviving corporation in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which such Guaranteeing Subsidiary shall have been merged, or by the corporation which shall have acquired 5 such property and (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists. (c) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee made pursuant to this Supplemental Indenture and the due and punctual performance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by each Guaranteeing Subsidiary, such successor corporation shall succeed to and be substituted for such Guaranteeing Subsidiary with the same effect as if it had been named herein as the Guaranteeing Subsidiary. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Supplemental Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this Supplemental Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. 5. RELEASES. (a) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of a Guaranteeing Subsidiary), all Liens, if any, in favor of the Trustee in the assets sold thereby shall be released; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. If the assets sold in such sale or other disposition include all or substantially all of the assets of a Guaranteeing Subsidiary or all of the Capital Stock of a Guaranteeing Subsidiary, then the Guaranteeing Subsidiary (in the event of a sale or other disposition of all of the Capital Stock of such Guaranteeing Subsidiary) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guaranteeing Subsidiary) shall be released from and relieved of its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect that such sale or other disposition was made by the Company or the Guaranteeing Subsidiary, as the case may be, in accordance with the provisions of the Indenture and this Supplemental Indenture, including without limitation, Section 4.10 of the Indenture, the Trustee shall execute 6 any documents reasonably required in order to evidence the release of the Guaranteeing Subsidiary from its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto. If the Guaranteeing Subsidiary is not released from its obligations under its Subsidiary Guarantee, it shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of such Guaranteeing Subsidiary under the Indenture as provided in this Supplemental Indenture. (b) Upon the designation of a Guaranteeing Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the Indenture, such Guaranteeing Subsidiary shall be released and relieved of its obligations under its Subsidiary Guarantee and this Supplemental Indenture. Upon delivery by the Company to the Trustee of an Officers" Certificate and an Opinion of Counsel to the effect that such designation of such Guaranteeing Subsidiary as an Unrestricted Subsidiary was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.07 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guaranteeing Subsidiary from its obligations under its Subsidiary Guarantee. Any Guaranteeing Subsidiary not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guaranteeing Subsidiary under the Indenture as provided herein. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of any Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 8. 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. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 7 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. 8 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: November 9, 2001 L-3 COMMUNICATIONS CORPORATION By: ------------------------------------------ Name: Title: COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ----------------------------------------- Name: Title: 9 Dated: November 9, 2001 THE BANK OF NEW YORK as Trustee By: ---------------------------------- Name: Title: NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE Pursuant to the Supplemental Indenture (the "Supplemental Indenture") dated as of November 9, 2001 among L-3 Communications Corporation, a Delaware corporation, Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation, and The Bank of New York, each Guarantor (i) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, and premium, interest and Liquidated Damages on the Notes, whether at maturity or an interest payment date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest and Liquidated Damages on the Notes, and (c) 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 in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and all costs and expenses (including reasonable attorneys" fees) incurred by the Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee. Notwithstanding the foregoing, in the event that the Subsidiary Guarantee of any Guarantor would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guarantor under its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. No past, present or future director, officer, employee, agent, incorporator, stockholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantee, the Indenture, any supplemental indenture delivered pursuant to the Indenture by such Guarantor or any Subsidiary Guarantees, 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. This Subsidiary Guarantee shall be binding upon each Guarantor and its successors and assigns 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 Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the meaning assigned to them in the Indenture. COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: -------------------------------------- Name: Title: EX-10.57 15 file014.txt DELIVERED BY GUARANTEEING SUBSIDIARIES SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTEEING SUBSIDIARIES Supplemental Indenture (this "Supplemental Indenture"), dated as of November 9, 2001, among Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation(each, a "Guaranteeing Subsidiary," and collectively, the "Guaranteeing Subsidiaries"), each a subsidiary of L-3 Communications Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April 30, 1997 providing for the issuance of an aggregate principal amount of up to $225,000,000 of 10 3/8% Senior Notes due 2007 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company"s obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 4.13 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries 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. Each Guaranteeing Subsidiary hereby agrees as follows: 2 (a) Such Guaranteeing Subsidiary, jointly and severally with all other current and future guarantors of the Notes (collectively, the "Guarantors" and each, a "Guarantor"), unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company under the Indenture or the Notes, that: (i) the principal of, premium and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium and interest on the Notes, to the extent lawful, and all other obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (b) Notwithstanding the foregoing, in the event that this Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guaranteeing Subsidiary under this Supplemental Indenture and its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. (a) To evidence its Subsidiary Guarantee set forth in this Supplemental Indenture, such Guaranteeing Subsidiary hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit F to the Indenture shall be endorsed by an officer of such Guaranteeing Subsidiary on each Note authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, such Guaranteeing Subsidiary hereby agrees that its Subsidiary Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. (c) If an Officer whose signature is on this Supplemental Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. 3 (d) The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of each Guaranteeing Subsidiary. (e) Each Guaranteeing Subsidiary hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (f) Each Guaranteeing Subsidiary 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 its Subsidiary Guarantee made pursuant to this Supplemental indenture will not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (g) If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guaranteeing Subsidiary, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or such Guaranteeing Subsidiary, any amount paid by either to the Trustee or such Holder, the Subsidiary Guarantee made pursuant to this Supplemental Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect. (h) Each Guaranteeing Subsidiary agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guaranteeing Subsidiary further agrees that, as between such Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand: (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Subsidiary Guarantee made pursuant to this Supplemental Indenture, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; and (ii) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by 4 such Guaranteeing Subsidiary for the purpose of the Subsidiary Guarantee made pursuant to this Supplemental Indenture. (i) Each Guaranteeing Subsidiary shall have the right to seek contribution from any other non-paying Guaranteeing Subsidiary so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Subsidiary Guarantee made pursuant to this Supplemental Indenture. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Except as set forth in Articles 4 and 5 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into the Company or any other Guarantor or shall prevent any transfer, sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to the Company or any other Guarantor. (b) Except as set forth in Article 4 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into a corporation or corporations other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guaranteeing Subsidiary), or successive consolidations or mergers in which a Guaranteeing Subsidiary or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to a corporation other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guaranteeing Subsidiary) authorized to acquire and operate the same; provided, however, that each Guaranteeing Subsidiary hereby covenants and agrees that (i) subject to the Indenture, upon any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by such Guaranteeing Subsidiaries, shall be expressly assumed (in the event that the Guaranteeing Subsidiaries are not the surviving corporations in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which such Guaranteeing Subsidiary shall have been merged, or by the corporation which shall have acquired such property and (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists. (c) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, 5 executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee made pursuant to this Supplemental Indenture and the due and punctual performance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by each Guaranteeing Subsidiary, such successor corporation shall succeed to and be substituted for the Guaranteeing Subsidiary with the same effect as if it had been named herein as the Guaranteeing Subsidiary; provided that, solely for purposes of computing Consolidated Net Income for purposes of clause (b) of the first paragraph of Section 4.07 in the Indenture, the Consolidated Net Income of any Person other than Central Tractor Farm & Country, Inc. and its Restricted Subsidiaries shall only be included for periods subsequent to the effective time of such merger, consolidation, combination or transfer of assets. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Supplemental Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this Supplemental Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. 5. RELEASES. (a) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of a Guaranteeing Subsidiary), all Liens, if any, in favor of the Trustee in the assets sold thereby shall be released; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. If the assets sold in such sale or other disposition include all or substantially all of the assets of a Guaranteeing Subsidiary or all of the Capital Stock of a Guaranteeing Subsidiary, then the Guaranteeing Subsidiary (in the event of a sale or other disposition of all of the Capital Stock of such Guaranteeing Subsidiary) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guaranteeing Subsidiary) shall be released from and relieved of its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers" Certificate to the effect that such sale or other disposition was made by the Company or the Guaranteeing Subsidiary, as the case may be, in accordance with the provisions of the Indenture and this Supplemental Indenture, including without limitation, Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of the 6 Guaranteeing Subsidiary from its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto. If the Guaranteeing Subsidiary is not released from its obligations under its Subsidiary Guarantee, it shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of such Guaranteeing Subsidiary under the Indenture as provided in this Supplemental Indenture. (b) Upon the designation of a Guaranteeing Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the Indenture, such Guaranteeing Subsidiary shall be released and relieved of its obligations under its Subsidiary Guarantee and this Supplemental Indenture. Upon delivery by the Company to the Trustee of an Officers" Certificate and an Opinion of Counsel to the effect that such designation of such Guaranteeing Subsidiary as an Unrestricted Subsidiary was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.07 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guaranteeing Subsidiary from its obligations under its Subsidiary Guarantee. Any Guaranteeing Subsidiary not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guaranteeing Subsidiary under the Indenture as provided herein. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of any Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 8. 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. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. 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 7 in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. 8 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: November 9, 2001 L-3 COMMUNICATIONS CORPORATION By: ______________________________________ Name: Title: COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ______________________________________ Name: Title: 9 Dated: November 9, 2001 THE BANK OF NEW YORK as Trustee By: ______________________________________ Name: Title: NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE Each Guaranteeing Subsidiary (as defined in the Supplemental Indenture (the "Supplemental Indenture") dated November 9, 2001 among L-3 Communications Corporation, a Delaware corporation, Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation, and The Bank of New York) (i) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, premium and interest on the Notes, whether at maturity or an interest payment date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest on the Notes, and (c) 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 in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and all costs and expenses (including reasonable attorneys" fees) incurred by the Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee. Notwithstanding the foregoing, in the event that the Subsidiary Guarantee of any Guaranteeing Subsidiary would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guaranteeing Subsidiary under its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. No past, present or future director, officer, employee, agent, incorporator, stockholder or agent of any Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantee, Indenture, any supplemental indenture delivered pursuant to the Indenture by such Guaranteeing Subsidiary or any Subsidiary Guarantees, 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. This Subsidiary Guarantee shall be binding upon each Guaranteeing Subsidiary and its successors and assigns 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 2 extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. 3 This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the meaning assigned to them in the Indenture. COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ______________________________________ Name: Title: EX-10.58 16 file015.txt DELIVERED BY GUARANTEEING SUBSIDIARIES SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTEEING SUBSIDIARIES SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of November 9, 2001 among Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation (each, a "Guaranteeing Subsidiary", and collectively, the "Guaranteeing Subsidiaries") each a subsidiary of L-3 Communications Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company and The Bank of New York, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of May 22, 1998 providing for the issuance of an aggregate principal amount of up to $250,000,000 of 8 1/2% Senior Subordinated Notes due 2008 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company"s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 4.13 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries 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. Each Guaranteeing Subsidiary hereby agrees as follows: 2 (a) Such Guaranteeing Subsidiary, jointly and severally with any other current or future guarantors of the Notes (collectively, "the Guarantors" and each, a "Guarantor"), Guaranteeing Subsidiaries, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company under the Indenture or the Notes, that: (i) the principal of, premium and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium and interest on the Notes, to the extent lawful, and all other Obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and (ii) in case of any extension of time for payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. (b) Notwithstanding the foregoing, in the event that this Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guaranteeing Subsidiary under this Supplemental Indenture and its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. (a) To evidence its Subsidiary Guarantee set forth in this Supplemental Indenture, each Guaranteeing Subsidiary hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit C to the Indenture shall be endorsed by an officer of such Guaranteeing Subsidiary on each Note authenticated and delivered by the Trustee after the date hereof. (b) Notwithstanding the foregoing, each Guaranteeing Subsidiary hereby agrees that its Subsidiary Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 3 (c) If an Officer whose signature is on this Supplemental Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. (d) The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of each Guaranteeing Subsidiary. (e) Each Guaranteeing Subsidiary hereby agrees that its obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions of the Notes or the Indenture, 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. (f) Each Guaranteeing Subsidiary 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 its Subsidiary Guarantee made pursuant to this Supplemental Indenture will not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (g) If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guaranteeing Subsidiary, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or such Guaranteeing Subsidiary, any amount paid by either to the Trustee or such Holder, the Subsidiary Guarantee made pursuant to this Supplemental Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect. (h) Each Guaranteeing Subsidiary agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guaranteeing Subsidiary further agrees that, as between such Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand: 4 (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Subsidiary Guarantee made pursuant to this Supplemental Indenture, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby; and (ii) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by such Guaranteeing Subsidiary for the purpose of the Subsidiary Guarantee made pursuant to this Supplemental Indenture. (i) Each Guaranteeing Subsidiary shall have the right to seek contribution from any other non-paying Guaranteeing Subsidiary so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Subsidiary Guarantee made pursuant to this Supplemental Indenture. 4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Except as set forth in Articles 4 and 5 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into the Company or any Guarantor or shall prevent any transfer, sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to the Company or any other Guarantor. (b) Except as set forth in Article 4 of the Indenture, nothing contained in the Indenture, this Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into a corporation or corporations other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guaranteeing Subsidiary), or successive consolidations or mergers in which a Guaranteeing Subsidiary or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to a corporation other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guaranteeing Subsidiary) authorized to acquire and operate the same; provided, however, that each Guaranteeing Subsidiary hereby covenants and agrees that (i) subject to the Indenture, upon 5 any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by such Guaranteeing Subsidiary, shall be expressly assumed (in the event that such Guaranteeing Subsidiary is not the surviving corporation in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which such Guaranteeing Subsidiary shall have been merged, or by the corporation which shall have acquired such property and (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists. (c) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee made pursuant to this Supplemental Indenture and the due and punctual performance of all of the covenants and conditions of the Indenture and this Supplemental Indenture to be performed by each Guaranteeing Subsidiary, such successor corporation shall succeed to and be substituted for such Guaranteeing Subsidiary with the same effect as if it had been named herein as the Guaranteeing Subsidiary. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Supplemental Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this Supplemental Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. 5. RELEASES. (a) Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of a Guaranteeing Subsidiary), all Liens, if any, in favor of the Trustee in the assets sold thereby shall be released; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. If the assets sold in such sale or other disposition include all or substantially all of the assets of a Guaranteeing Subsidiary or all of the Capital Stock of a Guaranteeing Subsidiary, then the Guaranteeing Subsidiary (in the 6 event of a sale or other disposition of all of the Capital Stock of such Guaranteeing Subsidiary) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guaranteeing Subsidiary) shall be released from and relieved of its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers" Certificate to the effect that such sale or other disposition was made by the Company or the Guaranteeing Subsidiary, as the case may be, in accordance with the provisions of the Indenture and this Supplemental Indenture, including without limitation, Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of the Guaranteeing Subsidiary from its obligations under this Supplemental Indenture and its Subsidiary Guarantee made pursuant hereto. If the Guaranteeing Subsidiary is not released from its obligations under its Subsidiary Guarantee, it shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of such Guaranteeing Subsidiary under the Indenture as provided in this Supplemental Indenture. (b) Upon the designation of a Guaranteeing Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the Indenture, such Guaranteeing Subsidiary shall be released and relieved of its obligations under its Subsidiary Guarantee and this Supplemental Indenture. Upon delivery by the Company to the Trustee of an Officers" Certificate and an Opinion of Counsel to the effect that such designation of such Guaranteeing Subsidiary as an Unrestricted Subsidiary was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.07 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guaranteeing Subsidiary from its obligations under its Subsidiary Guarantee. Any Guaranteeing Subsidiary not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guaranteeing Subsidiary under the Indenture as provided herein. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of any Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary 7 Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. THIS SUPPLEMENTAL INDENTURE, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 8. 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. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. 8 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. L-3 COMMUNICATIONS CORPORATION By: ---------------------------------------------- Name: Title: COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ---------------------------------------------- Name: Title: 9 Dated: November 9, 2001 THE BANK OF NEW YORK, as Trustee By: ------------------------------------------ Name: Title: NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE Pursuant to the Supplemental Indenture (the "Supplemental Indenture") dated as of November 9, 2001 among L-3 Communications Corporation, a Delaware corporation, Coleman Research Corporation, a Florida corporation, EER Systems, Inc., a Virginia corporation, Electrodynamics, Inc., an Arizona corporation, Henschel Inc., a Delaware corporation, Hygienetics Environmental Services, Inc., a Delaware corporation, Interstate Electronics Corporation, a California corporation, KDI Precision Products, Inc., a Delaware corporation, L-3 Communications Aydin Corporation, a Delaware corporation, L-3 Communications DBS Microwave, Inc., a California corporation, L-3 Communications ESSCO, Inc., a Delaware corporation, L-3 Communications ILEX Systems, Inc., a Delaware corporation, L-3 Communications SPD Technologies, Inc., a Delaware corporation, L-3 Communications Storm Control Systems, Inc., a California corporation, Microdyne Corporation, a Maryland corporation, MPRI, Inc., a Delaware corporation, Pac Ord Inc., a Delaware corporation, Power Paragon, Inc., a Delaware corporation, Southern California Microwave, Inc., a California corporation, SPD Electrical Systems, Inc., a Delaware corporation, SPD Holdings, Inc., a Delaware corporation and SPD Switchgear Inc., a Delaware corporation, and The Bank of New York, each Guaranteeing Subsidiary (i) has jointly and severally unconditionally guaranteed (a) the due and punctual payment of the principal of, premium and interest on the Notes, whether at maturity or an interest payment date, by acceleration, call for redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal and premium of, and interest on the Notes, and (c) 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 in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise and (ii) has agreed to pay any and all costs and expenses (including reasonable attorneys" fees) incurred by the Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee. Notwithstanding the foregoing, in the event that the Subsidiary Guarantee of any Guaranteeing Subsidiary would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guaranteeing Subsidiary under its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. No past, present or future director, officer, employee, agent, incorporator, stockholder or agent of any Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantee, Indenture, any supplemental indenture delivered pursuant to the Indenture by such Guaranteeing Subsidiary or any Subsidiary Guarantees, 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. This Subsidiary Guarantee shall be binding upon each Guaranteeing Subsidiary and its successors and assigns 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 Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. Capitalized terms used herein have the meaning assigned to them in the Indenture. COLEMAN RESEARCH CORPORATION EER SYSTEMS, INC. ELECTRODYNAMICS, INC. HENSCHEL INC. HYGIENETICS ENVIRONMENTAL SERVICES, INC. INTERSTATE ELECTRONICS CORPORATION KDI PRECISION PRODUCTS, INC. L-3 COMMUNICATIONS AYDIN CORPORATION L-3 COMMUNICATIONS DBS MICROWAVE, INC. L-3 COMMUNICATIONS ESSCO, INC. L-3 COMMUNICATIONS ILEX SYSTEMS, INC. L-3 COMMUNICATIONS SPD TECHNOLOGIES, INC. L-3 COMMUNICATIONS STORM CONTROL SYSTEMS, INC. MICRODYNE CORPORATION MPRI, INC. PAC ORD INC. POWER PARAGON, INC. SOUTHERN CALIFORNIA MICROWAVE, INC. SPD ELECTRICAL SYSTEMS, INC. SPD HOLDINGS, INC. SPD SWITCHGEAR INC. As Guaranteeing Subsidiaries By: ------------------------------------------------- Name: Title: C-2 EX-10.59 17 file016.txt ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT among Raytheon Company and Raytheon Australia Pty Ltd. and L-3 Communications Corporation January 11, 2002
ARTICLE I ASSET PURCHASE.....................................................2 1.1 Purchase and Sale of Assets; Assumption of Liabilities......................2 1.2 Purchase Price and Related Matters.........................................10 1.3 The Closing................................................................14 1.4 Post-Closing Adjustment....................................................18 1.5 Consents to Assignment.....................................................24 1.6 Further Assurances.........................................................26 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS.........................26 2.1 Organization, Qualification and Corporate Power............................27 2.2 Authorization of Transaction...............................................28 2.3 Noncontravention...........................................................28 2.4 Financial Statements.......................................................30 2.5 Absence of Certain Changes.................................................31 2.6 Undisclosed Liabilities....................................................33 2.7 Tax Matters................................................................33 2.8 Tangible Personal Property.................................................35 2.9 Owned Real Property........................................................36 2.10 Leased Real Property.......................................................36 2.11 Intellectual Property......................................................37 2.12 Contracts..................................................................39 2.13 Government Contracts.......................................................41 2.14 Entire Business............................................................43 2.15 Litigation.................................................................44 2.16 Employment and Labor Matters...............................................44 2.17 Employee Benefits..........................................................45 2.18 Environmental Matters......................................................48 2.19 Legal Compliance...........................................................51 2.20 Permits....................................................................51 2.21 Title to Assets............................................................52 2.22 Government-Furnished Equipment.............................................52 2.23 Accounts Receivable........................................................52 2.24 Brokers Fees...............................................................52 2.25 Affiliate Relationships....................................................53 2.26 Liability for Cost and Pricing Data........................................53 i ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER...........................53 3.1 Organization...............................................................54 3.2 Authorization of Transaction...............................................54 3.3 Noncontravention...........................................................54 3.4 Litigation.................................................................56 3.5 Financing..................................................................56 3.6 Due Diligence by the Buyer.................................................56 ARTICLE IV PRE-CLOSING COVENANTS.............................................57 4.1 Closing Efforts; Hart-Scott-Rodino Act.....................................57 4.2 Replacement of Guarantees and Letters of Credit............................59 4.3 Operation of Business......................................................60 4.4 Access.....................................................................64 4.5 Purchase of Equipment......................................................66 4.6 Exclusivity................................................................66 4.7 Schedules..................................................................66 4.8 Title Insurance............................................................67 4.9 Cooperation in Financing...................................................68 4.10 Tax Certificates...........................................................69 ARTICLE V CONDITIONS PRECEDENT TO CLOSING...................................69 5.1 Conditions to Obligations of Buyer.........................................69 5.2 Conditions to Obligations of Sellers.......................................72 ARTICLE VI TERMINATION.......................................................74 6.1 Termination of Agreement...................................................74 6.2 Effect of Termination......................................................76 ARTICLE VII INDEMNIFICATION...................................................76 7.1 Indemnification by Raytheon................................................76 7.2 Indemnification by the Buyer...............................................77 7.3 Defense or Control of Third Party Actions and Environmental Claims.........78 7.4 Claims for Indemnification.................................................83 7.5 Survival...................................................................85 7.6 Limitations................................................................86 7.7 Treatment of Indemnification Payments......................................92 ii ARTICLE VIII TAX MATTERS.......................................................92 8.1 Responsibility for Taxes and Filing of Tax Returns.........................92 8.2 Allocation of Taxes........................................................94 8.3 Refunds and Credits........................................................94 8.4 Allowable Taxes............................................................95 8.5 Cooperation on Tax Matters; Tax Audits.....................................96 8.6 Scope of Article VIII......................................................98 ARTICLE IX EMPLOYEE MATTERS..................................................98 9.1 Pre-Closing Conduct; Other Liabilities.....................................98 9.2 Offer of Employment; Continuation of Employment...........................100 9.3 Savings Plan..............................................................101 9.4 Defined Benefit Plans.....................................................101 9.5 Compensation; Employee Benefits; Severance Plans..........................102 9.6 Welfare Plans.............................................................104 9.7 Accrued Paid Time Off.....................................................104 9.8 WARN Act..................................................................105 9.9 COBRA.....................................................................106 ARTICLE X OTHER POST-CLOSING COVENANTS.....................................106 10.1 Access to Information; Record Retention; Cooperation......................106 10.2 Covenant Not to Compete...................................................110 10.3 Novation of Government Contracts..........................................113 10.4 Seller Guarantees.........................................................115 10.5 Outstanding Bid Proposals.................................................115 10.6 Use of Raytheon Name in Transferred Technology............................117 10.7 Collection of Accounts Receivable.........................................118 10.8 Payment of Assumed Liabilities............................................118 10.9 Access to Facility........................................................118 10.10 Boeing Business Jet Operations............................................119 10.11 Insurance.................................................................121 10.12 Non-Solicitation..........................................................122 10.13 Record Keeping............................................................122 10.14 Compliance with Agreement.................................................122 10.15 Proprietary Information; Marketing and Sales Restriction..................123 10.16 Confidentiality Obligations of the Sellers................................123 10.17 Environmental Response Activities.........................................123 iii ARTICLE XI MISCELLANEOUS....................................................124 11.1 Press Releases and Announcements..........................................124 11.2 No Third Party Beneficiaries..............................................124 11.3 Entire Agreement..........................................................124 11.4 Succession and Assignment.................................................125 11.5 Notices...................................................................125 11.6 Amendments and Waivers....................................................126 11.7 Severability..............................................................127 11.8 Expenses..................................................................127 11.9 Specific Performance......................................................127 11.10 Governing Law.............................................................128 11.11 Submission to Jurisdiction................................................128 11.12 Construction..............................................................128 11.13 Counterparts and Facsimile Signature......................................129
Disclosure Schedule Schedule 1.1(a)(iv) Owned Real Property Schedule 1.1(a)(v) Real Estate Leases Schedule 1.1(a)(vii) Patents and Patent Applications Schedule 1.1(a)(xv) Insurance Policy Schedule 1.1(b)(ii) BBJ Aircraft and Contracts Schedule 1.1(b)(iii) Excluded Assets Schedule 1.1(d)(iv) Excluded Agreements Schedule 1.4 Target Net Tangible Book Value Schedule 2.4 Financial Statements Schedule 2.5(e) Capital Expenditure Budget Schedule 2.12 Designated Contracts iv Schedule 2.14 Omitted Assets Schedule 2.15 Litigation Schedule 2.16 AIS Employees Schedule 2.17 AIS Benefit Plans Schedule 2.20 Permits Schedule 2.22 Government-Furnished Equipment Schedule 3.3(c) Buyer Consent Schedule 4.2 Seller Guarantees Schedule 4.3 Operation of Business Schedule 5.1(f) Required Consents Schedule 9.1 Retained Employees Schedule 9.2(b) BBJ Employees Schedule 10.5 Bid Proposals Schedule 10.10(b) Consigned Assets Schedule 10.12 Key Employees Exhibits - -------- Exhibit A Bill of Sale Exhibit B Patent Assignment Exhibit C Special Warranty Deed Exhibit D Assignment and Assumption of Leases v Exhibit E Assumption Agreement Exhibit F Supply Agreement (Raytheon as Supplier) Exhibit G Supply Agreement (Raytheon as Customer) Exhibit H Supply Agreement (Raytheon Technical Services Company as Supplier) Exhibit I Supply Agreement (Raytheon Technical Services Company as Customer) Exhibit J Supply Agreement (Thales-Raytheon Systems Co., LLC as Supplier) Exhibit K Supply Agreement (Raytheon Systems Canada, Ltd. as Supplier) Exhibit L Supply Agreement (Raytheon Aircraft Company as Customer) Exhibit M Subcontract Agreement (with Raytheon Systems Limited) Exhibit N-1 Lease Agreement Exhibit N-2 Sublease Agreement Exhibit N-3 Equipment License Agreement Exhibit O Intellectual Property Agreement Exhibit P Cooling Technology Marketing Agreement Exhibit Q Transition Services Agreement Exhibit R Business Jet Services Agreement vi TABLE OF DEFINED TERMS DEFINED TERM SECTION - ------------ ------- 777 Aircraft 10.10(a) 777 Contracts 10.10(a) AAA 7.4(c) AAA Rules 7.4(c) Actual Cost 10.10(a) Acquired Assets 1.1(a) Adjusted Purchase Price 1.2(a) Affiliate 1.1(b)(iv) Agreed Amount 7.4 (b) AIS Benefit Plan 2.17(a) AIS Business Introduction AIS Employee 9.1 AIS Material Adverse Effect 2.1 AIS Properties 2.18(a)(vii) Allocation Schedule 1.2(b)(ii) Allowable Tax 8.4(a) Ancillary Agreements 1.3(b) Arbitration Award 7.4(d) Arbitrator 7.4(c) Assigned Contracts 1.1(a)(vi) Assumed Liabilities 1.1(c) Balance Sheet Date 1.1(c)(i) BBJ Employees 9.2(b) Bid Proposal 10.5(a) Boeing Business Jet Division 1.1(b)(ii) Bombardier Litigation 1.1(b)(ix) Business Day 1.3(a) Buyer Preliminary Statement Buyer Certificate 5.2(d) Buyer Defined Contribution Plans 9.3 Buyer Material Adverse Effect 3.3(b) Buyer Non-Union Plans 9.4 Buyer Pension Plans 9.4 Buyer Plans 9.5 CERCLA 2.18(a)(i) vii DEFINED TERM SECTION - ------------ ------- Chrysler Agreement 10.14 Claim Notice 7.4(a) Claimed Amount 7.4(a) Closing 1.3(a) Closing Date 1.3(a) Closing Net Tangible Book Value 1.4(b) Closing Statement 1.4(b) COBRA 9.9 Code 2.17(b) Collective Bargaining Agreement 2.16(b) Confidentiality Agreement 4.4(a) Consigned Assets 10.10(b) Controlling Party 7.3(a) Damages 7.1 Designated Contracts 2.12(b) Designated Intellectual Property 2.11(a) Dispute 7.4(c) Employee Benefit Plans 2.17(a) Encumbrance 2.8 Environment 2.18(a)(ii) Environmental Claim 7.3(b) Environmental Law 2.18(a)(iv) Environmental Matters 2.18(a)(v) Environmental Response Activities 7.3(b) ERISA 2.17(a) ERISA Affiliate 2.17(e) Excluded Assets 1.1(b) Excluded Liabilities 1.1(d) Final Closing Statement 1.4(d)(v) GAAP 1.1(c)(i) Government Bid 2.13(a) Government Contract 2.13(a) Governmental Filings 4.1(a) Governmental Entity 1.1(a)(viii) Hart-Scott-Rodino Act 2.3 Indebtedness 2.5(c) Indemnified Party 7.3(a) Indemnifying Party 7.3(a) viii DEFINED TERM SECTION - ------------ ------- Information 10.1(a) Intellectual Property 1.1(a)(vii) Intellectual Property Agreement 1.3(b) Leased Facilities 1.1(a)(viii) Legal Permits 1.1(a)(viii) LTD AIS Employees 9.2(a) Materials of Environmental Concern 2.18(a)(iii) Most Recent Balance Sheet 2.4 Neutral Accountant 1.2(b)(I) Noncompetition Period 10.2 Non-AIS Information 10.15 Non-controlling Party 7.3(a) Novation Agreement 10.3(a) Off-Site Liabilities 2.18(a)(vi) Owned Real Property 1.1(a)(iv) P-3 SRP Program 10.1(a) Parties Preliminary Statement PTO Policies 9.7 Purchase Price 1.2(a) Raytheon Preliminary Statement Raytheon Australia Preliminary Statement Raytheon Certificate 5.1(d) Raytheon Subsidiary 10.2 Real Estate Leases 1.1(a)(v) Release 2.18(a)(I) Response 7.4(b) Restricted Business 10.2 Savings Plan 9.3 Schedule of Exceptions Article II Seller Preliminary Statement Seller Guarantees 4.2 Sellers' Pension Plans 9.4 Special Damages 7.6(c) Statistical Profit 10.5(a) Target Net Tangible Book Value 1.4(a) Tax Purchase Price 1.2(b) Tax Returns 2.7 Taxes 2.7 ix DEFINED TERM SECTION - ------------ ------- Taxing Authority 8.5(a) Third Party Action 7.3(a) Third Party Event 1.4(b) Third Party Consents 4.1(a) Title Commitments 4.8 Title Company 5.1(h) Title Policy 5.1(h) Transferred Employees 9.2(a) Transition Services Agreement 1.3(b) U.S. Governmental Entity 2.13(a) Union 2.16(b) Union Pension Plan 9.4 Unresolved Objections 1.4(d)(iii) WARN 9.8 x ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT is entered into as of January 11, 2002 among Raytheon Company, a Delaware corporation ("Raytheon"), Raytheon Australia Pty Ltd., a corporation organized under the laws of Australia and a wholly-owned indirect subsidiary of Raytheon ("Raytheon Australia") (Raytheon and Raytheon Australia are each individually referred to herein as a "Seller" and are collectively referred to herein as the "Sellers"), and L-3 Communications Corporation, a Delaware corporation (the "Buyer"). The Sellers and the Buyer are collectively referred to herein as the "Parties." INTRODUCTION For purposes of this Agreement, the "AIS Business" means those operations of Raytheon or any of its Subsidiaries that are conducted as of the Closing Date through its Aircraft Integration Systems business unit principally at facilities located in Greenville, Texas, Waco, Texas, Lexington, Kentucky and Avalon, Australia (but expressly excluding any business or operations similar or identical to the type performed by Raytheon or its Subsidiaries at facilities other than those named above which are managed by personnel other than AIS management, including, but not limited to, the business and operations of the type performed at Raytheon's Wichita, Kansas, McKinney, Texas, Garland, Texas, El Segundo, California, Goleta, California, Fort Wayne, Indiana, Indianapolis, Indiana, and Falls Church, Virginia facilities). The Buyer desires to purchase from the Sellers, and the Sellers desire to sell to the Buyer, the assets of the Sellers relating exclusively or primarily to the AIS Business (other than assets excluded pursuant hereto), subject to the assumption of related liabilities, upon the terms and subject to the conditions set forth herein. In consideration of the representations, warranties, covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows: ARTICLE I ASSET PURCHASE 1.1 Purchase and Sale of Assets; Assumption of Liabilities. (a) Transfer of Assets. On the basis of the representations, warranties, covenants and agreements and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing (as defined in Section 1.3(a)), each Seller shall sell, convey, assign and transfer to the Buyer, and the Buyer shall purchase and acquire from such Seller, all of such Seller's right, title and interest in and to the assets, properties and rights of such Seller, of every kind, nature, character and description (accrued, contingent or otherwise), tangible and intangible, real, personal or mixed, wherever located, existing as of the Closing which are utilized exclusively or primarily in the AIS Business (the "Acquired Assets"), including, without limitation, the following assets, properties and rights, in each case to the extent the assets or properties are owned or the rights are held by a Seller as of the Closing and exclusively or primarily utilized in or relating to the AIS Business: (i) all accounts receivable and other receivables (whether or not billed); (ii) all inventory of raw materials, work in process, finished goods, office supplies, maintenance supplies and packaging materials, together with spare parts, 2 supplies, promotional materials and inventory (in each case, whether on hand, in transit or on order); (iii) all computer hardware, equipment, furniture, furnishings, fixtures, machinery, installations, supplies, work stations, data processing equipment, networking equipment, vehicles, tools and tooling and other tangible personal property and all warranties and guarantees, if any, express or implied, existing for the benefit of a Seller in connection therewith; (iv) the real property described on Schedule 1.1(a)(iv) (the "Owned Real Property"); (v) all of the Sellers' rights under the real property leases or subleases described on Schedule 1.1(a)(v) (the "Real Estate Leases"), except as provided in Section 1.5; (vi) the rights under all contracts or agreements to which any Seller is a party (excluding the Real Estate Leases), including those listed on Schedule 2.12, but excluding those listed on Schedule 4.2 (the "Assigned Contracts"), except as provided in Section 1.5; (vii) all (A) patents and patent applications listed on Schedule 1.1(a)(vii), and any patent applications that are filed based on the invention disclosures listed on Schedule 1.1(a)(vii), related (i.e., claiming priority to at least one of such patents or patent applications) and foreign counterpart patent applications and patents, including any reissues, re-examinations, continuations, continuations-in-part or divisionals thereof, (B) copyrights and copyright registrations and works of authorship in any media, (C) computer software and management information systems, and (D) technical information, trade secrets, technology, know-how, specifications, designs, inventions, discoveries, developments, techniques, drawings 3 and processes and quality control data, and other confidential, proprietary or non-public business information, documents, analyses, research and lists (including current and potential customer lists and vendor lists) and all other intellectual property of any nature, including text, images and other content relating exclusively or primarily to the AIS Business contained in websites maintained by the Sellers (collectively, "Intellectual Property"); (viii) all licenses, permits, franchises, grants, consents, concessions, orders, authorizations, approvals or registrations issued by any Governmental Entity (as defined below) (collectively, "Legal Permits") relating to the development, use, maintenance or occupation of the Owned Real Property, the facilities covered by the Real Property Leases (the "Leased Facilities") or the Acquired Assets or the AIS Business, to the extent that such Legal Permits are transferable (for purposes of this Agreement, "Governmental Entity" means any government, court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency, whether federal, state, local, foreign or multinational); (ix) all goods and services and all other economic benefits to be received subsequent to the Closing arising out of prepayments and payments by a Seller prior to the Closing, including credits, deferred charges, deposits, prepaid assets and prepaid expenses; (x) all books (other than stock record books), records, accounts, ledgers, files, documents, correspondence, studies, reports and other printed or written materials (whether in hard copy, magnetic tape or other format or media), including property records, production records, purchasing and sales records, personnel and payroll records, credit records, accounting records, creative materials, and advertising and marketing materials, subject to any 4 restrictions imposed by applicable law on the transfer of employee files and other materials related to classified programs; (xi) all goodwill; (xii) the rights under purchase orders outstanding on the Closing Date; (xiii) all rights relating to refunds or recoupment of Taxes (as defined in Section 2.7) relating to all periods ending after the Closing, determined in accordance with Section 8.2, including rights under any legal or administrative proceedings relating thereto, whether or not yet commenced; (xiv) all actions, claims, causes of action, rights of recovery, choses in action, rights of setoff of any kind, and all rights under and pursuant to all indemnities, warranties, representations and guarantees arising before, on or after the Closing relating exclusively or primarily to the AIS Business, any Acquired Assets or any Assumed Liabilities; and (xv) the insurance policies listed on Schedule 1.1(a)(xv). (b) Excluded Assets. Notwithstanding anything to the contrary in this Agreement, the Acquired Assets shall not include any of the following (collectively, the "Excluded Assets"): (i) all cash and cash equivalents or similar investments, bank accounts, commercial paper, certificates of deposit, Treasury bills and other marketable securities; (ii) all assets, properties and rights utilized exclusively or primarily in the Boeing Business Jet Division (for the purposes of this Agreement, the "Boeing Business Jet 5 Division" means those operations of the Sellers that are currently conducted through its AIS Business at facilities located in Waco, Texas and that relate specifically to the design, configuration, manufacture, modification, installation and delivery of interior structures, furnishings and components for the aircraft listed by Aircraft Serial Number in Schedule 1.1(b)(ii) in accordance with the contracts listed in Schedule 1.1(b)(ii) and to the Consigned Assets (as defined in Section 10.10(c)); (iii) the assets, properties or rights listed on, or arising under the contracts or agreements listed on, Schedule 1.1(b)(iii); provided that the $44,651,603 SSDMP receivable listed thereon was considered an Excluded Asset as of September 30, 2001 and is therefore not reflected on the Most Recent Balance Sheet or in Schedule 1.4, but any portion of such receivable that remains uncollected as of the Closing shall become an Acquired Asset and shall be conveyed and assigned to the Buyer and shall be reflected on the Closing Statement (which shall have the effect of increasing the Closing Net Tangible Book Value); (iv) all rights to any of the Intellectual Property licensed by Raytheon or an Affiliate (for purposes of this Agreement, "Affiliate" has the meaning assigned to it in Rule 12b-2 under the Securities Exchange Act of 1934) thereof to the Buyer, or otherwise retained by Raytheon or its Affiliates under the terms of the Intellectual Property Agreement (as defined in Section 1.3(b)); (v) all trademarks, trademark registrations and trademark applications (together with the goodwill associated therewith); (vi) all accounts receivable and similar rights to payment from Raytheon or any Subsidiary of Raytheon that are accrued prior to the Closing; 6 (vii) the capital stock of all subsidiaries of each Seller; (viii) all rights relating to refunds or recoupment of Taxes (as defined in Section 2.7) relating to all periods ending on or prior to the Closing, determined in accordance with Section 8.2, including rights under any legal or administrative proceedings relating thereto, whether or not yet commenced; (ix) all rights to any payment, recovery or settlement relating to or arising out of the litigation with Bombardier, Inc. and Learjet, Inc. filed on June 2, 2000 (196th Judicial District Court, Hunt County, Texas, Docket No. 621284) (the "Bombardier Litigation"); (x) all actions, claims, causes of action, rights of recovery, choses in action and rights of setoff of any kind arising before, on or after the Closing to the extent relating to (A) the items set forth in this Section 1.1(b) or (B) any Excluded Liabilities; (xi) all rights of the Sellers under the AIS Benefit Plans (as defined in Section 2.17); (xii) the rights which accrue or will accrue to the benefit of the Sellers under this Agreement or any Ancillary Agreement (as defined in Section 1.3(b)); and (xiii) all books, records, accounts, ledgers, files, documents, correspondence, studies, reports and other printed or written materials related exclusively or primarily to any Excluded Assets or Excluded Liabilities. (c) Assumed Liabilities. On the basis of the representations, warranties, covenants and agreements and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing, the Buyer shall assume and agree to pay, perform and discharge when due all liabilities and obligations of each Seller, of every kind, nature, character and 7 description (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), which are related exclusively or primarily to the AIS Business or the Acquired Assets (the "Assumed Liabilities"), including, without limitation, the following liabilities and obligations, in each case to the extent related exclusively or primarily to the AIS Business or the Acquired Assets: (i) all liabilities reflected on the Most Recent Balance Sheet (as defined in Section 2.4) and any other liabilities as of September 30, 2001 (the "Balance Sheet Date") which are not required to be reflected thereon according to United States generally accepted accounting principles as in effect as of the Balance Sheet Date ("GAAP"), except to the extent satisfied prior to the Closing; (ii) all liabilities arising subsequent to the Balance Sheet Date, except to the extent satisfied prior to the Closing; (iii) all liabilities and obligations under the Assigned Contracts and under the Real Estate Leases, except as provided in Section 1.5; (iv) all liabilities and obligations under the Legal Permits transferred pursuant to Section 1.1(a)(viii); (v) all liabilities and obligations in respect of the AIS Business or the Acquired Assets arising or incurred by the Buyer after the Closing; (vi) all liabilities and obligations arising out of the ownership, leasing or operation of any Leased Facility, Owned Real Property or other real property at any time; (vii) all liabilities and obligations for Environmental Matters (as defined in Section 2.18(a)) or liability under common law with respect to Materials of Environmental 8 Concern (as defined in Section 2.18(a)) that relate exclusively or primarily to the AIS Business or the Acquired Assets; (viii) all liabilities and obligations in respect of employees or employee benefits assumed by the Buyer pursuant to Article IX; and (ix) all liabilities with respect to all actions, suits, proceedings, disputes, claims or investigations that relate exclusively or primarily to the AIS Business or the Acquired Assets. (d) Excluded Liabilities. Notwithstanding anything to the contrary in this Agreement, the Assumed Liabilities shall not include the following (collectively, the "Excluded Liabilities"): (i) all liabilities and obligations relating exclusively or primarily to the Excluded Assets; (ii) all liabilities and obligations for Taxes (whether or not reflected on the Most Recent Balance Sheet) relating to all periods ending on or prior to the Closing, determined in accordance with Section 8.2; (iii) all liabilities and obligations of the Sellers in respect of employees or employee benefits retained by a Seller pursuant to Article IX; (iv) all liabilities and obligations of the Sellers under the agreements listed on Schedule 1.1(d)(iv); (v) all liabilities and obligations of the Sellers under this Agreement or any Ancillary Agreement; 9 (vi) all liabilities and obligations of any Seller for costs and expenses incurred in connection with this Agreement or the consummation of the transactions contemplated by this Agreement (including without limitation any fees for financial advisors engaged by or on behalf of the Sellers) and any Taxes arising in connection with the consummations of the transactions contemplated hereby (other than Taxes referred to in Section 8.1(d)); (vii) all liabilities and obligations arising out of disallowances, redeterminations and reallocations of overhead charges and other allocated expenses and rates included in costs incurred on or prior to the Closing under any Government Contract included in the Acquired Assets, but only to the extent such overhead charges and allocated expenses and rates relate exclusively or primarily to operations of Raytheon other than the AIS Business; (viii) all accounts payable or similar payment obligations by the AIS Business to Raytheon or any Subsidiary of Raytheon; and (ix) all liabilities and obligations of the Sellers relating to or arising out of the Bombardier Litigation. 1.2 Purchase Price and Related Matters. (a) Purchase Price. In consideration for the sale and transfer of the Acquired Assets, the Buyer shall at the Closing assume the Assumed Liabilities as provided in Section 1.1(c) and shall pay to the Sellers an aggregate amount of $1,130,000,000 (the "Purchase Price"). The Purchase Price shall be subject to adjustment as provided in Section 1.4. The Purchase Price, as adjusted pursuant to such Section, is referred to herein as the "Adjusted Purchase Price." 10 (b) Allocation of Purchase Price. The amount of the Adjusted Purchase Price and the Assumed Liabilities (the "Tax Purchase Price") shall be allocated among the Acquired Assets and the covenant contained in Section 10.2 as follows. (i) Raytheon shall prepare and deliver to the Buyer, within 180 days following the final determination of the Adjusted Purchase Price pursuant to Section 1.4, a schedule setting forth a proposed allocation of the Tax Purchase Price among the Sellers. The Buyer shall deliver to Raytheon, within 30 days after delivery of such allocation schedule, either a notice indicating that the Buyer accepts such allocation schedule or a statement detailing its objections to such allocation schedule. If the Buyer delivers to Raytheon a notice accepting Raytheon's allocation schedule, or if the Buyer does not deliver a written objection within such 30-day period, then, effective as of either the date of delivery of such notice of acceptance or as of the close of business on such 30th day, such allocation schedule shall be deemed to be accepted by the Buyer. If the Buyer timely objects to Raytheon's schedule and the Buyer and Raytheon cannot reach agreement on such allocation within 15 days following the date that the Buyer notified Raytheon of the objection, then the Buyer and Raytheon shall jointly engage a mutually agreeable "big five" accounting firm (other than PricewaterhouseCoopers LLP) (the "Neutral Accountant"). If the Neutral Accountant determines that the allocation schedule provided by Raytheon was reasonable, such allocation schedule shall be final. If the Neutral Accountant determines that the allocation schedule provided by Raytheon was unreasonable, the Neutral Accountant shall prepare the allocation schedule based upon appraisal of the fair value of the assets among which the Tax Purchase Price is to be allocated and such appraisal shall be determined by an independent appraisal firm. The Buyer and Raytheon agree to provide to the 11 Neutral Accountant such information as the Neutral Accountant may reasonably request in connection with the preparation of such schedule and shall request that the Neutral Accountant prepare and deliver to Raytheon and the Buyer such allocation schedule as promptly as practicable. The Buyer and Raytheon shall share equally the costs and expenses of the Neutral Accountant and the independent appraisal firm for its services under this Section 1.2(b)(i). (ii) Within 30 days following the final determination of the allocation of the Tax Purchase Price among the Sellers in accordance with clause (i) above, the Buyer shall prepare and deliver to Raytheon a schedule with respect to each Seller setting forth a proposed allocation of the portion of the Tax Purchase Price allocated to such Seller pursuant to clause (i) above among the Acquired Assets that were acquired from such Seller and the covenant contained in Section 10.2 hereof in accordance with the rules under Section 1060 of the Code and the regulations promulgated thereunder (the "Allocation Schedule"). The Allocation Schedule so proposed by the Buyer shall be final unless Raytheon in good faith objects to such Allocation Schedule within 30 days after receiving the Allocation Schedule from the Buyer. If Raytheon timely objects to the Allocation Schedule and the Buyer and Raytheon cannot reach an agreement on the Allocation Schedule within 15 days following the date that Raytheon notified the Buyer of the objection, then the Buyer and Raytheon shall jointly engage the Neutral Accountant. If the Neutral Accountant determines that the Allocation Schedule provided by the Buyer was reasonable, the Allocation Schedule shall be final. If the Neutral Accountant determines that the Allocation Schedule provided by the Buyer was unreasonable, the Neutral Accountant shall prepare the Allocation Schedule based upon appraisal of the fair value of the assets among the assets to which the Tax Purchase Price is to be allocated and such appraisal 12 shall be determined by an independent appraisal firm. The Buyer and Raytheon agree to provide the Neutral Accountant with such information as the Neutral Accountant may reasonably request in connection with the preparation of the Allocation Schedule and shall request that the Neutral Accountant prepare and deliver to the Buyer and Raytheon such Allocation Schedule as promptly as possible. The Buyer and Raytheon shall share equally the costs and expenses of the Neutral Accountant and the independent appraisal firm for its services under this Section 1.2(b)(ii). (iii) The Buyer and the Sellers agree that amounts payable to any parties pursuant to the agreements set forth in clauses (x) through (xxii) of Section 1.3(b) were separately agreed upon and represent arm's length payments for the goods and services to be provided thereunder. Accordingly, no portion of the Tax Purchase Price is properly allocable to such agreements or the goods or services provided thereunder. (iv) The final determination of the Allocation Schedule shall be used by each party in preparing any filings required pursuant to Section 1060 of the Code or any similar provisions of state or local law and all relevant income and franchise Tax Returns. Neither the Buyer nor any Seller shall take a position before any taxing authority or in any judicial proceeding that is inconsistent with such Allocation Schedule without the prior written consent of the other Party. The Parties shall in good faith exercise reasonable efforts to support such Allocation Schedule in any audit proceedings initiated by any taxing authorities. Notwithstanding the foregoing, if the Allocation Schedule has not been finally determined in accordance with this Section 1.2(b) by the time (taking into account all applicable extensions) that any Seller, the Buyer, or any of their respective Affiliates is required to file any Tax Return 13 reflecting an allocation of the Tax Purchase Price between the Sellers and/or among the Acquired Assets and the covenant contained in Section 10.2 hereof, such party shall be entitled to file such Tax Return based upon an allocation of the Tax Purchase Price that reflects (i) any allocation pursuant to Section 1.2(b)(i) that has become final, (ii) any allocation to any item pursuant to Section 1.2(b)(ii) hereof upon which the Parties have agreed or with respect to which the 30-day period for objecting has passed with no objection having been made by Raytheon to the allocation to the item and (iii) an allocation of any remaining amounts based upon a good faith determination by such party of the respective fair market values of the Acquired Assets, provided that such allocation is not inconsistent with any allocations specified in clauses (i) and (ii) of this sentence. 1.3 The Closing. (a) Time and Location. The closing of the transactions contemplated by this Agreement ("Closing") shall take place at the offices of Hale and Dorr LLP in Boston, Massachusetts, commencing at 10:00 a.m., local time, on February 28, 2002 or, if all of the conditions to the obligations of the Parties to consummate the transactions contemplated hereby (excluding the delivery of any documents to be delivered at the Closing by any of the Parties) have not been satisfied in full or waived by such date, on such mutually agreeable later date as soon as practicable (but in no event more than three Business Days (as defined below)) after the first date on which the conditions to the obligations of the Parties to consummate the transactions contemplated hereby (excluding the delivery of any documents to be delivered at the Closing by any of the Parties) have been satisfied or waived (the "Closing Date"). For purposes of this Agreement, a "Business Day" shall be any day other than (i) a Saturday or Sunday or (ii) a day 14 on which banking institutions located in New York, New York are permitted or required by law, executive order or governmental decree to remain closed. (b) Actions at the Closing. At the Closing: (i) the Sellers shall deliver (or cause to be delivered) to the Buyer the various certificates, instruments and documents required to be delivered under Section 5.1; (ii) the Buyer shall deliver (or cause to be delivered) to the Sellers the various certificates, instruments and documents required to be delivered under Section 5.2; (iii) the Sellers and the Buyer shall execute and deliver a Bill of Sale in substantially the form attached hereto as Exhibit A; (iv) Raytheon and any other Affiliate thereof owning patents or patent applications included in the Acquired Assets shall execute and deliver a Patent Assignment in substantially the form attached hereto as Exhibit B; (v) Raytheon and any other Affiliate thereof owning any of the Owned Real Property shall execute and deliver a Special Warranty Deed in substantially the form attached hereto as Exhibit C with respect to each parcel of Owned Real Property; (vi) the Sellers and the Buyer shall execute and deliver an Assignment and Assumption of Leases with respect to each Real Estate Lease in substantially the form attached hereto as Exhibit D; (vii) the Sellers and the Buyer shall execute and deliver such other instruments of conveyance as the Buyer may reasonably request in order to effect the sale, conveyance, assignment and transfer to the Buyer of valid ownership of the Acquired Assets; 15 (viii) the Sellers and the Buyer shall execute and deliver an Assumption Agreement in substantially the form attached hereto as Exhibit E; (ix) the Sellers and the Buyer shall execute and deliver such other instruments as any Seller may reasonably request in order to effect the assumption by the Buyer of the Assumed Liabilities; (x) Raytheon and the Buyer shall execute and deliver the Supply Agreement in substantially the form attached hereto as Exhibit F; (xi) Raytheon and the Buyer shall execute and deliver the Supply Agreement in substantially the form attached hereto as Exhibit G; (xii) Raytheon Technical Services Company and the Buyer shall execute and deliver the Supply Agreement in substantially the form attached hereto as Exhibit H; (xiii) Raytheon Technical Services Company and the Buyer shall execute and deliver the Supply Agreement in substantially the form attached hereto as Exhibit I; (xiv) Thales-Raytheon Systems Co., LLC and the Buyer shall execute and deliver the Supply Agreement in substantially the form attached hereto as Exhibit J; (xv) Raytheon Systems Canada, Ltd. and the Buyer shall execute and deliver the Supply Agreement in substantially the form attached hereto as Exhibit K; (xvi) Raytheon Aircraft Company and the Buyer shall execute and deliver the Supply Agreement in substantially the form attached hereto as Exhibit L; (xvii) Raytheon Systems Limited and the Buyer shall execute and deliver the Subcontract Agreement in substantially the form attached hereto as Exhibit M; 16 (xviii) Raytheon and the Buyer shall execute and deliver a Lease Agreement in substantially the form attached hereto as Exhibit N-1, a Sublease Agreement in substantially the form attached hereto as Exhibit N-2 and an Equipment License Agreement in substantially the form attached hereto as Exhibit N-3; (xix) Raytheon and the Buyer shall execute and deliver the Intellectual Property Agreement in substantially the form attached hereto as Exhibit O (the "Intellectual Property Agreement"); (xx) Raytheon Commercial Ventures, Inc. and the Buyer shall execute and deliver the Cooling Technology Marketing Agreement in substantially the form attached hereto as Exhibit P; (xxi) Raytheon and the Buyer shall execute and deliver the Transition Services Agreement in substantially the form attached hereto as Exhibit Q (the "Transition Services Agreement"); (xxii) Raytheon and the Buyer shall execute and deliver the Business Jet Services Agreement in substantially the form attached hereto as Exhibit R; (xxiii) the Buyer shall pay to the Sellers the Purchase Price in cash by wire transfer of immediately available funds into an account designated by Raytheon in writing prior to the Closing; (xxiv) the Sellers shall deliver to the Buyer, or otherwise put the Buyer in possession and control of, all of the Acquired Assets of a tangible nature owned by the Sellers; and 17 (xxv) the Parties shall execute and deliver to each other a cross-receipt evidencing the transactions referred to above. The agreements and instruments referred to in clauses (iii) through (xxii) above are referred to herein as the "Ancillary Agreements." 1.4 Post-Closing Adjustment. The Purchase Price set forth in Section 1.2(a) shall be subject to adjustment after the Closing Date as follows: (a) For purposes of this Agreement, the "Target Net Tangible Book Value" shall be $475,200,000. Such figure is $25,000,000 in excess of the figure derived from the Most Recent Balance Sheet in the manner shown on Schedule 1.4. (b) Within 75 days after the Closing Date, Raytheon shall prepare and deliver to the Buyer a statement (the "Closing Statement") that is prepared in accordance with GAAP (provided that in the event of any inconsistency between GAAP and the methodologies described below, the methodologies described below shall control) and that sets forth the Acquired Assets and Assumed Liabilities as of the Closing (without giving effect to the transactions contemplated by this Agreement) and also showing the excess of the Acquired Assets, excluding goodwill and other intangible assets, over the Assumed Liabilities as shown thereon (the "Closing Net Tangible Book Value"), together with a special purpose audit report by PricewaterhouseCoopers LLP which shall state that the Closing Statement fairly presents, in all material respects, the Acquired Assets and the Assumed Liabilities as of the Closing Date on a basis consistent with this Section 1.4. All fees, costs and expenses of the services rendered by PricewaterhouseCoopers LLP in connection with the preparation of the Closing Statement shall be borne by the Sellers. Subject to the methodologies and procedures described in the balance of 18 this Section 1.4(b), the Closing Statement shall be prepared using the same accounting principles, practices, procedures, policies and methods, with consistent classifications, judgments, inclusions, exclusions and valuation and estimation methodologies, that were employed in the preparation of the balance sheet attached as Schedule 1.4 and the derivation of the Target Net Tangible Book Value. Except as specifically provided in the following sentence, (A) the Closing Net Tangible Book Value, and any difference between the Target Net Tangible Book Value and the Closing Net Tangible Book Value, shall not reflect any of the following items: (i) the effect of any changes to estimates used to prepare the Most Recent Balance Sheet (it being agreed that increases in percentage of completion resulting from normal cost-to-cost accounting applied to additional contract expenditures shall not be considered estimates for purposes of this section), (ii) any changes in or adjustments to the reserves or estimates at completion used in the preparation of the balance sheet attached as Schedule 1.4, (iii) deferred tax asset or liability accounts, or (iv) any changes in any of the assets or liabilities of the AIS Business between the Balance Sheet Date and the Closing Date, and (B) all estimates at completion, contract profit rates and loss or other reserves associated with contracts in process used in the preparation of the balance sheet attached as Schedule 1.4 shall be the same in Schedule 1.4 and in the Closing Statement, and any associated impacts on any other accounts which change based on a change in such estimates at completion, contract profit rates and loss or other reserves shall be ignored. Notwithstanding the foregoing sentence, the following items and changes shall be taken into account in preparing the Closing Statement: (i) all amounts of any reserve or valuation accounts shall be reduced for any cash payments with respect to such reserve and valuation accounts after the Balance Sheet Date; (ii) changes shall be made to any 19 reserves or valuation accounts relating to depreciation of physical assets to the extent that such changes are required by the passage of time after the Balance Sheet Date; (iii) estimates at completion, contract profit rates and loss and other reserves associated with contracts in process used in the preparation of the Most Recent Balance Sheet may be revised from the amount used in such preparation for, and only for, the occurrence of a Third Party Event, and only to the extent of the impact of that Third Party Event; and (iv) changes to other components of the Acquired Assets (excluding goodwill and other intangible assets and excluding estimates at completion, contract profit rates and loss or other reserves associated with contracts in process used in the preparation of the balance sheet attached as Schedule 1.4) and the Assumed Liabilities that result from the operation of the AIS Business between the Balance Sheet Date and the Closing Date shall be reflected. A "Third Party Event" is an event that (i) occurs between the Balance Sheet Date and the Closing, (ii) is communicated to a Seller on or prior to the date 30 days after the Closing Date, from a source outside the personnel, premises and operations of the Sellers, and (iii) states a claim or provides notice of a condition, the financial statement effect of which is probable of occurrence and reasonably stated or estimable, and would therefore require, under GAAP, the revision, upward or downward, of a contract reserve or estimate at completion in the absence of the other provisions of this Section 1.4. For the purposes of the previous sentence only, "communicated" shall mean the receipt by a Seller of a written notice from a customer, Governmental Entity, subcontractor or third-party vendor. The intent of the Buyer and the Sellers with regard to the methodologies described above is to prohibit a Purchase Price adjustment with respect to changes in estimates at completion and/or 20 views of risks, opportunities or judgments with respect to agreements existing as of September 30, 2001, except upon the occurrence of a Third Party Event. (c) Upon receipt of the Closing Statement by the Buyer, the Buyer and the Buyer's independent accountants shall have reasonable access during normal business hours to the Closing Statement working papers of PricewaterhouseCoopers LLP to the extent reasonably required to complete review of the Closing Statement. The Buyer shall deliver to Raytheon, within 30 days after delivery by Raytheon to the Buyer of the Closing Statement, either a notice indicating that the Buyer accepts the Closing Statement or a statement describing the Buyer's objections to the Closing Statement, which statement of objections shall describe in reasonable detail the specific nature and amount of each objection and shall state in reasonable detail all bases upon which the Buyer believes the Closing Statement is not in conformity with the requirements set forth in Section 1.4(b). If the Buyer delivers to Raytheon a notice accepting the Closing Statement, or the Buyer does not deliver a written objection to the Closing Statement within such 30-day period, then, effective as of either the date of delivery of such notice of acceptance or as of the close of business on such 30th day, the Closing Statement shall be deemed to be accepted by the Buyer. (d) If the Buyer timely objects to the Closing Statement, such objections shall be resolved as follows: (i) The Buyer and Raytheon shall first use reasonable efforts to resolve such objections. (ii) If the Buyer and Raytheon are able to resolve such objections within 30 days after delivery to Raytheon of such statement of objections, the Buyer and 21 Raytheon shall, within 45 days after delivery of such statement of objections, jointly prepare and sign a statement setting forth the Acquired Assets and Assumed Liabilities as of the Closing and the Closing Net Tangible Book Value, which amounts shall reflect the resolution of objections agreed to by the Buyer and Raytheon. (iii) If the Buyer and Raytheon do not reach a resolution of all objections set forth on the Buyer's statement of objections within 30 days after delivery of such statement of objections, the Buyer and Raytheon shall, within 30 days after the expiration of such 30-day period, (A) jointly prepare and sign a statement setting forth (1) those objections (if any) that the Buyer and Raytheon have resolved and the resolution of such objections and (2) those objections that the Buyer and Raytheon did not resolve (the "Unresolved Objections") and (B) engage the Neutral Accountant to resolve the Unresolved Objections. (iv) The Buyer and Raytheon shall jointly submit to the Neutral Accountant, within 10 days after the date of the engagement of the Neutral Accountant (as evidenced by the date of the engagement agreement), a copy of the Closing Statement (along with PricewaterhouseCoopers LLP's special purpose audit report thereon), a copy of the statement of objections delivered by the Buyer to Raytheon, and the joint statement referred to in Section 1.4(d)(iii)(A) above. Each of the Buyer and Raytheon shall submit to the Neutral Accountant (with a copy delivered to the other Party on the same day), within 45 days after the date of the engagement of the Neutral Accountant, a memorandum (which may include supporting exhibits) setting forth their respective positions on the Unresolved Objections. Each of the Buyer and Raytheon may (but shall not be required to) submit to the Neutral Accountant (with a copy delivered to the other Party on the same day), within 75 days after the date of the 22 engagement of the Neutral Accountant, a memorandum responding to the initial memorandum submitted to the Neutral Accountant by the other Party. Unless requested by the Neutral Accountant in writing, neither the Buyer nor Raytheon may present any additional information or arguments to the Neutral Accountant, either orally or in writing. (v) The Buyer and Raytheon shall instruct the Neutral Accountant that (A) the scope of its review and authority shall be limited to resolving the Unresolved Objections, (B) in resolving the Unresolved Objections, the Neutral Accountant shall accept each of the values set forth on the Closing Statement unless the Buyer demonstrates that such value is contrary to the requirements of the Closing Statement set forth in Section 1.4(b) (in which case its resolution of each Unresolved Objection shall consist of the determination of an appropriate value for each Closing Statement item that is the subject of an Unresolved Objection, which value shall be equal to one of, or between, the values proposed by Raytheon in the Closing Statement and by the Buyer in its statement of objections), and (C) issue a ruling which sets forth the resolution of each Unresolved Objection and includes a statement setting forth the Closing Net Tangible Book Value, reflecting the Neutral Accountant's resolution of the Unresolved Objections. The "Final Closing Statement" shall be the statement accepted (or deemed accepted) by the Buyer pursuant to Section 1.4(c), prepared and signed pursuant to Section 1.4(d)(ii) or delivered by the Neutral Accountant pursuant to this Section 1.4(d)(v), as the case may be. (vi) The resolution by the Neutral Accountant of the Unresolved Objections shall be conclusive and binding upon the Buyer and the Sellers. The Buyer and the Sellers agree that the procedure set forth in this Section 1.4(d) for resolving disputes with respect to the Closing Statement shall be the sole and exclusive method for resolving any such disputes; 23 provided that this provision shall not prohibit any Party from instituting litigation to enforce the ruling of the Neutral Accountant. (vii) The Buyer and Raytheon shall share equally the fees and expenses of the Neutral Accountant for its services under this Section 1.4(d). Other than such fees and expenses of the Neutral Accountant, the Buyer and Raytheon shall each be responsible for their own costs and expenses incurred in connection with any actions taken pursuant to Section 1.4(c) and this Section 1.4(d). (e) If the Closing Net Tangible Book Value as shown on the Final Closing Statement is less than the Target Net Tangible Book Value, the Purchase Price shall be reduced by such deficiency and Raytheon shall pay to the Buyer, by wire transfer or other delivery of immediately available funds, within three Business Days after the date on which the Final Closing Statement is finally determined pursuant to this Section 1.4, an amount equal to such deficiency (plus interest thereon at the rate of 8.0% per annum, compounded monthly, from the Closing Date). If the Closing Net Tangible Book Value as shown on the Final Closing Statement exceeds the Target Net Tangible Book Value, the Purchase Price shall be increased by such excess amount and the Buyer shall pay to Raytheon, by wire transfer or other delivery of immediately available funds, within three Business Days after the date on which the Final Closing Statement is finally determined pursuant to this Section 1.4, an amount equal to such excess (plus interest thereon at the rate of 8.0% per annum, compounded monthly, from the Closing Date). 1.5 Consents to Assignment. If (a) any Assigned Contract or Real Estate Lease may not be assigned and transferred by the applicable Seller to the Buyer (as a result of either the 24 provisions thereof or applicable laws, statutes, rules, regulations, judgments, rulings, decisions, writs, orders or decrees) without the consent or approval of a third party (including, for example, a Governmental Entity) and (b) such consent or approval has not been obtained prior to the Closing, then, with respect to each such Assigned Contract or Real Estate Lease, (i) notwithstanding any other provision of this Agreement, such Assigned Contract or Real Estate Lease shall not be assigned and transferred by such Seller or assumed by the Buyer at the Closing, (ii) such Seller and the Buyer will cooperate, in all reasonable respects, to obtain the necessary consent or approval as soon as practicable after the Closing, provided that neither Party shall be required to make any payments or agree to any material undertakings in connection therewith (except to the extent provided in Section 4.1), (iii) if and when such consent or approval is obtained, such Seller and the Buyer shall execute such further instruments of conveyance (in substantially the form executed at the Closing) as may be necessary to assign and transfer such Assigned Contract or Real Estate Lease to the Buyer and (iv) from and after the Closing until the assignment of such Assigned Contract or Real Estate Lease pursuant to clause (iii) above, such Seller and the Buyer shall cooperate, in all reasonable respects to (1) provide the Buyer with all of the rights and obligations under any such Assigned Contract or Real Estate Lease, (2) cooperate in any reasonable and lawful arrangement designed to provide such rights and obligations to the Buyer, including subcontracting, sublicensing or subleasing to the Buyer or the appointment of the Buyer as the agent of the Seller for purposes of such Assigned Contract or Real Estate Lease, and (3) enforce, at the request of the Buyer and for the account of the Buyer, any and all rights of the applicable Seller arising under any such Assigned Contract or 25 Real Estate Lease (provided that Section 10.3(b), and not this clause (iv), shall apply in the case of any such Assigned Contract that is a Government Contract (as defined in Section 2.13)) . 1.6 Further Assurances. At any time and from time to time after the Closing Date, as and when requested by any Party hereto and at such Party's expense, the other Party or Parties shall promptly execute and deliver, or cause to be executed and delivered, all such documents, instruments and certificates and shall take, or cause to be taken, all such further or other actions as are necessary to evidence and effectuate the transactions contemplated by this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS The Sellers jointly and severally represent and warrant to the Buyer that, except as set forth in the Schedule of Exceptions provided by the Sellers to the Buyer on the date hereof (the "Schedule of Exceptions"), the statements contained in this Article II are true and correct as of the date hereof and will be true and correct as of the Closing to the extent required by Section 5.1(a). The Schedule of Exceptions shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article II. The disclosures in any section or subsection of the Schedule of Exceptions shall qualify other sections and subsections in this Article II to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections. The inclusion of any information in the Schedule of Exceptions (or any update thereto) shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material to the AIS Business, has resulted in or would result in an AIS Material Adverse Effect (as defined in Section 2.1), or is outside the ordinary course of business. 26 For purposes of this Agreement, the phrase "to the knowledge of the Sellers" or any phrase of similar import shall mean and be limited to the actual knowledge of the following individuals: Richard F. Anderson, Gary Arnold, William H. Cooke, Robert Drewes, Ed Gloviak, Anthony F. O'Brien, Robert O'Rourke, Steven Post, Barry K. Pride, Cheryl Y. Whitis, Walter S. Hogle, Jr., Harold D. Smith, Thomas S. Brown, and E. Dean Calvert, and with respect to ASTOR, Tom Yeager, Bob Bearden and Angelo Strano. 2.1 Organization, Qualification and Corporate Power. Each of the Sellers is a corporation duly organized, validly existing and, where applicable, in good standing under the laws of its respective jurisdiction of organization, and is duly qualified to conduct business under the laws of each jurisdiction where the character of the properties or assets owned, leased or operated by it or the nature of its activities, in each case as they relate exclusively to the AIS Business, makes such qualification necessary, except for any such failures to be qualified that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. Each Seller has all requisite corporate power and authority to carry on the AIS Business in which it is now engaged and to own, lease and use the Acquired Assets currently owned, leased and used by it. For purposes of this Agreement, "AIS Material Adverse Effect" means any material adverse effect on (a) the assets, financial condition or results of operations of the AIS Business as a whole (other than (i) any effect arising out of or resulting from economic factors affecting the economy as a whole or factors generally affecting the industry in which the AIS Business competes, (ii) any effect proximately caused by the announcement of this Agreement and/or the transactions contemplated hereby, and (iii) the failure of a Seller to be 27 awarded any particular new contract or contracts), or (b) the ability of the Sellers to consummate the transactions contemplated by this Agreement. 2.2 Authorization of Transaction. Each Seller has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party and to perform its obligations hereunder and thereunder. The execution and delivery by each Seller of this Agreement and such Ancillary Agreements and the consummation by each Seller of the transactions contemplated hereby and thereby have been validly authorized by all necessary corporate action on the part of each Seller. This Agreement has been, and such Ancillary Agreements will be, validly executed and delivered by each Seller and, assuming this Agreement and each such Ancillary Agreement constitute the valid and binding agreement of the Buyer, constitutes or will constitute a valid and binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses. 2.3 Noncontravention. Subject to compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act"), and applicable foreign antitrust or trade regulation laws, neither the execution and delivery by any Seller of this Agreement or the Ancillary Agreements to which such Seller will be a party, nor the consummation by any Seller of the transactions contemplated hereby or thereby, will: 28 (a) conflict with or violate any provision of the charter or bylaws of any Seller; (b) except for consents to transfer or novations required with respect to contracts with Governmental Entities, require on the part of any Seller any filing, designation, declaration or registration with, or any permit, authorization, consent or approval of, any Governmental Entity, except for any filing, designation, declaration, registration, permit, authorization, consent or approval which if not obtained or made would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect; (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, result in the loss of a benefit or increase in liabilities or fees under, create in any party the right to terminate, cancel or modify, or require any notice, consent, approval, authorization or waiver under, any Assigned Contract or Real Estate Lease, except for (i) any conflict, breach, default, acceleration, loss, increase, or right to terminate, cancel or modify that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect or (ii) any notice, consent, approval, authorization or waiver the absence of which would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect; (d) violate any order, writ, injunction, judgment, ruling, decision or decree specifically naming, or statute, rule, law, ordinance or regulation applicable to, any Seller or any of their respective properties or assets or the Acquired Assets or Assumed Liabilities, except for any violation that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect; or 29 (e) result in the creation of any Encumbrance (as defined in Section 2.8) upon any of the Acquired Assets. 2.4 Financial Statements. Schedule 2.4 includes copies of the following financial statements with respect to the AIS Business: (a) the audited combined balance sheet and combined statements of operations, parent company investment and cash flows as of and for the fiscal years ended December 31, 1999 and December 31, 2000 and (b) the unaudited statement of operations for the nine-month period ended September 30, 2001. Schedule 1.4 includes a copy of the unaudited balance sheet of the AIS Business as of September 30, 2001 (the "Most Recent Balance Sheet"). The audited financial statements referenced in clause (a) above have been prepared in accordance with GAAP and fairly present, in all material respects, the financial condition and results of operations and cash flows of the AIS Business as of the respective dates thereof and for the periods referred to therein in accordance with GAAP; provided that Schedule 2.4 describes any differences between the AIS Business (as defined herein) and the business and operations that are covered by such financial statements. The unaudited statement of operations referenced in clause (b) above (i) has, to the knowledge of the Sellers, been prepared in accordance with GAAP and (ii) fairly presents, in all material respects, the results of operations of the AIS Business for the period referred to therein; provided that (i) such statement of operations includes the audit adjustments made to the audited financial statements referenced in clause (a) above, updated to reflect the appropriate amounts as of September 30, 2001 and (ii) Schedule 2.4 describes any differences between the AIS Business (as defined herein) and the business and operations that are covered by such statement of operations. The Most Recent Balance Sheet (i) has, to the knowledge of the Sellers, been prepared in accordance with GAAP 30 and (ii) fairly presents, in all material respects, the assets and liabilities that would constitute the Acquired Assets and the Assumed Liabilities if the Closing were to occur on September 30, 2001. 2.5 Absence of Certain Changes. Since the Balance Sheet Date, there has not been any change, event or development in the AIS Business other than (i) the pending sale of the AIS Business contemplated by this Agreement and (ii) changes, events or developments arising in the ordinary course of business that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. From the Balance Sheet Date to the date of this Agreement, the AIS Business has been operated in the ordinary course of business, and none of the Sellers has taken any of the following actions (or permitted any of the following events to occur) with respect to the AIS Business: (a) conveyed, exchanged, sold, assigned, abandoned, disposed of or transferred any portion of the Acquired Assets in a single transaction or series of related transactions in an amount in excess of $1,000,000, except in the ordinary course of business; (b) suffered any extraordinary losses (whether or not covered by insurance) material to the AIS Business; (c) incurred or guaranteed any indebtedness for borrowed money, including capitalized lease obligations, sale leaseback obligations and other similar indebtedness obligations, whether current or funded, or secured or unsecured ("Indebtedness") (all of which is reflected on the Most Recent Balance Sheet); 31 (d) granted or amended any rights to severance benefits, "stay pay" or termination pay to any AIS Employee (as defined in Section 9.1) that will constitute an Assumed Liability; (e) made any capital expenditures or commitments therefor in an amount in excess of $1,000,000, except in accordance with the AIS Business' capital expenditure budget included in Schedule 2.5(e); (f) acquired any operating business, whether by merger, stock purchase or asset purchase, except for any such business which did not, and is not expected to, become part of the AIS Business; (g) entered into any employment, compensation or deferred compensation agreement (or any amendment to any such existing agreement) with any AIS Employee whose annual base salary exceeds $150,000 that is an Assumed Liability; (h) established, terminated or materially amended any AIS Benefit Plan, except as required by law or as a result of the combination by the Sellers of any AIS Benefit Plans and as disclosed to the Buyer; (i) materially changed its accounting principles, methods or practices, except in each case to conform to changes in GAAP; (j) created or suffered the imposition of any Encumbrance on any of the Acquired Assets; (k) forgiven or cancelled any material debt or claim of the AIS Business or voluntarily waived any right of material value other than compromises of accounts receivable in the ordinary course of business consistent with past practice; 32 (l) terminated or cancelled, or permitted to lapse, terminate or expire, any of the Assigned Contracts; (m) entered into, or performed previously agreed upon, intercompany transactions relating to the AIS Business with any Affiliate of any of the Sellers, except any transactions which were in the ordinary course of business consistent with past practice; (n) increased (or committed to increase) the compensation, pension or other benefits payable or to become payable to any AIS Employee or paid any bonus payments or arrangements to any of them, that will constitute Assumed Liabilities, other than (i) increases amounting to less than $100,000 (an annualized basis) in the aggregate effected in the ordinary course of the AIS Business on a basis consistent with the past practice of the Seller and (ii) any increase required under the terms of any AIS Benefit Plan; or (o) entered into any agreement or commitment with respect to any of the matters referred to in paragraphs (a) through (n) of this Section 2.5. 2.6 Undisclosed Liabilities. There are no material liabilities relating exclusively or primarily to the AIS Business, except for (a) liabilities shown on the Most Recent Balance Sheet, (b) liabilities which have arisen since the Balance Sheet Date in the ordinary course of business and which are not, individually or in the aggregate, reasonably expected to result in an AIS Material Adverse Effect, (c) contractual and other liabilities which are not required by GAAP to be reflected on a balance sheet or in the footnotes thereto and (d) the Excluded Liabilities. 2.7 Tax Matters. Each Seller has filed or had filed on its behalf all material Tax Returns (as defined below) that it was required to file (separately or as part of a consolidated, combined or unitary group) and all such Tax Returns were complete and accurate to the extent 33 they relate to the AIS Business or the Acquired Assets, except for any failure to file, error or omission that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. Each Seller has paid (or had paid on its behalf) all Taxes that are shown to be due on any such Tax Returns to the extent they relate to the AIS Business or the Acquired Assets. None of the Acquired Assets is tax-exempt use property within the meaning of Section 168(h) of the Code. None of the Acquired Assets is property that is or will be required to be treated as being owned by another person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986. There are no liens for any Tax due on the Acquired Assets, except for Taxes not yet due and payable. Raytheon is not a foreign person as defined in Treasury Regulation Section 1.1445-2(b)(2)(i) and will not be subject to withholding under Section 1445 of the Code and the Treasury Regulations promulgated thereunder with respect to the sale of the Acquired Assets. None of the Acquired Assets to be acquired from Raytheon Australia are United States real property interests as defined in Section 897(c)(1) and the regulations promulgated thereunder. For purposes of this Agreement, "Taxes" means all taxes, including without limitation income, gross receipts, ad valorem, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, profits, estimated, windfall profits, severance, intangible property, occupation, production, license, capital gains, stamp, capital stock, payroll, goods and services, alternative minimum tax and franchise taxes or any other tax, custom or duty, or other like assessment or charge of any kind whatsoever, imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and 34 any interest, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means all reports, returns, declarations, statements, forms or other information required to be supplied to a taxing authority in connection with Taxes. 2.8 Tangible Personal Property. One of the Sellers owns all of the tangible personal property reflected on the Most Recent Balance Sheet (other than property sold, consumed or otherwise disposed of in the ordinary course of business since the Balance Sheet Date), free and clear of all Encumbrances. For purposes of this Agreement, "Encumbrance" means any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law), other than (i) mechanic's, materialmen's, landlord's and similar liens arising in the ordinary course of business, (ii) liens arising under worker's compensation, unemployment insurance, social security, retirement and similar legislation, (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the ordinary course of business, (iv) liens for Taxes not yet due and payable, (v) liens for Taxes which are being contested in good faith and by appropriate proceedings, (vi) liens relating to capitalized lease financings or purchase money financings that have been entered into in the ordinary course of business, and (vii) liens arising solely by action of the Buyer; provided that any of the items set forth in the foregoing clauses (i) through (vii) shall be considered an Encumbrance if the existence of any such items, individually or in the aggregate, (x) would reasonably be expected to result in an AIS Material Adverse Effect or (y) materially and adversely impairs the present use or value of the Acquired Assets. 35 2.9 Owned Real Property. The Owned Real Property constitutes all real property owned by any Seller that is used exclusively or primarily in the AIS Business. With respect to each piece of Owned Real Property: (a) one of the Sellers has record and marketable fee simple title to, and is in possession of, such Owned Real Property, free and clear of any Encumbrance, except for recorded easements, covenants and other restrictions which do not, individually or in the aggregate, materially impair the value or current uses of such Owned Real Property; (b) there are no leases, subleases or agreements granting to any party or parties the right of use or occupancy of any portion of such Owned Real Property, and no third party is in possession of any of the Owned Real Property; (c) there are no outstanding options or rights of first refusal to purchase such Owned Real Property; (d) none of the Sellers has received notice of, and to the knowledge of the Sellers, there is no pending eminent domain proceeding or proceeding to change or redefine the zoning classification with respect to such Owned Real Property; and (e) to the knowledge of the Sellers, (i) the improvements constructed on such Owned Real Property are in good condition, normal wear and tear excepted, (ii) no Seller has received any uncured notice, demand or request stating that such Owned Real Property is not in compliance with any applicable law, statute, ordinance or code, and (iii) there are no violations of any deed restrictions or recorded covenants affecting such Owned Real Property. 2.10 Leased Real Property. The Real Estate Leases constitute all leases or subleases of any Seller covering real property which is used exclusively or primarily in the AIS Business. 36 The Sellers have made available to the Buyer complete and accurate copies of the Real Estate Leases and all amendments and modifications thereto. With respect to each Real Estate Lease: (a) the Real Estate Lease is a valid and binding obligation of the applicable Seller and, to the knowledge of the Sellers, each other party to such Real Estate Lease; (b) one of the Sellers is the holder of the tenant's interest under the Real Estate Lease and is in possession of the Leased Facility, and, to the knowledge of the Sellers, is entitled to quiet enjoyment and use of the Leased Facility in connection with the conduct of the AIS Business without any interference or claims by any Person; (c) none of the Sellers nor, to the knowledge of the Sellers, any other party to the Real Estate Lease is in breach or default and, to the knowledge of the Sellers, no event has occurred which, with notice or lapse of time or both, would constitute a breach or default or permit termination, modification or acceleration thereunder, except for any such breach or default as would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect; and (d) none of the Sellers has assigned, transferred, conveyed, mortgaged, deeded in trust, encumbered or otherwise permitted, created, or suffered any Encumbrance on any interest in the leasehold or subleasehold to the Real Estate Lease. 2.11 Intellectual Property. (a) Schedule 1.1(a)(vii) lists substantially all of the patents and patent applications owned by any Seller or an Affiliate that are used or planned for use exclusively or primarily in the AIS Business as conducted prior to and up to the date of this Agreement (the "Designated Intellectual Property"). To the knowledge of the Sellers, the Sellers own or have 37 the right to use, and pursuant to this Agreement, the Intellectual Property Agreement or the Transition Services Agreement will assign, license or provide access to the Buyer, all of the Intellectual Property of the Seller (except for any Intellectual Property set forth on Schedule 2.14) necessary to conduct the AIS Business, free of all Encumbrances. There are no copyright registrations owned by any Seller or an Affiliate that are used exclusively or primarily in the AIS Business. (b) Except for any claims which have previously been resolved and are no longer outstanding or which were made more than three years prior to the date of this Agreement and which have not been subsequently pursued, none of the Sellers has received notice of, or has, to the knowledge of the Sellers, been threatened with, any written claim from any third party, and there are no pending actions, suits or proceedings alleging (i) infringement or violation of such third party's Intellectual Property which is based on the use of the Intellectual Property to be sold to the Buyer pursuant to this Agreement or the Acquired Assets and which would reasonably be expected to result in an AIS Material Adverse Effect, or (ii) the invalidity or unenforceability of any of the Intellectual Property to be sold to the Buyer pursuant to this Agreement. (c) The Buyer acknowledges that the Intellectual Property to be assigned to the Buyer pursuant to this Agreement may be subject to certain pre-existing rights or licenses which have previously been granted to, or acquired by, the United States Government or other third parties. Other than rights and licenses granted in the ordinary course of business, none of the Sellers has granted to any third party any license or right to the commercial use of any of the Designated Intellectual Property. 38 (d) To the knowledge of the Sellers, no third party is infringing any of the Intellectual Property to be sold to the Buyer pursuant to this Agreement. 2.12 Contracts. (a) Schedule 2.12 lists all of the following contracts or agreements to which any Seller is a party as of the date of this Agreement that relate exclusively or primarily to the AIS Business (excluding Real Estate Leases, any contracts or agreements relating to Excluded Assets or Excluded Liabilities and excluding any contracts or agreements that cannot be disclosed to the Buyer due to the provisions of applicable law or regulations): (i) any agreement (or group of related agreements with the same party) for the lease of personal property from or to third parties providing for lease payments the remaining unpaid balance of which is in excess of $500,000; (ii) any agreement (or group of related agreements with the same party) for the purchase of products or services under which the undelivered balance of such products and services is in excess of $500,000, other than agreements executed in the ordinary course of business which are cancelable by the applicable Seller without penalty upon six months or shorter notice; (iii) any agreement (or group of related agreements with the same party) relating exclusively or primarily to the AIS Business which involves a payment to be made to any Seller in excess of $500,000, either pursuant to a contract with a customer of the AIS Business or pursuant to any other contract or agreement for the sale of goods and services outside the ordinary course of business; 39 (iv) any agreement for the acquisition by any Seller of any operating business, whether by merger, stock purchase or asset purchase, except for any such business which did not or will not become part of the AIS Business; (v) any agreement establishing a partnership or joint venture; (vi) any agreement (or group of related agreements with the same party) under which any Seller has created, incurred, assumed or guaranteed Indebtedness the outstanding balance of which is more than $500,000 or under which it has imposed an Encumbrance on any of the Acquired Assets; (vii) any agreement that contains non-competition covenants limiting or restricting the ability of any Seller or any subsequent transferees or assignees, including the Buyer, from engaging in the AIS Business anywhere in the world; (viii) any agreement for the employment of any AIS Employee providing base annual compensation at a rate in excess of $150,000; (ix) any employment, change in control, severance, "stay pay" or termination agreement with any AIS Employee; (x) any agreement relating exclusively or primarily to the AIS Business and requiring estimated or actual annual capital expenditures in excess of $1,000,000; (xi) any material agreement with respect to the representation of the AIS Business in foreign countries; (xii) any agreement relating to any material indemnification obligations of any of the Sellers; 40 (xiii) any agreement relating to any litigation, suit, proceeding, action, investigation, claim, settlement, judgment, award, order or decree which involves liability of the Sellers in excess of $500,000; and (xiv) any license of computer software used primarily in the AIS Business, requiring payments in excess of $500,000 per year. (b) The Sellers have made available to the Buyer a complete and accurate copy of each contract and agreement listed in Schedule 2.12 (the "Designated Contracts"), other than any contracts or agreements that cannot be provided to the Buyer due to the provisions of applicable law or regulations. Each Designated Contract (i) is in full force and effect and (ii) constitutes a valid and binding obligation of the applicable Seller and, to the knowledge of the Sellers, of each other party thereto, and there exists no defaults of any Seller or, to the knowledge of the Sellers, any other party thereto under any Designated Contract, except for any such failure to be valid and binding or default that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. To the knowledge of the Sellers, no outstanding bid or proposal to provide products or services to a third party or Governmental Entity was bid, such that if accepted such bid or proposal would reasonably be expected to generate a net loss to the Seller in the performance thereof. 2.13 Government Contracts. (a) (i) None of the AIS Employees is or during the last three years has been (except as to routine security investigations) under administrative, civil or criminal investigation, indictment or information by any agency, entity or regulatory authority of the United States Federal Government (a "U.S. Governmental Entity"), (ii) there is no pending or, to the 41 knowledge of the Sellers, threatened audit or investigation by any U.S. Governmental Entity of the AIS Business or any AIS Employee with respect to the AIS Business with respect to any alleged irregularity, misstatement or omission arising under or relating to a Government Contract or Government Bid, and (iii) during the last three years, none of the Sellers has made a voluntary disclosure with respect to any alleged irregularity, misstatement or omission arising under or relating to a Government Contract or Government Bid with respect to the AIS Business or included in the Acquired Assets, other than routine inquiries, audits and reconciliations that, in each case, would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. To the knowledge of the Sellers, none of the Sellers nor any of their respective employees has made any intentional misstatement or omission in connection with any voluntary disclosure that has led or is expected to lead, either before or after the Closing Date, to any of the consequences set forth in clause (i) or (ii) of the immediately preceding sentence or any other material damage, penalty assessment, recoupment of payment or disallowance of cost. For purposes of this Agreement, "Government Contract" means any Assigned Contract that (i) is between any Seller and a U.S. Governmental Entity or (ii) is entered into by any Seller as a subcontractor (at any tier) in connection with a contract between another entity and a U.S. Governmental Entity, and "Government Bid" means any offer to sell made by any of the Sellers prior to the Closing Date which, if accepted, would result in a Government Contract. (b) There are (i) no outstanding claims against any Seller by a U.S. Governmental Entity or any non-U.S. Governmental Entity or by any prime contractor, subcontractor or vendor arising under any Government Contract or Government Bid with respect to the AIS Business or otherwise included in the Acquired Assets and (ii) no disputes between 42 any Seller and a U.S. Governmental Entity or non-U.S. Governmental Entity under the Contract Disputes Act or any other federal statute or between any Seller and any prime contractor, subcontractor or vendor arising under or relating to any such Government Contract or Government Bid with respect to the AIS Business or otherwise included in the Acquired Assets, except any such claim or dispute that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. (c) None of the Sellers nor any of the AIS Employees is (or during the last three years has been) suspended or debarred from doing business with a U.S. Governmental Entity or a non-U.S. Governmental Entity or is (or during such period was) the subject of a finding of non-responsibility or ineligibility for U.S. Government or non-U.S. Government contracting. (d) No misstatement contained in schedules of U.S. Government-furnished equipment provided to any Governmental Entity under any Government Contract relating to the AIS Business are reasonably expected, individually or in the aggregate, to result in an AIS Material Adverse Effect. (e) The rates and rate schedules submitted to U.S. Governmental Entities with respect to the Government Contracts relating to the AIS Business or otherwise included in the Acquired Assets have been closed for all years prior to 1995. 2.14 Entire Business. Except for (i) the Excluded Assets, (ii) any services or functions provided to the Buyer under the Transition Services Agreement, (iii) any Assigned Contracts covered by Section 1.5 and (iv) those items listed in Schedule 2.14, (x) the Acquired Assets are, when utilized by a labor force substantially similar to that employed by the Sellers in connection 43 with the AIS Business, adequate to conduct the AIS Business in all material respects as currently conducted, and (y) no material assets used exclusively or primarily in the AIS Business (other than assets leased or licensed by a Seller) are owned by a party other than the Sellers. 2.15 Litigation. Schedule 2.15 lists, as of the date of this Agreement, each (a) judgment, writ, order, decree, stipulation, ruling, decision or injunction of any Governmental Entity specifically naming any Seller that relates to the AIS Business that would reasonably be expected, individually or in the aggregate, to result in an AIS Material Adverse Effect and (b) action, suit, arbitration or proceeding by or before any Governmental Entity to which any Seller is a party or, to the knowledge of the Sellers, which has been threatened in writing against any Seller that relates to the AIS Business and that seeks either (i) unspecified damages which could reasonably expected to be in excess of $500,000, (ii) damages in excess of $500,000 or (iii) equitable relief that would materially impair the operation of the AIS Business as currently conducted. There is no (i) judgment, writ, order, decree, stipulation, ruling, decision or injunction of a Governmental Entity specifically naming any Seller that relates to the AIS Business or (ii) action, suit, arbitration or proceeding by or before any Governmental Entity to which any Seller is a party or, to the knowledge of the Sellers, which has been threatened in writing against any Seller that relates to the AIS Business, that, in either case, would reasonably be expected, individually or in the aggregate, to result in an AIS Material Adverse Effect. 2.16 Employment and Labor Matters. (a) Schedule 2.16 contains a list, as of the date of this Agreement, of all AIS Employees whose annual rate of compensation exceeds $150,000, along with the position and the annual rate of compensation of each such person. 44 (b) Raytheon has a collective bargaining relationship with the United Automobile, Aerospace and Agricultural Implement Workers of America (the "Union") and is a party to a collective bargaining agreement with the Union renewed as of August 21, 2001 (the "Collective Bargaining Agreement"). None of the Sellers has any other collective bargaining relationship or is party to any other collective bargaining agreement with respect to the AIS Business, and none of the Sellers is negotiating any other collective bargaining agreement with respect to the AIS Business. The Collective Bargaining Agreement will expire on August 21, 2004 unless a successor agreement has been negotiated. The Union has not engaged in a work stoppage or strike with respect to the AIS Business within the preceding 20 years. There is not currently in effect any litigation between any Seller and the Union relating to the collective bargaining relationship or the collective bargaining agreement, including but not limited to grievances, arbitrations or unfair labor practice proceedings, except any which would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. The Collective Bargaining Agreement shall be deemed an Assigned Contract. 2.17 Employee Benefits. (a) Schedule 2.17 contains a complete and accurate list, as of the date of this Agreement, of all Employee Benefit Plans (as defined below) maintained, or contributed to, by any Seller for the benefit of AIS Employees (and their beneficiaries) or under which the AIS Business would otherwise reasonably be expected to have liability in respect of the AIS Employees (the "AIS Benefit Plans"). For purposes of this Agreement, "Employee Benefit Plan" means (i) any "employee pension benefit plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) other than a 45 "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), (ii) any "employee welfare benefit plan" (as defined in Section 3(1) of ERISA), and (iii) any other written or oral plan, agreement or arrangement involving compensation, including without limitation insurance coverage, severance benefits, vacation, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation or benefits, but excluding any Employee Benefit Plan required to be maintained or contributed to under foreign law. Complete and accurate copies of all AIS Benefit Plans (or, if no written plan or agreement, a complete and accurate written summary thereof) and all related trust agreements, insurance contracts and summary plan descriptions have been made available to the Buyer. (b) Each AIS Benefit Plan has been administered in all material respects in accordance with its terms and each Seller has met its obligations with respect to such AIS Benefit Plan. Each AIS Benefit Plan is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code of 1986, as amended (the "Code"), the regulations thereunder and any other applicable laws. (c) There are no termination proceedings or other claims (except claims for benefits payable in the normal operation of the AIS Benefit Plans and proceedings with respect to qualified domestic relations orders), suits or proceedings against or involving any AIS Benefit Plan or asserting any rights or claims to benefits under any AIS Benefit Plan, or, to the knowledge of the Sellers, any pending or threatened such proceedings or other claims, suits, proceedings, or investigations by any Governmental Entity involving any AIS Benefit Plan, which could reasonably be expected to result in material liability to the AIS Business. 46 (d) The AIS Benefit Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service to the effect that such AIS Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, and nothing has occurred, whether by action or failure to act, that would reasonably be expected to cause the loss of any such qualification, except for such failures to qualify which may be corrected without material liability to the AIS Business. (e) None of the Sellers nor any ERISA Affiliate (as defined below) has withdrawn from any multiemployer plan in a complete or partial withdrawal which has resulted in any material withdrawal liability which has not been satisfied in full, and none of the Sellers nor any ERISA Affiliate reasonably expects to incur any such liability. All required contributions by any Seller or any ERISA Affiliate to any such multiemployer plan have been made in full. For purposes of this Agreement, "ERISA Affiliate" means any entity which is a member of (i) a controlled group of corporations (as defined in Section 414(b) of the Code), (ii) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (iii) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes any Seller. (f) No AIS Benefit Plan provides welfare benefits after termination of employment to any AIS Employee (or to any beneficiary of any such employee), excluding continuation of health coverage required to be continued under Section 4980B of the Code or other applicable laws. 47 (g) No act or omission has occurred and no condition exists with respect to any AIS Benefit Plan maintained by any Seller or any ERISA Affiliate that would subject any Seller or any ERISA Affiliate to any fine, penalty, Tax or liability of any kind imposed under ERISA or the Code (other than liabilities for benefits accrued under AIS Benefit Plans for AIS Employees and their beneficiaries), except for any fine, penalty, Tax or liability that would not, individually or in the aggregate, reasonably be expected to be material. (h) No AIS Benefit Plan is a "multiple employer plan" within the meaning of Section 413(c) of the Code. 2.18 Environmental Matters. (a) For purposes of this Agreement, the following terms have the meanings provided below. (i) "Release" has the meaning assigned to that term under the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"). (ii) "Environment" means any surface water, ground water, drinking water supply, land surface or subsurface strata, or ambient air. (iii) "Materials of Environmental Concern" means any hazardous substance, pollutant or contaminant, as those terms are defined under CERCLA, solid waste and hazardous waste, as those terms are defined in the Federal Resource Conservation and Recovery Act, and oil, petroleum and petroleum products. (iv) "Environmental Law" means any foreign, federal, state, provincial, or municipal statute, rule or regulation, order, or the common law, relating to protection of the 48 Environment or occupational health and safety, including, without limitation, any statute or regulation pertaining to (A) the presence, manufacture, processing, use, treatment, storage, disposal, transportation, handling or generation of Materials of Environmental Concern; (B) air, water and noise pollution; (C) groundwater and soil contamination; or (D) the Release or threatened Release of Materials of Environmental Concern to the Environment (including without limitation bodily injury or property damage resulting therefrom). (v) "Environmental Matters" means any legal obligation or liability arising under Environmental Law (including, without limitation, strict liability under CERCLA and analogous Environmental Law) relating to the properties and the business which are the subject of the transaction contemplated by this Agreement, including, without limitation, Off-Site Liabilities. (vi) "Off-Site Liabilities" means Environmental Matters resulting from any transportation, treatment, storage, disposal or Release, or the arrangement therefor, in connection with the AIS Business, of any Materials of Environmental Concern to or at any property, location, site or facility other than an AIS Property, but Off-Site Liabilities do not include Environmental Matters to the extent arising from Releases on an AIS Property, manifested by contamination on such property which has migrated beyond a boundary of such property through soil or ground water. (vii) "AIS Properties" means the Owned Real Property and Leased Facilities or government-owned facility now or formerly operated by the AIS Business, but only to the extent operated by the AIS Business. 49 (b) To the knowledge of the Sellers, except as described or identified in the Schedule of Exceptions or in a document listed in the Schedule of Exceptions: (i) the AIS Business' operations at the AIS Properties are in compliance with applicable Environmental Laws, except for any failure to comply with Environmental Laws that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect; (ii) there is no pending or threatened civil or criminal litigation, written notice of violation or formal administrative proceeding, investigation or claim relating to any Environmental Law involving the AIS Business, any of the AIS Properties, any property formerly owned or operated by the AIS Business, except for any such litigation, notice, proceeding, investigation or claim that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect; (iii) The Sellers have those permits, licenses and approvals required under Environmental Law to operate the AIS Properties as currently operated by the Sellers, except for any such permit, license or approval the absence of which would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect; and (iv) No Materials of Environmental Concern have been Released by the AIS Business that would require remediation under applicable Environmental Law, except for any such Release that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. (c) The Parties agree that the only representations and warranties of the Sellers herein as to any Environmental Matters are those contained in this Section 2.18. Without 50 limiting the generality of the foregoing, the Buyer specifically acknowledges that the representations and warranties contained in Sections 2.15, 2.19 and 2.20 do not relate to Environmental Matters. 2.19 Legal Compliance. Each Seller is in compliance with all applicable laws (including rules, regulations, statutes, writs, orders, judgments and decrees thereunder) of any federal, state or foreign government, or any Governmental Entity, currently in effect with respect to the AIS Business, except where the failure to comply therewith would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. None of the Sellers has received written notice of any pending action, suit, proceeding, hearing or investigation relating to the AIS Business alleging any failure to so comply, except for any that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. 2.20 Permits. Schedule 2.20 lists all Legal Permits held by any Seller relating to the AIS Business or the use and ownership of the Acquired Assets, the absence of which would, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. To the knowledge of the Sellers, (a) each Legal Permit listed in Schedule 2.20 is in full force and effect and none of the Sellers is in violation of or default thereunder, and (b) no suspension or cancellation of any such Legal Permit is threatened, except for any violation, default, suspension or cancellation that would not, individually or in the aggregate, reasonably be expected to result in any material liability to the AIS Business or materially impair the operation of the AIS Business. 51 2.21 Title to Assets. Each of the Sellers owns or has the right to transfer all of the Acquired Assets. All of the tangible Acquired Assets have been adequately maintained for their continued operation, subject to normal wear and tear, except where the failure to maintain such Acquired Assets would not, individually or in the aggregate, reasonably be expected to have an AIS Material Adverse Effect. 2.22 Government-Furnished Equipment. Schedule 2.22 incorporates by reference to their location the most recent schedules delivered to any Governmental Entity, as of the date of this Agreement, which identifies by description or by inventory number certain equipment and fixtures loaned, bailed or otherwise furnished to or held by any Seller by or on behalf of any Governmental Entity and used exclusively or primarily in the AIS Business. Such schedules are maintained in the files of the respective projects and were accurate and complete and, as of the Closing Date, would contain only those additions and omit only those deletions of equipment and fixtures that have occurred in the ordinary course of business, except for such inaccuracies that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 2.23 Accounts Receivable. All accounts receivable of the AIS Business, as reflected in Most Recent Balance Sheet, arose from sales actually made or services actually performed in the ordinary course of business. 2.24 Brokers Fees. Except for Bear, Stearns & Co. Inc., whose fees and expenses will be paid by the Sellers, no finder, broker, agent or other intermediary has worked for or on behalf of any of the Sellers in connection with the negotiation or consummation of the transactions contemplated hereby. 52 2.25 Affiliate Relationships. No agreement, arrangement or relationship exists between the AIS Business on the one hand and any of the Sellers or their Affiliates on the other hand, except for agreements, arrangements and relationships (i) with respect to accounts receivable and accounts payable relating to the AIS Business that do not constitute Acquired Assets or Assumed Liabilities, and (ii) contemplated by the Ancillary Agreements or Section 10.5 of this Agreement. 2.26 Liability for Cost and Pricing Data. To the knowledge of the Sellers, there exists no reasonable basis for a claim for any liability of the AIS Business by any Governmental Entity as a result of defective cost and pricing data submitted to any Governmental Entity, including, without limitation, any such data relating to liabilities accrued on the books of the AIS Business or in the financial accounts for deferred compensation to any AIS Employee, except any such liability that would not, individually or in the aggregate, reasonably be expected to result in an AIS Material Adverse Effect. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER The Buyer represents and warrants to each Seller that the statements contained in this Article III are true and correct as of the date hereof and will be true and correct as of the Closing to the extent required by Section 5.2(a). For purposes of this Agreement, the phrase, "to the knowledge of the Buyer" or any phrase of similar import shall mean and be limited to the actual knowledge of the following individuals: Frank C. Lanza, Robert V. LaPenta, Christopher C. Cambria, Michael T. Strianese, and David T. Butler. 53 3.1 Organization. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. 3.2 Authorization of Transaction. The Buyer has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party and to perform its obligations hereunder and thereunder. The execution and delivery by the Buyer of this Agreement and such Ancillary Agreements and the consummation by the Buyer of the transactions contemplated hereby and thereby have been validly authorized by all necessary corporate action on the part of the Buyer. This Agreement has been, and such Ancillary Agreements will be, validly executed and delivered by the Buyer and, assuming this Agreement and each such Ancillary Agreement constitute the valid and binding agreement of the Sellers, constitutes or will constitute a valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses. 3.3 Noncontravention. Subject to compliance with the applicable requirements of the Hart-Scott-Rodino Act and applicable foreign antitrust or trade regulation laws, neither the execution and delivery by the Buyer of this Agreement or the Ancillary Agreements to which the Buyer will be a party, nor the consummation by the Buyer of the transactions contemplated hereby or thereby, will: 54 (a) conflict with or violate any provision of the charter or bylaws of the Buyer; (b) require on the part of the Buyer any filing, designation, declaration or registration with, or permit, authorization, consent or approval of, any Governmental Entity, except for any filing, designation, declaration, registration, permit, authorization, consent or approval which if not obtained or made would not, individually or in the aggregate, reasonably be expected to result in a material adverse effect on the ability of the Buyer to consummate the transactions contemplated by this Agreement (a "Buyer Material Adverse Effect"); (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, cancel or modify, or require any notice, consent, approval, authorization or waiver under, any contract or agreement to which the Buyer is a party or by which the Buyer is bound, except for (i) any conflict, breach, default, acceleration or right to terminate, cancel or modify that would not, individually or in the aggregate, reasonably be expected to result in a Buyer Material Adverse Effect, (ii) any notice, consent, approval, authorization or waiver the absence of which would not, individually or in the aggregate, reasonably be expected to result in a Buyer Material Adverse Effect or (iii) any consent set forth on Schedule 3.3(c); or (d) violate any order, writ, injunction, judgment, ruling, decision or decree specifically naming, or statute, rule, law, ordinance or regulation applicable to, the Buyer or any of its properties or assets, except for any violation that would not, individually or in the aggregate, reasonably be expected to result in a Buyer Material Adverse Effect. 55 3.4 Litigation. There is no (a) judgment, writ, order, decree, stipulation, ruling, decision or injunction of any Governmental Entity specifically naming the Buyer or (b) action, suit, arbitration or proceeding by or before any Governmental Entity to which the Buyer is a party or, to the knowledge of the Buyer, which has been threatened against the Buyer, that, in the case of either clause (a) or (b), would reasonably be expected, individually or in the aggregate, to result in a Buyer Material Adverse Effect. 3.5 Financing. The Buyer has, and at the Closing will have, sufficient sources of financing in order to consummate the transactions contemplated by the Agreement and to fulfill its obligations hereunder, including without limitation payment to the Sellers of the Purchase Price at the Closing. 3.6 Due Diligence by the Buyer. The Buyer acknowledges that it has conducted an independent investigation of the financial condition, results of operations, assets, liabilities, properties and projected operations of the AIS Business and, in making its determination to proceed with the transactions contemplated by this Agreement, the Buyer has relied solely on the results of such investigation and the representations, warranties, covenants and agreements of the Sellers set forth herein, including the Schedule of Exceptions and other Schedules hereto, and in the Ancillary Agreements. Such representations and warranties by the Sellers constitute the sole and exclusive representations and warranties of the Sellers to the Buyer in connection with the transactions contemplated hereby, and the Buyer acknowledges and agrees that the Sellers are not making any representation or warranty whatsoever, express or implied, beyond those expressly given in this Agreement and the Ancillary Agreements, including any implied warranty as to condition, merchantability, or suitability as to any of the Acquired Assets. The 56 Buyer further acknowledges and agrees that any cost estimates, projections or other predictions that may have been provided to the Buyer or any of its employees, agents or representatives are not representations or warranties of the Sellers or any of their Affiliates; provided that the foregoing is not intended to and shall not limit the scope of the representations and warranties contained herein and in the Ancillary Agreements, including Sections 2.4, 2.6 and 2.26 hereof and in the appendices to the Supply Agreements. ARTICLE IV PRE-CLOSING COVENANTS 4.1 Closing Efforts; Hart-Scott-Rodino Act. (a) Each of the Parties shall use reasonable commercial efforts to take all actions and to do all things reasonably necessary or advisable to consummate the transactions contemplated by this Agreement, including using reasonable commercial efforts to (i) obtain all waivers, permits, consents, approvals or other authorizations from Governmental Entities and other third parties (the "Third Party Consents"), (ii) effect all registrations, declarations, filings and notices with or to Governmental Entities (the "Governmental Filings"), (iii) otherwise comply in all material respects with all applicable laws, statutes, orders, decrees, judgments, rules and regulations in connection with the consummation of the transactions contemplated by this Agreement, and (iv) take such other actions as may be reasonably necessary or as another Party may reasonably request to satisfy the conditions set forth in Article V hereof or otherwise to comply with this Agreement. Each of the Parties shall promptly notify each of the other Parties of any fact, condition, or event known to it that could reasonably be expected to prohibit, make unlawful or delay the consummation of the transaction contemplated hereby. Each of the 57 Parties shall bear its own costs and expenses associated with obtaining Third Party Consents from Governmental Entities and effecting Governmental Filings. Notwithstanding the foregoing, none of the Parties shall be required to pay any out-of-pocket costs associated with obtaining Third Party Consents from entities other than Governmental Entities; provided that if an out-of-pocket payment is required to obtain a Third Party Consent which is listed on Schedule 5.1(f) or which Raytheon and the Buyer agree is advisable to obtain, Raytheon and the Buyer shall each pay 50% of such out-of-pocket payment. (b) Without limiting the generality of the foregoing, each of the Parties shall (or shall cause the appropriate Affiliate thereof to) (i) promptly file any Notification and Report Forms and related material that it may be required to file with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Act, (ii) use reasonable commercial efforts to obtain an early termination of the applicable waiting period under the Hart-Scott-Rodino Act, (iii) make any further filings or information submissions pursuant thereto that may be reasonably necessary or advisable and (iv) promptly make any filings or submissions required under any applicable foreign antitrust or trade regulation law. Each of the Parties shall use reasonable commercial efforts to resolve any objections that may be asserted by any Governmental Entity with respect to the transactions contemplated hereby, and shall cooperate with each other to contest any challenges to the transactions contemplated hereby by any Governmental Entity. Each of the Parties shall promptly inform each other of any material communication (and shall send a copy of any such written or electronic communication to the other Parties) received by such Party from the Federal Trade Commission, the Antitrust Division of the Department of Justice or any other 58 Governmental Entity regarding any of the transactions contemplated hereby (unless the provision of such information would (i) violate the provisions of any applicable laws or regulations (including without limitation those relating to security clearance or export controls) or any confidentiality agreement or (ii) cause the loss of the attorney-client privilege with respect thereto); provided that each such Party shall use its reasonable commercial efforts to promptly communicate to the other Parties the substance of any such material communication, whether by redacting parts of such material communication or otherwise, so that such communication would not violate applicable laws or regulations or cause the loss of the attorney-client privilege with respect thereto. 4.2 Replacement of Guarantees and Letters of Credit. For purposes of this Agreement, "Seller Guarantees" means all guarantees, covenants, indemnities, letters of credit and similar credit assurances provided by any Seller or any of their respective Affiliates that relate exclusively or primarily to the AIS Business. Unless otherwise agreed to in writing by the Sellers, the Buyer shall use commercially reasonable efforts to arrange, prior to the Closing, for replacement arrangements (which shall include a full and complete release of each Seller and their respective Affiliates), from all Seller Guarantees. To fulfill such obligation, the Buyer shall not be obligated to pay any consent fee or similar amount, but shall be obligated to offer to provide substitute security or guarantees that it reasonably believes to be of like character, quality and amount. The Buyer will consult with the Sellers from time to time concerning the progress made with respect to such efforts, and shall permit the Sellers reasonable participation in such process. All Seller Guarantees as of the date of this Agreement are listed on Schedule 4.2. This Section 4.2 (and Section 5.2(e)) shall not apply to any Seller Guarantee issued between 59 the date of this Agreement and the Closing unless (a) notice of such Seller Guarantee is provided to the Buyer at least 15 days prior to the Closing and such Seller Guarantee is for an amount of not more than $500,000, provided, however, that the aggregate amount of all Seller Guarantees issued pursuant to this clause (a) does not exceed $5,000,000, or (b) such Seller Guarantee is issued with the consent of the Buyer (which shall not be unreasonably withheld or delayed). 4.3 Operation of Business. Except as contemplated by this Agreement, or as set forth on Schedule 4.3, during the period from the date of this Agreement until the Closing, each of the Sellers shall use reasonable commercial efforts to (i) operate the AIS Business in the ordinary course of business consistent with past practice and (ii) preserve the present business organization of the AIS Business intact. Without limiting the generality of the foregoing, prior to the Closing, none of the Sellers shall, without the written consent of the Buyer: (a) sell, assign or transfer any portion of the Acquired Assets in a single transaction or series of related transactions in an amount in excess of $1,000,000, except in the ordinary course of business consistent with past practice; (b) incur or guarantee any Indebtedness relating exclusively or primarily to the AIS Business; (c) grant any rights to severance benefits, "stay pay" or termination pay to any AIS Employee or increase the benefits payable or potentially payable to any AIS Employee under any previously existing severance benefits, "stay-pay" or termination pay arrangements, other than salary increases or bonus payments made prior to the Closing that are substantially consistent with the past practice of the AIS Business; 60 (d) make any capital expenditures or commitments therefor relating exclusively or primarily to the AIS Business in an amount in excess of $1,000,000 in the aggregate, except in accordance with the AIS Business' capital expenditure budget included in Schedule 2.5(e); (e) acquire any operating business, whether by merger, stock purchase or asset purchase (except for any such business which will not become part of the AIS Business); (f) enter into any employment, compensation or deferred compensation agreement (or any amendment to any such existing agreement) with any AIS Employee whose annual base salary exceeds $150,000, except in the ordinary course of business; (g) establish, terminate or materially amend any AIS Benefit Plan, except as required by law; (h) materially change its accounting principles, methods or practices insofar as they relate to the AIS Business, except in each case to conform to changes in GAAP; (i) enter into any contract or agreement relating exclusively or primarily to the AIS Business outside the ordinary course of business; (j) take any action that would be inconsistent with the maintenance of the inventory of supplies, parts and other materials of the AIS Business, including the preservation and maintenance of the Designated Intellectual Property or the maintenance of the books, accounts, files and records of the AIS Business, except in the ordinary course of business consistent with past practice; (k) amend, modify, terminate, cancel, or allow to lapse any insurance policies related exclusively or primarily to the Acquired Assets or the AIS Business; 61 (l) take any action that would not be in compliance in all material respects with all applicable laws, statutes, rules, regulations, orders, writs, decrees, rulings, judgments, obligations pursuant to agreements and any other obligations related to the AIS Business, the Acquired Assets and the Assumed Liabilities; (m) except for any agreement, bid, proposal or other commitment relating to Operation Enduring Freedom, (i) enter into any agreement, bid, proposal or other commitment for the purchase of goods or services related to the AIS Business which involves aggregate consideration in excess of $2,500,000 (in the case of a purchase in support of an existing customer program) or $1,000,000 (in any other case); (ii) enter into any agreement, bid, proposal or other commitment for the sale of goods or services of the AIS Business which involves aggregate consideration in excess of $5,000,000 (provided that the Buyer shall be deemed to have consented in writing to any agreement, bid, proposal or other commitment involving aggregate consideration of between $5,000,000 and $7,500,000 if it does not send to the applicable Seller (in writing or via e-mail) an objection within two business days following receipt, in writing or via e-mail, by such Seller to the Buyer of written notice (including a reasonable description thereof) of such agreement, bid, proposal or other commitment) or which is expected to result in a loss in excess of $100,000 for any individual agreement or $500,000 in the aggregate; or (iii) amend, supplement, waive, modify, terminate, cancel or allow to lapse, or transfer any material right or claim pursuant to, any Assigned Contract other than in the ordinary course of the business consistent with past practice; (n) permit or allow any of the Acquired Assets to become subject to any Encumbrance; 62 (o) waive any material claims or rights relating to the AIS Business, the Acquired Assets or the Assumed Liabilities; (p) pay, discharge or satisfy any claims, liabilities, debts or obligations (whether absolute, accrued, asserted, unasserted, contingent or otherwise) in excess of $100,000 related to the AIS Business, the Acquired Assets or the Assumed Liabilities, or settle or compromise any litigation, arbitration, suit, claim, action or proceeding related to the AIS Business, the Acquired Assets or the Assumed Liabilities, except in accordance with their terms as in effect on the date hereof in the ordinary course of business consistent with past practice; (q) make any prepayment or other payment on or in respect of Indebtedness unless required by the terms thereof on the date of this Agreement, or assume, issue, incur or guarantee any new Indebtedness, debt securities or warrants or rights to acquire any debt securities, enter into any "keep well" or other similar arrangement, or enter into any agreement having the economic effect on the AIS Business of any of the foregoing, in any case, which would constitute, or increase the Buyer's obligation with respect to, any Assumed Liability; (r) make any changes or modifications in the current methods, practices or procedures relating to accounts receivable, accounts payable or inventory; (s) except for any Government Bid relating to Operation Enduring Freedom, (i) submit any new Government Bid which, if accepted, is expected to result in a loss to the AIS Business or would result in a Government Contract with a backlog value in excess of (A) $10,000,000 if a new Government Bid or (B) $10,000,000 if a task order or purchase order under an existing Government Contract; or (ii) enter into any new Government Contract with respect to an existing Government Bid which is expected to result in a loss to the AIS Business or which 63 would have a backlog value in excess of (A) $10,000,000 if a new Government Bid or (B) $10,000,000 if a task order or purchase order under an existing Government Contract; (t) increase (or commit to increase) the compensation, pension or other benefits payable or to become payable to any AIS Employee or pay (or commit to pay) any bonus payments or arrangements to any of them, other than (i) increases effected in the ordinary course of the AIS Business on a basis consistent with the past practice of the Seller as disclosed in advance to the Buyer and (ii) any increase required under the terms of any AIS Benefit Plan; (u) enter into any agreement, arrangement or relationship with any of the Sellers or their Affiliates, except for agreements, arrangements and relationships (i) with respect to accounts receivable and accounts payable relating to the AIS Business that do not constitute Acquired Assets or Assumed Liabilities, and (ii) contemplated by the Ancillary Agreements or Section 10.5 of this Agreement; or (v) agree in writing or otherwise to take any of the foregoing actions. 4.4 Access. (a) Each Seller shall permit the representatives, agents, employees, counsel, advisors and potential financing sources of the Buyer to have access (at reasonable times, on reasonable prior written notice and in a manner so as not to interfere with the normal business operations of the AIS Business) to the premises, properties, financial, accounting, tax and operating records, contracts, and other records and documents, of or pertaining to the AIS Business. Notwithstanding the foregoing, none of the Sellers shall be obligated (i) to provide any information, documents or access to any person unless the Buyer is responsible, pursuant to the terms of the confidentiality letter agreement dated September 28, 2001 between the Buyer 64 and Raytheon (the "Confidentiality Agreement"), for the use and disclosure of any information obtained by such person from Raytheon, or such person enters into a confidentiality agreement with Raytheon on terms that are substantially the same as those set forth in the Confidentiality Agreement or (ii) to provide any information, documents or access that would (A) violate the provisions of any applicable laws or regulations (including without limitation those relating to security clearance or export controls) or any confidentiality agreement to which it is a party or (B) cause the loss of the attorney-client privilege with respect thereto; provided that each Seller shall use reasonable commercial efforts to provide information, documents and access to the Buyer and its representatives, agents, employees, counsel, advisors and potential financing sources in a manner that would not violate applicable laws or regulations or cause the loss of the attorney-client privilege with respect thereto. Prior to the Closing, the Buyer and its representatives shall not contact or communicate with the employees, customers and suppliers of any Seller in connection with the transactions contemplated by this Agreement, except with the prior written consent of the applicable Seller (not to be unreasonably withheld or delayed). (b) The Buyer and the Sellers acknowledge and agree that the Confidentiality Agreement remains in full force and effect and that information provided by any Party to the other Party or Parties pursuant to this Agreement prior to the Closing shall be treated in accordance with the Confidentiality Agreement. If this Agreement is terminated prior to the Closing, the Confidentiality Agreement shall remain in full force and effect in accordance with its terms. If the Closing occurs, the Confidentiality Agreement, insofar as it covers information relating exclusively or primarily to the AIS Business, shall terminate effective as of the Closing, but shall remain in effect insofar as it covers other information disclosed thereunder. 65 (c) Notwithstanding any provision of this Agreement to the contrary, the Buyer and its representatives shall not have any access at any time prior to the Closing to any information regarding pending or proposed bids for new contracts or subcontracts or any related information where the Buyer or an Affiliate of the Buyer also has submitted or intends to submit a bid for such contract or subcontract. 4.5 Purchase of Equipment. One of the Sellers shall, prior to the Closing, purchase any equipment or other tangible assets that (i) relate exclusively or primarily to the AIS Business and (ii) are leased by any Seller or an Affiliate thereof pursuant to a lease that is not an Assigned Contract. Such purchased equipment and tangible assets shall be deemed Acquired Assets and shall be sold, conveyed, assigned and transferred to the Buyer at the Closing. 4.6 Exclusivity. Each Seller shall not, and shall use its best efforts to cause its officers, directors, employees, representatives and agents not to, (i) initiate, solicit or encourage any proposal, offer or discussion with any party (other than the Buyer) concerning any merger, business combination, sale of stock or sale of assets (other than sales of assets in the ordinary course of business) involving the AIS Business (other than as part of a sale of Raytheon substantially in its entirety) or (ii) engage in discussions or negotiations with any party (other than the Buyer) concerning any such transaction. 4.7 Schedules. The Sellers shall be entitled to submit to the Buyer, from time to time between the date hereof and the Closing Date, written updates to the Schedule of Exceptions to disclose any events or developments that occur between the date of this Agreement and the Closing Date. The Sellers' representations and warranties contained in this Agreement shall be construed for all purposes of Section 5.1 and Article VII of this Agreement in accordance with 66 the Schedule of Exceptions, as so updated; provided that the Buyer shall have the right to terminate this Agreement as a result of any such update to the Schedule of Exceptions to the extent provided in Section 6.1(c); and provided, further, that no updates to the Schedule of Exceptions shall be taken into account for purposes of Article VII unless, as a result of any particular update or updates, the Buyer had but did not exercise a right to terminate this Agreement pursuant to Section 6.1(c). 4.8 Title Insurance. The Buyer shall use reasonable commercial efforts to obtain, as promptly as practicable following the date of this Agreement, commitments for the Title Policies (the "Title Commitments") and the ALTA surveys referred to in Section 5.1(h). The Buyer shall be solely responsible for the costs and expenses of obtaining such Title Commitments and ALTA surveys. The applicable Seller shall provide to the Buyer, promptly following a request by the Buyer, an affidavit of title with respect to each piece of Owned Real Property in a form reasonably satisfactory to the Title Company and such other affidavits with respect to each piece of Owned Real Property as may be reasonably requested by the Title Company. Unless the Buyer notifies Raytheon in writing within 30 days after the date of this Agreement that a Title Policy contains any exceptions (beyond those set forth in Section 2.9(a)) which are not acceptable to the Buyer, the condition to Closing set forth in Section 5.1(h) shall be deemed waived by the Buyer; provided, however, that if after the expiration of such 30-day period but prior to Closing, a new title exception (other than those set forth in Section 2.9(a)) appears of record which is not reasonably acceptable to the Buyer, the Buyer shall be entitled to object to such new title exception as not in conformity with the condition to Closing set forth in Section 5.1(h). 67 4.9 Cooperation in Financing. (a) From the date of this Agreement to the Closing Date, the Sellers shall reasonably cooperate, and shall request their auditors, PricewaterhouseCoopers LLP, to reasonably cooperate, on a timely basis with the Buyer and the Buyer's auditors in their preparation of any audited financial statements of the AIS Business that are required for SEC filings required to be made by the Buyer in connection with the purchase of the AIS Business. The Buyer anticipates requiring audited financial statements of the AIS Business for the most recent three years, including statements of operations, cash flows and investment equity for three years and two balance sheets. The cooperation required of the Sellers shall include providing reasonable and customary management and legal representations to PricewaterhouseCoopers LLP, and the cooperation requested of the Sellers' auditors shall include providing consent to the Buyer to include their audit reports on the AIS Business in the Buyer's SEC filings. (b) Without limitation of the foregoing paragraph (a), each of the Sellers agrees to provide, and will request their respective accountants, investment bankers, advisors, counsel and other representatives to provide, reasonable cooperation in connection with the arrangement of financing by the Buyer to be consummated prior to or at the Closing in respect of transactions contemplated by this Agreement and the replacement of the Seller Guarantees. Such cooperation shall include, to the extent reasonable and customary, participation in meetings and due diligence sessions and assistance with the preparation of offering memoranda, private placement memoranda, prospectuses and similar documents. Notwithstanding the foregoing, the Parties acknowledge that such cooperation is not intended to condition the Buyer's obligation to consummate the transactions contemplated by this Agreement on the obtaining of any financing, 68 and the Buyer may not assert a breach by the Sellers of this Section 4.9 as a basis for its failure to consummate the transactions contemplated by this Agreement. 4.10 Tax Certificates. (a) Raytheon shall provide the Buyer with a certificate that complies with Treasury Regulations Section 1.1445-2(b) that states that it is not a foreign person. Raytheon Australia shall provide the Buyer with a statement that complies with Treasury Regulations Section 1.1445-2(c)(3) that certifies that the assets acquired from Raytheon Australia are not U.S. real property interests. If either Raytheon or Raytheon Australia fails to deliver such certificate or statement, as applicable, by the Closing Date, the Buyer shall be entitled to withhold from any amounts payable to such Seller at the Closing all applicable withholding taxes under Section 1445 of the Code. (b) The Sellers shall provide to the Buyer, no later than the Closing, a certificate on Raytheon letterhead providing all information reasonably required by the Buyer relating to the base period research and experimental expenses and any other information reasonably requested by the Buyer to allow the Buyer to claim research and experimentation tax credits in accordance with the Code and regulations promulgated thereunder. ARTICLE V CONDITIONS PRECEDENT TO CLOSING 5.1 Conditions to Obligations of Buyer. The obligation of the Buyer to consummate the transactions to be consummated at the Closing is subject to the satisfaction (or waiver in writing by the Buyer) of the following conditions: 69 (a) the representations and warranties of the Sellers set forth in Article II shall be true and correct as of the Closing Date as if made as of the Closing Date, except (i) for those representations and warranties that address matters only as of a particular date (which shall be true and correct as of such date, subject to clause (ii) below), and (ii) where the failure of the representations and warranties to be true and correct would not reasonably be expected to result, in the aggregate, in an AIS Material Adverse Effect (it being agreed that any materiality or AIS Material Adverse Effect qualification in a representation and warranty shall be disregarded in determining whether any such failure would reasonably be expected to result in an AIS Material Adverse Effect for purposes of this clause (ii)); (b) each Seller shall have performed or complied with in all material respects the agreements and covenants required to be performed or complied with by it under this Agreement as of or prior to the Closing; (c) no action, suit or proceeding shall be pending by or before any Governmental Entity seeking to prevent consummation of the transactions contemplated by this Agreement, and no judgment, order, decree, stipulation or injunction enjoining, preventing or making illegal the consummation of any substantial portion of the transactions contemplated by this Agreement shall be in effect; (d) Raytheon shall have delivered to the Buyer a certificate (the "Raytheon Certificate") to the effect that each of the conditions specified in clauses (a) through (c) (insofar as clause (c) relates to an action, suit or proceeding involving, or a judgment, order, decree, stipulation or injunction against, any Seller) of this Section 5.1 is satisfied; 70 (e) all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act and applicable foreign antitrust or trade regulation laws shall have expired or otherwise been terminated, except (in the case of foreign antitrust or trade regulation laws) where the consummation of the transactions contemplated by this Agreement before the expiration or other termination of any such waiting period under applicable foreign antitrust or trade regulation law would not reasonably be expected to result in an AIS Material Adverse Effect or a Buyer Material Adverse Effect; (f) the Sellers shall have obtained (or caused to be obtained) all of the Third Party Consents and effected all of the Governmental Filings which are required on the part of any Seller to consummate the transactions contemplated by this Agreement, and which are listed in Schedule 5.1(f); (g) since the Balance Sheet Date, there has not been any change, event or development that, individually or in the aggregate, has had or would reasonably be expected to result in an AIS Material Adverse Effect; (h) the Buyer shall have received (i) an owner's policy of title insurance (the "Title Policy") from Fidelity National Title Insurance Company or another reputable title insurance company licensed in each jurisdiction where the Owned Real Property is located (the "Title Company") with respect to each parcel of Owned Real Property, in the standard form used in the jurisdiction where such Owned Real Property is located, insuring as of the Closing Date, at ordinary premium rates, that the Buyer owns fee simple title to such Owned Real Property, subject only to the matters set forth in Section 2.9(a), and with such endorsements, to the extent available in the state in which the Owned Real Property is located, as may reasonably be 71 required by the Buyer or its lender, and (ii) an ALTA survey with respect to each piece of Owned Real Property which shall not reflect any statement of facts inconsistent in any material respect with the requirements of this Agreement and which shall be in form and substance reasonably satisfactory to the Buyer; and (i) the Buyer shall have received such other customary certificates (such as certificates of good standing of the Sellers in their jurisdictions of incorporation and certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing. 5.2 Conditions to Obligations of Sellers. The obligation of the Sellers to consummate the transactions to be consummated at the Closing is subject to the satisfaction (or waiver in writing by the Sellers) of the following conditions: (a) the representations and warranties of the Buyer set forth in Article III shall be true and correct as of the Closing Date as if made as of the Closing Date, except (i) for those representations and warranties that address matters only as of a particular date (which shall be true and correct as of such date, subject to clause (ii) below), and (ii) where the failure of the representations and warranties to be true and correct would not reasonably be expected to result, in the aggregate, in a Buyer Material Adverse Effect (it being agreed that any materiality or Buyer Material Adverse Effect qualification in a representation and warranty shall be disregarded in determining whether any such failure would reasonably be expected to result in a Buyer Material Adverse Effect for purposes of this clause (ii)); 72 (b) the Buyer shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with by it under this Agreement as of or prior to the Closing; (c) no action, suit or proceeding shall be pending by or before any Governmental Entity seeking to prevent consummation of the transactions contemplated by this Agreement and no judgment, order, decree, stipulation or injunction enjoining or preventing consummation of the transactions contemplated by this Agreement shall be in effect; (d) the Buyer shall have delivered to Raytheon a certificate (the "Buyer Certificate") to the effect that each of the conditions specified in clauses (a) through (c) (insofar as clause (c) relates to an action, suit or proceeding involving, or a judgment, order, decree, stipulation or injunction against, the Buyer) of this Section 5.2 is satisfied; (e) for each Seller Guarantee, the Buyer shall have either (i) effected replacement arrangements, in accordance with Section 4.2, reasonably satisfactory to the Sellers, or (ii) delivered to Raytheon an irrevocable, unconditional standby letter of credit in favor of Raytheon in an amount equal to the amount of such Seller Guarantee, issued by a bank rated A or better by Standard & Poor's, in form and substance reasonably satisfactory to Raytheon; (f) the Buyer shall have delivered to Raytheon an irrevocable, unconditional standby letter of credit in favor of Raytheon in the amount of $10,000,000, issued by a bank in the United Kingdom rated A or better by Standard & Poor's, in form and substance reasonably satisfactory to Raytheon, providing for a draw-down in the event of a certification by Raytheon Systems Limited that the Buyer has breached its obligations under the Subcontract Agreement with Raytheon Systems Limited attached hereto as Exhibit M; 73 (g) all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act and applicable foreign antitrust or trade regulation laws shall have expired or otherwise been terminated, except (in the case of foreign antitrust or trade regulation laws) where the consummation of the transactions contemplated by this Agreement before the expiration or other termination of any such waiting period under applicable foreign antitrust or trade regulation law would not reasonably be expected to result in a material adverse effect on the Sellers, taken as a whole; (h) the Buyer shall have obtained (or caused to be obtained) all of the Third Party Consents and effected all of the Governmental Filings which are required on the part of the Buyer to consummate the transactions contemplated by this Agreement, except for those Third Party Consents and Governmental Filings, which, if not obtained or effected, would not in the aggregate reasonably be expected to result in a material adverse effect on the Sellers, taken as a whole; and (i) Raytheon shall have received such other customary certificates (such as a certificate of good standing of the Buyer in its jurisdiction of incorporation and certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing. ARTICLE VI TERMINATION 6.1 Termination of Agreement. The Parties may terminate this Agreement prior to the Closing as provided below: (a) the Parties may terminate this Agreement by mutual written consent; 74 (b) the Buyer may terminate this Agreement by giving written notice to Raytheon in the event any Seller is in breach of any representation, warranty, covenant or agreement contained in this Agreement, and such breach, individually or in combination with any other such breach, (i) would cause the conditions set forth in Section 5.1(a) or Section 5.1(b) not to be satisfied and (ii) is not cured within 30 days following delivery by the Buyer to Raytheon of written notice of such breach; (c) the Buyer may terminate this Agreement by giving written notice to Raytheon, within 10 days following the end of the 30-day period referred to below in this Section 6.1(c), in the event any Seller provides an update to the Schedule of Exceptions pursuant to Section 4.7 which contains information that, absent such disclosure and the provisions of Section 4.7 permitting the update of representations and warranties, would have the effect of causing the condition set forth in Section 5.1(a) not to be satisfied, and the Sellers fail to cure the event or condition causing the failure of such condition within 30 days following delivery by the Buyer to Raytheon of written notice under this Section 6.1(c); (d) Raytheon may terminate this Agreement by giving written notice to the Buyer in the event the Buyer is in breach of any representation, warranty, covenant or agreement contained in this Agreement, and such breach, individually or in combination with any other such breach, (i) would cause the conditions set forth in Section 5.2(a) or Section 5.2(b) not to be satisfied and (ii) is not cured within 30 days following delivery by Raytheon to the Buyer of written notice of such breach; (e) the Buyer may terminate this Agreement by giving written notice to Raytheon if the Closing shall not have occurred on or before the date six months after the date of 75 this Agreement by reason of the failure of any condition precedent under Section 5.1 (unless the failure results primarily from a breach by the Buyer of any representation, warranty, covenant or agreement contained in this Agreement); and (f) Raytheon may terminate this Agreement by giving written notice to the Buyer if the Closing shall not have occurred on or before the date six months after the date of this Agreement by reason of the failure of any condition precedent under Section 5.2 (unless the failure results primarily from a breach by any Seller of any representation, warranty, covenant or agreement contained in this Agreement). 6.2 Effect of Termination. If any Party terminates this Agreement pursuant to Section 6.1, all obligations of the Parties hereunder shall terminate without any liability of any Party to the other Parties. Notwithstanding the foregoing, termination of this Agreement shall not relieve any Party from liability for any breach by such Party, prior to the termination of this Agreement, of any covenant or agreement (but not any representation or warranty) contained in this Agreement or impair the right of any Party to obtain such remedies as may be available to it in law or equity with respect to such a breach by any other Party. ARTICLE VII INDEMNIFICATION 7.1 Indemnification by Raytheon. Subject to the terms and conditions of this Article VII, from and after the Closing, Raytheon shall indemnify the Buyer in respect of, and hold the Buyer harmless against, any and all claims, losses, liabilities, damages, fines, fees, penalties, costs and expenses (including without limitation reasonable attorneys' and accountants' fees, disbursements and expenses) (collectively, "Damages") incurred by the Buyer or any of its 76 directors, officers, employees, stockholders, Affiliates, representatives or advisors resulting from, arising out of or constituting: (a) any breach of any representation or warranty of the Sellers contained in this Agreement or the Raytheon Certificate (other than Section 2.18); (b) any failure by any Seller to perform any covenant or agreement contained in this Agreement or the Ancillary Agreements; (c) any Excluded Liabilities; or (d) any Environmental Matters, but only to the extent the liability or obligation relating thereto arises from conditions existing or events occurring prior to the Closing, and provided that Raytheon's indemnity obligation under this Section 7.1(d) shall be limited to 50% of the Damages covered by this Section 7.1(d). 7.2 Indemnification by the Buyer. Subject to the terms and conditions of this Article VII, from and after the Closing, the Buyer shall indemnify each Seller in respect of, and hold each Seller harmless against, any and all Damages incurred by any Seller or any of their respective directors, officers, employees, stockholders, Affiliates, representatives or advisors resulting from, arising out of, or constituting: (a) any breach of any representation or warranty of the Buyer contained in this Agreement or the Buyer Certificate; (b) any failure by the Buyer to perform any covenant or agreement contained in this Agreement or the Ancillary Agreements; or (c) any Assumed Liabilities, except to the extent Raytheon is liable therefor under Section 7.1(d). 77 7.3 Defense or Control of Third Party Actions and Environmental Claims. (a) A person entitled to indemnification under this Article VII (an "Indemnified Party") shall give prompt written notification to the person from whom indemnification is sought (the "Indemnifying Party") of any claim, demand, action, suit or proceeding commenced by a person or entity (other than a Party or an Affiliate of a Party) for which indemnification may be sought under this Article VII (a "Third Party Action"); provided that any claim, demand, action, suit or proceeding covered by Section 7.3(b) shall not be considered a Third Party Action and shall not be governed by this Section 7.3(a), other than as expressly provided in Section 7.3(b). Such notification shall be given within 10 days after receipt by the Indemnified Party of notice of such Third Party Action, and shall describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such Third Party Action and the amount of the claimed damages; provided, however, that no delay or failure on the part of the Indemnified Party in so notifying the Indemnifying Party shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent the Indemnifying Party is damaged or prejudiced by such failure. Within 20 days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Third Party Action with counsel of its choosing reasonably acceptable to the Indemnified Party. An Indemnifying Party's decision to assume control of such defense shall not be an admission that the Third Party Action is indemnifiable under this Article VII. If the Indemnifying Party does not, or is not permitted under the terms hereof to, so assume control of the defense of a Third Party Action, or thereafter abandons or fails to diligently pursue the defense of a Third Party Action, the Indemnified Party shall control 78 such defense. The party not controlling the defense of such Third Party Action (the "Non-controlling Party") may participate in such defense at its own expense, except as provided below. The party controlling the defense of such Third Party Action (the "Controlling Party") shall keep the Non-controlling Party advised of the status of such Third Party Action and the defense thereof and shall consider in good faith recommendations made by the Non-controlling Party with respect thereto. The Non-controlling Party shall furnish the Controlling Party with such information as it may have with respect to such Third Party Action (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such Third Party Action. If the Indemnifying Party assumes control of the defense of a Third Party Action, any fees and expenses of separate counsel to the Indemnified Party with respect to such Third Party Action shall be considered Damages for which the Indemnified Party may be entitled to indemnification under this Article VII only if the Indemnified Party reasonably concludes, based on written advice from counsel, that (i) the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such Third Party Action or (ii) there are defenses available to such Indemnifying Party and the representation of both parties by the same counsel would therefore be inappropriate, and the Indemnified Party so notifies the Indemnifying Party in writing before incurring such fees and expenses (provided that in such situation, the Indemnified Party shall not be entitled to employ more than one law firm, plus one firm acting solely as local counsel). The Indemnifying Party shall not agree to any settlement or compromise of, or the entry of any judgment arising from, any Third Party Action without the prior written consent of 79 the Indemnified Party; provided that the consent of the Indemnified Party shall not be required if the Indemnifying Party agrees in writing to pay any amounts payable pursuant to such settlement, compromise or judgment and such settlement, compromise or judgment includes a complete written release of the Indemnified Party from further liability and does not impose any injunctive relief or other operational restrictions on the Indemnified Party. The Indemnified Party shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Action without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed). (b) The Buyer shall give prompt written notice to Raytheon of (i) the commencement of any claim, demand, action, suit or proceeding by a person or entity (other than a Party) involving Environmental Matters for which indemnification may be sought under Section 7.1 and (ii) the assertion of any claim, commencement of any inquiry or receipt of any notice involving Environmental Matters for which indemnification may be sought under Section 7.1 (collectively, an "Environmental Claim"). Such notification shall be given within 10 days after receipt by the Buyer of notice of such Environmental Claim, and shall describe in reasonable detail (to the extent known by the Buyer) the facts constituting the basis for such Environmental Claim and the amount of the claimed Damages; provided, however, that no delay or failure on the part of the Buyer in so notifying Raytheon shall relieve Raytheon of any liability or obligation hereunder except to the extent Raytheon is damaged or prejudiced by such failure. Except for Off-Site Liabilities, the defense of which shall be controlled by Raytheon, Buyer, shall control the defense of such Environmental Claim (with counsel of its choosing reasonably acceptable to Raytheon), and manage, direct and perform any related environmental assessment 80 or remediation on any affected AIS Property ("Environmental Response Activities"). If the Buyer has conducted any Environmental Response Activities on the affected AIS Property prior to notifying Raytheon, Raytheon shall have no responsibility or liability for the costs of such activities conducted more than 10 days prior to such notice. The Buyer hereby grants Raytheon and its employees, agents, servants, consultants and contractors a license, subject to security requirements, including entry by only U.S. citizens, to enter upon the affected AIS Property for purposes related to overseeing its obligations under this Agreement, subject to the following conditions: (i) Raytheon shall have reasonable access at reasonable times pre-arranged at least 48 hours in advance where practical, unless Raytheon received less than five business days advance notice of an activity it reasonably wishes to oversee; (ii) Raytheon shall hold harmless and indemnify the Buyer from any claims, demands, actions, suits or proceedings for injuries to persons or damages to property caused by Raytheon or its agents, servants, consultants and contractors while on the affected AIS Property overseeing Environmental Response Activities pursuant to the license granted by this Section 7.3(b); (iii) Raytheon assumes no responsibility for notification, removal or remediation of contaminants which may be in, on, under or at the affected AIS Property as a result of the actions or operations of (A) the Buyer or its employees, agents, servants, consultants and contractors or (B) third parties or their respective employees, agents, servants, consultants and contractors after the Closing; 81 (iv) the Buyer shall hold harmless and indemnify the Sellers (and their agents) from any claims, demands or actions for injuries to persons or damages to property caused by the Buyer or its agents, servants, consultants and contractors while on the affected AIS Property managing, directing or performing Environmental Response Activities; provided that the required procedures and conditions for indemnification set forth in this Article VII shall apply with respect to any indemnification by the Buyer pursuant to this Section 7.3(b)(iv); (v) the Buyer shall cause this license to survive any transfer of ownership or operational control of an AIS Property to a third party, and to be binding upon such third party; (vi) if the Buyer, or any successor owner, occupant or operator of any property subject to said license, defaults under this Section 7.3(b) or terminates the license granted hereunder for any reason, Raytheon's obligations to conduct the Environmental Response Activities (or to indemnify the Buyer for Damages relating thereto) shall cease; (vii) Buyer shall use consultants and counsel reasonably acceptable to Raytheon; and (viii) Buyer shall provide Raytheon with copies of all reports and correspondence relating to the indemnified matter, and, if practicable, provide Raytheon with an opportunity to comment upon all submissions to a regulatory agency at least five business days prior to submission. Buyer shall incorporate reasonable, timely comments, unless in Buyer's opinion, such comments: (1) are more likely to increase the cost of Buyer's obligations; or (2) are not consistent with Buyer's obligations hereunder, provided, however, that Buyer's decision not to include comments proposed by Raytheon shall not alter the limitations on Raytheon's 82 indemnity obligation set out in this Section VII. If Raytheon agrees in writing and without qualification to pay all increased costs identified by Buyer under subpart (1) of the preceding sentence, Buyer will incorporate Raytheon's reasonable comments. 7.4 Claims for Indemnification. (a) In order to seek indemnification under this Article VII, an Indemnified Party shall deliver to the Indemnifying Party a written notification (a "Claim Notice") which contains (i) a description of the Damages incurred by the Indemnified Party and the amount (the "Claimed Amount") of such Damages, (ii) a statement that the Indemnified Party is entitled to indemnification under this Article VII for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages. (b) Within 30 days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a written response (the "Response") in which the Indemnifying Party shall: (i) agree that the Indemnified Party is entitled to receive all of the Claimed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Claimed Amount, by check or by wire transfer), (ii) agree that the Indemnified Party is entitled to receive some, but not all (the "Agreed Amount") of the Claimed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Agreed Amount, by check or by wire transfer) or (iii) dispute that the Indemnified Party is entitled to receive any of the Claimed Amount. (c) During the 30-day period following the delivery of a Response that disputes the Indemnified Party's right to receive some or all of the Claimed Amount (a 83 "Dispute"), the Indemnifying Party and the Indemnified Party shall use good faith efforts to resolve the Dispute. If the Dispute is not resolved within such 30-day period, then the Dispute shall be resolved by binding arbitration in Boston, Massachusetts (if initiated by the Buyer) or New York, New York (if initiated by a Seller) conducted by a single independent arbitrator (the "Arbitrator") in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") in effect from time to time (the "AAA Rules"). Either the Indemnifying Party or the Indemnified Party may submit such Dispute to arbitration by submitting to the AAA a Demand for Arbitration in accordance with the AAA Rules. If such Dispute is not submitted to arbitration as provided in this Section 7.4(c) within 60 days following the expiration of the 30-day period referred to in this Section 7.4(c), then the indemnification claim which is the subject of such Dispute (but only to the extent it is subject to such Dispute) shall be deemed waived by the Indemnified Party for all purposes and the Indemnified Party shall not be entitled to recover from the Indemnifying Party the portion of the Claimed Amount which is subject to such Dispute. Arbitration in accordance with the terms of this Section 7.4 shall be the exclusive means of resolving such Dispute, and neither the Indemnifying Party nor the Indemnified Party may commence litigation for damages with respect to such Dispute. (d) The Arbitrator shall have no power or authority, under the AAA Rules or otherwise, to (i) modify or disregard any provision of this Agreement, including those set forth in Section 7.6, (ii) address or resolve any issue other than the Dispute submitted to such arbitration in accordance with this Section 7.4, (iii) make an award of Damages in excess of the portion of the Claimed Amount that is subject to such Dispute or (iv) grant injunctive relief, specific performance or other equitable relief. The Indemnifying Party and the Indemnified Party shall 84 request that the Arbitrator prepare and distribute to such Parties, as promptly as is practicable, a written decision setting forth the Arbitrator's decision with respect to such Dispute and the Arbitrator's reasons therefor (the "Arbitration Award"). The Arbitration Award shall be final, conclusive and binding upon the Indemnifying Party and the Indemnified Party, and judgment thereon may be entered and enforced in any court of competent jurisdiction (as provided in Section 11.11). (e) The Indemnifying Party and the Indemnified Party shall each bear its own costs and expenses in connection with the arbitration, and shall share equally the fees and expenses of the Arbitrator and AAA. 7.5 Survival. All representations and warranties contained in this Agreement, the Raytheon Certificate and the Buyer Certificate shall survive the Closing and shall expire on the date 15 months following the Closing Date, except that the representations and warranties set forth in Section 2.11 (and the portion of the Raytheon Certificate relating thereto) shall survive until the second anniversary of the Closing Date, the representations and warranties set forth in Section 2.7 (and the portion of the Raytheon Certificate relating thereto) shall survive until 60 days following expiration of the applicable statute of limitations, the representations and warranties set forth in Section 2.18 (and the portion of the Raytheon Certificate relating thereto) shall expire at the Closing, and the representations and warranties set forth in Sections 2.1, 2.2, 3.1 and 3.2 (and the portion of the Raytheon Certificate or the Buyer Certificate relating thereto) shall survive the Closing without limitation. All covenants and other agreements contained in this Agreement and the Ancillary Agreements shall survive the Closing in accordance with their terms. No claim for indemnification under Section 7.1(a) or Section 7.2(a) may be made under 85 this Agreement after the expiration of the survival period for such representation or warranty. Any investigations by or on behalf of a Party shall not constitute a waiver of such Party's right to enforce a representation or warranty of any other Party contained herein or in the Ancillary Agreements. Notwithstanding the foregoing, if an indemnification claim is properly asserted in writing pursuant to Section 7.4 prior to the expiration as provided in this Section 7.5 of the representation or warranty that is the basis for such claim, then such representation or warranty shall survive until, but only for the purpose of, the resolution of such claim. 7.6 Limitations. (a) Notwithstanding anything to the contrary contained in this Agreement, the following limitations shall apply to indemnification claims under this Article VII: (i) Raytheon shall be liable with respect to claims under Section 7.1(a) for only that portion of the aggregate Damages related to such claims which exceeds 2% of the Adjusted Purchase Price; and (ii) the Buyer shall be liable with respect to claims under Section 7.2(a) for only that portion of the aggregate Damages related to such claims which exceeds 2% of the Adjusted Purchase Price; (iii) the aggregate liability of Raytheon for all Damages under Section 7.1(a) and Section 7.1(d) shall not exceed an amount equal to 15% of the Adjusted Purchase Price; and (iv) the aggregate liability of the Buyer for all Damages under Section 7.2(a) shall not exceed an amount equal to 15% of the Adjusted Purchase Price. 86 (b) No Party shall be entitled to make any claim for indemnification with respect to any matter to the extent the Purchase Price has been adjusted to reflect such matter pursuant to Section 1.4. The amount of Damages for which the Buyer is entitled to indemnification under Section 7.1(a) shall be calculated net of any accruals, reserves or provisions therefor reflected in the Final Closing Statement. (c) In no event shall any Indemnifying Party be responsible or liable for any Damages or other amounts under this Article VII that are incidental, consequential, in the nature of lost profits, special, multiple or punitive or any equitable equivalent thereof or substitute therefor (collectively, "Special Damages") based upon, or arising out of, this Agreement or any Ancillary Agreements or any course of conduct, course of dealing, statements or actions of any Party relating thereto; provided, however, that Special Damages shall be indemnifiable under this Article VII to the extent owed by a Party to a third party. (d) The amount of Damages recoverable by an Indemnified Party under this Article VII with respect to an indemnity claim shall be reduced by the amount of any payment received by such Indemnified Party (or an Affiliate thereof), with respect to the Damages to which such indemnity claim relates, from an insurance carrier, net of any retroactive premium increase payable by such Indemnified Party (or an Affiliate thereof) as a result of such insurance payment; provided, however, that no Indemnified Party shall be required to provide notice of or pursue recovery in respect of any claim under the Indemnified Party's insurance policies where the Indemnified Party determines in its reasonable discretion that such notice or pursuit is likely to invalidate any portion of the coverage available under such policy or result in the imposition of retroactive premiums or material prospective premium increases; and, provided, further, that if 87 an Indemnified Party makes such a determination after it has notified its insurer, it shall be entitled to retract such notice. An Indemnified Party shall use reasonable commercial efforts to pursue, and to cause its Affiliates to pursue, all insurance claims to which it may be entitled in connection with any Damages it incurs, and the Parties shall cooperate with each other in pursuing insurance claims with respect to any Damages or any indemnification obligations with respect to Damages. If an Indemnified Party (or an Affiliate) receives any insurance payment in connection with any claim for Damages for which it has already received an indemnification payment from the Indemnifying Party, it shall pay to the Indemnifying Party, within 60 days of receiving such insurance payment, an amount equal to the excess of (A) the amount previously received by the Indemnified Party under this Article VII with respect to such claim plus the amount of the insurance payments received (net of the offsets described in the first sentence of this Section 7.6(d)), over (B) the amount of Damages with respect to such claim which the Indemnified Party has become entitled to receive under this Article VII. (e) Each Party agrees that (i) it shall not offset any payment it is entitled to receive (or it claims it is entitled to receive) from an Indemnifying Party under this Article VII against any other payment or other obligation it owes to such Indemnifying Party (or any Affiliate thereof) under this Agreement or otherwise (other than payments or obligations owed pursuant to this Article VII) and (ii) it shall not offset any payment it is obligated to make to an Indemnified Party under this Article VII against any other payment or other obligation it is entitled to receive (or it claims it is entitled to receive) from such Indemnified Party (or any Affiliate thereof) under this Agreement or otherwise (other than payments or obligations owed pursuant to this Article VII). 88 (f) If the Buyer incurs any Damages resulting from, arising out of, or constituting Environmental Matters and arising from conditions existing or events occurring prior to the Closing, Raytheon shall use reasonable commercial efforts to pursue any indemnity claim it may have under the Chrysler Agreement with respect to such Damages. Any payment Raytheon receives pursuant to such indemnity claim, net of any costs incurred by Raytheon in pursuing such indemnity claim, shall be promptly remitted to the Buyer, and the amount of such payment to the Buyer shall reduce the amount of Damages to which Raytheon's obligation under Section 7.1(d) (covering 50% of such Damages) shall apply. (g) Except with respect to claims for equitable relief, including specific performance, made with respect to breaches of any covenant or agreement contained in this Agreement or the Ancillary Agreements, the rights of the Parties under this Article VII, from and after the Closing, shall (in the absence of fraud) be the sole and exclusive remedies of the Parties and their respective Affiliates with respect to claims covered by Section 7.1 or Section 7.2 or otherwise relating to the transactions that are the subject of this Agreement. Without limiting the generality of the foregoing, in no event shall any Party, its successors or permitted assigns be entitled to claim or seek rescission of the transactions consummated by this Agreement. (h) Notwithstanding anything to the contrary in this Agreement: (i) In the event Raytheon becomes obligated pursuant to Section 7.1 to indemnify the Buyer for any Damages involving Environmental Matters, Raytheon's obligations hereunder shall be satisfied by and limited to indemnifying Buyer for 50% of those costs of investigation or remediation of Materials of Environmental Concern at such AIS Property to (unless otherwise required under Environmental Law) the less expensive of either the 89 (A) levels of contamination consistent with applicable industrial or commercial risk-based cleanup standards based upon future commercial or industrial use of such property or (B) the highest residual levels of contamination acceptable to the jurisdictional government environmental agency (including the right to perform a risk-based remediation to commercial or industrial standards). Raytheon shall not be required to do, or to indemnify Buyer for doing, more. (ii) Raytheon shall have no liability under Section 7.1 for any Damages in connection with an Environmental Matter in any way arising out of or related to any actual or proposed (A) movement, excavation or grading of land, or construction, reconstruction, refurbishment, renovation, modification, restoration, conversion, structural alteration or relocation of any structure, except to the extent reasonably necessary to repair or replace any building or structure or utilities, facilities and appurtenances related thereto; enlargement of any building or structure; change in use of any building or land or any change in zoning or government land use approval, or (B) change of any use of land at an AIS Property to the extent the change increases the cost of any Environmental Response Activities. (iii) The Buyer shall not be entitled to indemnification under Section 7.1 for Damages in connection with an Environmental Matter directly arising as a result of the Buyer's voluntary disclosure to a third party (other than an Affiliate of the Buyer) of information or data, except to the extent that it would be unlawful not to provide such information to such third party. Nothing in this paragraph shall preclude the Buyer from being indemnified for 50% of the costs incurred in addressing circumstances it reasonably determines constitute a condition 90 of ongoing noncompliance in connection with the AIS Business, to the extent indemnification for such costs otherwise is available under this Article VII. (iv) The Buyer shall only be entitled to indemnification under Section 7.1(d) for such Damages that result directly (A) from a determination (whether by judgment, order or other legal directive) in a judicial or administrative Third Party Action that the AIS Business has an obligation to investigate, remediate or pay Damages on account of an Environmental Matter incurred in connection with the AIS Business prior to the Closing Date or (B) from the settlement (with the consent of the Seller) of such a Third Party Action. Nothing in this paragraph shall preclude the Buyer from being indemnified for 50% of the costs incurred in addressing circumstances it reasonably determines constitute a condition of ongoing noncompliance in connection with the AIS Business, to the extent indemnification for such costs otherwise is available under this Article VII. (v) Without limiting the generality of Section 7.6(g), this Article VII shall be the sole and exclusive remedy of (i) the Buyer and its Affiliates against the Sellers or any of their respective Affiliates, and their respective present or former officers, directors and employees, agents, attorneys or contractors, and (ii) the Sellers and their respective Affiliates against the Buyer or any of its Affiliates, and their respective present or former officers, directors and employees, agents, attorneys or contractors, for any and all claims, Damages or other matters related directly or indirectly to the AIS Business and arising at any time under Environmental Laws or under any common law with respect to Materials of Environmental Concern. The Buyer, on the one hand, and the Sellers, on the other hand, hereby waive (on behalf of themselves and their respective Affiliates, successors and assigns) any right to seek contribution 91 or other recovery from each other or their respective Affiliates or any present or former officer, director or employee, agent, attorney or contractor of the Buyer, the Sellers or any of their respective Affiliates with respect to events related directly or indirectly to the AIS Business that any of them may now or in the future have under any Environmental Law or any common law providing for any remedy or right of recovery with respect to Environmental Matters or Materials of Environmental Concern other than as expressly provided for in this Article VII. In the absence of fraud, the Buyer, on the one hand, and the Sellers, on the other hand, hereby release (on behalf of themselves and their respective Affiliates, successors and assigns) each other, such Party's Affiliates, and their respective present or former officers, directors and employees, agents, attorneys and contractors from any and all such claims, demands and causes of action. 7.7 Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the Parties as an adjustment to the Adjusted Purchase Price. ARTICLE VIII TAX MATTERS 8.1 Responsibility for Taxes and Filing of Tax Returns. (a) Except as provided in Section 8.1(d) below, the Sellers shall remain responsible, and indemnify and hold harmless the Buyer, for all Taxes payable in connection with the operation of the AIS Business for all periods through the Closing, and shall be responsible for the filing of all related Tax Returns. 92 (b) The Buyer shall be responsible, and indemnify and hold harmless the Sellers, for all Taxes payable in connection with the operation of the AIS Business from and after the Closing, and shall be responsible for the filing of all related Tax Returns. (c) Notwithstanding Section 8.1(a) to the contrary, any Tax Return that pertains to both Taxes for which the Sellers are responsible pursuant to Section 8.1(a) and Taxes for which the Buyer is responsible pursuant to Section 8.1(b) shall be prepared by the Buyer on a basis consistent with the applicable Seller's last previous similar Tax Return, and the Buyer shall consult with the Sellers concerning each such Tax Return and report all items relating to the Taxes for which the Sellers are responsible in accordance with the instructions of the Sellers; provided, however, that if the Buyer is advised by counsel that the filing of any Tax Return and the reporting on such Tax Return of any item in accordance with the instructions of the Sellers reasonably could subject the Buyer to penalties or fines, the Buyer may file such Tax Return without regard to the Sellers' instructions relating to such item. The Buyer shall provide the Sellers with a copy of each proposed Tax Return the preparation of which is governed by this Section 8.1(c) (and such additional information regarding such Tax Return as may reasonably be requested by the Sellers) at least 20 days prior to the filing of such Tax Return. The cost of preparing Tax Returns, the preparation of which is governed by this Section 8.1(c), shall be borne equally by the Buyer, on the one hand, and the Sellers, on the other. (d) The Buyer, on the one hand, and the Sellers, on the other, shall each be responsible for the payment of 50% of any transfer, sales, use, stamp, conveyance, value added, recording, registration, documentary, filing and other non-income Taxes (including any stamp 93 duty or goods and services tax payable in Australia) arising in connection with the consummation of the transactions contemplated by this Agreement. 8.2 Allocation of Taxes. (a) For purposes of this Agreement, Taxes shall be allocated between the period ending at the Closing and the period that begins immediately following the Closing based upon the actual operations and transactions of the AIS Business during such periods. (b) Notwithstanding Section 8.2(a) to the contrary, in the case of any ad valorem Taxes, real estate Taxes, property Taxes, and other similar Taxes imposed with respect to the ownership or use of property and assessed with respect to a taxable period that commences before the Closing and that ends after the Closing, such Taxes shall be allocated between the portion of such period that ends on the Closing and the portion of such period that begins immediately following the Closing based upon the respective number of days during such portions of the taxable period (with the day of the Closing deemed to be in the period following the Closing); provided, however, that appropriate adjustment shall be made for acquisitions and dispositions of property during such period. 8.3 Refunds and Credits. (a) The Sellers and/or their Affiliates, as the case may be, shall be entitled to any Tax refunds (including any interest paid thereon) or credits to the extent such refunds or credits relate to any Taxes for which the Sellers are responsible pursuant to Section 8.1. (b) The Buyer and/or its Affiliates, as the case may be, shall be entitled to any Tax refunds (including any interest paid thereon) or credits to the extent such refunds or credits relate to any Taxes for which the Buyer is responsible pursuant to Section 8.1. 94 8.4 Allowable Taxes. (a) For purposes of this Agreement, "Allowable Tax" means the allocable share of any Tax of any Seller or any of the Sellers' Affiliates which is an allowable cost under the Federal Acquisition Regulation, 48 CFR Chapter 1, and associated regulations and agreements between any Seller and any U.S. Governmental Entity, allocated based on the Seller's existing finance policy (as it is in effect on the date hereof). (b) If any Seller or any of its Affiliates has paid or reimbursed the Buyer for any Allowable Tax for which the Sellers are responsible pursuant to Section 8.1(a), the Buyer agrees to repay to the Sellers promptly upon receipt any portion of such Allowable Tax that the Buyer or any of its Affiliates is ultimately able to recover from a U.S. Governmental Entity. (c) If the Buyer or any of its Affiliates receives a refund with respect to an Allowable Tax for which the Sellers are responsible pursuant to Section 8.1(a), the Buyer shall pay to the Sellers the amount of such refund reduced by the amount, if any, that the Buyer will be required to pay to a U.S. Governmental Entity or suffer by reason of offset in accordance with the Federal Acquisition Regulation, 48 CFR Chapter 1, and associated regulations and agreements between any Seller and any U.S. Governmental Entity. If any Seller receives a refund after the Closing Date with respect to an Allowable Tax for which the Sellers are responsible pursuant to Section 8.1(a), the Sellers will pay to the Buyer the amount, if any, which the Buyer will be required to pay to a U.S. Governmental Entity or suffer by reason of an offset in accordance with the foregoing regulations and agreements. (d) The Sellers and the Buyer agree to cooperate with respect to the calculation of any amounts payable pursuant to this Section 8.4 and to give each other written 95 notice of events reasonably likely to result in the increase or decrease of any Allowable Tax for which the Sellers are responsible pursuant to Section 8.1(a). 8.5 Cooperation on Tax Matters; Tax Audits. (a) The Buyer and the Sellers shall (and shall cause their respective Affiliates to) cooperate in (A) the preparation of all Tax Returns (including amended Tax Returns), (B) the preparation and pursuit of any claims for refunds of Taxes, (C) the defense or administration of any audit, dispute, or similar proceeding with or by any Governmental Entity responsible for the imposition of any Tax (a "Taxing Authority") and (D) any proceeding with any U.S. Governmental Entity relating to refunds or reimbursements for any Allowable Tax, in each case, to the extent attributable to any Tax period for which one Party could reasonably require the assistance of another Party in obtaining necessary information. Such cooperation shall include, without limitation: (i) providing all relevant information in the Party's possession including financial data, copies of prior-period Tax Returns (together with all related schedules and work papers), copies of prior-period Tax preparation packages, and copies of any notices, rulings, determinations, or reports from any Taxing Authority to the extent they pertain to the Tax and Tax period for which the other Party requires assistance; (ii) the preparation by employees of Buyer or its Affiliates who were previously employed by the Sellers in the AIS Business, to the extent they have done so in the past, of drafts of all or any portion of any Tax Returns and/or Tax preparation packages with respect to Tax Returns for which the Sellers are responsible pursuant to Section 8.1(a) (such Tax Returns and Tax preparation packages to be prepared on a basis consistent with past practice); 96 (iii) making the Parties' respective employees and facilities available on a mutually convenient basis to provide the other Party access to, or an explanation of, information and documents and to participate in any proceedings with any Tax Authority or (with respect to refunds and reimbursements attributable to Allowable Taxes) with any U. S. Governmental Entity, including, without limitation, the Buyer making available Mr. Steven Post to the extent that a Seller determines (in its reasonable discretion) that Mr. Post's participation is necessary or appropriate in connection with any proceeding relating to sales Taxes in the state of Texas (and any related claim by or against a U.S. Governmental Entity to the extent such sales Taxes are, or affect the amount of, Allowable Taxes); and (iv) promptly forwarding copies of notices, forms, and other communications received from or sent to any Tax Authority to the extent such items relate to (or may impact) Taxes for which the other Party is responsible under Section 8.1. (b) The Buyer and each Seller shall maintain all records pertaining to Taxes associated with the operation of the AIS Business through the Closing for a period of ten years following the Closing or, if later, until the expiration of the statute of limitations for collection of the Tax to which such record relates. Prior to discarding or destroying such records, the Party holding such records shall notify the other Party or Parties of its intention to so discard or destroy the records. If the Party receiving such notice so requests, the Party holding such records shall deliver them to the requesting Party. (c) In the event that any Tax is assessed or any refund of Tax is denied, and it is determined that a substantial reason for such additional Tax or the failure to receive the refund was another Party's failure to maintain or deliver the records specified in Section 8.5(b), or its 97 failure to fully or timely cooperate in accordance with Section 8.5(a), then such other Party shall pay the amount of such assessed Tax or the amount of such disallowed Tax refund to the Party with respect to which the Tax was assessed or the refund was denied together with such additional amount as may be necessary to pay any Taxes that may be attributable to payments under this Section 8.5(c). If the Parties cannot agree as to whether a failure to maintain or deliver records or to cooperate constituted a "substantial reason" for the assessment of the additional Tax or the denial of the Tax refund, such determination shall be made by the Neutral Accountant in accordance with the procedure set forth in Section 1.4(d). 8.6 Scope of Article VIII. Any claim by any Party relating to a breach by another Party of their obligations under this Article VIII shall be pursued in accordance with the procedures for indemnification claims, and shall otherwise be subject to the terms and conditions, set forth in Article VII. Notwithstanding the foregoing or any other term or condition of Article VII, (i) claims for a breach of an obligation under this Article VIII may be made by a Party any time prior to the 60th day after the expiration of the statute of limitations applicable to the Tax matter to which the claim relates and (ii) to the extent there is any inconsistency between the terms of Article VII and this Article VIII with respect to the allocation of responsibility between the Sellers and the Buyer for Taxes relating to the AIS Business, the provisions of this Article VIII shall govern. ARTICLE IX EMPLOYEE MATTERS 9.1 Pre-Closing Conduct; Other Liabilities. For purposes of this Agreement, "AIS Employees" means those employees engaged exclusively or primarily in the AIS Business as of 98 the Closing Date, including BBJ Employees (as defined in Section 9.2(b)), but excluding those employees listed on Schedule 9.1. None of the Sellers shall be under any obligation to terminate the employment of any AIS Employee prior to the Closing Date. The Sellers shall be liable, and shall hold the Buyer harmless, for all amounts to which any AIS Employee becomes entitled under any Employee Benefit Plan that exists or arises (or may be deemed to exist or arise) under any applicable law or otherwise, as a result of, or in connection with, (i) the employment of any AIS Employee by a Seller prior to the Closing Date, (ii) the termination of employment of any AIS Employee prior to the Closing Date, (iii) the termination of employment of any AIS Employee on or after the Closing Date that is a result of any such AIS Employee's failure to accept an offer of employment made by the Buyer in accordance with Section 9.2(a), and (iv) the termination of employment of any LTD AIS Employee (as defined in Section 9.2(a)) on or after the Closing Date. Except as set forth in the immediately preceding sentence, the Buyer shall be liable, and shall hold the Sellers harmless, for any amounts to which any AIS Employee becomes entitled under any Employee Benefit Plan that exists or arises (or may be deemed to exist or arise) under any applicable law or otherwise, as a result of, or in connection with, (i) the employment of any AIS Employee by the Buyer on or after the Closing Date and (ii) the termination of employment of any AIS Employee on or after the Closing Date. Notwithstanding anything in this Agreement or the Assumption Agreement to the contrary, the Sellers shall be responsible for the payment of retention bonuses under the "stay pay" agreements listed on Schedule 2.12 that become payable as a result of the Closing and for any obligations referred to in such agreements relating to Raytheon stock options, and the Buyer shall be responsible for the 99 payment obligations under such "stay pay" agreements that become payable upon the completion of specified employment periods following the Closing. 9.2 Offer of Employment; Continuation of Employment. (a) The Parties hereto intend that there shall be continuity of employment with respect to all AIS Employees (including those employees who are, as of the Closing Date, on vacation, leave of absence or short-term disability, but excluding those employees who are, as of the Closing Date, on long-term disability or layoff). The Buyer shall offer employment commencing on the Closing Date to all such AIS Employees, on the terms set forth in Section 9.5. Notwithstanding the preceding sentences, the Buyer shall offer employment to any AIS Employee on long-term disability who becomes able to return to work within two years after the Closing Date only in the event and to the extent that a position comparable to the position such AIS Employee held prior to such long-term disability is available at the time such AIS Employee becomes able to return to work or subsequently becomes available during such two-year period. In addition, if the Buyer increases employment, the Buyer shall first offer employment to individuals on layoff and shall comply with all applicable provisions regarding returning to work after layoff in any applicable collective bargaining agreement. Those persons who accept the Buyer's offer of employment shall hereafter be referred to as "Transferred Employees." Those AIS Employees on long-term disability who become able to return to work within two years after the Closing Date but for whom the Buyer has no comparable position (as described above) are defined as "LTD AIS Employees". (b) For purposes of this Agreement, "BBJ Employees" means those employees listed on Schedule 9.2(b). The Buyer shall use reasonable commercial efforts to 100 retain the services of the BBJ Employees to the extent necessary to perform the Buyer's obligations under Section 10.10 and the Business Jet Services Agreement. Raytheon agrees to reimburse the Buyer for the amount of any severance costs, determined in accordance with the Employee Benefit Plans of the Sellers applicable to AIS Employees as of the date of this Agreement, relating to the termination within one year following the Closing Date by the Buyer of any BBJ Employees. 9.3 Savings Plan. Effective as of the Closing Date, the Sellers shall take such action, if any, as may be necessary (i) to cause the active participation of the Transferred Employees under the Raytheon Savings and Investment Plan (the "Savings Plan") to cease as of the Closing Date, and (ii) to permit Transferred Employees to elect to take distributions (subject to applicable law) of their entire accounts thereunder and, if such Transferred Employees so elect, to roll them over, directly or otherwise, in accordance with applicable law and regulations, to an individual retirement account or to one or more defined contribution retirement plans qualified under Section 401(a) of the Code and maintained by the Buyer or one of its subsidiaries (the "Buyer Defined Contribution Plans"), and the Buyer Defined Contribution Plans shall, to the extent such distributions are in cash or plan loans, accept such rollovers. 9.4 Defined Benefit Plans. The Sellers shall retain all liability and responsibility for the defined benefit pension plans maintained by the Sellers in which Transferred Employees participate as of the Closing ("Sellers' Pension Plans"), with respect to those AIS Employees (or their beneficiaries) who, as of the Closing Date, are participants in the Sellers' Pension Plans. The Buyer shall establish, effective as of the Closing Date, defined benefit pension plans (the "Buyer Pension Plans") identical in all respects to the Retirement Plan for Hourly Employees of 101 the Greenville Division (the "Union Pension Plan") and those Sellers' Pension Plans in which AIS Employees participate , except benefits accrued under the Buyer's Plans shall be offset by the benefits accrued under the respective Seller's Plans. The Buyer Pension Plan covering AIS Employees who participated in the Union Pension Plan shall be maintained in effect without change (except for changes agreed to by the Union representing the plan participants or as are otherwise permitted or required under the applicable collective bargaining agreement or applicable law) until August 21, 2004, or such later date to which the collective bargaining agreement may be extended. All of the other Buyer Pension Plans (the "Buyer Non-Union Plans") shall be maintained in effect for at least 15 months after the Closing Date without substantive change (other than as may be required by applicable law). Without limiting the generality of this Section 9.4, at all times during the period beginning on the Closing Date and ending on the date 15 months after the Closing Date, the total benefits payable to any Transferred Employee participating under the Buyer Pension Plans, when combined with the total benefits payable under the Sellers' Pension Plans, shall be no less than the total benefits which would have been payable to such Transferred Employee under the provisions of the Sellers' Pension Plans as in effect as of the Closing Date if such Transferred Employee had continued to be employed by the Sellers. 9.5 Compensation; Employee Benefits; Severance Plans. Except as otherwise provided in this Article IX or as otherwise required by applicable law, the Transferred Employees shall cease to participate in or accrue further benefits under the AIS Benefit Plans immediately prior to the Closing. Beginning at the Closing, the Buyer shall, for a period ending on the date 15 months after the Closing Date, (a) provide each Transferred Employee who is not 102 a member of a unit of employees covered by the Collective Bargaining Agreement with total cash compensation (defined as base salary and bonus opportunity at least equal to those in effect on the date hereof) that is no less favorable in the aggregate than such Transferred Employee's total cash compensation (as defined above) immediately prior to the Closing Date, (b) maintain (or cause its subsidiaries to maintain) Employee Benefit Plans (including without limitation, defined benefit plans, defined contribution plans and excess plans, but excluding stock-based plans), for the benefit of each Transferred Employee that are no less favorable in the aggregate than the Employee Benefit Plans in effect immediately prior to the Closing Date with respect to employees of the Buyer ("Buyer Plans"), (c) maintain (or cause its subsidiaries to maintain) a Severance Pay Plan, program or practice for the benefit of each Transferred Employee that is no less favorable than the plan, program or practice in effect immediately prior to the Closing Date with respect to such Transferred Employee, and (d) provide the Transferred Employee company-paid retiree medical benefits that are substantially comparable in value to such benefits as are provided to the Transferred Employees immediately prior to the Closing and continue such company-paid retiree medical benefits for as long as retiree medical benefits are provided generally to other employees of the Buyer, its successors and its Subsidiaries during such 15-month period. Subsequent to the Closing Date, the Sellers shall retain no liability for provision of retiree medical benefits to the Transferred Employees, all of such liability, if any, having been assumed by the Buyer. The Buyer shall cause each Buyer Plan to recognize all credited service for purposes of eligibility and vesting and level of benefits (including, to the extent required to meet the Buyer's obligations under Section 9.4, accrual of benefits under any defined benefit plan); provided, however, that the Buyer shall not be required to provide any of the Transferred 103 Employees with any stock-based plans relating to equity securities (or their equivalent, such as phantom stock plans or SAR's ). Nothing herein shall preclude the Sellers from continuing to administer stock-based and incentive plans for service by the Transferred Employees with the Sellers through the Closing Date. 9.6 Welfare Plans. With respect to any Buyer Plan that is a "welfare benefit plan" (as defined in Section 3(1) of ERISA) or any Buyer Plan that would be a "welfare benefit plan" (as defined in Section 3(1) of ERISA) if it were subject to ERISA, the Buyer shall (i) cause to be waived any pre-existing condition limitations, and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such employees with respect to similar plans maintained by any Seller immediately prior to the Closing Date. The Buyer shall cooperate with the Sellers, which shall make appropriate arrangements to allow the use by Transferred Employees of any accrued benefits under any cafeteria plan (as defined in Section 125 of the Code for the plan year in which the Closing Date occurs) which was maintained by the Sellers or any of their Affiliates for such Transferred Employees. 9.7 Accrued Paid Time Off. With respect to any accrued but unused paid time off to which any Transferred Employee is entitled pursuant to the Sellers' paid time off policies applicable to such Transferred Employee immediately prior to the Closing Date (the "PTO Policies"), the Buyer shall assume the liability for such accrued paid time off and allow such Transferred Employee to use such accrued paid time off; provided, however, that if the Buyer deems it necessary to disallow such Transferred Employee from taking such accrued paid time off, the Buyer shall permit each such Transferred Employee to carry over paid time off in 104 accordance with the terms of the PTO Policies; and provided, further, that the Buyer shall be liable for and pay in cash an amount equal to such accrued paid time off to any Transferred Employee whose employment terminates for any reason subsequent to the Closing Date. The Sellers shall be liable for and pay in cash to the Buyer, within ten Business Days after receipt from the Buyer of written notice thereof accompanied by reasonable supporting documentation, the amount of any accrued but unused paid time off, which is not accounted for on the Final Closing Statement, to which any such Transferred Employees are entitled pursuant to the Sellers' paid time off policies applicable to such Transferred Employees. 9.8 WARN Act. The Buyer agrees to provide any required notice under the Worker Adjustment and Retraining Notification Act ("WARN") and any other applicable similar state or local law and to otherwise comply with any applicable statute with respect to any "plant closing" or "mass layoff' (as defined in WARN or other applicable state or local statutes) or similar event affecting employees and occurring on or after the Closing Date or arising as a result of the transactions contemplated hereby. The Buyer shall assume sole responsibility for any liabilities or obligations arising under WARN or other applicable law resulting from the actions (or inactions) of the Buyer or its Affiliates on or after the Closing Date or from the transactions contemplated hereby. The Sellers agree to provide any required notice under WARN and any other applicable law and to otherwise comply with any such statute with respect to any "plant closing" or "mass layoff" (as defined in WARN) or similar event affecting employees and occurring prior to the Closing Date. The Sellers shall assume sole responsibility for any liabilities or obligations arising under WARN or other applicable law resulting from the actions (or inactions) of the Sellers or their Affiliates prior to the Closing Date. 105 9.9 COBRA. The Buyer agrees to provide any required notice under the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") and any other applicable law on or after the Closing Date related to Transferred Employees who are entitled to such notices after the Closing Date. The Buyer shall assume sole responsibility for any liabilities or obligations arising under COBRA or other applicable law related to Transferred Employees who are entitled to such notices after the Closing Date which result from the actions (or inactions) of the Buyer or its Affiliates on or after the Closing Date or from the transactions contemplated hereby. ARTICLE X OTHER POST-CLOSING COVENANTS 10.1 Access to Information; Record Retention; Cooperation. (a) Access to Information. Subject to compliance with contractual obligations and applicable laws and regulations regarding classified information and security clearance, following the Closing, each Party shall afford to each other Party and to such other Party's authorized accountants, counsel and other designated representatives, during normal business hours in a manner so as to not unreasonably interfere with the conduct of business, (i) reasonable access and duplicating rights to all non-privileged records, books, contracts, instruments, documents, correspondence, computer data and other data and information (collectively, "Information") within the possession or control of such Party relating to the AIS Business, and (ii) reasonable access to the personnel of such Party. Requests may be made under this Section 10.1(a) for financial reporting and accounting matters, preparing financial statements, preparing, reviewing and analyzing the Closing Statement, resolving any differences between the Parties 106 with respect to the Closing Statement, preparing and filing of any Tax Returns, prosecuting any claims for refund, defending any Tax claims or assessment, preparing securities law or securities exchange filings, prosecuting, defending or settling any litigation, Environmental Matter or insurance claim, performing obligations under this Agreement and the Ancillary Agreements, and all other proper business purposes. (b) Preparation of Seller Financial Statements. Without limiting the generality of Section 10.1(a), from and after the Closing, the Buyer shall, and shall request its auditors to, reasonably cooperate on a timely basis with the Sellers and their auditors in connection with the preparation by Raytheon of the (i) Closing Statement and (ii) financial statements of Raytheon and its Affiliates. In connection with the preparation of (i) the Closing Statement and (ii) such financial statements, the Buyer shall provide Raytheon (and its auditors) with reasonable access to the AIS Business, its financial management, and any accountant's work papers in the possession of the Buyer (and shall request that the Buyer's auditors provide access to their work papers), and all financial books, accounts and records relating to the AIS Business. (c) Preparation of Buyer Financial Statements. Without limiting the generality of Section 10.1(a), from and after the Closing, each of the Sellers agrees that it shall, and shall request PricewaterhouseCoopers LLP to, reasonably cooperate on a timely basis with the Buyer and the Buyer's auditors to prepare audited financial statements of the AIS Business that are required for SEC filings required to be made by the Buyer and take any further actions in connection therewith as set forth in Section 4.9(a). 107 (d) Cooperation in Litigation. Without limiting the generality of Section 10.1(a), from and after the Closing, the Buyer shall provide such cooperation as the Sellers shall reasonably request in connection with the Bombardier Litigation. Such cooperation shall include providing the Sellers and their counsel and other designated representatives access to such Information and personnel as the Sellers may reasonably request. The Parties also agree specifically that all Information concerning the Sustained Readiness Program for modification and refurbishment of P-3 Orion Aircraft for the United States Navy (the "P-3 SRP Program") shall be stored in the same manner as at the time of the Closing at a location to which the Seller will have full access upon seven days advance written notification to the Buyer. The Buyer will not destroy or dispose of any P-3 SRP Program Information without 30 days prior written notice to Raytheon. Upon receipt of such notice, Raytheon may require that all or part of the P-3 SRP Program Information be delivered to it. (e) Reimbursement. A Party making Information or personnel available to another Party under Section 10.1 shall be entitled to receive from such other Party, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may reasonably be incurred in making such Information or personnel available; provided, however, that no such reimbursements shall be required for the salary or cost of fringe benefits or similar expenses pertaining to employees of the providing Party. (f) Retention of Records. Except as may otherwise be required by law or agreed to in writing by the Parties, and except as provided in Section 8.5 with respect to Tax records, each Party shall each use reasonable commercial efforts to preserve, until the date six 108 years after the Closing Date, all Information in its possession pertaining to the AIS Business prior to the Closing. Notwithstanding the foregoing, in lieu of retaining any specific Information, any Party may offer in writing to the other Party or Parties to deliver such Information to the other Party or Parties and, if such offer is not accepted within 90 days, the offered Information may be disposed of at any time. (g) Confidentiality. Each Party shall hold, and shall use reasonable commercial efforts to cause their respective Affiliates, consultants, advisors, agents and representatives to hold, in strict confidence all Information concerning the other furnished to it by the other Party or Parties or their representatives pursuant to this Section 10.1 (except to the extent that such Information (i) is or becomes generally available to the public other than as a result of any action or inaction by the receiving Party, (ii) was within the possession of the receiving Party prior to it being furnished to the receiving Party by or on behalf of the disclosing Party pursuant hereto, provided that the source of such information was not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to any person or entity with respect to such information), or (iii) is or becomes available on a non-confidential basis to the receiving Party from a source other than the disclosing Party, provided that the source of such information was not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to any person or entity with respect to such information), and each Party shall not release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors, unless compelled to disclose such Information by judicial or administrative process or by other requirements of law or so as not to violate the rules of any 109 stock exchange; provided, however, that in the case of disclosure compelled by judicial or administrative process, the receiving Party shall (to the extent permitted by applicable law) notify the disclosing Party promptly of the request and the documents requested thereby so that the disclosing Party may seek an appropriate protective order or other appropriate remedy. If, in the absence of a protective order or other remedy or the receipt of a waiver hereunder, a Party is, in the written opinion of its counsel, compelled to disclose any Information to any tribunal or other entity or else stand liable for contempt or suffer other censure or penalty, such Party may so disclose the Information without liability hereunder; provided, however, that, such Party gives written notice to the other Party or Parties of the information to be disclosed (including copies of the relevant portions of the relevant documents) as far in advance of its disclosure as is practicable, uses all reasonable efforts to limit any such disclosure to the precise terms of such requirement and cooperates with the disclosing Party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded to such information by the tribunal or other entity. 10.2 Covenant Not to Compete. During the period commencing on the Closing Date and continuing until the fourth anniversary of the Closing Date (the "Noncompetition Period"), Raytheon shall not (and shall cause each Raytheon Subsidiary (as defined below) not to), directly or indirectly, engage in any of the following (the "Restricted Business"): (i) aircraft modification (i.e., alterations to an aircraft that permit the integration of electronic equipment such as sensors, consoles and communications suites) and maintenance as related to the modification or refurbishment of aircraft owned and/or operated by 110 the U.S. and foreign governments and associated with U.S. and foreign Intelligence, Surveillance and Reconnaissance (ISR); (ii) aircraft modification (i.e., alterations to an aircraft that permit the integration of electronic equipment such as sensors, consoles and communications suites) and refurbishment, life extension and special mission aircraft management; (iii) development and integration of complex mechanical and electromechanical systems for mission critical aircraft operations; (iv) integrated airborne SIGINT platforms, exclusive of the development, integration and production of SIGINT sensors performed by Raytheon or Raytheon Subsidiaries; and (v) maintenance, repair, modification, fabrication, prototyping and manufacturing, and logistics support that is currently performed by the AIS Business Joint Operations Group, for Special Operations Forces Equipment. For purposes of this Agreement, "Raytheon Subsidiary" means any corporation, partnership, limited liability company or other non-corporate business enterprise in which Raytheon (or another Raytheon Subsidiary) holds stock or other ownership interests representing more than 50% of the voting power of all outstanding stock or ownership interests of such entity. Notwithstanding the foregoing, neither Raytheon nor any Raytheon Subsidiary shall be prohibited from: (a) continuing to engage in any type of business conducted by Raytheon or any Raytheon Subsidiary as of the date hereof which is not part of the AIS Business or which is part of the Boeing Business Jet Division (as such business exists as of the date of this 111 Agreement), or selling products or services that are under development by Raytheon or any Raytheon Subsidiary as of the date hereof which are not part of the AIS Business (it being agreed that the type of business conducted by Raytheon or any Raytheon Subsidiary shall include any type of business that is either expressly addressed in a bid or contract of Raytheon or any Raytheon Subsidiary existing as of the date hereof or that is a logical follow-on to business that is expressly addressed in such an existing bid or contract); (b) purchasing products or services from, or selling products or services to, or otherwise engaging in a commercial relationship with, an entity which is engaged in the Restricted Business; (c) acquiring or owning less than 5% (by voting power) of the outstanding capital stock of any publicly-traded company which is engaged in the Restricted Business; (d) performing its obligations under this Agreement and the Ancillary Agreements or otherwise taking actions in connection with the winding up of the AIS Business; or (e) acquiring any entity which is engaged in the Restricted Business if either: (i) in its last full fiscal year prior to such acquisition, the consolidated revenues of such entity from the Restricted Business constituted less than 25% of the total revenues of such entity; or (ii) Raytheon or the applicable Raytheon Subsidiary thereafter uses, until the earlier to occur of the expiration of the Noncompetition Period and 12 months after such acquisition, reasonable commercial efforts to sell that portion of the business of such entity as 112 constitutes the Restricted Business, upon terms and conditions and at a price deemed acceptable by Raytheon. 10.3 Novation of Government Contracts. (a) As soon as practicable following the Closing, the applicable Seller shall prepare (with the Buyer's assistance, which will include preparation of all information and documents required of the transferee for such requests), in accordance with Federal Acquisition Regulations, 48 CFR ss.42.12, and any applicable agency regulations or policies, a written request meeting the requirements of the Federal Acquisition Regulations Part 42, as reasonably interpreted by the Responsible Contracting Officer (as such term is defined in Federal Acquisition Regulations Part 42), which shall be submitted by such Seller to each Responsible Contracting Officer, for the applicable U.S. Governmental Entity (i) to recognize the Buyer as such Seller's successor-in-interest to each Government Contract and (ii) to enter into a novation agreement (a "Novation Agreement"), in form and substance reasonably satisfactory to the Buyer and such Seller, pursuant to which, subject to the requirements of the Federal Acquisition Regulations Part 42, all of such Seller's right, title and interest in and to, and all of such Seller's obligations and liabilities under, such Government Contract shall be validly conveyed, transferred and assigned and novated to the Buyer by all parties thereto. The Sellers and the Buyer shall each use all reasonable efforts to obtain all consents, approvals and waivers required for the purpose of processing, entering into and completing the Novation Agreements with regard to any such Government Contracts, including responding to any requests for information by a U.S. Governmental Entity with regard to such Novation Agreements. The Sellers and the Buyer shall promptly provide to each other (or to the requesting U.S. Governmental Entity) any 113 information with respect to such Party required in connection with any such request for information. (b) The Parties acknowledge that the transfer or assignment of a Government Contract is subject to the contracting agency's approval of a Novation Agreement recognizing the Buyer as the successor-in-interest to the applicable Seller. Unless and until the contracting agency recognizes the Buyer as the successor-in-interest to the applicable Seller under any Government Contract, then the applicable Seller shall subcontract, sublease or lease to the Buyer all of such Seller's rights and obligations under such Government Contract and appoint the Buyer as the agent of the applicable Seller for purposes of such Government Contract, or otherwise cooperate in any reasonable arrangement designed to provide the benefits of such Government Contract to the Buyer (provided the Buyer also discharges the applicable Seller's obligations under such Government Contract), in each case to the maximum extent permissible under law. In connection therewith, the Buyer shall perform on behalf of such Seller all of such Seller's obligations under such Government Contract, and such Seller shall remit to the Buyer all payments it receives under such Government Contract with respect to obligations performed by the Buyer (less any additional costs incurred by such Seller in connection therewith). (c) In connection with obtaining the consents or approvals contemplated in Sections 10.3(a) and 10.3(b), none of the Sellers shall consent to any modification of any Government Contract which would adversely affect the rights of the Buyer under such Government Contract without the prior written consent of the Buyer (which shall not be withheld or delayed if such modification is not material). 114 10.4 Seller Guarantees. In the event that after the Closing Date any Seller or an Affiliate is required to reimburse a letter of credit issuer for any drawing under a Seller Guarantee, or is required to make any payment under a Seller Guarantee (other than carrying costs), then the Buyer shall reimburse such Seller or Affiliate within 20 days after demand for the payment of such amount. The Buyer's payment obligation under this Section 10.4 shall not be subject to any right of set-off or defense to payment otherwise available to the Buyer. However, the payment by the Buyer of any such payment obligation will not constitute a waiver by the Buyer of any of its rights to make a subsequent claim under Article VII, to the extent applicable. 10.5 Outstanding Bid Proposals. (a) In the event that, as of the Closing Date, the AIS Business has furnished any proposals to another business unit of Raytheon to provide products and services to such other business unit in connection with a Bid Proposal (as defined below) by such other business unit, the Buyer agrees that if such Bid Proposal is accepted, the Buyer will honor such proposal by the AIS Business in accordance with its terms, which will be performed pursuant to the terms of the applicable Supply Agreement, or if no Supply Agreement applies to the applicable scope of work, pursuant to a new supply agreement in a form and with terms substantially equivalent to the Supply Agreements; provided, however, that (i) with respect to proposals by the AIS Business to another business unit of Raytheon in connection with a fixed-price Bid Proposal, the Buyer hereby waives any right to claim or otherwise collect Statistical Profit under such proposals, and (ii) with respect to proposals by the AIS Business to another business unit of Raytheon in connection with a cost-plus Bid Proposal, the profit margin for such proposals that 115 include cost-plus pricing with a Statistical Profit, or no provision for profit, shall be paid by such business unit of Raytheon to the Buyer in a percentage equal to the fee percentage in the prime or higher tier contract for the applicable cost-plus Bid Proposal. For purposes of this Agreement, "Bid Proposal" means a proposal that has been submitted to a customer of Raytheon, a Raytheon Subsidiary or the AIS Business. The Buyer's obligations under this Section 10.5(a) shall apply only to Bid Proposals that are listed on Schedule 10.5(a) and are (i) outstanding on the date of this Agreement or (ii) become outstanding prior to the Closing with the consent of the Buyer. For purposes of this Agreement, "Statistical Profit" means, with respect to proposals furnished by one party to another party to provide products or services in connection with a Bid Proposal by such other party, an amount equal to the fee uplift constituting the profit which would have been recorded by the party supplying such products or services for financial reporting purposes internal to the Sellers pursuant to Raytheon General Policies and Procedures 23-2003-110, but which the party receiving such products or services would not have paid to the supplying party, if the Buyer and the Sellers had remained Affiliates. (b) In the event that, as of the Closing Date, Raytheon or a Raytheon Subsidiary has furnished any proposals to the AIS Business to provide products and services to the AIS Business in connection with a Bid Proposal by the AIS Business, Raytheon agrees that if such Bid Proposal is accepted, Raytheon will, or will cause the applicable Raytheon Subsidiary to, honor such proposal in accordance with its terms, which will be performed pursuant to the terms of the applicable Supply Agreement or if no Supply Agreement applies to the applicable scope of work, pursuant to a new supply agreement in a form and with terms substantially equivalent to the Supply Agreements; provided, however, that (i) with respect to proposals by 116 Raytheon or a Raytheon Subsidiary to the AIS Business in connection with a fixed-price Bid Proposal, Raytheon hereby waives, or will cause its Raytheon Subsidiary to waive, any right to claim or otherwise collect Statistical Profit under such proposals, and (ii) with respect to proposals by Raytheon or a Raytheon Subsidiary to the AIS Business in connection with a cost-plus Bid Proposal, the profit margin for such proposals that include cost-plus pricing with fiscal or statistical profit, or no provision for profit, shall be paid by the Buyer to Raytheon or the Raytheon Subsidiary, as applicable, in a percentage equal to the fee percentage in the prime or higher tier contract for the applicable cost-plus Bid Proposal. Raytheon's obligations under this Section 10.5(b) shall apply only to Bid Proposals which are listed on Schedule 10.5(b) and (i) are outstanding on the date of this Agreement or (ii) become outstanding prior to the Closing with the consent of Raytheon. 10.6 Use of Raytheon Name in Transferred Technology. The Sellers and the Buyer will cooperate and use reasonable commercial efforts to provide to the Buyer for inclusion in its web site, as promptly as practicable following the Closing, all text, images and other content contained in all web sites relating exclusively or primarily to the AIS Business maintained by the Sellers (or their Affiliates). Prior to including any such text, images or other content in its web site, the Buyer shall remove all references to the "Raytheon" and "E-Systems" names from any such text, images or other content, except that the Buyer may use such names in a non-trademark sense to describe the historical affiliation of the AIS Business. The Sellers (or their Affiliates) shall retain ownership of all domain names employing the name Raytheon or E-Systems and neither the Buyer nor any of its Affiliates shall have any right or license to any such domain name. To the extent the AIS Business utilized any internet protocol address space allocated to 117 the Sellers, such internet protocol address space shall remain the property of the Sellers, and no rights or licenses are granted to the Buyer with respect thereto. Except as may be provided in this Section 10.6 or the Transition Services Agreement, the Buyer shall have no right to continued access to the Raytheon telephone network, Raytheon internet mail, or any other Raytheon computer network. 10.7 Collection of Accounts Receivable. Each Seller agrees that it shall forward promptly to the Buyer any monies, checks or instruments received by such Seller after the Closing with respect to the accounts receivable purchased by the Buyer from the Sellers pursuant to this Agreement. Each Seller hereby authorizes the Buyer to endorse and cash any checks or instruments payable or endorsed to such Seller or its order which are received by the Buyer and which relate to accounts receivable purchased by the Buyer from the Sellers. 10.8 Payment of Assumed Liabilities. In the event that any Seller (or an Affiliate thereof) inadvertently pays or discharges, after the Closing, any Assumed Liabilities, the Buyer shall reimburse such Seller or Affiliate for the amount so paid or discharged within 45 days of being presented with written evidence of such payment or discharge. In the event that the Buyer (or an Affiliate thereof) inadvertently pays or discharges, after the Closing, any Excluded Liabilities, the applicable Seller shall reimburse the Buyer or such Affiliate for the amount so paid or discharged within 45 days of being presented with written evidence of such payment or discharge. 10.9 Access to Facility. In order to permit the Sellers to continue to conduct Raytheon's operations relating to payroll processing, PeopleSoft support, Enterprise IT SAP support and CSC support services located at Raytheon's Greenville, Texas facilities (which 118 facilities are covered by one of the Real Estate Leases being assigned to the Buyer), the Buyer shall, for a period of one year following the Closing (or such shorter period of time as the Sellers shall elect with respect to all or any portion of the space so occupied), permit the Sellers to continue to occupy the amount of space at the Greenville facilities currently occupied by the Raytheon operations described above, and permit the Sellers' employees, agents and contractors to have access both to such portion of such facilities as is reasonably necessary to operate such functions in the manner in which they are currently operated and to such services, equipment and systems as are currently utilized by them in such operations. The Sellers shall make all reasonable efforts to avoid and mitigate any interruption or interference with the Buyer's business activities. As consideration for the access permitted by the Buyer under this Section 10.9, the Seller shall pay to the Buyer a pro rata portion (based on the portion of the Greenville facilities occupied by the Sellers) of (i) the payments owed by the Buyer under such Real Estate Lease and (ii) any other costs reasonably incurred by the Buyer in operating and maintaining such facilities and providing support for the occupants thereof, for the period of time during which the Sellers occupy such facilities. The Seller shall indemnify the Buyer for any Damages incurred by the Buyer if the arrangement contemplated by this Section 10.9 constitutes a violation of such Real Estate Lease. 10.10 Boeing Business Jet Operations. (a) Raytheon is obligated to design, manufacture and deliver a VIP interior in (i) a Boeing B777-200 Increased Gross Weight (IGW) aircraft under Completion Agreement Number 98-RESY-W-1057 between Raytheon (as successor to Raytheon E-Systems, Inc.) and Alfa Sierra, Inc. dated June 5, 1998 and (ii) a Boeing B737-700 IGW aircraft under Completion 119 Agreement Number 99-RSC-W-1085 between Raytheon (as successor to Raytheon E-Systems, Inc.) and Funair, Inc. dated April 24, 1999 and Completion Specification, Change dated January 24, 2000, as revised by Work Change Requests. Such aircrafts are referred to herein as the "777 Aircraft" and such contracts (as supplemented or modified) are referred to herein as the "777 Contracts." The Buyer agrees that, at the request of Raytheon, it shall perform such work as is reasonably necessary to complete the 777 Aircraft and prepare them for delivery in accordance with the terms of the 777 Contracts. Raytheon shall pay the Buyer for such work at a rate equal to the Buyer's Actual Cost for the first 15,000 man hours of such work, and at a rate equal to the Buyer's Actual Cost plus 8% for any work in excess of 15,000 man hours. For purposes of this Agreement, "Actual Cost" shall mean the Buyer's actual costs (including labor and fringes, overhead and general and administrative costs, plus the actual cost to the Buyer of materials used and applicable material handling rates and any other direct costs) determined in accordance with the standards and practices under the Raytheon Company Aircraft Integration Systems Segment Cost Accounting Standards Board Disclosure Statement (or any successor thereto) in effect at the time the work is performed, subject to any limitations agreed to by Raytheon and the Buyer. The Buyer shall perform such work in accordance with customary standards of quality in the industry and in accordance with the standards required under the 777 Contracts. (b) Raytheon owns supplemental type certificates and data identified on the applicable Master Drawing List associated with Boeing Business Jet Model 737-700 aircraft and one Boeing Model 777-200 and excess materials, as described in more detail on Schedule 10.10(b) (the "Consigned Assets"). The Consigned Assets are located at Raytheon's Waco, Texas facility and are not part of the Acquired Assets. The Buyer agrees to store the Consigned 120 Assets for the benefit of Raytheon. The Buyer further agrees to use reasonable commercial efforts to find a buyer for the Consigned Assets and agrees that Steven Hannah shall (for so long as he remains employed by the Buyer or an Affiliate) be responsible for the Buyer's efforts to find such buyer (it being agreed that the foregoing shall not require Buyer to retain Mr. Hannah as an employee). Raytheon, as owner of the Consigned Assets, shall have the authority to accept or reject any proposed sale of the Consigned Assets. Upon the consummation of any sale of some or all of the Consigned Assets, Raytheon shall pay to the Buyer 40% of the proceeds received by Raytheon for such sale. 10.11 Insurance. The Sellers shall provide reasonable cooperation to the Buyer in order to afford the Buyer the right to receive payment, after the Closing, under any insurance policies of the Sellers covering the AIS Business or the Acquired Assets prior to the Closing with respect to any claim or loss covered by such policies that relates to any of the Acquired Assets or constitutes an Assumed Liability. The Buyer shall promptly notify the Sellers of the occurrence of any events that might form the basis of such an insurance claim and the amount of such claim. Any such rights of the Buyer to receive payment on any such insurance claim shall be subject to any deductibles, self-insured retentions, retained amounts, retentions or exclusions, to the Buyer's payment of any retrospectively rated premiums that become due and payable after the Closing, and to the other terms of the applicable insurance policy. If so requested by Raytheon, the Buyer shall, as a condition to receiving payment on any such insurance claim, make arrangements reasonably satisfactory to Raytheon for the payment directly to the applicable insurance carrier of any amounts which are the responsibility of the Buyer in accordance with the immediately preceding sentence. This Section 10.11 shall not require any Seller to convert any 121 "claims made" policy to an "occurrence based" policy and shall not obligate any Seller to maintain any insurance policy in effect such that it covers claims made or events occurring after the Closing. 10.12 Non-Solicitation. From the date hereof to the second anniversary of the Closing Date, none of the Sellers shall, directly or indirectly (including through Subsidiaries), solicit or encourage any of the officers and employees listed on Schedule 10.12 hereto to leave the employ of the Buyer or any of its Subsidiaries; provided, that nothing contained in this sentence shall prevent or restrict a Seller from employing any individual who responds to a general solicitation for employment made by or on behalf of any Seller that is not specifically directed at employees or officers of the Buyer or any of its Subsidiaries, or any individual who, after the Closing, initiates contact with a Seller for purposes of seeking employment. 10.13 Record Keeping. Within six months after the Closing, the Sellers shall deliver to the Buyer all data relating primarily or exclusively to the Acquired Assets to the extent such transfer is permitted by applicable law and such data has not be transferred to an AIS Business facility prior to Closing. Such data includes, but it not limited to, data relating to financial accounting, real estate leases, human resources, contracts, insurance, intellectual property, legal matters, novation agreements and assignment agreements. The costs incurred in connection with the delivery of such data to the Buyer shall be borne by the Sellers. 10.14 Compliance with Agreement. The Buyer shall forbear (and shall cause its Affiliates and any other person or entity under its control to forbear) from taking any action with respect to any AIS Property that, if taken by Raytheon (as successor to Raytheon E-Systems, Inc.), would (i) represent a breach of a covenant of the Seller to Chrysler under the April 4, 1996 122 Stock Purchase Agreement by and among Chrysler Technologies Corporation, Cisa Financial Services, S.A. and E-Systems, Inc. (the "Chrysler Agreement") or (ii) reduce or result in the loss of any indemnity claim or right of Raytheon pursuant to such Agreement. 10.15 Proprietary Information; Marketing and Sales Restriction. The Buyer acknowledges that the AIS Business possesses, and, after the Closing the Buyer will possess, significant information about non-AIS Business technology, marketing, and sales that is confidential and trade secret to the Sellers ("Non-AIS Information"), including, without limitation, Non-AIS Information regarding the operations of the Sellers at the locations identified in the definition of the AIS Business set forth in the Introduction to this Agreement. The Buyer will not, directly or indirectly, use or disclose any Non-AIS Information for any purpose, specifically including, without limitation, research, development, marketing or sales efforts in competition with the Sellers. 10.16 Confidentiality Obligations of the Sellers. The Sellers shall hold, and shall use reasonable commercial efforts to cause their respective Affiliates, consultants, advisors, agents and representatives to hold, in strict confidence all confidential or trade secret information relating exclusively or primarily to the AIS Business, except as required by law or administrative process and except for 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 10.16. 10.17 Environmental Response Activities. In performing Environmental Response Activities for which it seeks indemnification under Article VII of this Agreement, Buyer will select the remedy which most cost effectively achieves the level of cleanup with respect to which Raytheon owes an indemnity obligation pursuant to Section 7.1(d). 123 ARTICLE XI MISCELLANEOUS 11.1 Press Releases and Announcements. Immediately after the execution and delivery of this Agreement, the Parties will issue a joint press release announcing the execution and delivery of this Agreement, substantially in the form previously delivered to each other. Prior to the Closing, no Party shall issue (and each Party shall cause its Affiliates not to issue) any other press release or public disclosure relating to the subject matter of this Agreement without the prior written approval of the other Party or Parties (which shall not be unreasonably withheld or delayed); provided, however, that any Party may make any public disclosure it believes in good faith is required by law, regulation or stock exchange rule (in which case the disclosing Party shall advise the other Party or Parties and the other Party or Parties shall, if practicable, have the right to review such press release or announcement prior to its publication). 11.2 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns and, to the extent specified herein, their respective Affiliates. 11.3 Entire Agreement. This Agreement (including the documents referred to herein) and the Confidentiality Agreement constitute the entire agreement among the Buyer, on the one hand, and the Sellers, on the other hand. This Agreement supersedes any prior agreements or understandings among the Buyer, on the one hand, and the Sellers, on the other hand, and any representations or statements made by or on behalf of any Seller or any of their respective Affiliates to the Buyer, whether written or oral, with respect to the subject matter hereof, other than the Confidentiality Agreement. 124 11.4 Succession and Assignment. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of Raytheon (in the case of an assignment by the Buyer) or the Buyer (in the case of an assignment by any Seller), which written approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, this Agreement, and all rights, interests and obligations hereunder, may be assigned, without such consent, to any entity that acquires all or substantially all of a Party's business or assets, and the Buyer may assign without the Sellers' consent all or part of its rights, interests or obligations hereunder to one or more subsidiaries of the Buyer (provided that no such assignment shall relieve the Buyer of its obligations to the Sellers hereunder). This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. 11.5 Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below: 125 If to any or all Sellers: Copy to: Raytheon Company Hale and Dorr LLP 141 Spring Street 60 State Street Lexington, MA 02421 Boston, MA 02109 Attn: Neal E. Minahan, Esq. Attn: Mark G. Borden, Esq. Senior Vice President and General Counsel If to the Buyer: Copy to: L-3 Communications Corporation Simpson Thacher & Bartlett 600 Third Avenue 425 Lexington Avenue New York, NY 10016 New York, NY 10017 Attn: Christopher C. Cambria, Esq. Attn: William E. Curbow, Esq. Senior Vice President, Secretary and General Counsel Any Party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. 11.6 Amendments and Waivers. The Parties may mutually amend or waive any provision of this Agreement at any time. No amendment or waiver of any provision of this Agreement, including this Section 11.6, shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any 126 prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 11.7 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the body making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. 11.8 Expenses. Except as otherwise specifically provided to the contrary in this Agreement, each of the Parties shall bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. 11.9 Specific Performance. Each Party acknowledges and agrees that the other Party or Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each Party agrees that the other Party or Parties may be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter. 127 11.10 Governing Law. This Agreement and any disputes hereunder (including any arbitration proceeding pursuant to Section 7.4) shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware. 11.11 Submission to Jurisdiction. Except as otherwise provided in Section 7.4 with respect to arbitration of Disputes, each Party (a) submits to the exclusive jurisdiction of any state or federal court sitting in the State of Delaware in any action or proceeding arising out of or relating to this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined only in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each Party agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 11.5. Nothing in this Section 11.11, however, shall affect the right of any Party to serve such summons, complaint or initial pleading in any other manner permitted by law. 11.12 Construction. (a) The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. 128 (b) Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. (c) The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (d) Any reference herein to an Article, section or clause shall be deemed to refer to an Article, section or clause of this Agreement, unless the context clearly indicates otherwise. (e) All references to "$", "Dollars" or "US$" refer to currency of the United States of America. 11.13 Counterparts and Facsimile Signature. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile signature. [Remainder of page intentionally left blank] 129 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. RAYTHEON COMPANY By:_______________________________ Name:_____________________________ Title:____________________________ RAYTHEON AUSTRALIA PTY LTD. By:_______________________________ Name:_____________________________ Title:____________________________ L-3 COMMUNICATIONS CORPORATION By:_______________________________ Name:_____________________________ Title:____________________________ 130 EX-10.60 18 file017.txt EV AMENDMENT TO ASSET PURCHASE AGREEMENT RAYTHEON COMPANY 141 SPRING STREET LEXINGTON, MASSACHUSETTS 02421 March 8, 2002 L-3 Communications Corporation 600 Third Avenue New York, New York 10016 Attention: Christopher C. Cambria, Esq. Vice President, Secretary and General Counsel Ladies and Gentlemen: Reference is hereby made to the Asset Purchase Agreement, dated as of January 11, 2002 (the "Agreement"), among Raytheon Company, a Delaware corporation ("Raytheon"), Raytheon Australia Pty Ltd., a corporation organized under the laws of Australia and a wholly-owned subsidiary of Raytheon ("Raytheon Australia") (Raytheon and Raytheon Australia are each individually referred to herein as a "Seller" and are collectively referred to herein as the "Sellers"), and L-3 Communications Corporation, a Delaware corporation (the "Buyer"). Defined terms used herein without definition have the meanings given them in the Agreement. The Sellers and the Buyer have agreed to amend the Agreement and certain Exhibits and Schedules in order to amend certain provisions thereof relating to, among other things, the retention of employees, the ASTOR Subcontract and transition services. Accordingly, the Parties are entering into this letter agreement to reflect such amendments. This letter will confirm the agreement of the Parties as follows: I. Amendments 1.1. Additional Buyers. (a) In accordance with Section 11.4 of the Agreement, L-3 Communications Corporation contemporaneously herewith has assigned its rights, interests and obligations under the Agreement to L-3 Communications Integrated Systems L.P., a Delaware limited partnership and a wholly-owned subsidiary of L-3 Communications Corporation (the "L-3 U.S. Subsidiary"), and to L-3 Communications Australia Pty Ltd., a corporation organized under the laws of Australia and a wholly-owned subsidiary of L-3 Communications Corporation (the "L-3 Australian Subsidiary"). The L-3 U.S. Subsidiary and the L-3 Australian Subsidiary shall from and after the date of this letter agreement each be considered a "Buyer" for purposes of the Agreement, and shall be subject to the rights and obligations of the Buyer under the Agreement, L-3 Communications Corporation March 8, 2002 from and after the date of this letter agreement. L-3 Communications Corporation hereby acknowledges that such assignment shall not relieve it of its obligations to the Sellers under the Agreement. (b) At the Closing, (i) the L-3 Australian Subsidiary shall acquire all of the Acquired Assets which are owned or held by Raytheon Australia as of the Closing (the "Australian Acquired Assets") and shall assume and agree to pay, perform and discharge when due all Assumed Liabilities of Raytheon Australia as of the Closing (the "Australian Assumed Liabilities") and (ii) the L-3 U.S. Subsidiary shall acquire all of the Acquired Assets other than the Australian Acquired Assets and the Real Estate Leases, which leases shall be acquired by L-3 Communications Corporation (the "U.S. Acquired Assets"), and shall assume and agree to pay, perform and discharge when due all Assumed Liabilities other than the Australian Assumed Liabilities and the Real Estate Leases, which leases shall be assumed by L-3 Communications Corporation (the "U.S. Assumed Liabilities"). The parties to the Ancillary Agreements to be executed pursuant to Section 1.3(b) of the Agreement shall be appropriately revised to reflect the terms of this Section 1.1(b) and, where appropriate, more than one version of an Ancillary Agreement, with different parties thereto, shall be executed. (c) Section 3.1 is hereby amended and restated in its entirety to read as follows: "3.1 Organization. L-3 Communication is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. The L-3 U.S. Subsidiary is a limited partnership duly organized, validly existing and in good standing under the laws of the state of Delaware. The L-3 Australian Subsidiary is a corporation duly organized and validly existing under the laws of Australia." (d) Any notice, request, demand, claim or other communication required to be delivered under the Agreement to or by the Buyer shall be deemed delivered to or by the Buyer if it is delivered, in accordance with the terms of Section 11.5 of the Agreement, to or by, respectively, L-3 Communications Corporation. Any consent or waiver required of the Buyer under the Agreement shall be deemed given by the Buyer if it is given in writing by L-3 Communications Corporation. 1.2. Retained Employees. Schedule 9.1 of the Agreement is amended and restated in its entirety to read as set forth on Exhibit A hereto. With respect to the addition of Gary Arnold to the list of Retained Employees set forth on Schedule 9.1, the Parties hereby agree to the following additional amendments: (a) The "Letter Agreement dated October 23, 2001 between Raytheon Company and Gary Arnold" is hereby deleted from Schedule 2.12 to the Agreement. L-3 Communications Corporation March 8, 2002 (b) The reference to Gary Arnold, his position and his annual rate of compensation is hereby deleted from Schedule 2.16 to the Agreement. (c) The reference to Gary Arnold and his position is hereby deleted from Schedule 10.12 to the Agreement. (d) The "Letter Agreement dated October 23, 2001 between Raytheon Company and Gary Arnold" is hereby deleted from Section 2.5(d) of the Schedule of Exceptions. 1.3. Section 7.2. (a) Section 7.2(b) is hereby amended and restated in its entirety to read as follows: "(b) any failure by the Buyer to perform any covenant or agreement contained in this Agreement or the Ancillary Agreements, other than the Subcontract Agreement between Raytheon Systems Limited and the Buyer attached hereto as Exhibit M; or" (b) The following sentence is added as a new sentence at the end of Section 7.2: "The Parties agree that the responsibility for any liabilities or costs that are covered by Condition 9(b) of the Subcontract Agreement between Raytheon Systems Limited and the Buyer attached hereto as Exhibit M shall be allocated as set forth in such Subcontract and are not covered by this Article VII." 1.4. Assignment and Assumption of Leases. Exhibit D (Assignment and Assumption of Leases) to the Agreement is hereby amended to add E-Systems Technologies Holding, Inc., a Delaware corporation, as an "Assignor" and signatory under such Exhibit D. 1.5. Supply Agreement Amendments. (a) Appendix E of Exhibit G (Supply Agreement - Raytheon as Customer) to the Agreement is amended and restated in its entirety to read as set forth on Exhibit B hereto. (b) Exhibit K (Supply Agreement - Raytheon Systems Canada, Ltd. as Supplier) to the Agreement is hereby amended to reflect the correct name of the Supplier: Raytheon Canada Limited. (c) Appendix D of Exhibit J (Supply Agreement - Thales-Raytheon Systems Co., LLC as Supplier) to the Agreement is amended and restated in its entirety to read as set forth on Exhibit G hereto. (d) Appendix F of Exhibit F (Supply Agreement - Raytheon as Supplier) to the Agreement is amended and restated in its entirety to read as set forth on Exhibit H hereto. L-3 Communications Corporation March 8, 2002 (e) Page 1 of Appendix D of Exhibit H (Supply Agreement " Raytheon Technical Services Company as Supplier) to the Agreement is amended and restated in its entirety to read as set forth on Exhibit I hereto. 1.6. ASTOR Subcontract. Exhibit M (Subcontract Agreement with Raytheon Systems Limited) to the Agreement is hereby amended as set forth on Exhibit C hereto. 1.7. Transition Services. Schedule I, Schedule II and Schedule III of Exhibit Q (Transition Services Agreement) to the Agreement are amended and restated in their entirety to read as set forth on Exhibit D hereto. The Agreement is hereby amended by adding Exhibit S (Transition Services Agreement) to the Agreement in the form attached hereto as Exhibit E, such Exhibit S to document the agreement relating to transition services between Raytheon Australia and L-3 Communications Australia Pty Ltd. and to be executed at the Closing. 1.8. Australian Issues. The Parties agree as set forth on Exhibit F hereto with respect to certain Australian issues. 1.9. Schedule 2.12. The Parties agree that section (a)(ii) of Schedule 2.12 to the Agreement is amended and restated in its entirety to read as set forth on Exhibit J hereto. 1.10. Section 9.4. Section 9.4 of the Agreement is hereby amended by the addition of the following at the end thereof: "The monthly benefit rate used to calculate benefits from Raytheon under the Retirement Plan for Hourly Employees of the Greenville Division of E-Systems, Inc., of which Raytheon is the plan sponsor (the "Plan") shall be the rate in effect as of the earlier of the date the participant retires under the Plan and the date the participant terminates employment from the Buyer. Such rate shall never exceed $36.00 even though monthly rates negotiated in subsequent collective bargaining agreements by the Buyer and its successors may be higher." 1.11. Section 10.4. Section 10.4 of the Agreement is hereby amended by the addition of the following at the end thereof: "Without limiting the foregoing, the Buyer shall use commercially reasonable efforts (in accordance with the standards set forth in Section 4.2) to arrange, as promptly as practicable, for replacement arrangements (which shall include a full and complete release of each Seller and their respective Affiliates), with respect to the following Seller Guarantees: Performance Corporate Guarantee No. 2490 issued on November 2, 2001 by Raytheon Company for benefit of Empresa Brasileira de Aeronautica S.A. (EMBRAER) in the amount of U.S.$ 10,728,592; and Performance Corporate Guarantee No. 2491 issued on November 2, 2001 by Raytheon Company for benefit of Empresa Brasileira de Aeronautica S.A. (EMBRAER) in the amount of U.S.$ 3,576,197. If the Buyer is unable to effect such replacement arrangements within 30 days following the Closing Date, the Buyer shall, for either or both of such Seller Guarantees which have not been replaced, deliver to Raytheon, on such 30th day, an irrevocable, unconditional standby letter of credit in favor of Raytheon in an amount equal to the amount of such Seller Guarantee or Guarantees, issued by a bank rated A or better by Standard & Poor"s, in form and substance reasonably satisfactory to Raytheon." L-3 Communications Corporation March 8, 2002 1.12. Bank Account. Raytheon and the Buyer hereby agree (notwithstanding anything to the contrary in the Agreement) that (i) Fleet Bank Account No. 27852796 (the "Account"), which is owned and operated by Raytheon, shall be transferred by Raytheon to the Buyer as part of the transactions effected at the Closing and the Buyer shall honor all checks written on the Account which are outstanding as of the Closing and the amount of all such checks shall be Assumed Liabilities; (ii) Raytheon shall, on Monday, March 11, 2002, transfer, by wire transfer of immediately available funds, $18,638,589.82 into the Account (which amount represents the estimated amount of the overdraft of the Account as of the Closing Date), which funds (and any other funds therein) shall become property of the Buyer pursuant to this Agreement and shall be Acquired Assets; (iii) Raytheon shall issue checks as directed by the Buyer (including made payable to the Buyer, if so requested) from Saudi American Bank Account No. 132-3458 from time to time in an aggregate amount not to exceed 375,000 Saudi Riyads; and (iv) the Purchase Price and the Target Net Tangible Book Value shall be increased to $1,148,738,589.82 and $493,938,589.82, respectively. II. Miscellaneous 2.1. Except as amended as provided above, the Agreement remains in full force and effect and binding on the Parties in accordance with its terms. 2.2. This letter agreement (including the documents referred to herein) together with the Agreement (as amended hereby and including all documents referred to therein), constitutes the entire agreement among the Buyer, on the one hand, and the Sellers on the other hand, and supersedes any prior agreements or understandings among the Buyer, on the one hand, and the Seller, on the other hand, and any representations or statements made by or on behalf of any Seller or any of their respective Affiliates to the Buyer, whether written or oral, with respect to the subject matter hereof, other than the Confidentiality Agreement. This letter agreement shall not be amended or waived except by a written instrument hereafter signed by each of the Parties hereto. 2.3. This letter agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns and, to the extent specified herein or in the Agreement, their respective Affiliates. 2.4. The language used in this letter agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. 2.5. THIS LETTER AGREEMENT AND ANY DISPUTES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE L-3 Communications Corporation March 8, 2002 THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN THOSE OF THE STATE OF DELAWARE. 2.6. This letter agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This letter agreement may be executed by facsimile signature. L-3 Communications Corporation March 8, 2002 Please sign where indicated below to confirm that the foregoing accurately reflects our agreement. Very truly yours, RAYTHEON COMPANY By: ------------------------------------------- Name: Title: RAYTHEON AUSTRALIA PTY LTD. (pursuant to S127(1) of the Corporations Act 2001 (C"th)) By: ------------------------------------------- Name: Title: By: ------------------------------------------- Name: Title: ACCEPTED AND AGREED: L-3 COMMUNICATIONS CORPORATION By: -------------------------- Name: Title: L-3 Communications Corporation March 8, 2002 L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P. By: L-3 Communications AIS GP Corporation its general partner By: ---------------------------------------- Name: Title: L-3 COMMUNICATIONS AUSTRALIA PTY LTD. (pursuant to S127(1) of the Corporations Act 2001 (C'th)) By: ---------------------------------------- Name: Title: By: ---------------------------------------- Name: Title: Exhibit A to ------------ Letter Agreement ---------------- Schedule 9.1 to --------------- Asset Purchase Agreement ------------------------ Retained Employees ------------------ Richard R. Anderson Gary Arnold Bob Bearden Mona R. Collins Susie Fleming Roy Larsen Anthony O"Brien Thomas Wheeler Vince McKenzie Kent Wong Kevin Hennabry Mike Romanczuk Exhibit B to ------------ Letter Agreement ---------------- Appendix E of Supply Agreement (Raytheon as Customer) ----------------------------------------------------- Exhibit C to ------------ Letter Agreement ---------------- Exhibit M (Subcontract Agreement with Raytheon Systems Limited) to the Agreement is hereby amended as follows: On the cover page (Page 1), "36599N" is hereby inserted after "SUBCONTRACT NUMBER." Immediately after the words "FOR THE" insert the words "WORK AS DESCRIBED HEREIN ON THE ASTOR PROGRAMME." On page 2, in the first line, the Effective Date shall be 8 March 2002. In Paragraph 12 (Page 3), the words "This Subcontract shall be effective on the date last written and signature by both parties hereto providing" is hereby deleted in its entirety. In addition, at the end of what was the third line of that paragraph, the words "have been" are hereby replaced by the words "shall be." In Condition 1, for the definition of "Design Authority" (Page 8), "[______]" is hereby deleted and replaced with "05-123 Chapter 101". In Condition 3 (Pages 13-14), that entire provision is deleted in its entirety and replaced with the new Condition 3 set out in Exhibit C-1 hereto. In Condition 8(a) (Page 19), the reference to $108,760,957 and the subsequent bracketed note is replaced with "the dollar amount indicated as the total of the column entitled "Price" in Condition 3, as that amount may be adjusted by the Contractor in accordance with the provisions in Condition 3." In Condition 8 (page 19), the following new paragraph 8(b)(ii) is inserted in place of the existing paragraph 8(b)(ii): "the "Direct Cost of Materials" (as defined below) and work subcontracted by the Subcontractor; as used above, the term "Direct Cost of Materials" shall mean the purchase cost of materials, plus the following: (x) the customary material burden rates of the Subcontractor as applied to the purchase cost of materials, and (y) the customary general and administrative expense rates of the Subcontractor as applied only to the material burden. The foregoing rates shall be determined in accordance with the standards and practices under the Raytheon Company Aircraft Integration Systems Segment Cost Accounting Standards Board Disclosure Statement (or any government approved successor thereto) in effect at the time the materials are purchased." In Condition 9 (page 21), the following new paragraph 9(b) is added, and the existing paragraph (b) is relabeled as paragraph (c): "Contractor and Subcontractor recognize and agree that until Design Authority is transferred to Contractor, as required by this Subcontract, Subcontractor will act as Design Authority for the ASTOR System. Such transfer of Design Authority for the ASTOR System shall be in accordance with this Subcontract, including without limitation the Statement of Work contained in Annex G, but in any event shall occur when agreed and approved by the Authority. Regardless of whether Contractor or Subcontractor is acting as Design Authority for the ASTOR System, in the event that the ASTOR System or any sub-system, component, parts or equipment thereof fails to meet the required ASTOR System performance specification or other requirement: (i) due to (1) Contractor's delivery of CFR (including CFR delivered by third-party subcontractors) that do not meet the requirements of the applicable CFR specification and Annex G hereto or (2) erroneous or incomplete designs or specifications for the ASTOR System or any sub-system, component, parts or equipment thereof provided by Contractor or any of its affiliates (other than Subcontractor or its predecessor, i.e., the AIS Business as defined in the asset purchase agreement dated 11 January 2002 between Raytheon Company, Raytheon Australia Pty. Ltd. and L-3 Communications Corporation ("Predecessor")), then Contractor shall bear the full cost of (A) reasonable time spent by Subcontractor in determining that such failure to meet the required ASTOR System performance specification or other requirement was due to the cause described in this part (i); (B) obtaining replacement CFR that meets those requirements or, at Contractor's sole option, identifying and implementing alternative system or other sub-system level solutions; (C) compensating Subcontractor for additional expenses and/or labour costs incurred in the delays resulting from the need to obtain replacement CFR and/or reperform services with respect to such replacement CFR; and (D) any other liabilities therefor. If Subcontractor incorrectly claims that Contractor is responsible for costs pursuant to this part (i), then Subcontractor shall reimburse Contractor for its costs resulting from such claim. (ii) due to erroneous or incomplete designs or specifications for the ASTOR System or any sub-system, component, parts or equipment thereof (except for those sub-systems identified in part (iii) below) provided by Subcontractor or its Predecessor occurring before the Effective Date, then Contractor and Subcontractor shall work together in order to minimize the costs to be incurred, to the extent technically feasible and in a manner consistent with the Authority's instructions, where relevant, (individually and/or jointly) with respect to (A) reasonable time spent in determining that such failure to meet the required ASTOR System performance specification or other requirement was due to the cause described in this part (ii); (B) (i) redesigning and respecifying the ASTOR System or any such sub-system, component, parts or equipment which were both designed and specified by Subcontractor or its Predecessor and (ii) respecifying (but not redesigning) the ASTOR System or any such sub-system, component, parts or equipment which were specified (but not designed) by Subcontractor or its Predecessor; (C) (i) redesigning (but not respecifying) the ASTOR System or any such sub-system, component, parts or equipment which were specified (but not designed) by Subcontractor or its Predecessor and (ii) whether or not designed by Subcontractor or its Predecessor, modifying all CFR or manufacturing new CFR; (D) causing other subcontractors or third parties to modify CFR or manufacture new CFR; (E) additional expenses and/or labour costs incurred by either Contractor or Subcontractor in the delays resulting from the actions described in (A), (B), (C) and (D) above (including without limitation the payment of liquidated damages to any third parties) and then reperforming services with respect to such replacement designs, specifications and/or CFR; and (F) any other liabilities therefor. Any work or rework, including redesign undertaken by the Subcontractor pursuant to this part (ii) and any reimbursement of costs thereof shall be subject to the procedures set forth in Condition 31 below, except that the third sentence of Condition 31(b) shall not apply. Subcontractor shall bear all its costs incurred under part (ii)(A) and (B) hereof, and reasonable costs incurred by Contractor in providing any assistance requested by Subcontractor in connection therewith. Contractor and Subcontractor further agree that the aggregate costs incurred by them, either individually or jointly, under part (ii)(C), (D), (E) and (F) hereof shall be divided equally between them on the basis of Contractor being responsible for fifty percent (50%) of those costs and Subcontractor being responsible for the remaining fifty percent (50%) of those costs; provided, however, that for the aggregate costs incurred under part (ii)(C), (D), (E) and (F) in excess of Forty Million Dollars (US$40,000,000), Contractor shall be 100% responsible for such costs (i.e., Subcontractor"s maximum costs incurred under part (ii)(C), (D), (E) and (F) shall not exceed Twenty Million Dollars (US$20,000,000). On a calendar quarterly basis, each party shall report to the other party its costs incurred under part (ii)(C), (D), (E) and (F) during such quarter, with appropriate supporting documentation as required in Condition 31 below; provided, however, that Contractor shall only be required to provide such reports until such aggregate amount is reached. To the extent Contractor provides to Subcontractor financial data in such reports, Subcontractor agrees that it will treat such data as confidential and will restrict access to such data to the same extent that Contractor has agreed to similar protections in Condition 41(e) below with respect to Subcontractor's financial data. If, prior to the time that such aggregate amount is reached, one party (the "first party") incurred (whether individually or jointly with the other party) during such quarter a percentage of those costs greater than the percentage for which it is responsible, the other party (the "second party") shall, within ten (10) days after a written request from the first party, pay whatever amount to the first party that is necessary in order to reduce the first party's costs to the percentage of those costs that is envisioned in the cost sharing percentages stated above. To the extent that liquidated damages would otherwise be recoverable by Contractor in accordance with Condition 19 below due to delays described in this part (ii), such liquidated damages shall not be recoverable by Contractor and this Condition 9(b)(ii) constitutes an express written waiver of Contractor's right to recover such liquidated damages, for the purposes of Condition 19(e) below. If either Contractor or Subcontractor incorrectly claims that the other party is responsible for costs pursuant to this part (ii), then the claiming party shall reimburse the other party for such other party's costs resulting from such claim. (iii) due to erroneous or incomplete designs or specifications provided by Subcontractor for those sub-systems awarded to other subcontractors by either Contractor or Subcontractor after the Effective Date (including without limitation related Subcontractor designs and specifications), then Subcontractor shall be 100% responsible for the types of costs described in part (ii)(A), (B), (C), (D), (E) and (F) above. Contractor and Subcontractor agree that if Contractor or an affiliate of Contractor is required to pay, or assume responsibility for, any amounts or liabilities pursuant to this Condition 9(b)(ii), the Purchase Price under the Asset Purchase Agreement of even date herewith by and among Raytheon Company, Raytheon Australia Pty Ltd. and Subcontractor (the "Asset Purchase Agreement") shall be deemed reduced for all purposes of the Asset Purchase Agreement by such additional amounts or liabilities." In Condition 14(d) (page 28), the following phrase is added at the end of the first sentence: "; provided, that the Subcontractor"s performance is the exclusive cause of the payment being withheld by the Authority". The title of Condition 19 shall be changed to "Liquidated Damages and Success Fees". In Condition 19 (page 34), the following language is added at the end of paragraph 19(c): "It is further agreed, that in the event that Subcontractor satisfies the requirements described in any of parts (x), (y) and (z) below by the date specified in such part, Contractor shall be required to pay Subcontractor, in addition to any and all other amounts payable to Subcontractor under this Subcontract, by way of a success fee the following amount for each such part: (x) delivery of Air Platform Number 1 on or before August 1, 2004 - -- US$3,146,814; (y) completion of all of Subcontractor's obligations with respect to the Logistical Support Date (as defined in the Statement of Work) on or before April 1, 2004 -- US$675,468; and (z) completion of installation of all training equipment into the Mission Operating Base on or before April 1, 2004 - US$945,618. The total amount of success fees which might be become payable to Subcontractor hereunder shall not exceed US$4,767,900." Conditions 19(d), (e) and (f) shall be renumbered accordingly. In Condition 19(f) (Page 34), insert the following after the word payable: ", and the right of the Subcontractor to obtain a Success Fee shall not be prejudiced,". At the end of Condition 19(f) (Page 34), add the following before the period: "or where the delay has been approved by the Authority or the Contractor." In Condition 25(c), line 2 (Page 44), "[(to be inserted)]" is hereby deleted and replaced with "JLK/L3/LET001". Annex N is set out in Exhibit C-7 hereto. In Condition 28(a), line 4 (Page 50), the phrase "except Contractor Furnished Requirements (CFR) which fail to meet the applicable CFR specification and SOW" is hereby inserted at the end of the second sentence. In Condition 28(b)(ii) (Page 50), the words "applicable and relevant" are hereby inserted after the word "the" and before the word "requirements." In Condition 28(c)(i) (Page 50), the parenthetical is hereby deleted in its entirety and replaced with "(other than CFR provided by Contractor which fail to meet the applicable CFR specification and SOW and those parts described in paragraph c.ii below)." In Condition 37(c) (Page 64), the words "and the Contractor's liability in respect to CFR supplied to the Subcontractor shall, in any event, cease with effect from the time that the CFR is made available or offered on such dates as may be agreed between the Parties." are hereby deleted and replaced with ". Nothing herein shall relieve Contractor of any obligation to timely deliver to Subcontractor CFR that meets the requirements of the applicable CFR specification and SOW." In Condition 37(j) (Page 65), the following sentence shall be added as the third sentence: "In the event Contractor and Subcontractor are unable to agree whether delay or additional cost are attributable to Contractor"s failure, Subcontractor shall be entitled to submit a claim to Contractor in accordance with Condition 31, except that the third sentence of Condition 31(b) shall not apply." In Condition 37(l), line 1 (Page 65), the words "in accordance with Condition 31" shall be added after the word "Subcontractor" and before the comma. In Condition 41 (Page 70), renumber the existing sub-clauses 41(e) and 41(f) as sub-clauses 41(f) and 41(g), respectively, and insert a new sub-clause 41(e) as follows: " Without prejudice to sub-clause 24.11, where the Subcontractor provides to the Contractor financial data, in the form of particulars of labour rates or actual costs incurred, the Contractor agrees that it will treat such data as confidential and will restrict access to such data only to Contractor employees working on and having a need to receive such data in connection with the ASTOR Programme, and to senior management of the Contractor"s parent and affiliate companies having a need to receive such data for use on the ASTOR Programme. The Parties shall put in place internal measures to ensure the requirements of this sub-clause are implemented at all levels." In Condition 41, in sub-clause 41(e) (now renumbered (f)), line 2 (Page 70), "of even date herewith" is deleted and replaced with "dated 11 January 2002." In Condition 41, in sub-clause 41(e) (now renumbered (f)), line 3 (Page 70), "[Buyer]" is hereby deleted and replaced with "L-3 Communications Corporation." In Condition 43(a), line 3 (Page 72), "[(to be inserted)]" is hereby deleted and replaced with the following: "Legal Counsel, AIS." In Condition 43 (a), lines 4-5 (Page 72), "[(to be inserted)]" is hereby deleted and replaced with the following: "President, AIS." Annex A is hereby deleted in its entirety and replaced with the new Annex A set out in Exhibit C-2 hereto. In Annex B, lines 1-3 (beginning "NOTE: Raytheon shall determine. . .) and the chart entitled "Engineering Services (US DOLLARS $)" are hereby deleted, and replaced with the chart set out in Exhibit C-3 hereto. The text and tables of Annex E are hereby deleted in their entirety and replaced with the following: " The Contractor Furnished Equipment to be provided to the Subcontractor shall be as set forth in the ASTOR Deliverables Database (hereinafter referred to as "ADDS") and the Government Furnished Supplies Database (hereinafter referred to as "GFSD"), as the same may be from time to time amended by agreement between the Parties. The ADDS and GFSD shall be held and maintained in accordance with a procedure to be agreed hereafter between the Parties." Annex F is hereby deleted in its entirety and replaced with the new Annex F set out in Exhibit C-4 hereto. Annex F1 is hereby deleted in its entirety and replaced with the new Annex F1 set out in Exhibit C-5 hereto. Annex G is hereby deleted in its entirety and replaced with the new Annex G set out in Exhibit C-6 hereto. In Annex H (Page 261), lines 1-3 (beginning "[NOTE: The Technical Specification. . .") are hereby deleted in their entirety, and replaced with the following: "As Design Authority for the ASTOR System and subject to Condition 9(b), the Subcontractor agrees to perform its obligations under the Subcontract in accordance with the Technical Specification which is set out in Annex A to Contract CIS4B/9 dated 17 December 1999, and which is already in the possession of the Subcontractor"s ASTOR Programme Office as of the Effective Date. Nothing herein shall relieve Contractor of any obligation to timely deliver to Subcontractor CFR that meets the requirements of the applicable CFR specification and SOW." In Annex I (Page 262) lines 1-3 (beginning "[NOTE: The Acceptance Specification. . .") are hereby deleted in their entirety, and replaced with the following: "As Design Authority for the ASTOR System and subject to Condition 9(b), the Subcontractor agrees to perform its obligations under the Subcontract in accordance with the Acceptance Specification which is set out in Annex C to Contract CIS4B/9 dated 17 December 1999, and which is already in the possession of the Subcontractor"s ASTOR Programme Office as of the Effective Date. Nothing herein shall relieve Contractor of any obligation to timely deliver to Subcontractor CFR that meets the requirements of the applicable CFR specification and SOW. " In Annex N (Page 286), "[To be provided by RSL]" is hereby deleted, and the words attached hereto as Exhibit C-7 are inserted in place thereof. Annex P (Pages 288 - 291) is hereby deleted in its entirety and replaced with the new Annex P set out in Exhibit C-8 hereto. In Annex R (Pages 300-302), the Contractor has exercised its right to amend that Annex. Annex R is hereby deleted in its entirety and replaced with the new Annex R set out in Exhibit C-9 hereto. EXHIBIT C-1 CONDITION 3 - SCHEDULE OF REQUIREMENTS 3. SCHEDULE OF REQUIREMENTS The Subcontractor shall design, develop, manufacture and supply to the Contractor, who shall purchase and where appropriate, take delivery of the Articles and/or Services specified below in accordance with the terms and conditions of the Subcontract, including without limitation the obligations set forth in Condition 4 below.
ITEM NO TASK COST 6% FEE PRICE 1 FLIGHT DECK MODIFICATION $ 6,538,956 $ 392,337 $ 6,931,293 2 MAIN AIRCRAFT CABIN MODIFICATION $ 2,842,654 $ 170,559 $ 3,013,213 3 MISSION EQUIPMENT $ 10,138,694 $ 608,321 $ 10,747,015 4 ELECTRICAL SYSTEM MODIFICATIONS $ 1,620,609 $ 97,237 $ 1,717,846 5 WORKSTATION AND EQUIPMENT RACKS $ 1,212,753 $ 72,765 $ 1,285,518 6 ELECTRICAL SYSTEM SUPPORT EQUIPMENT $ 138,570 $ 8,314 $ 146,884 7 ENVIRONMENTAL CONTROL $ 3,997,798 $ 239,868 $ 4,237,666 8 STRUCTURAL MONITORING $ 511,929 $ 30,716 $ 542,645 9 INTERFERENCE CANCELLATION SYSTEM $ 18,533 $ 1,112 $ 19,645 10 WORKSTATION/SERVER SOFTWARE DESIGN, DEVELOPMENT, TEST & INTEGRATION 10.1 Test & Integration $ 954,164 $ 57,250 $ 1,011,414 10.2 Software Testing $ 424,683 $ 25,481 $ 450,164 10.3 Technical Operations and Support Documents $ 442,274 $ 26,536 $ 468,810 - Version Description Document, Software User Manual, Software Quality Programme Plan, Software Configuration Plan, Software Problem Reports, Software Transition Plan 10.4 Track Manager and Control Reporting/System $ 6,637,042 $ 398,223 $ 7,035,265 Server Software 11 SUPPORT SEGMENT DESIGN, DEVELOPMENT, TEST AND INTEGRATION $ 5,232,370 $ 313,942 $ 5,546,312 11.1 Integration of the Mission Planning and Mission Replay Facility Software $ 188,957 $ 11,337 $ 200,294 12 TRAINING SUBSYSTEM INCLUDING ICD'S, TEST PROCEDURES, (EXCLUDING FBFCT) $ 3,778,916 $ 226,735 $ 4,005,651 13 THE FIRST ARTICLE INSTALLATION, INTEGRATION AND TEST 13.1 Integration & Test $ 5,082,340 $ 304,940 $ 5,387,280 13.2 Aircraft System Test $ 489,039 $ 29,342 $ 518,381 13.3 Flight Test Programme $ 2,055,334 $ 123,320 $ 2,178,654 13.4 Aerodynamic Validation $ 47,359 $ 2,842 $ 50,201 14 STUDIES - AIR PLATFORM SIGNATURE MEASUREMENT STUDY, $ (126,137) $ (7,568) $ (133,705) MARITIME SEGMENT STUDY, NBC STUDY. 15 ALL TASKS ASSOCIATED WITH TRANSITION $ 263,204 $ 15,792 $ 278,996 16 INTEGRATED LOGISTICS SUPPORT PROGRAMME 16.1 Technical Manuals $ 4,711,759 $ 282,706 $ 4,994,465 16.2 Support Equipment $ 1,009,475 $ 60,569 $ 1,070,044 16.3 Training Curriculum $ 2,866,511 $ 171,991 $ 3,038,502 16.4 Spares Provisioning $ 332,419 $ 19,945 $ 352,364 16.5 Tooling $ 1,025,946 $ 61,557 $ 1,087,503 16.6 LSA Tasks/LORA $ 1,283,170 $ 76,990 $ 1,360,160 16.7 Human Factors engineering services $ 797,355 $ 47,841 $ 845,196 16.8 Reliability, Maintainability and $ 309,578 $ 18,575 $ 328,153 16.9 Failure Modes and Effects Criticality $ 79,594 $ 4,776 $ 84,370 16.10 Data Reporting and Corrective Action System $ 273,656 $ 16,419 $ 290,075 17 SAFETY $ 346,248 $ 20,775 $ 367,023 18 CONFIGURATION MANAGEMENT $ 1,836,283 $ 110,177 $ 1,946,460 19 QUALITY ASSURANCE - SOURCE INSPECTION, ACCEPTANCE, $ 2,083,260 $ 124,996 $ 2,208,256 PLANS, PROCEDURES, REPORTS AND CERTIFICATION. 20 DESIGN CERTIFICATION, AIRWORTHINESS AND MILITARY AIRCRAFT RELEASE $ 1,818,207 $ 109,092 $ 1,927,299 21 PROGRAMME MANAGEMENT $ 26,895,543 $1,613,732 $ 28,509,275 22 SYSTEM ENGINEERING $ 10,586,986 $ 635,219 $ 11,222,205 23 MISCELLANEOUS MATERIAL $ 10,412,662 $ 624,760 $ 11,037,422 24 PAINT $ 38,815 $ 2,329 $ 41,144 TOTAL $119,197,508 $7,151,850 $126,349,358
Notwithstanding anything contained in this Condition 3 to the contrary, the Contractor shall have the right, exercisable upon written notice to the Subcontractor before the date which is forty-five (45) days after the Effective Date, to decrease the costs and prices set forth above in an aggregate amount (which aggregate amount shall be allocable by the Contractor to the applicable line items set forth above) equal to the sum of (i) the costs incurred by the AIS Business (as defined in the Asset Purchase Agreement) during the period starting as of 26 January, 2002 and ending as of the Effective Date in the performance of work with respect to Articles and Services (as defined hereunder) and (ii) an amount equal to six percent (6%) of such costs. EXHIBIT C-2 ANNEX A - DELIVERY SCHEDULE
- ---------- ----------------------------------------------------------- ------------- ---------------------------- ITEM UNIT SCHEDULED DELIVERY DATE NO. DESCRIPTION REFERENCE - ----------------------------------------------------------------------------------------------------------------- DESIGN AND DEVELOPMENT - ----------------------------------------------------------------------------------------------------------------- 1 Design and Development of the Air System (Air Platform with Integrated Mission System) Lot February - 08 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 2 Design and Development of the Operational Level Ground Station (OLGS) Lot February - 08 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 3 Design and Development of the Tactical Ground Station (TGS) Lot February - 08 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 4 Design and Development of the Main Operating Base (MOB) Mission Planning and mission Data Replay Facility, including the Crew Briefing Facility and the Forward Lot April - 04 Operating Base (FOB) Mission Data Replay Facility - ---------- ----------------------------------------------------------- ------------- ---------------------------- 5 Design and Development of the Portable Mission Planner (PMP) and Crew Briefing facilities Lot April - 04 - ----------------------------------------------------------------------------------------------------------------- PRODUCTION - ----------------------------------------------------------------------------------------------------------------- AIR SYSTEMS - ----------------------------------------------------------------------------------------------------------------- 6 Produce and supply ASTOR Air Platform 1 Lot August - 04 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7 Group "A" Kits Aircraft #2 March 03 Aircraft #3 February 04 Aircraft #4 November 04 Aircraft #5 September 05 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-1 6123-00100 Placard Installation (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-2 6123-02000 Seat Installation - Top (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-3 6123-03000 Floor Modifications - Complete (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-4 6123-05000 Installation - Liner/Sidewall/Acoustics (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-5 6123-06000 Environmental Control Systems (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-6 6123-08000 Crew Rest Provisions - Structural (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-7 6123-09000 System Installation - Crew Rest (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-8. 6123-10000 System Installation - Avionics Modifications 4 Lots (Mech/Elect) - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-9 6123-11000 Oxygen System Installation (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-10 6123-12000 System Installation- Antennas (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-11 6123-14000 Console Installation (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-12 6123-15000 System Installation-Radomes/Fairings (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ----------------------------
- ---------- ----------------------------------------------------------- ------------- ---------------------------- ITEM UNIT SCHEDULED DELIVERY DATE NO. DESCRIPTION REFERENCE - ----------------------------------------------------------------------------------------------------------------- 7-13 6123-16000 Miscellaneous Bracketry Installation (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-14 6123-17000 Hydraulic Modifications Complete (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-15 6123-20000 Flight Deck Modification (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-16 6123-25000 System Installation-INTERPHONE (ICCS) (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-17 6123-28000 System Installation-POWER DISTR (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-18 6123-30000 System Installation-TACAN (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-19 6123-31000 System Installation-DIGITAL DATA BUS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-20 6123-33000 System Installation-V/UHF COMMS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-21 6123-40000 System Installation-CMDS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-22 6123-41000 System Installation-GPS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-23 6123-42000 Miscellaneous/Emergency Equip Installation 4 Lots (Mech) - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-24 6123-47000 System Installation - LIGHTING (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-25 6123-48000 Countermeasures Installations - Structural 4 Lots (Mech) - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-26 6123-50000 Major Structure Installations (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-27 6123-51000 Lateral Stability Enhancements (Mech) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-28 6123-58000 System Installation-LINK-16 (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-29 6123-60000 System Installation-NARROWBAND DATALINK (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-30 6123-61000 System Installation - Dual Mode Radar (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-31 6123-62000 System Installation-HF COMMS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-32 6123-64000 Rack System Installation - A/C (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-33 6123-67000 System Installation-SECURE COMMS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-34 6123-68000 System Installation-WIDE BAND DATALINK (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-35 6123-69000 System Installation-SMOKE DETECTION (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-36 6123-83000 System Installation-SATCOM (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-37 6123-84000 System Installation-ICS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-38 6123-85000 System Installation-OTP (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-39 6123-88000 System Installation-IFF (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-40 6123-89000 System Installation-RWR (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-41 6123-90000 System Installation- SIMS (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-42 6123-91000 System Installation- MWS (Mech/Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-43 6123-92000 System Installation- TOWED DECOY (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- 7-44 6123-93000 System Installation-TCAS (Elect) 4 Lots - ---------- ----------------------------------------------------------- ------------- ---------------------------- GROUND STATIONS - ----------------------------------------------------------------------------------------------------------------- 8 Software for the Ground Station Work Station Server 1 August - 04 - ---------- ----------------------------------------------------------- ------------- ---------------------------- - -----------------------------------------------------------------------------------------------------------------
- ---------- ----------------------------------------------------------- ------------- ---------------------------- ITEM UNIT SCHEDULED DELIVERY DATE NO. DESCRIPTION REFERENCE - ----------------------------------------------------------------------------------------------------------------- MISSION PLANNING, BRIEFING AND REPLAY FACILITIES - ----------------------------------------------------------------------------------------------------------------- 9 Produce and supply a Mission Planning and Mission Data Replay Facility, including Crew Briefing facilities at 1 April - 04 the Main Operating Base (MOB) - ---------- ----------------------------------------------------------- ------------- ---------------------------- 10 Produce and supply Portable Mission Planning and Crew Briefing Facilities 1 April - 04 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 2 April - 04 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 11 Produce and supply Forward Operating Base (FOB) Mission Data Replay Facilities 1 April - 04 - ----------------------------------------------------------------------------------------------------------------- SOFTWARE - ----------------------------------------------------------------------------------------------------------------- 12 Provision of software licences for L-3 developed software Lot April - 04 - ----------------------------------------------------------------------------------------------------------------- SUPPORT FACILITIES - ----------------------------------------------------------------------------------------------------------------- 13 Mission System Reference Sample Facility (MSRSF) for the MOB 1 Complete by Aug - 04 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 14 Provision of a Standard Interface for Multiple Platform Link Evaluation (SIMPLE) 1 Complete by April - 04 - ----------------------------------------------------------------------------------------------------------------- INTEGRATED LOGISTIC SUPPORT & MANAGEMENT - ----------------------------------------------------------------------------------------------------------------- 15-1 Implementation of ILS, including LSAR generation and maintenance in accordance with DEFSTAN 00-60 during Lot April - 04 Development and Production until LSD - ---------- ----------------------------------------------------------- ------------- ---------------------------- 15-2 Development and production of all Technical Documentation and Data Lot April - 04 - ----------------------------------------------------------------------------------------------------------------- SUPPORT & TRAINING EQUIPMENT - ----------------------------------------------------------------------------------------------------------------- 16 Provision of Support and Test Equipment, Training Equipment and Spares: - ---------- ----------------------------------------------------------- ------------- ---------------------------- 16-1 Aircraft Support and Test Equipment Lot April - 04 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 16-2 Ground Station Support and Test Equipment Lot April - 04 - ---------- ----------------------------------------------------------- ------------- ---------------------------- 16-3 Provision of all training equipment derived as in accordance with the Training Development Plan and Lot April - 04 Training Needs Analysis (TNA) - ----------------------------------------------------------------------------------------------------------------- IN-SERVICE RELIABILITY DEMONSTRATION - ----------------------------------------------------------------------------------------------------------------- 17 Provision of support to the In-Service Reliability Demonstration (ISRD) Lot Complete by Feb - 08 - -----------------------------------------------------------------------------------------------------------------
EXHIBIT C-3
- ------------------------------------------------------------------------------------------------------------------------------------ POOL DESCRIPTION DESCRIPTION CURRENT DOD RATES FULLY BURDENED THROUGH TOTAL COST (NO FEE) - ------------------------------------------------------------------------------------------------------------------------------------ LABOR CATEGORIES JAN02- JAN03- JAN04- JAN05- DEC02 DEC03 DEC04 DEC05 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ SYSTEMS ENGINEERING SYSTEMS ENGINEERING $116.29 $120.89 $125.12 $129.67 - ------------------------------------------------------------------------------------------------------------------------------------ PROJECT SYSTEMS $116.29 $120.89 $125.12 $129.67 - ------------------------------------------------------------------------------------------------------------------------------------ AIRWORTHINESS /FLIGHT TEST /DAS $116.29 $120.89 $125.12 $129.67 - ------------------------------------------------------------------------------------------------------------------------------------ AERO AERO $108.64 $112.94 $116.89 $121.15 - ------------------------------------------------------------------------------------------------------------------------------------ ELECTRICAL DESIGN $108.64 $112.94 $116.89 $121.15 - ------------------------------------------------------------------------------------------------------------------------------------ STRUCTURAL DESIGN $108.64 $112.94 $116.89 $121.15 - ------------------------------------------------------------------------------------------------------------------------------------ MECHANICAL DESIGN $108.64 $112.94 $116.89 $121.15 - ------------------------------------------------------------------------------------------------------------------------------------ THERMAL/FLUID DYNAMICS $108.64 $112.94 $116.89 $121.15 - ------------------------------------------------------------------------------------------------------------------------------------ ACCOUSTICS $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ AERODYNAMICS $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ MECHANICAL SYSTEMS $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ AERO SCIENCE $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ AERO TEST $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ MASS PROPERTIES $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ STRESS ANALYSIS $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ STRUCTURAL DYNAMICS $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ AERO DEVELOPMENT LAB $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ ENGINEERING SERVICES $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ HUMAN FACTORS $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ RELIABILITY/MAINTAINABILITIY $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ SYSTEMS SAFETY $101.82 $105.85 $109.55 $113.54 - ------------------------------------------------------------------------------------------------------------------------------------ LIAISON ENGINEERING $108.64 $112.94 $116.89 $121.15 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ HARDWARE/SOFTWARE DEVEL. EMC $106.43 $110.65 $114.51 $118.67 - ------------------------------------------------------------------------------------------------------------------------------------ EMI $106.43 $110.65 $114.51 $118.67 - ------------------------------------------------------------------------------------------------------------------------------------ HARDWARE ENGINEERING $106.43 $110.65 $114.51 $118.67 - ------------------------------------------------------------------------------------------------------------------------------------ MSTF $106.43 $110.65 $114.51 $118.67 - ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE ENGINEERING $106.43 $110.65 $114.51 $118.67 - ------------------------------------------------------------------------------------------------------------------------------------ TECHNICAL PUBLICATIONS CONFIGURATION MANAGEMENT $83.20 $86.49 $89.51 $92.78 - ------------------------------------------------------------------------------------------------------------------------------------ INTEGRATED LOGISTICS SUPPORT $83.20 $86.49 $89.51 $92.78 - ------------------------------------------------------------------------------------------------------------------------------------ LOGISTICS SUPPORT ANALYSIS $83.20 $86.49 $89.51 $92.78 - ------------------------------------------------------------------------------------------------------------------------------------ TECHNICAL PUBLICATIONS $83.20 $86.49 $89.51 $92.78 - ------------------------------------------------------------------------------------------------------------------------------------ REPRO REPRODUCTION $52.99 $55.08 $57.01 $59.08 - ------------------------------------------------------------------------------------------------------------------------------------ PROGRAM MANAGEMENT MATL PROGRAM MANAGER $99.19 $103.12 $106.72 $110.61 - ------------------------------------------------------------------------------------------------------------------------------------ PROGRAM CONTROLS $99.19 $103.12 $106.72 $110.61 - ------------------------------------------------------------------------------------------------------------------------------------ PROGRAM MANAGEMENT $99.19 $103.12 $106.72 $110.61 - ------------------------------------------------------------------------------------------------------------------------------------ PROGRAMMERS PROGRAMMERS $98.85 $102.78 $106.36 $110.24 - ------------------------------------------------------------------------------------------------------------------------------------ MANUFACTURING BURDEN POOL - ------------------------------------------------------------------------------------------------------------------------------------ MECHANICAL FAB MECHANICAL FAB/ASSY $82.40 $85.72 $88.43 $91.66 - ------------------------------------------------------------------------------------------------------------------------------------ TOOLING $82.40 $85.72 $88.43 $91.66 - ------------------------------------------------------------------------------------------------------------------------------------ HANGAR,DOCK & LINE / SUPT SHOPS AIRCRAFT SUPPORT $80.52 $83.79 $86.46 $89.65 - ------------------------------------------------------------------------------------------------------------------------------------ A/C PAINT $80.52 $83.79 $86.46 $89.65 - ------------------------------------------------------------------------------------------------------------------------------------ HANGAR, DOCK & LINE $70.15 $73.00 $75.32 $78.09 - ------------------------------------------------------------------------------------------------------------------------------------ ELECTRICAL/ELECTRONIC FAB & PILOT ASSY ELECTRICAL FAB/ASSY $70.90 $73.81 $76.18 $79.01 - ------------------------------------------------------------------------------------------------------------------------------------ ELECTRONIC FAB $70.90 $73.81 $76.18 $79.01 - ------------------------------------------------------------------------------------------------------------------------------------ PILOT ASSY $70.90 $73.81 $76.18 $79.01 - ------------------------------------------------------------------------------------------------------------------------------------ QUALITY ASSURANCE / TEST DATA SUPPORT $78.59 $82.07 $84.92 $88.25 - ------------------------------------------------------------------------------------------------------------------------------------ FLIGHT OPERATIONS $78.59 $82.07 $84.92 $88.25 - ------------------------------------------------------------------------------------------------------------------------------------ FAA SUPPORT $78.59 $82.07 $84.92 $88.25 - ------------------------------------------------------------------------------------------------------------------------------------ PROCUREMENT QA $78.59 $82.07 $84.92 $88.25 - ------------------------------------------------------------------------------------------------------------------------------------ QUALITY ENGINEERING $78.59 $82.07 $84.92 $88.25 - ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE QA $78.59 $82.07 $84.92 $88.25 - ------------------------------------------------------------------------------------------------------------------------------------ TEST, MFG $104.22 $108.79 $112.55 $116.95 - ------------------------------------------------------------------------------------------------------------------------------------ QUALITY CONTROL NDI $58.61 $61.18 $63.30 $65.76 - ------------------------------------------------------------------------------------------------------------------------------------ PLANNING PRODUCTION PLANNING $71.56 $74.81 $77.47 $80.56 - ------------------------------------------------------------------------------------------------------------------------------------ DEDICATED DEPOT / LOGISTICS DEDICATED DEPOT $53.65 $56.00 $57.92 $60.17 - ------------------------------------------------------------------------------------------------------------------------------------ WAREHOUSING PACKING & CRATING $48.92 $50.93 $52.58 $54.52 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ LIMITED OVERHEAD (FRINGE ONLY) BURDEN POOL - ------------------------------------------------------------------------------------------------------------------------------------ SECURITY SERVICES SECURITY $40.25 $42.12 $43.82 $45.61 - ------------------------------------------------------------------------------------------------------------------------------------ CONTROL TOWER CONTROL TOWER $52.66 $55.11 $57.33 $59.68 - ------------------------------------------------------------------------------------------------------------------------------------ MATERIAL CATEGORIES - ------------------------------------------------------------------------------------------------------------------------------------ REGULAR MATERIAL BURDEN POOL - ------------------------------------------------------------------------------------------------------------------------------------ REGULAR MATERIAL SHOP OFFLOAD REGULAR 110% 110% 110% 109% - ------------------------------------------------------------------------------------------------------------------------------------ PURCH PTS REGULAR 110% 110% 110% 109% - ------------------------------------------------------------------------------------------------------------------------------------ SUBCONTRACTS REGULAR 110% 110% 110% 109% - ------------------------------------------------------------------------------------------------------------------------------------ IOT REGULAR 110% 110% 110% 109% - ------------------------------------------------------------------------------------------------------------------------------------ FOREIGN S/C REGULAR 110% 110% 110% 109% - ------------------------------------------------------------------------------------------------------------------------------------ SPECIAL MATERIAL BURDEN POOL - ------------------------------------------------------------------------------------------------------------------------------------ SPECIAL MATERIAL LETTER OF CREDIT 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ TREASURY COST 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ AGENT'S FEE 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ SHOP OFFLOAD SPECIAL 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ PURCH PTS SPECIAL 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ SUBCONTRACTS SPECIAL 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ IOT SPECIAL 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ SPECIAL MATL (I.E. A/C PURCHASE) 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ FOREIGN S/C SPECIAL 103% 103% 103% 103% - ------------------------------------------------------------------------------------------------------------------------------------ OTHER CATEGORIES - ------------------------------------------------------------------------------------------------------------------------------------ OTHER DIRECT COSTS - ------------------------------------------------------------------------------------------------------------------------------------ OTHER DIRECT COSTS WARRANTY 128% 128% 128% 128% - ------------------------------------------------------------------------------------------------------------------------------------ (G&A ONLY) ENGINEERING REPRO SUPPLIES 128% 128% 128% 128% - ------------------------------------------------------------------------------------------------------------------------------------ TRAVEL 128% 128% 128% 128% - ------------------------------------------------------------------------------------------------------------------------------------ FIELD SERVICE ODC 128% 128% 128% 128% - ------------------------------------------------------------------------------------------------------------------------------------ ITS RENTAL AND SUPPLIES 128% 128% 128% 128% - ------------------------------------------------------------------------------------------------------------------------------------ MISC. ODC 128% 128% 128% 128% - ------------------------------------------------------------------------------------------------------------------------------------ S/W LICENSE 128% 128% 128% 128% - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C-4 ANNEX F STAGE (MILESTONE) PAYMENT SCHEME
- ----------------------------------------------------------------------------------------------------------- # Milestone Description Date Quarter US ($) Dollars (inclusive of 6% fee) - ----------------------------------------------------------------------------------------------------------- 1 Frame Mods Fwd Fuselage Drawings issued 30/03/02 Q1 10,700,590 DAG Structural Installation Design complete - ----------------------------------------------------------------------------------------------------------- 2 Production Enhancers Drawings issued 30/06/02 Q2 15,584,997 MIST CSCI Detail Design complete - ----------------------------------------------------------------------------------------------------------- 3 SIL Test Plan complete 30/09/02 Q3 17,331,789 SIL Group A (Systems ) Test complete - ----------------------------------------------------------------------------------------------------------- 4 LSA 300 tasks complete 30/12/02 Q4 13,855,870 Satcom Radome Installation complete - ----------------------------------------------------------------------------------------------------------- 5 Initial provisioning complete 30/03/03 Q1 14,135,659 A/C #1 ECS Installation complete - ----------------------------------------------------------------------------------------------------------- 6 SIL Integration Test complete 30/06/03 Q2 12,352,680 A/C Group A Test Execution complete - ----------------------------------------------------------------------------------------------------------- 7 Gnd Test Air Segment Group B Test complete 30/09/03 Q3 7,181,576 Track Manager CSCI complete - ----------------------------------------------------------------------------------------------------------- 8 Aircraft Flight Readiness Review complete 30/12/03 Q4 6,846,090 ASTOR Ground Segment test report complete - ----------------------------------------------------------------------------------------------------------- 9 Human Engineering Systems Analysis Report Complete 30/03/04 Q1 8,465,585 Training Subsystem Acceptance test at MoD complete - ----------------------------------------------------------------------------------------------------------- 10 Safety Case complete 30/06/04 Q2 6,417,712 Support Segment Installation and Acceptance test at MOB complete - ----------------------------------------------------------------------------------------------------------- 11 ASTOR System Flight Test Report 30/09/04 Q3 2,338,443 A/C #1 Delivery to MoD complete - ----------------------------------------------------------------------------------------------------------- 12 Support for all UK activities. 30/12/04 Q4 79,263 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- 13 Support for all UK activities. 30/03/05 Q1 79,263 - ----------------------------------------------------------------------------------------------------------- 14 Support for all UK activities. 30/06/05 Q2 79,263 - ----------------------------------------------------------------------------------------------------------- 15 Support for all UK activities. 30/09/05 Q3 79,263 - ----------------------------------------------------------------------------------------------------------- 16 Support for all UK activities. 30/12/05 Q4 79,263 - ----------------------------------------------------------------------------------------------------------- 17 Support for all UK activities. 30/03/06 Q1 79,263 - ----------------------------------------------------------------------------------------------------------- 18 Support for all UK activities. 30/06/06 Q2 79,263 - ----------------------------------------------------------------------------------------------------------- 19 Support for all UK activities. 30/09/06 Q3 79,263 - ----------------------------------------------------------------------------------------------------------- 20 Support for all UK activities. 30/12/06 Q4 79,263 - ----------------------------------------------------------------------------------------------------------- 21 Support for all UK activities. 30/03/07 Q1 79,263 - ----------------------------------------------------------------------------------------------------------- 22 Support for all UK activities. 30/06/07 Q2 79,263 - ----------------------------------------------------------------------------------------------------------- 23 Support for all UK activities. 30/09/07 Q3 79,263 - ----------------------------------------------------------------------------------------------------------- 24 Support for all UK activities. 30/12/07 Q4 79,263 - ----------------------------------------------------------------------------------------------------------- 25 ISRD completed in accordance with the 30/03/08 Q1 10,107,948 requirements of the Authority ISRD Directive - ----------------------------------------------------------------------------------------------------------- Total Price 126,349,358 - -----------------------------------------------------------------------------------------------------------
Notwithstanding anything contained in this Annex F to the contrary, the Contractor shall have the right to decrease the amounts specified in the last column, entitled "US ($) Dollars (inclusive of 6% fee)", to correspond to the line items in Condition 3, as those line items may be adjusted by the Contractor in accordance with the provisions of Condition 3; provided, however, that the revised Total Price for the column entitled "US ($) Dollars (inclusive of 6% fee)" shall be equal to the dollar amount indicated as the total of the column entitled "Price" in Condition 3, as that amount may be adjusted by the Contractor in accordance with the provisions of Condition 3. EXHIBIT C-5 ANNEX F1 STAGE (MILESTONE) PAYMENT CRITERIA This annex contains the criteria associated with each stage (milestone) payment as identified in Annex F that the Subcontractor shall complete.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No.001 Title: a) Frame Mods Fwd Fuselage Drawings issued and: b) DAG Structural Installation Design complete. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 28/01/02 & b) 26/02/02 Submission Date: a) & b) 30/03/02 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 10,700,590 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The issue of the drawings for the Frame Modifications for the Forward Fuselage and: b) the completion of the DAG Structural Installation Design - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) A complete set of drawings for the Frame Modifications to the Forward Fuselage approved by the necessary authorities and entered into CM/DM and available for use. b) The fully complete DAG Structural Installation Design drawings issued for review and approval by the necessary authorities. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
III.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 002 Title: a) Production Enhancers Drawings issued and: b) MIST CSCI Detail Design complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 25/04/02 & b) 01/05/04 Submission Date: 30/06/02 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 15,584,997 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - --------------------------------------------------------------------------------------------------------------------------- a) The issue of drawings for the Production Enhancers and: b) completion of the MIST CSCI Detail Design. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) A complete set of drawings for the Production Enhancers approved by the necessary authorities and entered into CM/DM and available for use. b) The fully complete design documentation reviewed and approved by the necessary authorities and available to enable the software code to be completed. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - --------------------------------------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
IV.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 003 Title: a) SIL Test Plan complete and: b) SIL Group A (Systems ) Test complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 26/07/02 & b) 26/08/02 Submission Date: A0 & b) 30/09/02 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 17,331,789 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the SIL Test Plan and: b) the completion of the SIL Group "A" Systems Test. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The complete set of SIL Test Plans reviewed and approved and available for the generation of the associated Test Procedures. b) All Group "A" Test in accordance with the approved procedures successfully carried out by the Subcontractor and to the satisfaction of the Contractor and Final Test Report ready for release. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
V.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 004 Title: a) LSA 300 tasks complete and: b) Satcom Radome Installation complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 17/10/02 & b) 16/12/02 Submission Date: a) & b) 30/12/02 - ---------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 13,855,870 - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of all LSA 300 Tasks and: b) the completion of the installation of the Satcom Radome - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) Formal evidence to be provided that all LSA 300 tasks have identified all of the maintainence and operation tasks. Full visibility to be provided to ensure that the appropriate fields have been completed in the LSA Database b) Completion of the SATCOM Radome Installation on the Aircraft in accordance with the fully released drawings and all inspections performed and associated documention completed and approved. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - --------------------------------------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
VI.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 005 Title: a) Initial provisioning complete and: b) A/C #1 ECS Installation complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 14/02/03 & 20/02/03 Submission Date: a) & b) 30/03/03 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 14,135,659 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the Initial Provisioning Tasks and: b) the completion of Aircraft #1 ECS Installation - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) A fully defined Initial Spares Package and all associated items placed on order. Evidence to be supplied for items to be procured by the Subcontractor. b) Completion of the ECS Installation for Aircraft #1 in accordance with the fully released drawings and all inspections performed and associated documention completed and approved. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - --------------------------------------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
VII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 006 Title: a) SIL Integration Test complete and: b) A/C Group A Test Execution complete. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 25/04/03 & b) 12/05/03 Submission Date: A) & b) 30/06/03 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 12,352,680 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the SIL Integration Test and: b) the completion of the Execution of the Aircraft Group "A" Test - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) Complete performance by the Subcontractor to the satisfaction of the Contractor of the SIL Integration Acceptance Test in accordance with the approved procedures. The completion of the associated Test Report and availability for review. b) Complete performance by the Subcontractor to the satisfaction of the Contractor of the Aircraft Group "A" Test in accordance with the approved procedures. The completion of the associated Test Report and availability for review. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
VIII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 007 Title: a) Gnd Test Air Segment Group B Test complete and: b) Track Manager CSCI complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 20/08/03 & b) 19/09/03 Submission Date: a) & b) 30/09/03 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 7,181,576 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the Ground Test Air Segment Group "B" Test and: b) the completion of the Track Manager CSCI. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) Complete performance by the Subcontractor to the satisfaction of the Contractor of the Ground Test Air Segment Group "B" Acceptance Test in accordance with the approved procedures. The completion of the associated Test Report and availability for review. b) Fully functional Track Manager CSCI software completed tested, accepted and available for delivery to the SIL. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
IX.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 008 Title: a) Aircraft Flight Readiness Review complete and: b) Gnd Test Gnd Seg Group B test complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 19/11/03 & b) 22/12/03 Submission Date: a) & b) 30/12/03 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 6,846,090 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the Aircraft Flight Readiness Review and: b) the completion of the Ground Test Ground Segment Group "B" Test - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The successful completion of all Ground Test Ground Segment Group "B" Tests in accordance with the test procedures Test Reports produced, approved and issued for review. b) Aircraft Flight Readiness Review complete and all documentation available for signature to allow the Aircraft to fly. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
X.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 009 Title: a) Human Engineering Systems Analysis Report Complete and: b) Training Subsystem Acceptance test at MoD complete. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 05/01/04 & b) 14/01/04 Submission Date: A0 & b) 30/03/04 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 8,465,585 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the Human Engineering Systems Analysis Report and: b) the completion at the MoD of the Training Subsystem Acceptance Test. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the Human Engineering Systems Analysis Report, approved and available for release, incorporating all the requirements of the Human Engineering Test Plan. b) The successful completion at the MoD by the Subcontractor to the satisfaction of the Contractor of the Training Subsystems Acceptance Test in accordance with the Test Procedures. Test Reports produced, approved and issued for review. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XI.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 010 Title: a) Safety Case complete and Support Segment Installation and: b) Acceptance test at MOB complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 09/04/04 & b) 04/05/04 Submission Date: a) & b) 30/06/04 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 6,417,712 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the Safety Case and : b) the completion at the MOB of the acceptance test for the Support Segment Installation. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the Safety Case, approved and released documentation that fully meets the requirements of the Safety Plan by the Subcontractor to the satisfaction of the Contractor. b) The successful completion at the MOB by the Subcontractor to the satisfaction of the Contractor of the Support Segment Installation and Acceptance Test in accordance with the Test Procedures. Test Reports produced, approved and issued for review. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 011 Title: a) ASTOR System Flight Test Report and: b) A/C #1 Delivery to MoD complete - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: a) 27/04/04 & b) 09/04/04 Submission Date: a) & b) 30/09/04 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 2,338,443 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The release of the ASTOR System Flight Test Report and: b) the delivery to the MoD of Aircraft #1. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- a) The completion of the ASTOR System Flight Report, approved and released fully meeting the requirements of the Subcontract, by the Subcontractor to the satisfaction of the Contractor. b) Completion of the Delivery of Aircraft #1 and susquent acceptance by the Authority of the Aircraft. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XIII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 012 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/12/04 30/12/04 - ---------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 79,263 - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XIV.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 013 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/03/05 30/03/05 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XV.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 014 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/06/05 30/06/05 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XVI.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 015 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/09/05 30/09/05 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XVII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 016 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/12/05 30/12/05 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XVIII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 017 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/03/06 30/03/06 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XIX.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 018 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/06/06 30/06/06 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XX.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 019 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/09/06 30/09/06 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XXI.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 020 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/12/06 30/12/06 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XXII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 021 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/03/07 30/03/07 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XXIII.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 022 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/06/07 30/06/07 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XXIV.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 023 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/09/07 30/09/07 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
XXV.
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 024 Title: Support for all UK activities. - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/12/07 30/12/07 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($):79,263 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The continuous provision by the Subcontractor of Programme Management, Design, Engineering, Acceptance, Design Authority Liaison & Support for all activities associated with Transition and the Aircraft Modifications for Aircraft 2 - 5. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- The Subcontractor shall have provided the continuous support to the satisfaction of the Contractor to ensure that all activities described above have resulted in the Contractor meeting its delivery and acceptance obligations of Aircraft 2 - 5 to the Authority. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
=========================================================================================================================== PAYMENT MILESTONE =========================================================================================================================== Ser. No. 025 Title: ISRD completed in accordance with the requirements of the Authority ISRD Directive - --------------------------- ----------------------------------------------------------------------------------------------- Planned Completion Date: Submission Date: 30/03/08 30/03/08 - --------------------------------------------------------------------------------------------------------------------------- Milestone Value ($): 10,107,948 - --------------------------------------------------------------------------------------------------------------------------- Milestone Description: - ---------------------------------------------------------- ---------------------------------------------------------------- The completion by the Subcontractor of his support and responsibilities associated with ISRD in accordance with the requirements of the MoD ISRD Directive, the Master Test Plan and the Acceptance Specification. - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Milestone Completion Criteria: - ---------------------------------------------------------- ---------------------------------------------------------------- All responsibilities and support required by the Contractor from the Subcontractor to ensure that System reliability has Been fully characterised and has been demonstrated to meet or exceed reliability requirements. Any system reliability models have been updated to reflect additional data collected during the conduct of ISRD. - --------------------------------------------------------------------------------------------------------------------------- Milestone Owner: - --------------------------------------------------------------------------------------------------------------------------- Raytheon: - ------------------------------- ------------------------------------------------------------------------------------------- Subcontractor: ===========================================================================================================================
EXHIBIT C-6 REVISED STATEMENT OF WORK EXHIBIT C-7 The Secrets Matter Letter is to be sent by the security controller of the Contractor to the security controller of the Subcontractor under separate cover. For the purposes of this Subcontract the reference for the Secrets Matters Letter is JLK/L3/LET001. EXHIBIT C-8 ANNEX P - KEY PERSONNEL
- ---------------------------------------------------------------------------------------------------------------- RECOGNISED KEY ASTOR PERSONNEL - ---------------------------------------------------------------------------------------------------------------- INDIVIDUAL INTEGRATED PROJECT TEAM - ---------------------------------------------------------------------------------------------------------------- ANDERSON, HELEN L. PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- ARLEDGE, ROBERT G. AERO SCI 11 - ---------------------------------------------------------------------------------------------------------------- BLOW, WILLIE L. SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- BURGESS, FLOYD (KEN) ENG SERV 11 - ---------------------------------------------------------------------------------------------------------------- BURKS, MIKE W. SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- CANANT, ROSS L. SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- COLE, RONALD (CHIP) SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- DELAGUARDIA, CARLOS A. AERO SCI 11 - ---------------------------------------------------------------------------------------------------------------- DICK, DAVID SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- DONOVAN, JOHN (CLAY) PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- DUNCAN, GARNER (LEE) PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- DUVAL, CHARLES SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- EAMIGH, LAWRENCE TECH PUB 11 - ---------------------------------------------------------------------------------------------------------------- ELWELL, KEITH AERO 11 - ---------------------------------------------------------------------------------------------------------------- EVANS, DARREN - ---------------------------------------------------------------------------------------------------------------- FELPS, LOWELL (DOUG) PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- FORD, MIKE - ---------------------------------------------------------------------------------------------------------------- FOWLER, BERT PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- FRAZIER, WAYNE AERO SCI 11 - ---------------------------------------------------------------------------------------------------------------- FREELEN, DARYL H/D/L 11 - ---------------------------------------------------------------------------------------------------------------- GAROFALO, LYNNORE SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- GAUTHIER, EVANS ENG SERV 11 - ---------------------------------------------------------------------------------------------------------------- GLUCK, BARRY - ---------------------------------------------------------------------------------------------------------------- GRAHAM, DENNIS TECH PUB 11 - ---------------------------------------------------------------------------------------------------------------- GRAMLEY, HARRY PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- GRAY, RONALD QUAL ASSUR 11 - ----------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------- RECOGNISED KEY ASTOR PERSONNEL - ---------------------------------------------------------------------------------------------------------------- INDIVIDUAL INTEGRATED PROJECT TEAM - ---------------------------------------------------------------------------------------------------------------- GREEN, BARRY ENG SERV 11 - ---------------------------------------------------------------------------------------------------------------- GWIN, CONNIE AERO 11 - ---------------------------------------------------------------------------------------------------------------- HARKSEN, STEVEN SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- HOFF, JOHNNIE (LAVERNE) PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- HOTSKO, ANTHONY (TONY) PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- KAMEYER, DARREN AERO SCI 11 - ---------------------------------------------------------------------------------------------------------------- KING, JAMES SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- KJELLANDER, JON SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- KLEIN, DAVID SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- KUSMANOFF, ANTONE SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- LARSEN, JR ROY SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- LAWLESS, JIMMY SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- LEVAN, TIMOTHY TECH PUB 11 - ---------------------------------------------------------------------------------------------------------------- MABURY, SAM - ---------------------------------------------------------------------------------------------------------------- MOORE, R.C. - ---------------------------------------------------------------------------------------------------------------- MURPHEY, BETTY - ---------------------------------------------------------------------------------------------------------------- MURTHI, ARUN ENG SERV 11 - ---------------------------------------------------------------------------------------------------------------- NEEL, DIANNE SOFTWARE 11 - ---------------------------------------------------------------------------------------------------------------- ODOM, BARRY ENG SERV 11 - ---------------------------------------------------------------------------------------------------------------- PARKER, DONALD SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- PENDERGRASS, GARY SOFTWARE 11 - ---------------------------------------------------------------------------------------------------------------- PRELLER, R F. (FRED) SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- RADFORD, GARY SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- RAZIK, MOHAMED SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- REDUS, WESLEY SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- SANDOVAL, FRANK - ---------------------------------------------------------------------------------------------------------------- SCOTT, TRUMAN SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- SIEFFERT, JON PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- STAES, TRAVIS SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- STAFFORD, JOSEPH AERO 11 - ----------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------- RECOGNISED KEY ASTOR PERSONNEL - ---------------------------------------------------------------------------------------------------------------- INDIVIDUAL INTEGRATED PROJECT TEAM - ---------------------------------------------------------------------------------------------------------------- STEPHENS, GARY PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- STRANO, ANGELO S. - ---------------------------------------------------------------------------------------------------------------- SUTTON, WILLIAM TECH PUB 11 - ---------------------------------------------------------------------------------------------------------------- TURNER, RANDY AERO SCI 11 - ---------------------------------------------------------------------------------------------------------------- UNDERWOOD, RICHARD PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- VAUGHN, KATHRYN SOFTWARE 11 - ---------------------------------------------------------------------------------------------------------------- VILLANUEVA, JR JOSE PROG MGMT 11 - ---------------------------------------------------------------------------------------------------------------- WATTS, WILLIAM (MARK) AERO 11 - ---------------------------------------------------------------------------------------------------------------- WHITE, JOHN TECH PUB 11 - ---------------------------------------------------------------------------------------------------------------- WIRT, CHARLES (CHUCK) TECH PUB 11 - ---------------------------------------------------------------------------------------------------------------- WOODRUFF, ROBERT SYST ENG 11 - ---------------------------------------------------------------------------------------------------------------- WOOTEN, ANGELA SOFTWARE 11 - ---------------------------------------------------------------------------------------------------------------- YEAGER, THOMAS SYST ENG 11 - ----------------------------------------------------------------------------------------------------------------
EXHIBIT C-9 ANNEX R - ASSUMPTIONS GENERAL The ASTOR Air Segment peace time utilisation rate will be a maximum of three thousand two hundred (3,200) flying hours per annum. The ASTOR Air Segment usage during crisis and war utilisation rate will be a maximum of two thousand three hundred and ten (2,310) flying hours over a 90 day period. The combined Ground Segment peace time utilisation rate will be a maximum of twenty one thousand, two hundred (21,200) operating hours per annum. The combined Ground Segment utilisation rate during crisis and war will be a maximum of thirteen thousand eight hundred (13,800) operating hours over a 90 day period. The term 'in-service and supported' means any equipment in the MoD inventory that has an in-service Equipment Support Manager (ESM) and that spares provisioning, technical publications, training and PDS exist and are in place. That said, any element of support that is not already provided is excluded from this definition. A maximum deployment scenario consists of two (2) simultaneous independent Air Platform deployments and four (4) simultaneous independent Ground Station deployments, whilst continuing to maintain the remainder of the ASTOR System at the Main Operating Base. TRAINING The training courses to be developed by the Subcontractor and delivered by the Contractor are based on the manpower establishment as advised by the Authority in the Scoping Study (Issue 2.0) dated 7 Dec 99 (Once reviewed by RSL) - Phase One of the Training Needs Analysis. The training output standards for ASTOR personnel are of a comparable standard to current in-service courses. For example, pilots shall achieve a 100% overall pass mark for all AP safety related issues or electronic technicians are to be capable of carrying out repairs in accordance with the repair policy in that level 1 and 2 tasks should be completed within 30 mins and level 3 within 2 hours. During the design of the training systems, the Subcontractor will make best use of the knowledge available to enable the capability to link the ASTOR TSS to external training systems and equipment for real-time, realistic, interactive training. INITIAL PROVISIONING The Subcontractor is responsible for recommending deciding the content of the Initial Provisioning spares package. Initial Provisioning package, spares used by the Subcontractor to support the Integration and Test phase may be used and will be accepted by the Authority provided each such spare: a) is of the accepted build standard, b) has not been subject to environmental stressing beyond design limits, and c) has been appropriately refurbished. The OLGS AOS shall support both the JFACC and JFHQ, ie all 5 workstation containers and associated communications. Admin and Logistics Delay Times that affect the Supply Chain Pipeline when supporting deployed operations, including during sustained operations in Crisis, Tension and War have been taken into account. All spares supplied are capable of being identified when removed from their packaging. TECHNICAL DOCUMENTATION AND DATA By the System CDR the Contractor will either provide the Subcontractor with a Technical Documentation and Data (TD&D) viewer or confirm the specification of the TD&D viewer. Exhibit D to ------------ Letter Agreement ---------------- Exhibit E to ------------ Letter Agreement ---------------- Exhibit F to ------------ Letter Agreement ---------------- STAMP DUTY, GST AND SUPERANNUATION (AUSTRALIA) 1. STAMP DUTY The Sellers, L-3 Australian Subsidiary and Buyer agree to prepare a schedule within 75 days of Closing containing a description of the Australian Acquired Assets, their location within Australia and an allocation of their value to enable the L-3 Australian Subsidiary to lodge that schedule with relevant Australian Governmental Entities for stamp duty purposes, provided however that such allocation shall conform with the Allocation Schedule prepared in accordance with clause 1.4 of the Asset Purchase Agreement. 2. GST 2.1 SUPPLY OF A GOING CONCERN Raytheon Australia and L-3 Australian Subsidiary acknowledge and agree that: (a) the sale of the Australian AIS Business is a supply of a going concern for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth); (b) Raytheon Australia will supply to L-3 Australian Subsidiary all of the things that are necessary for the continued operation of the Australian AIS Business as provided by Article 1.1 of the Asset Purchase Agreement; (c) L-3 Australian Subsidiary warrants that it is Registered or is Required to be Registered at the date of Closing; and (d) Raytheon Australia will carry on the Australian AIS Business until the date of the supply of the Australian AIS Business to L-3 Australian Subsidiary. 2.2 GST If any Supply made by a party under this Agreement is subject to GST, including if the supply of the Australian AIS Business is not a supply of a going concern for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (C'th), the Supplier may, in addition to the consideration for the Supply, recover an additional amount on account of GST from the Recipient. The parties agree, that this clause overrides the effect that clause 8.1(d) of the Asset Purchase Agreement would otherwise have in respect of the manner in which the GST cost is to be borne between the parties. 2.3 ADDITIONAL AMOUNT The additional amount on account of GST referred to in clause 2.2 ("GST"): (a) is equal to the GST exclusive consideration payable by the Recipient for the relevant Supply multiplied by the prevailing GST rate; and (b) subject to clause 2.4, is payable not later than 14 days from the day the Supplier gives notice to the Recipient that the Supply is subject to GST. 2.4 TAX INVOICE The Supplier must provide a tax invoice to the Recipient in a form that complies with the GST Law when the Supplier gives notice to the Recipient that the Supply is subject to GST. 3. SUPERANNUATION 3.1 L-3 AUSTRALIAN SUBSIDIARY'S OBLIGATION Prior to Closing and with effect from the Closing, the L-3 Australian Subsidiary must establish or identify a superannuation fund or funds which will provide benefits for the Transferring Employees on terms no less favourable than those of the Australian Disclosed Funds that applied to the AIS Employees immediately before Closing and the Buyer must ensure that L-3 Australian Subsidiary offers to Transferring Employees, membership of such superannuation fund which provides to the particular Transferring Employee benefits on terms no less favourable than that Transferring Employee had in respect of the particular Australian Disclosed Funds of which it was a member. 3.2 WARRANTIES AND INDEMNITIES - SUPERANNUATION - AUSTRALIA (a) Except in relation to the Australian Disclosed Funds and the AIS Benefit Plans , the Sellers do not make payments to any funds, schemes or arrangements relating to retirement, death or disablement benefits, and there is no contract, agreement, arrangement or proposal in force or promised whereby the Sellers could become so liable at any time for the Transferred Employees. (b) Prior to Closing, the Sellers have disclosed full details, in relation to the Transferring Employees, of: (i) the level of benefits payable; and (ii) the rate at which employer contributions are currently paid to the Australian Disclosed Funds, the basis on which those contributions are calculated and whether those contributions are paid in advance or in arrears. (c) All amounts due to the Australian Disclosed Funds (including all contributions, taxes and expenses) have been paid and no services have been rendered or requested in relation to the Australian Disclosed Funds which have not been paid for. (d) In respect of the Australian Disclosed Funds, the Sellers have given the L-3 Australian Subsidiary true, correct and up to date copies of: (i) all trust deeds and rules; (ii) all explanatory booklets, announcements and notices of current effect; (iii) all relevant accounts; and (iv) the most recent actuarial valuations. 4. DEFINITIONS All other capitalised terms used in this clause and not defined have the meaning given to them in the Asset Purchase Agreement. In this Exhibit F, these meanings apply unless the contrary intention appears. AUSTRALIAN ACQUIRED ASSETS means the Australian assets utilized exclusively or primarily in the Australian AIS Business. AUSTRALIAN AIS BUSINESS means the Maritime Aircraft Patrol Division of the Sellers located at Avalon, Victoria and Adelaide, South Australia. AUSTRALIAN DISCLOSED FUNDS means Westpac Business Superannuation - Raytheon Systems Company Australia Superannuation Fund, The Superannuation Trust of Australia and Raytheon Superannuation Fund. GST has the same meaning as in the A New Tax System (Goods & Services Tax) Act 1999 (Cwlth). GST-FREE has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth). GST LAW has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth). SUPPLY means any supply (as defined in the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) and includes the sale of the Business) made by a party under this agreement. SUPPLIER means any party making a Supply under this agreement. RECIPIENT means the recipient of any Supply under this agreement. REGISTERED OR REQUIRED TO BE REGISTERED has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth). Exhibit G to ------------ Letter Agreement ---------------- APPENDIX D THALES-RAYTHEON SYSTEMS LLC (SUPPLIER) PAGE 1 Prime Contractor (Customer): Buyer Subcontractor (Supplier): Thales-Raytheon Systems LLC (TRS) Prospective Program Customer and Program Name: Korean Air Force AEW&C Existing Work: None. IOT: None. Proposed Activities: The parties shall cooperate in joint marketing for the Program to the prospective Program Customer particularly promoting the use of the SAADS MCRC software and related Operational capabilities, and the advantages of this being both at the ground sites and in the AEW. In event that the contract for the Program is awarded to Buyer, TRS LLC shall supply and support the implementation of the SAADS-based software into the AEW&C aircraft. Exclusivity: The teaming arrangement shall be exclusive with respect to both Parties. Exhibit H to ------------ Letter Agreement ---------------- Appendix F of Supply Agreement (Raytheon as Supplier) ----------------------------------------------------- Exhibit I to ------------ Letter Agreement ---------------- Appendix D of Supply Agreement (Raytheon Technical Services Company as Customer) ------------------------------------------------------------------------------- Exhibit J to ------------ Letter Agreement ---------------- (a)(ii)
- ----------------------------------------------------------------------------------------------------------------------------------- BUS. PROGRAM ORDER TECH SUPPLIER AREA NAME NUMBER AREA ITEM/SYSTEM NAME ULO ($) - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C ARP 130/141 WLR9303201 Nav/Comm AFCS-single; Honeywell 17,689,982 data;support;NRE - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS EAU 4500104497 Sensors Up/Down Converter Remec 7,388,984 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASTOR ASTOR A/C Systems Fab A/C parts AIS Greenville 7,000,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C MCS/SAM 4500110434 Sensors Tech Spt Rockwell Collins 4,733,306 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Sea Sentinal 4500051453 A/C Systems Engineering Support Lockheed Martin 3,394,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Big Safari 4500113507 A/C Systems Computers and Safe Flight 2,450,080 Computer parts - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Big Safari 4500117859 A/C Systems Radio Switches Herley New England 2,440,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C SRP G199910001 A/C Systems Horizontal Middle River Aircraft 2,089,566 (E-1KA) - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS Cobra Ball Spares 4500115808 Sensors Demod Chassis, RCU, Condor 1,953,368 Displays - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS EAU Spares 4500116619 Sensors Dual Downconverters Remec 1,781,254 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ARP 130/141 Nav/Comm OFP3 software Honeywell- Alb 1,657,495 upgrade - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Navy 4500117638 Sensors Pathfinder System BAE Systems 1,586,496 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C EJI 4500069362 SDRI Cabinets BomHoff 1,548,307 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Spares 4500118216 A/C Systems Tailpipes AHL 1,457,595 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Navy 4500105113 Nav/Comm Wideband Receiver BTG 1,411,969 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ARP 130/141 Nav/Comm OFP3 software Honeywell-Teterboro 1,388,403 upgrade - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASTOR ASTOR A/C Systems Testing Eglin AFB 1,370,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASTOR ASTOR 4500102176 Nav/Comm Interface American Nucl 1,246,000 Cancellation Unit - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C SRP G199940004 A/C Systems Upper Longerons Middle River Aircraft 1,146,619 (n-1 Kit) - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C MSC SAM 4500050991 Nav/Comm MCS SAM Areas of Rockwell Collins 1,102,526 Concern - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C ARP 130/141 WLR9617201 Nav/Comm Autopilot, CDS Honeywell 1,086,016 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Alfa Sierra 4500018631 SDRI Cabinets / Moved to DeCrane Aircraft 967,000 G21 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C SOFIA 4500075643 A/C Systems Aperture Scaled Technology 884,000 Works - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS Peace Pioneer 4500035066 Sensors Training & Materials L-3 Comm 863,472 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASTOR* ASTOR 4500092659 Sensors IFF Transponder Raytheon (RSL UK) 492,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS Peace Pioneer G199712012 Nav/Comm Data Link ELTA Electronics 786,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Big Safari 4500097917 A/C Systems Radio Switches Sun Moon/ Herley 754,910 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASTOR ASTOR 4300001329 SDRI Struct Monitor Sys & Elect Inc 746,978 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS Proj. Underdog 4500108820 Sensors Eng Support Raytheon 709,755 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS Extract 4500111215 Sensors Synthesizer ITT Industries 705,900 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C GPSENS 4500059226 Nav/Comm Autopilot,CDS Honeywell 675,120 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C MSC SAM HG11000001 Nav/Comm MCS SAM Support Rockwell Collins 673,127 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C August Moon 4500026160 SDRI Flat Panel Displays Astronautics 669,653 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Alfa Sierra 4500086868 SDRI Dance / Moved to W63 Jerry Fain 665,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C E6B 4500106770 Nav/Comm AN/ARQ-57 KIT Rockwell Collins 658,856 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C GPSENS OFP 2 4500098650 Nav/Comm GPS Honeywell 644,525 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASTOR ASTOR SDRI Tactical Ctl. Disp. TBD 1,500,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C GPSENS WLR9534701 Nav/Comm Autopilot,CDS Honeywell 598,065 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Tango/Dallah 4500046400 SDRI Cabinets/Tables/Misc JCP 591,327 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C ARP 130/141 WLR9320701 Nav/Comm GPS Honeywell 586,277 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS Big Safari 4500098295 Nav/Comm Cosite Array phase1 ANC 1,076,316 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Navy 4500112979 Sensors CCU Palomar 572,850 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- TRS TRS 4500054934 Sensors Support Services Pacific Sierra (PSR) 539,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Airlift/Avionics LC-130R 4500039530 A/C Systems Kits & Flt Test Smiths Industries 514,000 Support LC130-R - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASTOR ASTOR A/C Systems Testing Edwards AFB 512,828 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- G&C Executive Jet 4500054114 SDRI various audio/video Pacific Systems (564,000) comp - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Not available Not available 4700006439 153 Aircraft Gulfstream 32,800,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Not available Not available 4700005790 153 Engine Rep. Texas Aero 1,000,000 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- AMM C 141 4500126092 Nav/Comm Software Honeywell 1,657,495 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- AMM C 141 4500126380 Nav/Comm Software Honeywell 1,388,404 - -----------------------------------------------------------------------------------------------------------------------------------
*Upon the mutual agreement of the Buyer and Raytheon Systems Limited, the requirement to purchase IFF Transponders under Order No. 4500092659 may be amended and the corresponding value of the ULO($) may be reduced after the Closing to reflect a reduction in the quantity of deliverable units. EX-12 19 file018.txt RATIO OF EARNINGS TO FIXED CHARGES L-3 COMMUNICATIONS HOLDINGS, INC. AND L-3 COMMUNICATIONS CORPORATION RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
L-3 PREDECESSOR ----------------------------------------------------------------------- COMPANY ---------- NINE MONTHS THREE MONTHS ENDED ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31, 2001 2000 1999 1998 1997 1997 ------------- ------------- ------------- ------------- -------------- ------------- Earnings: Income before income taxes ............ $ 186,222 $ 134,079 $ 95,430 $ 53,450 $ 22,992 $ (505) Add: Interest expense .................... 80,002 87,308 56,686 47,015 29,884 8,441 Amortization of debt expense 6,388 5,724 3,904 2,564 1,517 -- Interest component of rent expense ............................ 14,332 11,882 7,500 4,664 3,213 851 --------- --------- --------- --------- -------- -------- Earnings .............................. $ 286,944 $ 238,993 $ 163,520 $ 107,693 $ 57,606 $ 8,787 --------- --------- --------- --------- -------- -------- Fixed charges: Interest expense .................... 80,002 87,308 56,686 47,015 29,884 8,441 Amortization of debt expense 6,388 5,724 3,904 2,564 1,517 -- Interest component of rent expense ............................ 14,332 11,882 7,500 4,664 3,213 851 --------- --------- --------- --------- -------- -------- Fixed charges ......................... $ 100,722 $ 104,914 $ 68,090 $ 54,243 $ 34,614 $ 9,292 --------- --------- --------- --------- -------- -------- Ratio of earnings to fixed charges ..... 2.8x 2.3x 2.4x 2.0x 1.7x n.a.(a) ========= ========= ========= ========= ======== ========
- ---------- (a) For the three months ended March 31, 1997, earnings were insufficient to cover fixed charges by $.5 million. EX-21 20 file019.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 L-3 COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2001 L-3 Communications Holdings, Inc. L-3 Communications Corporation 3931170 Canada Inc. Spar Aerospace Limited 3023001 Canada Inc. Godfrey Aerospace Inc. Spar Aviation Services (U.S.) Limited AMI Instruments, Inc. Aviation Communications & Surveillance Systems, LLC (70%) Coleman Research Corporation Delsub, Inc. Digital Technics, L.L.C. Digital Technics, L.P. (25% + 75%) EER Systems, Inc. Electrodynamics, Inc. Emergent Information Technologies-East Kapos Associates Inc. Honeywell TCAS Inc. Hygienetics Environmental Services, Inc. Interstate Electronics Corporation KDI Precision Products, Inc. L-3 Communications Ancot Corporation L-3 Communications Atlantic Science & Technology Corporation L-3 Communications Aydin Corporation Aydin Foreign Sales Limited Aydin Investments, Inc. L-3 Communications Global Network Solutions U.K. Ltd. L-3 Communications DBS Microwave, Inc. L-3 Communications ESSCO, Inc. Electronic Space Systems International Corp. Electronic Space Systems (UK) Limited (90%) ESSCO Collins Limited (99.99%) ESSCO Satellite Systems Corp. L-3 Communications Holding GmbH L-3 Communications ELAC Nautik GmbH Arbeitsmedizinische Betreungsgesellschaft Kieler Bertriebe mbH 50% ELAC Nautik Unterstutzungska\Se GmbH Power Paragon (Deutschland) Holding GmbH (99% +1%) EuroAtlas Gesellschaft fur Leistungselektronik mbH JovyAtlas Elektrische Umformtechnik GmbH Narda Safety Test Solutions GmbH PMM Costruzioni Electtroniche Centro Misure Radioelettriche S.r.l. (98%) L-3 Communications ILEX Systems, Inc. ITel Solutions, LLC (50%) L-3 Communications Secure Information Technology, Inc. L-3 Communications Security Systems Corporation L-3 Communications SPD Technologies, Inc. SPD Holdings, Inc. Henschel Inc. Pac Ord Inc. Power Paragon, Inc. SPD Electrical Systems, Inc. SPD Switchgear Inc. L-3 Communications Storm Control Systems, Inc. L-3 Communications U.K. Ltd. Storm Control Systems Limited L-3 Microdyne Holdings Corporation LogiMetrics, Inc. (53.5%) Logimetrics FSC, Inc. (53.5%) mmTECH, INC. (53.5%) L-Tres Comunicaciones Costa Rica, S.A. Microdyne Corporation Microdyne Communications Technologies Incorporated MCTI Acquisition Corporation Apcom, Inc. Celerity Systems Incorporated Microdyne Ltd. Microdyne Outsourcing Incorporated MPRI, Inc. Southern California Microwave, Inc. TrexCom (Asia) PTE, Ltd. EX-23.1 21 file020.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 March 14, 2002 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference to the registration statements of L-3 Communications Holdings, Inc. and subsidiaries (the "Company") on Forms S-8 (File No.'s 333-59281, 333-64389, 333-78317 and 333-64300) and on Forms S-3 (File No.'s 333-58328 and 333-75558) of our report dated February 4, 2002 on our audits of the consolidated financial statements of the Company as of December 31, 2001 and 2000 and for the three years ended December 31, 2001, which report is included in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP New York, New York -----END PRIVACY-ENHANCED MESSAGE-----