15.

The Company is subject to U.S. export laws and regulations, including the International Traffic in Arms Regulations (ITAR), that generally restrict the export of defense products, technical data, and defense services. The Company has filed voluntary disclosure reports concerning certain technical and administrative violations of the ITAR with the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) Office of Defense Trade Controls Compliance (DDTC Office of Compliance). The infractions reported by the Company were unintentional, did not result in any exports of sensitive military technology, and virtually all the reported transactions would have been allowed had the Company followed the correct regulatory procedures. To address these problems, the Company has made a number of investments in its export compliance functions, including: additional staffing; ongoing implementation of a new software system; employee training; and establishment of a regular compliance audit program and corrective action process. The DDTC Office of Compliance acknowledged the Company’s progress and continuing improvements, but nevertheless informed the Company that it intends to impose civil monetary fines and administrative sanctions based on the information it had concerning the Company’s earlier history in handling ITAR-controlled transactions, including the substance of the Company’s prior voluntary disclosures and other aspects of ITAR compliance errors. Management has been in discussions with the agency and provided supplemental information with the intent of reaching a settlement. On August 15, 2013, the DDTC Office of Compliance proposed a total penalty of $20 million with $10 million suspended and eligible for offset credit based on verified expenditures for past and future remedial compliance measures. Based on this proposal, the Company estimated and recorded a $10 million charge as of July 26, 2013, for this matter. The Company intends to continue discussions with the DDTC Office of Compliance on final settlement terms, and the final settlement is subject to approval by the agency. While the Company cannot be certain of the outcome, management believes that the final resolution of this matter will not be materially different from our estimated accrual.