As filed with the Securities and Exchange Commission on September 11, 1997
Registration No. 333-31649
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
L-3 COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 3812, 3663, 3679 13-3937436
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification Number)
organization) Classification Code
Number)
_________________________
600 Third Avenue
New York, New York 10016
(212) 697-1111
(Address, including zip Code, and telephone number, including area code,
of registrant's principal executive offices)
_________________________
Christopher C. Cambria, Esq.
L-3 Communications Corporation
600 Third Avenue
New York, New York 10016
(212) 697-1111
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
_________________________
With a copy to:
David B. Chapnick, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
_________________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
<PAGE>
<PAGE>2
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: / /
_________________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
<PAGE>3
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT COVERS THE REGISTRATION OF AN AGGREGATE
PRINCIPAL AMOUNT OF $225,000,000 OF 10 3/8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2007 (THE "EXCHANGE NOTES") OF L-3 COMMUNICATIONS CORPORATION
THAT MAY BE EXCHANGED FOR EQUAL PRINCIPAL AMOUNTS OF THE COMPANY'S
OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 (THE "OLD NOTES")
(THE "EXCHANGE OFFER"). THIS REGISTRATION STATEMENT ALSO COVERS THE
REGISTRATION OF THE EXCHANGE NOTES FOR RESALE BY LEHMAN BROTHERS INC. IN
MARKET-MAKING TRANSACTIONS. THE COMPLETE PROSPECTUS RELATING TO THE
EXCHANGE OFFER (THE "EXCHANGE OFFER PROSPECTUS") FOLLOWS IMMEDIATELY AFTER
THIS EXPLANATORY NOTE. FOLLOWING THE EXCHANGE OFFER PROSPECTUS ARE CERTAIN
PAGES OF THE PROSPECTUS RELATING SOLELY TO SUCH MARKET-MAKING TRANSACTIONS
(THE "MARKET-MAKING PROSPECTUS"), INCLUDING ALTERNATE FRONT AND BACK COVER
PAGES, A SECTION ENTITLED "RISK FACTORS--TRADING MARKET FOR THE EXCHANGE
NOTES" TO BE USED IN LIEU OF THE SECTION ENTITLED "RISK FACTORS--LACK OF
PUBLIC MARKET FOR THE EXCHANGE NOTES," ALTERNATE SECTIONS ENTITLED "USE OF
PROCEEDS" AND "PLAN OF DISTRIBUTION". IN ADDITION, THE MARKET-MAKING
PROSPECTUS WILL NOT INCLUDE THE FOLLOWING CAPTIONS (OR THE INFORMATION SET
FORTH UNDER SUCH CAPTIONS) IN THE EXCHANGE OFFER PROSPECTUS: "PROSPECTUS
SUMMARY--THE NOTE OFFERING" AND "--THE EXCHANGE OFFER", "RISK FACTORS--
CONSEQUENCES OF FAILURE TO EXCHANGE", "THE EXCHANGE OFFER" AND "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES". ALL OTHER SECTIONS OF THE EXCHANGE OFFER
PROSPECTUS WILL BE INCLUDED IN THE MARKET-MAKING PROSPECTUS.
<PAGE>
<PAGE>4
__________________________________________________________________________
Information contained herein is subject to completion or amendment without
notice. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
___________________________________________________________________________
SUBJECT TO COMPLETION DATED _________, 1997
PRELIMINARY PROSPECTUS
[LOGO OMITTED]
L-3 Communications Corporation
Offer to Exchange $225,000,000 of its 10 3/8% Series B
Senior Subordinated Notes due 2007,
which have been registered under the Securities Act,
for $225,000,000 of its outstanding 10 3/8% Senior
Subordinated Notes due 2007
_________________________
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ______,
1997, UNLESS EXTENDED.
_________________________
L-3 Communications Corporation (the "Company" or "L-3"), a wholly owned
subsidiary of L-3 Communications Holdings, Inc. ("Holdings"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange an aggregate of up to
$225,000,000 principal amount of 10 3/8% Series B Senior Subordinated Notes
due 2007 (the "Exchange Notes") of the Company for an identical face amount
of the issued and outstanding 10 3/8% Senior Subordinated Notes due 2007
(the "Old Notes" and together with the Exchange Notes, the "Notes") of the
Company from the Holders (as defined) thereof. As of the date of this
Prospectus, there is $225,000,000 aggregate principal amount of the Old
Notes outstanding. The terms of the Exchange Notes are identical in all
material respects to the Old Notes, except that the Exchange Notes have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and therefore will not bear legends restricting their transfer and will
not contain certain provisions providing for an increase in the interest rate
on the Old Notes under certain circumstances described in the Registration
Rights Agreement (as defined), which provisions will terminate as to all
of the Notes upon the consummation of the Exchange Offer.
Interest on the Exchange Notes will be payable semi-annually on May 1 and
November 1 of each year, commencing November 1, 1997. The Exchange Notes will
be redeemable at the option of the Company, in whole or in part, at any time
on or after May 1, 2002, at the redemption prices set forth herein, plus
<PAGE>
<PAGE>5
accrued and unpaid interest to the date of redemption. In addition, prior to
May 1, 2000, the Company may redeem up to 35% of the aggregate principal
amount of Exchange Notes at the redemption price set forth herein plus accrued
and unpaid interest through the redemption date with the net cash proceeds of
one or more Equity Offerings (as defined). The Exchange Notes will not be
subject to any mandatory sinking fund. In the event of a Change of Control (as
defined), each holder of Exchange Notes will have the right, at the holder's
option, to require the Company to purchase such holder's Exchange Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. The Company's ability to pay cash to
the holders of Notes upon a purchase may be limited by the Company's then
existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required purchases. See
"Description of the Exchange Notes".
The Exchange Notes will be general unsecured obligations of the Company,
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company. As of June 30, 1997, after giving pro forma effect
to the Offering of the Old Notes, application of the net proceeds therefrom
and borrowings under the Senior Credit Facilities (as defined), the Company
would have had approximately $400.0 million of indebtedness outstanding, of
which $175.0 million would have been Senior Debt (excluding letters of credit).
See "Capitalization". On the date of issuance of the Exchange Notes, the
Company will not have any subsidiaries; however, the Indenture (as defined)
will permit the Company to create subsidiaries in the future.
The Old Notes were issued and sold on April 30, 1997 in a transaction not
registered under the Securities Act in reliance upon an exemption from the
registration requirements thereof. In general, the Old Notes may not be offered
or sold unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act. The
Exchange Notes are being offered hereby in order to satisfy certain obligations
of the Company contained in the Registration Rights Agreement. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") set forth in no-action letters issued to third parties, the
Company believes that the Exchange Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business, such holder has
no arrangement with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any such other person is engaging
in or intends to engage in a distribution of such Exchange Notes. However, the
Company has not sought, and does not intend to seek, its own no-action letter,
and there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer. Notwithstanding the
foregoing, each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. See "Plan of Distribution". Any person
participating in the Exchange Offer who does not acquire the Exchange notes
<PAGE>
<PAGE>6
in the ordinary course of business: (i) may not tender its Private Notes in
the Exchange Offer; and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act.
The Old Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. There is no established
trading market for the Exchange Notes. The Company does not currently intend to
list the Exchange Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The date of acceptance and
exchange of the Old Notes (the "Exchange Date") will be the fourth business
day following the Expiration Date (as defined). Old Notes tendered pursuant
to the Exchange Offer may be withdrawn at any time prior to the Expiration
Date. The Company will not receive any proceeds from the Exchange Offer.
The Company will pay all of the expenses incident to the Exchange Offer.
For a discussion of certain factors that should be considered in connection
with an investment in the Exchange Notes, see "Risk Factors" beginning on
page 26.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is __________, 1997<PAGE>
<PAGE>7
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
on Form S-4 (together with all amendments, exhibits, schedules and
supplements thereto, the "Registration Statement") under the Securities
Act with respect to the Exchange Notes being offered hereby. This
Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement.
For further information with respect to the Company and the Exchange
Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement
is qualified by the provisions in such exhibit, to which reference is
hereby made. The Company is not currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). As a result of the offering of the Exchange Notes, the
Company will become subject to the informational requirements of the
Exchange Act, and, in accordance therewith, will file reports and
other information with the Commission. The Registration Statement, such
reports and other information can be inspected and copied at the Public
Reference Section of the Commission located at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington D.C. 20549 and at regional public
reference facilities maintained by the Commission located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material, including copies of all or any portion of the Registration
Statement, can be obtained from the Public Reference Section of the
Commission at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, it is required to furnish the
information required to be filed with the Commission to the Trustee and
the holders of the Old Notes and the Exchange Notes. The Company has
agreed that, even if it is not required under the Exchange Act to furnish
such information to the Commission, it will nonetheless continue to
furnish information that would be required to be furnished by the Company
by Section 13 of the Exchange Act to the Trustee and the holders of the
Old Notes or Exchange Notes as if it were subject to such periodic
reporting requirements.
In addition, the Company has agreed that, for so long as any Old
Notes remain outstanding and are required to bear the transfer restriction
legend, it will make available to any prospective purchaser of the Old
Notes or beneficial owner of the Old Notes in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities
Act, until such time as the Company has either exchanged the Old Notes for
the Exchange Notes or until such time as the holders thereof have disposed
of such Old Notes pursuant to an effective registration statement filed by
the Company.
<PAGE>
<PAGE>8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in this
Prospectus. As used in this Prospectus, unless the context requires
otherwise: (i) "Businesses" or the "Predecessor" means the operations of
Lockheed Martin Corporation and its subsidiaries that were acquired by the
Company upon consummation of the Acquisition (as defined), (ii) "L-3" or
the "Company" means L-3 Communications Corporation and the Businesses
after giving effect to the Acquisition, (iii) "Holdings" means L-3
Communications Holdings, Inc., the Company's sole shareholder and
(iv) "Lockheed Martin" means Lockheed Martin Corporation.
The Company
L-3 is a leading provider of sophisticated secure communication
systems and specialized communication products including secure, high data
rate communication systems, microwave components, avionics, and telemetry
and instrumentation products. 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 incorporated into the
transmission, processing, recording, monitoring and dissemination
functions of these communication systems. The Company's customers include
the U.S. Department of Defense (the "DoD"), selected U.S. government (the
"Government") intelligence agencies, major aerospace/defense prime
contractors, foreign governments and commercial customers. In 1996, L-3
had pro forma sales of $675.3 million and pro forma operating income of
$56.0 million. The Company's funded backlog as of December 31, 1996 was
approximately $542.5 million.
All of the Company's business units enjoy proprietary technologies
and capabilities and are well positioned in their respective markets.
Management has organized the Company's operations into two business areas:
Secure Communication Systems and Specialized Communication Products. In
1996, these areas generated approximately $371.5 million and $303.8
million of pro forma sales, respectively, and $23.0 million and $33.0
million of pro forma operating income, respectively.
Secure Communication Systems. L-3 is the established leader in
secure, high data rate communications in support of military and other
national agency reconnaissance and surveillance applications. The
Company's Secure Communication Systems operations are located in Salt Lake
City, Utah and Camden, New Jersey. Both operations are predominantly cost
plus, sole source prime system contractors supporting long-term programs
for the U.S. Armed Forces and classified customers. The Company's major
secure communication programs and systems include: strategic and tactical
signal intelligence systems that detect, collect, identify, analyze and
disseminate information and related support contracts for military and
national agency intelligence efforts; secure data links for airborne,
satellite, ground and sea-based information collection and transmission;
<PAGE>
<PAGE>9
as well as secure telephone and network equipment. The Company believes
that it has developed virtually every high bandwidth data link used by the
military for surveillance and reconnaissance in operation today. In
addition to these core Government programs, L-3 is expanding its business
base into related commercial communication equipment markets, including
applying its wireless communication expertise to develop local wireless
loop equipment primarily for emerging market countries and rural areas
where existing telecommunications infrastructure is inadequate or
non-existent.
Specialized Communication Products. This business area comprises the
Microwave Components, Avionics, and Telemetry and Instrumentation Products
operations of the Company.
Microwave Components. L-3 is the preeminent worldwide supplier of
commercial off-the-shelf, high performance microwave components and
frequency monitoring equipment. L-3's microwave products are sold under
the industry-recognized Narda brand name through a standard catalog to
wireless, industrial and military communication markets. L-3 also provides
state-of-the-art communication components including channel amplifiers and
frequency filters for the commercial communications satellite market.
Avionics. Avionics includes the Company's Aviation Recorders,
Display Systems and Antenna Systems operations. L-3 is the world's leading
manufacturer of commercial cockpit voice and flight data recorders ("black
boxes"). These recorders are sold under the Fairchild brand name both on
an original equipment manufacturer ("OEM") basis to aircraft manufacturers
as well as directly to the world's major airlines for their existing
fleets of aircraft. L-3 also provides military and high-end commercial
displays for use on a number of DoD programs including the F-14, V-22,
F-117 and E-2C. Further, L-3 manufactures high performance surveillance
antennas and related equipment for U.S. Air Force and U.S. Navy aircraft
including the F-16, AWACS, E-2C and B-2, as well as the U.K.'s Nimrod
aircraft.
Telemetry and Instrumentation Products. The Company's Telemetry and
Instrumentation Products operations 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 parameter data and other critical
information and transmit it from air or space to the ground. Telemetry
products are also used for range safety and training applications to
simulate battlefield situations. Further, the Company is applying its
technical capabilities in high data rate transmission to the medical image
archiving market in partnership with the General Electric Company ("GE")
through GE's medical systems business area ("GE Medical Systems").
Industry Overview
The defense industry has recently undergone significant changes
precipitated by ongoing federal budget pressures and new roles and
missions to reflect changing strategic and tactical threats. Since the
mid-1980's, the overall U.S. defense budget has declined in real dollars.
<PAGE>
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In response, the DoD has focused its resources on enhancing its military
readiness, joint operations and multiple mission capabilities, and
incorporating advanced electronics to improve the performance, reduce
operating cost and extend the life expectancy of its existing and future
platforms. The emphasis on system interoperability, force multipliers and
providing battlefield commanders with real-time data is increasing the
electronics content of nearly all of the major military procurement and
research programs. As a result, the DoD's budget for communications and
defense electronics is expected to grow. According to Federal Sources, an
independent private consulting group, the defense budget for command,
control, communications and intelligence ("C3I") is expected to increase
from $30.0 billion in the fiscal year ended September 30, 1996 to $42.0
billion in the fiscal year ended September 30, 2002, a compound annual
growth rate of 5.8%.
The industry has also undergone dramatic consolidation resulting in
the emergence of four dominant prime system contractors. One outgrowth of
this consolidation among the remaining major prime contractors is their
desire to limit purchases of products and sub-systems from one another.
Despite this desire, there are numerous essential but non-strategic
products, components and systems that are not economical for the major
prime contractors to design, develop or manufacture for their own internal
use. As the prime contractors continue to evaluate their core competencies
and competitive position, focusing their resources on larger programs and
platforms, the Company expects the prime contractors will seek to exit
non-strategic business areas and procure these needed elements on more
favorable terms from independent, commercially oriented merchant
suppliers.
The focus on cost control is also driving increased use of
commercial off-the-shelf products for both upgrades of existing systems
and in new systems. The Company believes the prime contractors will
continue to be under pressure to reduce their costs and will increasingly
seek to focus their resources and capabilities on major systems, turning
to commercially oriented merchant suppliers to produce non-core
sub-systems, components and products. Going forward, the successful
merchant suppliers will use their resources to complement and support,
rather than compete with the prime contractors. L-3 anticipates the
relationship between the major prime contractors and their primary
suppliers will, as in the automotive industry, develop into 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. Early involvement in the upgrading of existing systems
and the design and engineering of new systems incorporating these
outsourced products will provide top-tier suppliers, including the
Company, 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.
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Business Strategy
L-3 intends to leverage its market position, diverse program base
and favorable mix of cost plus to fixed price contracts to enhance its
profitability, reduce its indebtedness and to establish itself as the
premier merchant supplier of communication systems and products to the
major prime contractors in the aerospace/defense industry as well as the
Government. The Company's strategy to achieve these objectives includes:
-- Expand Merchant Supplier Relationships. Senior Management (as
defined) has developed strong relationships with virtually all of the
prime contractors, the DoD and other major government agencies, enabling
L-3 to identify business opportunities and anticipate customer needs. As
an independent merchant supplier, the Company anticipates its future
growth will be driven by expanding its share of existing programs and by
participating in new programs. Management has already identified several
opportunities where the Company believes it will be able to use its strong
relationships to increase its business presence and allow its customers to
reduce their costs. The Company also expects 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 L-3's
capabilities on a more favorable basis given its status as an independent
company.
-- Support Customer Requirements. A significant portion of L-3's
sales are derived from high-priority, long-term programs and from programs
for which the Company has been the incumbent supplier, and in many cases
acted as the sole provider, over many years. Approximately 67% of the
Company's total pro forma 1996 sales were generated from sole source
contracts. L-3's customer satisfaction and excellent performance record
are evidenced by its performance-based award fees exceeding 90% on average
over the past two years. Going forward, management believes prime
contractors will award long-term, sole source, outsourcing contracts to
the merchant supplier they believe is most capable on the basis of
quality, responsiveness, design, engineering and program management
support as well as cost. Reflecting L-3's strong competitive position, the
Company has experienced a contract award win rate over the past two years
of approximately 50% on new competitive contracts for which it competes
and approximately 90% on contracts for which it is the incumbent. The
Company intends to continue to align its research and development,
manufacturing and new business efforts to complement its customers'
requirements.
-- Leverage Technical and Market Leadership Positions. L-3 has
developed strong, proprietary technical capabilities that have enabled it
to capture a number one or two market position in most of its key business
areas, including secure, high data rate communication systems, solid state
aviation recorders, advanced antenna systems and high performance
microwave components. Over the past three years, the Company has invested
over $100 million in Company-sponsored independent research and
development, including bid and proposal costs, in addition to making
substantial investments in its technical and manufacturing resources.
Further, the Company has a highly skilled workforce including over 1,500
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<PAGE>12
engineers. As an independent company, management intends to leverage its
technical expertise and capabilities into several closely aligned
commercial business areas and applications, including opportunities in
wireless telephony and medical imaging archive management.
-- Maintain Diversified Business Mix. The Company enjoys a diverse
business mix with a limited program exposure, a favorable balance of cost
plus to fixed price contracts, a significant sole source business and an
attractive customer profile. The Company's largest program, representing
14% of 1996 pro forma sales, is a long-term, sole source, cost plus
support program for the U-2 program Directorate for the DoD. No other
program represented more than 7% of pro forma 1996 sales. Further, the
Company's pro forma sales mix of contracts in 1996 was 42% cost plus and
58% fixed price, providing the Company with a balanced mix of predictable
profitability (cost plus) and higher margin (fixed price) business. L-3
also enjoys an attractive customer mix of defense and commercial business,
with DoD related sales accounting for 65% and commercial and federal
(non-DoD) sales accounting for 35% of 1996 pro forma sales. The Company
intends to leverage this favorable business profile to expand its merchant
supplier business base.
-- Enhance Operating Margins. As part of larger corporations (i.e.,
Lockheed Martin, Loral, GE, Unisys), the Businesses were historically
required to absorb significant corporate expense allocations. As an
independent company, L-3 believes that it will be able to leverage its
discretionary expenditures in a more focused and efficient manner, enhance
its operating performance and reduce overhead expenses reflecting Senior
Management's more flexible, entrepreneurial approach. The Company believes
that significant costs incurred by the Businesses under Lockheed Martin's
ownership will not be incurred going forward. These cost savings include
reduced corporate administrative and facilities expenses and certain
operating performance improvements.
-- Capitalize on Strategic Acquisition Opportunities. Recent
industry consolidation has virtually eliminated traditional middle-tier
aerospace/defense companies. This level of consolidation is now beginning
to draw the concern of the DoD and federal anti-trust regulators. As a
result, the Company anticipates the pending major mergers as well as
continued consolidation of the smaller participants in the defense
industry will create attractive complementary acquisition candidates for
L-3 in the future as these companies continue to evaluate their core
competencies and competitive position.
The Transaction
The Acquisition
Holdings and L-3 were formed by Mr. Frank C. Lanza, the former
President and Chief Operating Officer of Loral Corporation ("Loral"), Mr.
Robert V. LaPenta, the former Senior Vice President and Controller of
Loral (collectively, "Senior Management"), Lehman Brothers Capital
Partners III, L.P. and its affiliates (the "Lehman Partnership") and
Lockheed Martin to acquire (the "Acquisition") substantially all of the
assets and certain liabilities of (i) nine business units previously
purchased by Lockheed Martin as part of its acquisition of Loral in April
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<PAGE>13
1996 (the "Loral Acquired Businesses") and (ii) one business unit,
Communication Systems -- Camden, purchased by Lockheed Martin as part of
its acquisition of the aerospace business of GE ("GE Aerospace") in April
1993 (collectively, the "Businesses"). Pursuant to a Transaction Agreement
dated March 28, 1997, among the parties named therein (the "Transaction
Agreement"), the total consideration paid to Lockheed Martin was $525
million, comprising $480 million of cash before an estimated $20 million
reduction related to a purchase price adjustment, and $45 million of
common equity being retained by Lockheed Martin. L-3 is a wholly-owned
subsidiary of Holdings. Holdings was capitalized with $125 million of
common equity, with Messrs. Lanza and LaPenta collectively owning 15.0%,
the Lehman Partnership owning 50.1% and Lockheed Martin owning 34.9%. L-3
was capitalized with $125 million of common equity provided by Holdings.
Sources and Uses of Funds
The Acquisition was structured as an asset purchase with customary
terms and conditions. Financing for the Acquisition was comprised of:
(i) $275 million of Senior Secured Credit Facilities, consisting of $175
million of term loan facilities (the "Term Loan Facilities") and a $100
million revolving credit facility (the "Revolving Credit Facility" and,
together with the Term Loan Facilities, the "Senior Credit Facilities");
(ii) $225 million of Senior Subordinated Exchange Notes; and (iii) $125
million of equity including the equity to be retained by Lockheed Martin
(collectively, the "Financing"). Approximately $480 million of the
proceeds from the Financing was used by the Company to (i) pay the
estimated $460 million cash portion of the purchase price after an
estimated purchase price adjustment and (ii) pay related fees and
expenses. The Revolving Credit Facility was not drawn (other than for
letters of credit) at the closing of the Transaction (the "Closing") and
is available for ongoing working capital financing needs. The following
table summarizes the sources and uses of funds in connection with the
Transaction.
<TABLE>
<CAPTION>
($ in millions)
Sources of Funds Amount Uses of Funds Amount
----------------------------------------- ------------------ ----------------------------------------- ------------------
<S> <C> <C> <C>
Revolving Credit Facility<F1> . . . . . . $ 0.0 Purchase of Assets
Term Loan Facilities . . . . . . . . . . 175.0 Cash Portion . . . . . . . . . . . . . $479.8
Senior Subordinated Notes . . . . . . . . 225.0 Lockheed Martin Equity in L-3 . . . . 45.2
Common Equity<F2> . . . . . . . . . . . . 125.0 525.0
----- -----
Estimated Purchase Price Adjustment . . . (20.0)
Estimated Fees and Expenses . . . . . . . 20.0
-----
Total Sources . . . . . . . . . . . . $525.0 Total Uses . . . . . . . . . . . . . . $525.0
====== ======
<PAGE>
<PAGE>14
____________________
<FN>
<F1> Availability of up to $100 million, none of which was drawn at
Closing other than letters of credit which were less than $10
million.
<F2> Includes $45 million of equity of Holdings retained by Lockheed
Martin.
</TABLE>
The purchase price of $525 million is subject to an adjustment based
upon the difference between the audited combined net tangible assets (as
defined in the Transaction Agreement) of the Businesses and a
contractually agreed-upon amount. It is anticipated that this adjustment,
currently estimated to be $20 million, will have the effect of reducing
the purchase price. Prior to Closing, Lockheed Martin estimated the
purchase price adjustment and reduced the cash portion of the purchase
price by $15.9 million. Any difference between the actual purchase price
adjustment calculated post-closing and the amount withheld at Closing will
be paid, with interest, to the appropriate party.
The Acquisition and the Financing are referred to herein as the
"Transaction".
<PAGE>
<PAGE>15
The Exchange Offer
The Exchange Offer . . . . . . . The Company is offering to exchange
pursuant to the Exchange Offer up to
$225,000,000 aggregate principal
amount of its new 10 3/8% Series B
Senior Subordinated Notes due 2007
(the "Exchange Notes") for a like
aggregate principal amount of its
outstanding 10 3/8% Senior
Subordinated Notes due 2007 (the "Old
Notes" and together with the Exchange
Notes, the "Notes"). The terms of the
Exchange Notes are identical in all
material respects (including principal
amount, interest rate and maturity) to
the terms of the Old Notes for which
they may be exchanged pursuant to the
Exchange Offer, except that the
Exchange Notes are freely
transferrable by Holders (as defined)
thereof (other than as provided
herein), and are not subject to any
covenant regarding registration under
the Securities Act. See "The Exchange
Offer".
Interest Payments . . . . . . . . Interest on the Exchange Notes shall
accrue from the last interest payment
date (May 1 or November 1) on which
interest was paid on the Notes so
surrendered or, if no interest has
been paid on such Notes, from April
30, 1997 (the "Interest Payment
Date").
Minimum Condition . . . . . . . . The Exchange Offer is not conditioned
upon any minimum aggregate principal
amount of Old Notes being tendered for
exchange.
Expiration Date; Withdrawal
of Tender . . . . . . . . . . The Exchange Offer will expire at 5:00
p.m., New York City time, on
, 1997, unless the Exchange Offer is
extended, in which case the term
"Expiration Date" means the latest
date and time to which the Exchange
Offer is extended. Tenders may be
withdrawn at any time prior to 5:00
p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer--Withdrawal Rights".
Exchange Date . . . . . . . . . . The date of acceptance for exchange of
the Old Notes will be the fourth
business day following the Expiration
Date.<PAGE>
<PAGE>16
Conditions to the
Exchange Offer . . . . . . . . The Exchange Offer is subject to
certain customary conditions, which
may be waived by the Company. The
Company currently expects that each of
the conditions will be satisfied and
that no waivers will be necessary. See
"The Exchange Offer--Certain
Conditions to the Exchange Offer". The
Company reserves the right to
terminate or amend the Exchange Offer
at any time prior to the Expiration
Date upon the occurrence of any such
condition.
Procedures for Tendering
Old Notes . . . . . . . . . . Each holder of Old Notes wishing to
accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof,
in accordance with the instructions
contained herein and therein, and mail
or otherwise deliver such Letter of
Transmittal, or such facsimile,
together with the Old Notes and any
other required documentation to the
Exchange Agent (as defined) at the
address set forth therein. See "The
Exchange Offer--Procedures for
Tendering Old Notes" and "Plan of
Distribution".
Use of Proceeds . . . . . . . . . There will be no proceeds to the
Company from the exchange of Notes
pursuant to the Exchange Offer.
Federal Income Tax
Consequences . . . . . . . . . The exchange of Notes pursuant to the
Exchange Offer will not be a taxable
event for federal income tax purposes.
See "Certain U.S. Federal Income Tax
Consequences".
Special Procedures for
Beneficial Owners . . . . . . Any beneficial owner whose Old Notes
are registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and who
wishes to tender should contact such
registered holder promptly and
instruct such registered holder to
tender on such beneficial owner's
behalf. If such beneficial owner
wishes to tender on such beneficial
owner's own behalf, such beneficial
owner must, prior to completing and
executing the Letter of Transmittal
and delivering the Old Notes, either
<PAGE>
<PAGE>17
make appropriate arrangements to
register ownership of the Old Notes in
such beneficial owner's name or obtain
a properly completed bond power from
the registered holder. The transfer of
registered ownership may take
considerable time. See "The Exchange
Offer--Procedures for Tendering Old
Notes".
Guaranteed Delivery
Procedures . . . . . . . . . . Holders of Old Notes who wish to
tender their Old Notes and whose Old
Notes are not immediately available or
who cannot deliver their Old Notes,
the Letter of Transmittal or any other
documents required by the Letter of
Transmittal to the Exchange Agent
prior to the Expiration Date must
tender their Old Notes according to
the guaranteed delivery procedures set
forth in "The Exchange Offer--
Procedures for Tendering Old Notes".
Acceptance of Old Notes and
Delivery of Exchange Notes . . The Company will accept for exchange
any and all Old Notes which are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The
Exchange Notes issued pursuant to the
Exchange Offer will be delivered
promptly following the Expiration
Date. See "The Exchange Offer--
Acceptance of Old Notes for Exchange;
Delivery of Exchange Notes".
Effect on Holders of Old Notes . As a result of the making of, and upon
acceptance for exchange of all validly
tendered Old Notes pursuant to the
terms of this Exchange Offer, the
Company will have fulfilled a covenant
contained in the Registration Rights
Agreement (the "Registration Rights
Agreement") dated April 30, 1997 among
the Company and Lehman Brothers Inc.
and BancAmerica Securities, Inc. (the
"Initial Purchasers") and,
accordingly, there will be no increase
in the interest rate on the Old Notes
pursuant to the terms of the
Registration Rights Agreement, and the
holders of the Old Notes will have no
further registration or other rights
under the Registration Rights
Agreement. Holders of the Old Notes
who do not tender their Old Notes in
the Exchange Offer will continue to
<PAGE>
<PAGE>18
hold such Old Notes and will be
entitled to all the rights and
limitations applicable thereto under
the Indenture between the Company and
The Bank of New York relating to the
Old Notes and the Exchange Notes (the
"Indenture"), except for any such
rights under the Registration Rights
Agreement that by their terms
terminate or cease to have further
effectiveness as a result of the
making of, and the acceptance for
exchange of all validly tendered Old
Notes pursuant to, the Exchange Offer.
All untendered Old Notes will continue
to be subject to the restrictions on
transfer provided for in the Old Notes
and in the Indenture. To the extent
that Old Notes are tendered and
accepted in the Exchange Offer, the
trading market for untendered Old
Notes could be adversely affected.
Consequence of Failure
to Exchange . . . . . . . . . Holders of Old Notes who do not
exchange their Old Notes for Exchange
Notes pursuant to the Exchange Offer
will continue to be subject to the
restrictions on transfer of such Old
Notes as set forth in the legend
thereon as a consequence of the offer
or sale of the Old Notes pursuant to
an exemption from, or in a transaction
not subject to, the registration
requirements of the Securities Act and
applicable state securities laws. In
general, the Old Notes may not be
offered or sold, unless registered
under the Securities Act, except
pursuant to an exemption from, or in a
transaction not subject to, the
Securities Act and applicable state
securities laws. The Company does not
currently anticipate that it will
register the Old Notes under the
Securities Act.
Exchange Agent . . . . . . . . . The Bank of New York is serving as
exchange agent (the "Exchange Agent")
in connection with the Exchange Offer.
See "The Exchange Offer--Exchange
Agent".<PAGE>
<PAGE>19
Terms of the Exchange Notes
Securities Offered . . . . . . . $225,000,000 aggregate principal
amount of 10 3/8% Senior Subordinated
Exchange Notes due 2007 (the "Exchange
Notes").
Maturity . . . . . . . . . . . . May 1, 2007.
Interest Payment Dates . . . . . May 1 and November 1, commencing
November 1, 1997.
Optional Redemption . . . . . . . The Exchange Notes may be redeemed at
the option of the Company, in whole or
in part, on or after May 1, 2002, at
the redemption prices set forth
herein, plus accrued and unpaid
interest to the date of redemption.
In addition, prior to May 1, 2000, the
Company may redeem up to an aggregate
of 35% of the Exchange Notes
originally issued at a redemption
price of 109.375% of the principal
amount thereof, plus accrued and
unpaid interest to the date of
redemption, with the net cash proceeds
of one or more Equity Offerings;
provided, however, that at least 65%
in aggregate principal amount of the
Exchange Notes originally issued
remain outstanding following such
redemption.
Change of Control . . . . . . . . In the event of a Change of Control
(as defined), the holders of the
Exchange Notes will have the right to
require the Company to purchase their
Exchange Notes at a price equal to
101% of the aggregate principal amount
thereof, plus accrued and unpaid
interest to the date of purchase.
Ranking . . . . . . . . . . . . . The Exchange Notes will be general
unsecured obligations of the Company,
subordinate in right of payment to all
current and future Senior Debt
including all obligations of the
Company and its Subsidiaries under the
Senior Credit Facilities. The Company
currently has no subsidiaries. At
June 30, 1997, on a pro forma basis
after giving effect to the
Transaction, the Company would have
had $400.0 million of indebtedness
outstanding, of which $175.0 million
would have been Senior Debt (excluding
<PAGE>
<PAGE>20
letters of credit). Borrowings under
the Senior Credit Facilities are
secured by substantially all of the
assets of the Company as well as the
capital stock of the Company and its
Subsidiaries. See "Risk Factors--
Substantial Leverage" and "--
Subordination".
Covenants . . . . . . . . . . . . The Indenture pursuant to which the
Exchange Notes will be issued (the
"Indenture") contains certain
covenants that, among other things,
limit the ability of the Company and
its Restricted Subsidiaries to incur
additional Indebtedness and issue
preferred stock, pay dividends or make
other distributions, repurchase Equity
Interests (as defined) or subordinated
Indebtedness, create certain liens,
enter into certain transactions with
affiliates, sell assets of the Company
or its Restricted Subsidiaries, issue
or sell Equity Interests of the
Company's Restricted Subsidiaries or
enter into certain mergers and
consolidations. In addition, under
certain circumstances, the Company is
required to offer to purchase Exchange
Notes at a price equal to 100% of the
principal amount thereof, plus accrued
and unpaid interest to the date of
purchase, with the proceeds of certain
Asset Sales (as defined). See
"Description of the Exchange Notes".
For a discussion of certain risk factors that should be considered
in connection with an investment in the Exchange Notes, see "Risk
Factors".
<PAGE>
<PAGE>21
Summary Unaudited Pro Forma Financial Data
The summary unaudited pro forma data as of June 30, 1997 and for
the six months then ended and as of December 31, 1996 and for the year
then ended have been derived from, and should be read in conjunction with,
the unaudited pro forma combined financial statements included elsewhere
herein. The unaudited pro forma data reflect the Acquisition and the
Financing as if these transactions had occurred on January 1, 1996 for
the statement of operations and other data.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1997 December 31, 1996
-------------- -----------------
($ in millions)
<S> <C> <C>
Statement of Operations Data:
Sales:
Secure Communication Systems . . . . . . . . . . . $176.1 $371.5
Specialized Communication Products . . . . . . . . 150.8 303.8
----- -----
Total sales . . . . . . . . . . . . . . . . . . . $326.9 $675.3
====== ======
Other Data:
EBITDA<F1>:
Secure Communication Systems . . . . . . . . . . . $ 14.6 $ 41.6
Specialized Communication Products . . . . . . . . 23.2 42.4
----- -----
Total EBITDA . . . . . . . . . . . . . . . . . . $ 37.8 $ 84.0
====== ======
EBITDA as a percentage of sales:
Secure Communication Systems . . . . . . . . . . . 8.3% 11.2%
Specialized Communication Products . . . . . . . . 15.4 14.0
----- -----
Total EBITDA as a percentage of sales . . . . . . 11.6% 12.4%
====== ======
Depreciation expense . . . . . . . . . . . . . . . . . $ 9.0 $ 18.0
Amortization expense . . . . . . . . . . . . . . . . . 4.7 10.0
Capital expenditures . . . . . . . . . . . . . . . . . 7.4 17.2
Ratio of earnings to fixed charges<F2> . . . . . . . . 1.23x 1.35x
Ratio of total EBITDA to cash interest expense<F3> . . 3.95x 2.18x
Ratio of total debt to total EBITDA . . . . . . . . . . N/A 4.76x
</TABLE>
<PAGE>
<PAGE>22
____________________
[FN]
<F1> EBITDA is defined as pro forma income before deducting interest expense,
income taxes, depreciation and amortization. EBITDA is not a
substitute for operating income, net income and cash flow from
operating activities as determined in accordance with generally
accepted accounting principles as a measure of profitability or
liquidity. EBITDA is presented as additional information because
management believes it to be a useful indicator of the Company's
ability to meet debt service and capital expenditure requirements
and because certain debt covenants of L-3 utilize EBITDA to measure
compliance with such covenants.
<F2> For purposes of this computation, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest
on indebtedness plus that portion of lease rental expense
representative of the interest factor.
<F3> For purposes of this computation, cash interest expense consists of
pro forma interest expense before amortization of deferred
financing costs.
<PAGE>
<PAGE>23
Summary Historical Financial Data
The following unaudited summary combined financial data as of June
30, 1997 and 1996 and for the six month periods then ended, has been
derived from, and should be read in conjunction with, the unaudited
interim condensed consolidated (combined) financial statements of the
Company and footnotes thereto included elsewhere herein. In the opinion
of the management, the unaudited condensed consolidated (combined)
financial statements include all adjustments (consisting of normal
recurring accruals) considered necessary for the fair presentation of the
information contained therein. Results for the interim periods are
not necessarily indicative of the results to be expected for the
entire year.
The summary combined financial data as of March 31, 1997 and for
the three month period ended March 31, 1997 and as of December 31, 1996
and 1995 and for the years ended December 31, 1996, 1995 and 1994 have
been derived from, and should be read in conjunction with, the audited
Combined Financial Statements of the Businesses and footnotes thereto
included elsewhere herein.
The unaudited summary combined financial data for the three month
period ended March 31, 1996 and as of December 31, 1994 and 1993, March
31, 1993 and December 31, 1992 for balance sheet data and the nine months
ended December 31, 1993, the three months ended March 31, 1993 and the
year ended December 31, 1992 for statement of operations data have been
derived from the unaudited financial statements of Communication Systems
-- Camden. In the opinion of the Businesses' management, such unaudited
financial statements reflect all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the financial position
and results of operations of Communication Systems -- Camden, also referred
to as Lockheed Martin Communication Systems Division in the Lockheed Martin
Predecessor Financial Statements, as of the dates and periods indicated.
These selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the condensed consolidated (combined) financial
statements of the Company and the Combined Financial Statements of the
Lockheed Martin Predecessor Businesses and the Loral Acquired Businesses
included elsewhere herein.
<PAGE>
<PAGE>24
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
------------------------------
For the Three
Three Months Months
Ended Six Months Ended March 31,
-------------------------------- Ended --------------------
June 30, 1997 March 31, 1997 June 30, 1996 1997 1996<F2>
--------------- -------------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales . . . . . . . . . . . . . . . $168.0 | $158.9 $206.4 $158.9 $41.2
Operating income . . . . . . . . . 15.1 | 7.9 10.9 7.9 1.7
Interest expense<F4>. . . . . . . . 10.0 | 8.4 9.4 8.4 2.0
Provision (benefit) for income |
taxes<F4> . . . . . . . . . . . . 2.0 | (.2) 1.3 (.2) .2
Net earnings (loss) . . . . . . . . 3.1 | (.3) .2 (.3) (.5)
|
Other Data: |
EBITDA<F5> . . . . . . . . . . . . $ 22.3 | $ 15.1 $ 21.2 $ 15.1 $4.8
Depreciation expense . . . . . . . 4.5 | 4.5 5.8 4.5 1.2
Amortization expense . . . . . . . 2.7 | 2.7 4.5 2.7 1.9
Capital expenditures . . . . . . . 3.1 | 4.3 4.7 4.3 .4
Ratio of earnings to fixed charges. 1.47x | <F6> 1.02x <F6> <F6>
Cash from (used in) operating |
activities . . . . . . . . . . . . 32.9 | (16.3) (29.4) (16.3) 10.2
Cash from (used in) investing |
activities . . . . . . . . . . . . (473.6) | (4.3) (292.0) (4.3) (.4)
Cash from (used in) financing |
activities . . . . . . . . . . . . 463.3 | 20.6 321.4 20.6 (9.8)
|
Balance Sheet Data: |
Working capital . . . . . . . . . . $117.6 | $121.4 N/A $ 121.4 N/A
Total assets . . . . . . . . . . . 680.9 | 608.5 N/A 608.5 N/A
Invested equity . . . . . . . . . . -- | 493.9 N/A 493.9 N/A
Shareholders' Equity. . . . . . . . 120.6 | -- N/A -- N/A
</TABLE>
<PAGE>
<PAGE>25
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------------
1993
--------------------------
Nine Months Three Months
Ended Ended
1996<F1> 1995<F2> 1994<F2> Dec. 31<F2> March 31<F3> 1992<F3>
----------- ---------- ---------- ----------- ------------- ------------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales . . . . . . . . . . . . . . . . $543.1 $166.8 $218.9 $200.0 | $67.8 $368.5
Operating income . . . . . . . . . . 43.7 4.7 8.4 12.4 | 5.1 49.3
Interest expense<F4>. . . . . . . . . 24.2 4.5 5.5 4.1 | -- --
Provision (benefit) for income |
taxes<F4> . . . . . . . . . . . . . . 7.8 1.2 2.3 3.8 | 2.0 19.8
Net earnings (loss) . . . . . . . . . 11.7 (1.0) 0.6 4.5 | 3.1 29.5
|
Other Data: |
EBITDA<F5> . . . . . . . . . . . . . . $ 68.7 $ 16.2 $ 19.9 $ 23.4 | $ 7.0 $ 58.5
Depreciation expense . . . . . . . . 14.9 5.5 5.4 6.1 | 1.8 8.9
Amortization expense . . . . . . . . 10.1 6.1 6.1 4.9 | 0.1 0.3
Capital expenditures . . . . . . . . 13.5 5.5 3.7 2.6 | 0.8 3.9
Ratio of earnings to fixed charges . 1.72x 1.03x 1.40x N/A | N/A N/A
Cash from (used in) operating 40.0 9.4 21.8 N/A | N/A N/A
activities . . . . . . . . . . . . . |
Cash from (used in) investing (298.2) (5.5) (3.7) N/A | N/A N/A
activities . . . . . . . . . . . . . |
Cash from (used in) financing 267.3 (3.8) (18.1) N/A | N/A N/A
activities . . . . . . . . . . . . . |
|
Balance Sheet Data: |
Working capital . . . . . . . . . . . $ 98.8 $ 21.1 $ 19.3 $ 24.7 | $22.8 $ 35.8
Total assets . . . . . . . . . . . . 593.3 228.5 233.3 241.7 | 93.5 105.1
Invested equity . . . . . . . . . . . 473.6 194.7 199.5 202.0 | 59.9 72.8
Shareholders' Equity. . . . . . . . -- -- -- -- | -- --
</TABLE>
<PAGE>
<PAGE>26
____________________
[FN]
<F1> Reflects ownership of Loral's Communication Systems -- Salt Lake
and Specialized Communication Products businesses commencing
April 1, 1996.
<F2> Reflects ownership of Communication Systems -- Camden by Lockheed
Martin commencing April 1, 1993.
<F3> Reflects ownership of Communication Systems -- Camden by GE
Aerospace for the periods indicated. The amounts shown herein
include only those amounts as reflected in the financial records of
Communication Systems -- Camden.
<F4> For periods prior to April 1, 1997, interest expense and income tax
(benefit) provision were allocated from Lockheed Martin.
<F5> EBITDA is defined as income before deducting interest expense,
income taxes, depreciation and amortization. EBITDA is not a
substitute for operating income, net earnings and cash flow from
operating activities as determined in accordance with generally
accepted accounting principles as a measure of profitability or
liquidity. EBITDA is presented as additional information because
management believes it to be a useful indicator of the Company's
ability to meet debt service and capital expenditure requirements
and because certain debt covenants of L-3 utilize EBITDA to measure
compliance with such covenants.
<F6> For the three months ended March 31, 1997 and 1996, earnings were
insufficient to cover fixed charges by $.5 million and $.4 million,
respectively.
<PAGE>
<PAGE>27
RISK FACTORS
Holders of Old Notes should consider carefully, in addition to the
other information contained in this Prospectus, the following factors
before deciding to tender Old Notes in the Exchange Offer. The risk
factors set forth below are generally applicable to the Old Notes as well
as the Exchange Notes.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject
to the restrictions on transfer of such Old Notes as set forth in the
legend thereon. In general, Old Notes may not be offered or sold unless
registered under the Securities Act, except pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws. The Company does not
currently intend to register the Old Notes under the Securities Act. Based
on interpretations by the staff of the Commission, the Company believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold or otherwise transferred by
Holders thereof (other than any such Holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Old Notes were acquired in the ordinary
course of such Holders' business and such Holders have no arrangement with
any person to participate in the distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution." To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes will
be adversely affected.
Lack of Market for the Exchange Notes
The Exchange Notes are being offered to the holders of the Old
Notes. The Old Notes were offered and sold in April 1997 to a small number
of institutional investors and are eligible for trading in the Private
Offerings, Resale and Trading through Automatic Linkages (PORTAL) Market.
The Company does not intend to apply for a listing of the Exchange
Notes on a securities exchange or on any automated dealer quotation
system. There is currently no established market for the Exchange Notes
and there can be no assurance as to the liquidity of markets that may
develop for the Exchange Notes, the ability of the holders of the Exchange
Notes to sell their Exchange Notes or the price at which such holders
would be able to sell their Exchange Notes. If such markets were to exist,
the Exchange Notes could trade at prices that may be lower than the
initial market value thereof depending on many factors, including
prevailing interest rates and the markets for similar securities. The
Exchange Notes are expected to be designated for trading in the PORTAL
market. The Initial Purchasers have advised the Company that they
currently intend to make a market with respect to the Exchange Notes.
However, the Initial Purchasers are not obligated to do so, and any market
<PAGE>
<PAGE>28
making with respect to the Exchange Notes may be discontinued at any time
without notice. In addition, such market making activity may be limited
during the pendency of the Exchange Offer or the effectiveness of a shelf
registration statement in lieu thereof. Because Lehman Brothers Inc. is an
affiliate of the Company, following consummation of the Exchange Offer
Lehman Brothers Inc. will be required to deliver a current "market-maker"
prospectus and otherwise comply with the registration requirements of the
Securities Act in connection with any secondary market sale of the New
Exchange Notes, which may affect its ability to continue market-making
activities. See "Notice to Investors" and "Plan of Distribution".
The liquidity of, and trading market for, the Notes also may be
adversely affected by general declines in the market for similar
securities. Such a decline may adversely affect such liquidity and trading
markets independent of the financial performance of, and prospects for,
the Company.
The liquidity of, and trading market for, the Exchange Notes also
may be adversely affected by general declines in the market for similar
securities.
Substantial Leverage
The Company incurred substantial indebtedness in connection with the
Transaction and the Company is highly leveraged. To effect the Transaction,
the Company incurred $400 million of indebtedness (excluding letters of
credit) in addition to equity contributions of approximately $116 million
(after giving effect to EITF 88-16 (as defined) accounting treatment
relating to basis in leveraged buyout transactions by Holdings). Of the
total $525 million used to consummate the Acquisition, $175 million (33.3%)
was supplied by the Senior Credit Facilities, $225 million (42.9%) was
supplied by the Old Exchange Notes, and, through Holdings, $80 million
(15.2%) was supplied by equity purchases by the Lehman Partnership and
Senior Management and $45 million (8.6%) contributed through equity
retention in L-3 by Lockheed Martin. After giving pro forma effect to the
Transaction, the Company's ratio of earnings to fixed charges would have
been 1.35:1 for the year ended December 31, 1996, and for the three months
ended March 31, 1997, pro forma earnings would have been insufficient to
cover fixed charges by $.9 million. The Company's actual ratio of earnings
to fixed charges for the three months ended June 30, 1997 was 1.47:1. The
Company may incur additional indebtedness in the future, subject to
limitations imposed by the Senior Credit Facilities and the Indenture.
Based upon the current level of operations and anticipated
improvements, management believes that the Company's cash flow from
operations, together with available borrowings under the Revolving Credit
Facility, will be adequate to meet its anticipated requirements for
working capital, capital expenditures, research and development
expenditures, program and other discretionary investments, interest
payments and scheduled principal payments for the foreseeable future.
There can be no assurance, however, that the Company's business will
continue to generate cash flow at or above current levels or that
currently anticipated improvements will be achieved. If the Company is
unable to generate sufficient cash flow from operations in the future
to service its debt, it may be required to sell assets, reduce capital
expenditures, refinance all or a portion of its existing debt (including
the Notes) or obtain additional financing. The Company's ability to make
<PAGE>
<PAGE>29
scheduled principal payments of, to pay interest on or to refinance its
indebtedness (including the Notes) depends on its future performance
and financial results, which, to a certain extent, are subject to general
economic, financial, competitive, legislative, regulatory and other
factors beyond its control. There can be no assurance that sufficient
funds will be available to enable the Company to service its indebtedness,
including the Notes, or make necessary capital expenditures and program
and other discretionary investments. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
The degree to which the Company is leveraged could have important
consequences to Holders of the Notes, including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from
operations will be required to be dedicated to debt service and will not
be available for other purposes including capital expenditures, research
and development expenditures, and program and other discretionary
investments; (ii) the Company's ability to obtain additional financing in
the future could be limited; (iii) certain of the Company's borrowings are
at variable rates of interest, which could result in higher interest
expense in the event of increases in interest rates; (iv) the Company may
be more vulnerable to downturns in its business or in the general economy
and may be restricted from making acquisitions, introducing new
technologies and products or exploiting business opportunities; and
(v) the Senior Credit Facilities and the Indenture contain financial and
restrictive covenants that limit, among other things, the ability of the
Company to borrow additional funds, dispose of assets or pay cash
dividends. Failure by the Company to comply with such covenants could
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company. In addition, the degree to which
the Company is leveraged could prevent it from repurchasing all Notes
tendered to it upon the occurrence of a Change in Control, which would
constitute an Event of Default under the Indenture. See "Description of
the Exchange Notes" and "Description of Senior Credit Facilities".
Lack of Independent Operating History
Prior to the consummation of the Transaction, the Company's
operations were conducted as divisions of Lockheed Martin, Loral, Unisys
and GE Aerospace. Following consummation of the Transaction the Company
operates independently of Lockheed Martin and is required to provide many
corporate services on a stand-alone basis that were previously provided by
Lockheed Martin, including corporate research and development, marketing,
and general and administrative services including tax, treasury,
management information systems, human resources and legal services. The
result of operations of the Predecessor Company reflects the allocation of
overhead costs, financing costs, income taxes, pension and post employment
benefit costs, among other costs, that differ from the manner the
Registrant will conduct its business as a separate entity. Lockheed Martin
and the Company have entered into a Transition Services Agreement pursuant
to which Lockheed Martin provides certain of these services at costs
consistent with past practices to the Company until December 31, 1997 (or
in the case of Communication Systems -- Camden for a period of up to 18
months after the Closing). There can be no assurance that the actual
corporate services costs incurred in operating the Company will not exceed
historical charges or that upon termination of the Transition Services
Agreement the Company will be able to obtain similar services on
comparable terms.
<PAGE>
<PAGE>30
Future Acquisition Strategy
The Company's strategy includes pursuing additional acquisitions
that will complement its business. There can be no assurance, however,
that the Company will be able to identify additional acquisition
candidates on commercially reasonable terms or at all or that, if
consummated, any anticipated benefits will be realized from such future
acquisitions. In addition, the availability of additional acquisition
financing cannot be assured and, depending on the terms of such additional
acquisitions, could be restricted by the terms of the Senior Credit
Facilities and/or the Indenture. The process of integrating acquired
operations into the Company's existing operations may result in unforeseen
operating difficulties and may require significant financial and
managerial resources that would otherwise be available for the ongoing
development or expansion of the Company's existing operations. Possible
future acquisitions by the Company could result in the incurrence of
additional debt, contingent liabilities and amortization expenses related
to goodwill and other intangible assets, all of which could materially
adversely affect the Company's financial condition and operating results.
Technological Change; New Product Development
The communication equipment industry for defense applications and in
general is characterized by rapidly changing technology. The Company's
ability to compete successfully in this market will depend on its ability
to design, develop, manufacture, assemble, test, market and support new
products and enhancements on a timely and cost-effective basis. The
Company has historically obtained technology from substantial
customer-sponsored research and development as well as from internally
funded research and development; however, there can be no assurance that
the Company will continue to maintain comparable levels of
customer-sponsored research and development in the future. See "Business--
Research and Development". Substantial funds have been allocated to
capital expenditures and program and other discretionary investments in
the past and will continue to be required in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
There can be no assurance that the Company will successfully identify new
opportunities and continue to have financial resources to develop new
products in a timely or cost-effective manner, or that products and
technologies developed by others will not render the Company's products
and systems obsolete or non-competitive.
Entry into Commercial Business
The Company's revenues historically have been derived principally
from business with the DoD and other government agencies. In addition to
continuing to pursue this major market area, the Company intends to pursue
a strategy that leverages the technical capabilities and expertise derived
from its defense business to expand further into related commercial
markets. Certain of the Company's commercial products, such as fixed
wireless loop communication equipment and medical image archiving
equipment, have only been recently introduced. As such, these new products
are subject to certain risks, including the need to develop and maintain
marketing, sales and customer support capabilities, to secure third-party
manufacturing and distribution arrangements, to respond to rapid
technological advances and, ultimately, to customer acceptance of these
products. The Company's efforts to expand its presence in the commercial
<PAGE>
<PAGE>31
market will require significant resources including capital and management
time. There can be no assurance that the Company will be successful in
addressing these risks or in developing these commercial business
opportunities.
Pension Plan Liabilities
The Transaction Agreement (as defined) provides that Lockheed Martin
transfer certain assets to Holdings and L-3 and that Holdings and L-3
assume certain liabilities relating to defined benefit pension plans for
present and former employees and retirees of certain businesses being
transferred to Holdings and L-3. Lockheed Martin received a letter from
the Pension Benefit Guaranty Corporation (the "PBGC") which requested
information regarding the transfer of such pension plans. The PBGC's
letter indicated that it believed certain of the employee pension plans
are underfunded using the PBGC's actuarial assumptions (which assumptions
result in a larger liability for accrued benefits than the assumptions
used for financial reporting under Statement of Financial Accounting
Standards No. 87, "Accounting for Pension Costs" ("FASB 87")). The Company
has calculated the net funding position of the pension plans to be
transferred and believes the plans to be overfunded by approximately $1
million under ERISA (as defined) assumptions, underfunded by approximately
$9 million under FASB 87 assumptions and, on a termination basis,
underfunded by as much as $51 million under PBGC assumptions.
Substantially all of the PBGC underfunding is related to two pension plans
covering employees at L-3's Communication Systems -- Salt Lake and
Aviation Recorders businesses.
The Company, Lockheed Martin and the PBGC entered into certain
agreements that include Lockheed Martin providing a commitment to the PBGC
with regard to the Subject Plans (as defined) and the Company providing
certain assurances to Lockheed Martin regarding such plans. See
"Business--Pension Plans". The Company expects, based in part upon
discussions with its consulting actuaries, that any increase in pension
expenses or future funding requirements from those previously anticipated
for the Subject Plans would not be material. However, there can be no
assurance that the impact of any increased pension expenses or funding
requirements under this arrangement would not be material to the Company.
Significant Customers
The Company's sales are predominantly derived from contracts with
agencies of, and prime contractors to, the Government. Although the
various branches of the Government are subject to the same budgetary
pressures and other factors, the various Government customers exercise
independent purchasing decisions. The U.S. defense budget has declined in
real terms since the mid-1980s, resulting in delays for some new program
starts, program stretch-outs and program cancellations. The U.S. defense
budget has begun to stabilize and increased modestly in fiscal 1996. In
1996, the Company performed under approximately 180 contracts with value
exceeding $1 million for the Government. Pro forma sales in 1996 to the
Government, including pro forma sales to the Government through prime
contractors, were $529 million, representing approximately 78.4% of the
Company's corresponding sales. The Company's largest Government program, a
cost plus, sole source contract for support of the U-2 Directorate of the
DoD, contributed 14% of pro forma sales for 1996. No other program
represented more than 7% of the Company's pro forma sales in 1996. The
<PAGE>
<PAGE>32
loss of all or a substantial portion of sales to the Government would have
a material adverse effect on the Company's income and cash flow. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business--Government Contracts".
Historical sales by the Company to Lockheed Martin were $70.7
million in 1996 or 13.0% of the Company's total reported historical sales.
As a part of the Acquisition, the Company and Lockheed Martin intend to
enter into certain purchase agreements for the sale of products and
systems to Lockheed Martin by the Company. The loss of all or a
substantial portion of such sales to Lockheed Martin would have a material
adverse effect on the Company's income and cash flow.
Dependence on Lockheed Martin
In addition to the above-mentioned sales to Lockheed Martin, the
Company continues to be dependent on Lockheed Martin for certain services
and continuing agreements. Lockheed Martin has agreed to indemnify the
Company, subject to certain limitations, for its breach of representations
and warranties contained in the Transaction Agreement. Lockheed Martin
also has agreed to provide to the Company certain corporate services of a
type currently provided to the Businesses at costs consistent with past
practices. The Company and Lockheed Martin have entered into (i) supply
agreements which reflect existing intercompany work transfer agreements or
similar support arrangements with prices and other terms consistent with
the present intercompany arrangements, (ii) certain subleases of real
property and (iii) cross-licenses of intellectual property. There can be no
assurance that, after the termination of these arrangements, the Company
will be able to obtain these services or arrangements at comparable costs.
Further, Lockheed Martin and Holdings have entered into a Limited Non-
Competition Agreement (the "Noncompetition Agreement") which, for up to
three years, in certain circumstances, after the Closing, precludes
Lockheed Martin from engaging in the sale of any products that compete
with the products of L-3 that are set forth in the Noncompetition
Agreement for specifically identified applications of the products.
Under the Noncompetition Agreement, Lockheed Martin is prohibited,
with certain exceptions, from acquiring any business engaged in the sale of
the specified products referred to in the preceding sentence, although
Lockheed Martin may acquire such a business provided that it offers to
sell such business to L-3 within 90 days of its acquisition. The
Noncompetition Agreement does not, among other things, (i) apply to
businesses operated and managed by Lockheed Martin on behalf of the
United States government, (ii) prohibit Lockheed Martin from engaging
in any existing businesses and planned businesses or businesses as of the
closing of the Transaction that are reasonably related to existing or
planned businesses or (iii) apply to selling competing products where
such products are part of larger systems sold by Lockheed Martin. The
Company has also entered into agreements with Lockheed Martin relating
to the PBGC matter discussed above.
Dependence on Key Personnel
The Company's success depends to a significant degree upon the
continued contributions of the Company's management, including Messrs.
Lanza and LaPenta, and its ability to attract and retain other highly
qualified management and technical personnel. As part of the Transaction,
Messrs. Lanza and LaPenta invested $15 million to purchase 15% of the
initial capital stock of the Company. The Company has entered into
employment agreements with Messrs. Lanza and LaPenta. The Company
maintains key man life insurance to cover Senior Management. The Company
also faces competition for management and technical personnel from other
companies and organizations. There can be no assurance that the Company
<PAGE>
<PAGE>33
will be successful in hiring and retaining key personnel. See
"Management--Directors and Executive Officers".
Environmental Liabilities
The Company's 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 or resulting from its operations.
The Company continually assesses its obligations and compliance with
respect to these requirements. Based on a review by an independent
environmental consulting firm and its own internal assessments, management
believes that the Company's current operations are in substantial
compliance with all existing applicable environmental laws and
regulations. New environmental protection laws that will be effective in
1997 and thereafter may require the installation of environmental
protection equipment at the Company's manufacturing facilities. However,
the Company does not believe that its environmental expenditures, if any,
will have a material adverse effect on its financial condition or results
of operations.
Pursuant to the Transaction Agreement, the Company has agreed to
assume certain on-site and off-site environmental liabilities related to
events or activities occurring prior to the consummation of the
Transaction. Lockheed Martin has agreed to retain all environmental
liabilities for all facilities no longer used by the Businesses and to
indemnify fully the Company for such prior site environmental liabilities.
Lockheed Martin has also agreed, for the first eight years following the
Closing, to pay 50% of all costs incurred by the Company above those
reserved for on the Company's balance sheet at closing relating to certain
Company-assumed environmental liabilities and, for the seven years
thereafter, to pay 40% of certain reasonable operation and maintenance
costs relating to any environmental remediation projects undertaken in the
first eight years. The Company is aware of environmental contamination at
two of its facilities that will require ongoing remediation. Management
believes that the Company has established adequate reserves for the
potential costs associated with the assumed environmental liabilities.
However, there can be no assurance that any costs incurred will be
reimbursable from the Government or covered by Lockheed Martin under the
terms of the Transaction Agreement or that the Company's environmental
reserves will be sufficient.
Litigation
From time to time the Company is involved in legal proceedings
arising in the ordinary course of its business. As part of the
Acquisition, the Company has agreed to assume certain litigation relating
to the Businesses and Lockheed Martin has agreed to indemnify the Company,
up to certain limits, for a breach of its representations and warranties.
Management believes it is adequately reserved for these liabilities and
that there is no litigation pending that could have a material adverse
effect on the Company or its operations, except as discussed below.
As of June 30, 1997, the Company and Universal Avionics Systems
Corporation ("Universal") has reached a settlement with respect to a
lawsuit brought by Universal against the Company's Aviation Recorders
operation ("Aviation Recorders"). The terms of this settlement will not
<PAGE>
<PAGE>34
have a material adverse effect on the Company's financial condition or
results of operations.
Risks Inherent in Government Contracts
The reduction in the U.S. defense budget has caused most
defense-related government contractors to experience declining revenues,
increased pressure on operating margins and, in few cases, net losses. The
Company has experienced declining sales in each of its last five fiscal
years. Specifically, adjusted sales of the Company and its predecessors
have decreased from $925.5 million for the fiscal year ended December 31,
1992 to $664.7 million for the fiscal year ended December 31, 1996. A
significant further decline in U.S. military expenditures could materially
adversely affect the Company's sales and earnings. The loss or significant
curtailment of a material program in which the Company participates could
also materially adversely affect the Company's future sales and earnings
and thus the Company's ability to meet its financial obligations.
Companies engaged primarily in supplying defense-related equipment
and services to government agencies are subject to certain business risks
peculiar to the defense industry. These risks include, among other things,
the ability of the Government to: (i) suspend unilaterally the Company
from receiving new contracts pending resolution of alleged violations of
procurement laws or regulations, (ii) terminate existing contracts,
(iii) audit the Company's contract related costs and fees, including
allocated indirect costs, and (iv) control and potentially prohibit the
export of the Company's products.
All of the Company's Government contracts are, by their terms,
subject to termination by the Government either for its convenience or for
default of the contractor. Termination for convenience provisions provide
only for the recovery by the Company of costs incurred or committed,
settlement expenses and profit on work completed prior to termination.
Termination for default provisions provide for the contractor to be liable
for excess costs incurred by the Government in procuring undelivered items
from another source. In addition to the right of the Government to
terminate, Government contracts are conditioned upon the continuing
availability of Congressional appropriations. Congress usually
appropriates funds for a given program on a fiscal-year basis even though
contract performance may take more than one year. Consequently, at the
outset of a major program, the contract is usually partially funded, and
additional monies are normally committed to the contract by the procuring
agency only if, as and when appropriations are made by Congress for future
fiscal years. Foreign defense contracts generally contain comparable
provisions relating to termination at the convenience of the government.
The Company is subject to audit and review by the Government of its
costs and performance on, and accounting and general business practices
relating to, Government contracts. The Company's contract related costs
and fees, including allocated indirect costs, are subject to adjustment
based on the results of such audits. In addition, under Government
purchasing regulations, certain of the Company's costs, including certain
financing costs, goodwill, portions of research and development costs, and
certain marketing expenses may not be reimbursable under Government
contracts. Further, as a government contractor, the Company is also
subject to investigation, legal action and/or liability that would not
apply to a commercial company.
<PAGE>
<PAGE>35
The Company, like all defense businesses, is subject to risks
associated with the frequent need to bid on programs in advance of design
completion (which may result in unforeseen technological difficulties
and/or cost overruns), the substantial time and effort required for
relatively unproductive design and development, design complexity and
rapid obsolescence, and the constant necessity for design improvement. The
Company obtains many of its Government contracts through a process of
competitive bidding. There can be no assurance that the Company will
continue to be successful in winning competitively awarded contracts or
that awarded contracts will generate sufficient sales to result in
profitability for the Company. See "Business--Major Customers" and "--
Government Contracts".
In addition to these Government contract risks, many of the
Company's products and systems require licenses from Government agencies
for export from the United States, and certain of the Company's products
currently are not permitted to be exported. There can be no assurance that
the Company will be able to gain any and all licenses required to export
its products, and failure to receive the required licenses could
materially reduce the Company's ability to sell its products outside the
United States.
The Company's services are provided primarily through fixed price or
cost plus contracts. Approximately 58% of the Company's pro forma sales in
1996 were attributable to fixed price contracts. The financial results of
long-term fixed price contracts are recognized using the cost-to-cost
percentage-of-completion method. As a result, revisions in revenues and
profit estimates are reflected in the period in which the conditions that
require such revisions become known and are estimable. The risks inherent
in long-term fixed price contracts include the difficulty of forecasting
costs and schedules, contract revenues that are related to performance in
accordance with contract specifications and potential for component
obsolescence in connection with long-term procurements. Failure to
anticipate technical problems, estimate costs accurately or control costs
during performance of a fixed price contract may reduce the Company's
profitability or cause a loss. Although the Company believes that adequate
provision for its fixed price contracts is reflected in its financial
statements, no assurance can be given that this provision is adequate or
that losses on fixed price and time-and-material contracts will not occur
in the future.
Backlog
The Company's backlog represents orders under contracts which are
primarily with the Government. The Government enjoys broad rights to
unilaterally modify or terminate such contracts. Accordingly, most of the
Company's backlog is subject to modification and termination at the
Government's will. There can be no assurance that the Company's backlog
will become revenues in any particular period or at all. Further, there
can be no assurance that the margins on any contract included in backlog
that does become revenue will be profitable.
Competition
The communications equipment industry for defense applications and
as a whole is highly competitive. Declining defense budgets and increasing
pressures for cost reductions have precipitated a major consolidation in
<PAGE>
<PAGE>36
the defense industry. The DoD's increased use of commercial off-the-shelf
products and components in military equipment is expected to increase the
entrance of new competitors. In addition, consolidation has resulted in
delays in contract funding or awards and significant predatory pricing
pressures associated with increased competition and reduced funding. The
Company expects that the emergence of merchant suppliers will increase
competition for OEM business. The Company's ability to compete for defense
contracts depends to a large extent on the effectiveness and
innovativeness of its research and development programs, its ability to
offer better program performance than its competitors at a lower cost to
the Government customer and its readiness in facilities, equipment and
personnel to undertake the programs for which it competes. In some
instances, programs are sole source or work directed by the Government to
a single supplier. 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 Government should choose to reopen the
particular program to competition. Many of the Company's competitors are
larger and have substantially greater financial and other resources than
the Company. See "Business--Competition".
Ownership of Holdings and the Company
The Lehman Partnership owns a majority of the outstanding voting
stock of Holdings, which owns all of the outstanding common stock of the
Company. By virtue of such ownership, the Lehman Partnership has the power
to direct the affairs of the Company and is able to determine the outcome
of substantially all matters required to be submitted to stockholders for
approval, including the election of a majority of the Company's directors
and, except to the extent otherwise required by law, amendment of the
Company's Certificate of Incorporation. See "The Transaction" and
"Ownership of Capital Stock".
Subordination
The Company's obligations under the Notes are subordinate and junior
in right of payment to all existing and future Senior Debt of the Company.
As of June 30, 1997, on a pro forma basis after giving effect to the
Transaction, the Company would have had approximately $400 million of
indebtedness outstanding, of which $175 million would have been Senior
Debt (excluding letters of credit). Additional Senior Debt may be incurred
by the Company from time to time, subject to certain restrictions. By
reason of such subordination, in the event of an insolvency, liquidation,
or other reorganization of the Company, the lenders under the Senior
Credit Facilities and other creditors who are holders of Senior Debt must
be paid in full before the holders of the Notes may be paid; accordingly,
there may be insufficient assets remaining after payment of prior claims
to pay amounts due on the Notes. In addition, under certain circumstances,
no payments may be made with respect to the Notes if a default exists with
respect to certain Senior Debt. See "Description of the Exchange Notes--
Subordination".
Restrictions Imposed by the Senior Credit Facilities and the Indenture
The Senior Credit Facilities and the Indenture contain a number of
significant covenants that, among other things, restrict the ability of
the Company to dispose of assets, incur additional indebtedness, repay
other indebtedness, pay dividends, make certain investments or
<PAGE>
<PAGE>37
acquisitions, repurchase or redeem capital stock, engage in mergers or
consolidations, or engage in certain transactions with subsidiaries and
affiliates and otherwise restrict corporate activities. There can be no
assurance that such restrictions will not adversely affect the Company's
ability to finance its future operations or capital needs or engage in
other business activities that may be in the interest of the Company. In
addition, the Senior Credit Facilities also require the Company to
maintain compliance with certain financial ratios, including total EBITDA
to total interest expense and total debt to total EBITDA, and limit
capital expenditures by the Company. The ability of the Company to comply
with such ratios and limits may be affected by events beyond the Company's
control. A breach of any of these covenants or the inability of the
Company to comply with the required financial ratios or limits could
result in a default under the Senior Credit Facilities. In the event of
any such default, the lenders under the Senior Credit Facilities could
elect to declare all borrowings outstanding under the Senior Credit
Facilities, together with accrued interest and other fees, to be due and
payable, to require the Company to apply all of its available cash to
repay such borrowings or to prevent the Company from making debt service
payments on the Notes, any of which would be an Event of Default under the
Notes. If the Company were unable to repay any such borrowings when due,
the lenders could proceed against their collateral. In connection with the
Senior Credit Facilities, the Company has granted the lenders thereunder a
first priority lien on substantially all of its assets. The lenders under
the Senior Credit Facilities will also have a first priority security
interest in all of the capital stock of the Company and its subsidiaries.
If the indebtedness under the Senior Credit Facilities or the Notes were
to be accelerated, there can be no assurance that the assets of the
Company would be sufficient to repay such indebtedness in full. See
"Description of the Exchange Notes" and "Description of Senior Credit
Facilities".
Fraudulent Conveyance
The Old Notes were incurred to finance the acquisition of the
Businesses from Lockheed Martin. Management believes that the indebtedness
of the Company represented by the Senior Credit Facilities and the Notes
were incurred for proper purposes and in good faith, and that, based on
present forecasts and other financial information, after the consummation
of the Transaction and the issuance of the Notes, the Company will be
solvent, will have sufficient capital for carrying on its business and
will be able to pay its debts as they mature. Notwithstanding management's
belief, however, under federal and state fraudulent transfer laws, if a
court of competent jurisdiction in a suit by an unpaid creditor or a
representative of creditors (such as a trustee in bankruptcy or a
debtor-in-possession) were to find that, at the time of the incurrence of
such indebtedness, the Company was insolvent, was rendered insolvent by
reason of such incurrence, was engaged in a business or transaction for
which its remaining assets constituted unreasonable small capital,
intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, or intended to hinder, delay or
defraud its creditors, and that the indebtedness was incurred for less
than reasonably equivalent value, then such court could, among other
things, (i) void all or a portion of the Company's obligations to the
Holders of the Exchange Notes, the effect of which would be that the
Holders of the Exchange Notes might not be repaid in full and/or (ii)
<PAGE>
<PAGE>38
subordinate the Company's obligations to the Holders of the Exchange Notes
to other existing and future indebtedness of the Company to a greater
extent than would otherwise be the case, the effect of which would be to
entitle such other creditors to which the Exchange Notes were not
previously subordinated to be paid in full before any payment could be
made on the Exchange Notes. See "--Substantial Leverage" above.
Limitation on Change of Control
The Indenture provides that, upon the occurrence of a Change of
Control of the Company or Holdings, the Company will make an offer to
purchase all of the Exchange Notes at a price in cash equal to 101% of the
aggregate principal amount thereof together with accrued and unpaid
interest to the date of purchase. The Senior Credit Facilities currently
prohibit the Company from repurchasing any Exchange Notes except with the
proceeds of one or more Equity Offerings. The Senior Credit Facilities
also provide that certain change of control events with respect to the
Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which the
Company becomes a party may contain similar restrictions and provisions.
In the event a Change of Control event occurs at a time when the Company
is prohibited from purchasing the Exchange Notes, or if the Company is
required to make a Net Proceeds Offer (as defined) pursuant to the terms
of the Exchange Notes, the Company could seek the consent of its lenders
to the purchase of the Exchange Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain
such a consent or repay such borrowings, the Company will remain
prohibited from purchasing the Exchange Notes. In such case, the Company's
failure to make such an offer or to purchase tendered Exchange Notes would
constitute an Event of Default under the Indenture. If, as a result
thereof, a default occurs with respect to any Senior Debt, the
subordination provisions in the Indenture would likely restrict payments
to the holders of the Exchange Notes. Finally, the Company's ability to
pay cash to the holders of Notes upon a purchase may be limited by the
Company's then-existing financial resources. There can be no assurance
that sufficient funds will be available when necessary to make any
required purchases. Furthermore, the Change of Control provisions may in
certain circumstances make more difficult or discourage a takeover of the
Company. See "Description of the Exchange Notes--Repurchase at the Option
of Holders -- Change of Control".
<PAGE>
<PAGE>39
Forward Looking Statements
This Prospectus contains forward looking statements concerning the
Company's operations, economic performance and financial condition,
including in particular, the likelihood of the Company's success in
operating as an independent company and developing and expanding its
business and the realization of sales from backlog. These statements are
based upon a number of assumptions and estimates which are inherently
subject to significant uncertainties and contingencies, many of which are
beyond the control of the Company, and reflect future business decisions
which are subject to change. Some of these assumptions inevitably will not
materialize, and unanticipated events will occur which will affect the
Company's future results. All such forward looking statements are
qualified by reference to matters discussed under this section entitled
"Risk Factors".
<PAGE>
<PAGE>40
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes
pursuant to the Exchange Offer.
The net proceeds received by the Company from the Offering of the
Old Notes, approximately $217.3 million after deducting discounts and
estimated fees and expenses, together with the borrowings under the Senior
Credit Facilities, were used to pay, in part, the cash portion of the
purchase price of the Acquisition and pay related fees and expenses.
CAPITALIZATION
The following table sets forth the capitalization of L-3 at June
30, 1997.
<TABLE>
<CAPTION>
June 30, 1997
-----------------
($ in millions)
<S> <C>
Revolving Credit Facility<F1> . . . . . . --
Term Loan Facilities . . . . . . . . . . $174.0
10 3/8% Senior Subordinated Notes
due 2007 . . . . . . . . . . . . . . . 225.0
------
Total Debt . . . . . . . . . . . . . 399.0
Shareholders' Equity Capital
Common Stock . . . . . . . . . . . . . 125.0
Retained Earnings . . . . . . . . . . 3.1
Deemed Distribution<F2>. . . . . . . . (7.5)
------
Total Capitalization . . . . . . . $519.6
======
__________________________
<FN>
<F1> Availability of up to $100 million, none of which was drawn at
Closing other than letters of credit, which were less than $10
million.
<F2> Reflects the "Push Down" of Holdings' basis of its investment in the
Company. The Acquisition was accounted for by Holdings as a purchase
transaction in accordance with Accounting Principles Board Opinion
No. 16. However, as a result of the 34.9% ownership retained by
Lockheed Martin, the provisions of the Financial Accounting
Standards Board's Emerging Issues Task Force Issue No. 88-16, "Basis
in Leveraged Buyout Transactions" ("EITF 88-16"), is applied in
connection with the allocation of purchase price to the acquired net
assets. The application of the provisions of EITF 88-16 results in
recording net assets acquired at approximately 34.9% of Lockheed
Martin's carrying values plus 65.1% of fair value and the recording
of a deemed distribution, estimated to be approximately $7.5
million.
</TABLE>
<PAGE>
<PAGE>41
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS
The following unaudited pro forma financial information gives effect
to (i) the purchase of the Businesses by Holdings and the Company, (ii)
the transfer of certain other assets and liabilities to the Company by
Lockheed Martin, (iii) the Financing, (iv) the initial capitalization of
the Company and (v) the "push down" of Holdings' basis of its investment
in the Company. The unaudited pro forma condensed consolidated statement
of operations assumes the transactions occurred as of January 1, 1996.
The pro forma financial information is based on the historical
consolidated (combined) financial statements of the Company for the six
months ended June 30, 1997 (which include the historical combined financial
statements of the Lockheed Martin Predecessor Businesses for the three
months ended March 31, 1997), and the year ended December 31, 1996 (which
include the results of the Loral Acquired Businesses for the nine months
ended December 31, 1996), and the Loral Acquired Businesses for the
three months ended March 31, 1996 using the purchase method of accounting
and the assumptions and adjustments in the accompanying notes to the
unaudited pro forma condensed consolidated (combined) financial statements.
The pro forma adjustments are based upon preliminary estimates.
Actual adjustments will be based on final appraisals and other analyses
of fair values and adjustment of the final purchase price. Changes between
preliminary and financial allocations for the valuation of contracts in
process inventories, pension liabilities, fixed assets and deferred taxes
could be material. The pro forma statement of operations does not reflect
any costs savings that management believes would have resulted had the
transactions occurred on January 1, 1996. The pro forma financial
information should be read in conjunction with the unaudited interim
condensed consolidated (combined) financial statements of the Company as
of June 30, 1997 and for the six month period ended June 30, 1997
and the audited combined financial statements as of December 31,
1996, and for the year ended December 31, 1996 of the Businesses. The pro
forma data may not be indicative of the results that actually would have
occurred had the transactions been in effect on the dates indicated or
results that may be obtained in the future.
<PAGE>
<PAGE>42
Unaudited Pro Forma Condensed Consolidated Statement of Operations Data
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997 Year Ended December 31, 1996
------------------------------------------------------ -----------------------------------------------------
The Company Lockheed Lockheed
Three Months Martin Martin Loral
Ended Predecessor Predecessor Acquired
June 30, Businesses Pro forma Pro forma Businesses Businesses Pro forma Pro forma
1997 <F1> Adjustments Consolidated <F1> <F1> Adjustments Consolidated
----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Sales . . . . . . . $168.0 $158.9 $ -- $326.9 $543.1 $132.2 $ -- $675.3
Cost of sales . . . 152.9 151.0 (1.0)<F3><F5> 302.9 499.4 124.4 (4.5)<F3><F5> 619.3
------ ------ ----- ------ ------ ------ ----- ------
Operating income 15.1 7.9 1.0 24.0 43.7 7.8 4.5 56.0
Interest expense . 10.0 8.4 1.3 <F2> 19.7 24.2 4.4 (12.0)<F2> 40.6
------ ------ ----- ------ ------ ------ ----- ------
Earnings
(loss) before
income taxes . 5.1 (.5) (.3) 4.3 19.5 3.4 (7.5) 15.4
Income tax expense
(benefit) . . . . 2.0 (.2) (.1)<F4> 1.7 7.8 1.3 (3.0)<F4> 6.1
------ ------ ----- ------ ------ ------ ----- ------
Net earnings
(loss) . . . . $ 3.1 $ (.3) (.2) 2.6 $ 11.7 $ 2.1 $(4.5) $ 9.3
====== ====== ===== ====== ====== ====== ===== ======
</TABLE>
See notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements.
<PAGE>
<PAGE>43
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following facts and assumptions were used in determining the pro
forma effect of the Transaction.
<F1> Holdings and Lockheed Martin entered into a Transaction Agreement
dated as of March 28, 1997 ("Transaction Agreement") whereby
Holdings acquired effective April 1, 1997 substantially all of the
assets and certain liabilities of ten business units of Lockheed
Martin that comprise the Company's Secured Communication Systems and
Specialized Communication Products businesses. As a result of the
Acquisition, Lockheed Martin, the Lehman Partnership and Senior
Management own 34.9%, 50.1% and 15.0% of common equity,
respectively, of Holdings, the sole stockholder of the Company. The
purchase price of $525.0 million comprised $479.8 million of cash
and $45.2 million of Holdings' common equity retained by Lockheed
Martin. The cash portion of the purchase price is subject to certain
agreed upon adjustments and other adjustments based upon the closing
tangible net asset value as defined in the Transaction Agreement.
For purposes of the pro forma financial information, a reduction
in the purchase price of $20.0 million has been assumed pursuant to
the Transaction Agreement. Costs related to the Transaction are
estimated to approximate $20.0 million of which $14.0 million is
related to the Financing and is included in other assets. Holdings
and the Company had no operations until the consummation of the
acquisition; accordingly, the pro forma financial statements
reflect the combined statement of operations of the Lockheed Martin
Predecessor Businesses for the three month period ended March 31, 1997
and for the year ended December 31, 1996 and the combined statement of
operations of the Loral Acquired Businesses for the three months ended
March 31, 1996.
<F2> The Acquisition was financed with the proceeds of $175 million of
Term Loan Facilities, $225 million of Exchange Notes and capital
contributions of $125 million, including the $45.2 million retained
by Lockheed Martin. Prior to April 1, 1997, interest expense was
allocated to the Lockheed Martin Predecessor Businesses from Lockheed
Martin. The pro forma statement of operations reflects the elimination
of allocated interest expense of $8.4 million for the three months
ended March 31, 1997 and $28.6 million for the year ended December 31,
1996 and the following additional adjustments to interest expense.
<PAGE>
<PAGE>44
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
March 31, December 31,
1977 1996
-------------- --------------
($ in millions)
<S> <C> <C>
Interest on Notes (10.375% on $225
million). . . . . . . . . . . . . . $ 5.8 $23.3
Interest on borrowings under the
Senior Credit Facilities (8.40% on
$175 million) . . . . . . . . . . . 3.7 14.7
Commitment fee of 0.50% on unused
Revolving Credit Facility . . . . . .1 .5
Amortization of deferred financing
costs . . . . . . . . . . . . . . . .6 2.1
---- ----
$10.2 $40.6
===== =====
<F3> The estimated excess of purchase price over net assets acquired of
$297.9 million is being amortized over 40 years resulting in a
pro forma charge of $7.7 million for 1996 and $1.9 million for the
three months ended March 31, 1997. Further, the pro forma balance
sheet includes the elimination of $280.1 million of intangibles,
primarily cost in excess of net assets acquired, included in the
Lockheed Martin Predecessor historical balance sheet, and the pro
forma statement of operations includes the elimination of $10.1
million and $2.7 million for 1996 and the three months ended March
31, 1997, respectively, of related amortization expense. The
preliminary purchase price allocation includes an estimated $4.4
million adjustment relating to a reduction of contracts in process
resulting from valuing acquired contracts in process at contract
price, less the estimated cost to complete and an allowance for
normal profit margin on the Company's effort to complete such
contracts. In addition, contracts in process include an estimated
increase of $3.0 million related to valuing certain commercial
finished goods inventory at their fair values. The non-recurring
changes to income in 1996 resulting from the above-mentioned
adjustments are not material to the pro forma statement of operations.
<F4> A combined statutory (federal and state) tax rate of 41% was
assumed on the pro forma adjustments.
</TABLE>
<PAGE>
<PAGE>45
<F5> In connection with the Acquisition, Lockheed Martin also
transferred the assets and liabilities of a microwave semiconductor
product line, a building to be used by one of the acquired
divisions, and certain leasehold improvements. No adjustment has
been made to the pro forma statement of operations for the effect
of these transfers because they are not material. In addition, L-3
has agreed to assume the assets and liabilities of certain defined
benefit pension plans and a liability for retiree medical and life
insurance for certain employees. The pro forma statement of
operations for the six months ended June 30, 1997 (for the three
months ended March 31, 1997) and the year ended December 31, 1996
includes a net reduction to costs and expenses of $.6 million and $2.5
million, respectively, to record estimated pension cost on a separate
company basis net of the reversal of the allocated pension cost
included in the historical financial statements. No such adjustment
has been made to the pro forma statement of operations for retiree
medical and life insurance benefits because the estimated expense of
those benefits on a separate company basis approximates the cost
included in the historical financial statements.
<PAGE>
<PAGE>46
SELECTED FINANCIAL INFORMATION
The following unaudited selected consolidated (combined) financial
data as of June 30, 1997 and for the six month periods then ended June
30, 1997 and 1996 have been derived from, and should be read in conjunction
with, the unaudited interim condensed consolidated (combined) financial
statements of the Company and footnotes thereto as of June 30, 1997
included elsewhere herein.
The following selected combined financial data as of March 31, 1997
and for the three months ended March 31, 1997 and as of December
31, 1996 and 1995 and for the years ended December 31, 1996, 1995 and 1994
have been derived from, and should be read in conjunction with, the audited
Combined Financial Statements of the Businesses and footnotes thereto
included elsewhere herein. The combined selected financial data for the
three month periods ended March 31, 1996 have been derived from, and should
be read in conjunction with, the unaudited Combined Financial Statements
of the Businesses and footnotes thereto included elsewhere herein. In
the opinion of the management, the unaudited combined financial
statements include all adjustments (consisting of normal recurring
accruals) considered necessary for the fair presentation of the
information contained therein. Results for the interim periods are not
necessarily indicative of the results to be expected for the entire year.
The unaudited selected combined financial data for the three month
period ended March 31, 1996 and as of December 31, 1994 and 1993, March 31,
1993 and December 31, 1992 for balance sheet data and the nine months ended
December 31, 1993, the three months ended March 31, 1993 and the year ended
December 31, 1992 for statement of operations data have been derived from
the unaudited financial statements of Communication Systems -- Camden. In
the opinion of the Businesses' management, such unaudited financial
statements reflect all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position and results
of operations of Communication Systems -- Camden, also referred to as
Lockheed Martin Communication Systems Division in the Lockheed Martin
Predecessor Financial Statements, as of the dates and periods indicated.
These selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the condensed consolidated (combined) financial
statements of the Company and the Combined Financial Statements of the
Lockheed Martin Predecessor Businesses and the Loral Acquired Businesses
included elsewhere herein.
<PAGE>
<PAGE>47
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
--------------------------------
For the Three
Three Months Months
Ended Six Months Ended March 31,
-------------------------------- Ended --------------------
June 30, 1997 March 31, 1997 June 30, 1996 1997 1996<F2>
--------------- -------------- ------------- -------- ----------
($ in millions)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data: |
Sales . . . . . . . . . . . . . . . . . . $168.0 | $158.9 $206.4 $158.9 $ 41.2
Operating income . . . . . . . . . . . . 15.1 | 7.9 10.9 7.9 1.7
Interest expense <F4> . . . . . . . . . . . 10.0 | 8.4 9.4 8.4 2.0
Provision (benefit) for income taxes<F4>. 2.0 | (.2) 1.3 (.2) .2
Net earnings (loss) . . . . . . . . . . . 3.1 | (.3) .2 (.3) (.5)
|
Other Data: |
EBITDA<F5> . . . . . . . . . . . . . . . $ 22.3 | $ 15.1 $ 21.2 $ 15.1 $ 4.8
Depreciation expense . . . . . . . . . . 4.5 | 4.5 5.8 4.5 1.2
Amortization expense . . . . . . . . . . 2.7 | 2.7 4.5 2.7 1.9
Capital expenditures . . . . . . . . . . 3.1 | 4.3 4.7 4.3 .4
Ratio of earnings to fixed charges . . . 1.47x | <F6> 1.02x <F6> <F6>
Cash from (used in) operating activities. 32.9 | (16.3) (29.4) (16.3) 10.2
Cash from (used in) investing activities. (473.6) | (4.3) (292.0) (4.3) (.4)
Cash from (used in) financing activities. 463.3 | 20.6 321.4 20.6 (9.8)
|
Balance Sheet Data: |
Working capital . . . . . . . . . . . . . $117.6 | $121.4 N/A $121.4 N/A
Total assets . . . . . . . . . . . . . . 680.9 | 608.5 N/A 608.5 N/A
Invested equity . . . . . . . . . . . . . -- | 493.9 N/A 493.9 N/A
Shareholders' equity. . . . . . . . . . . 120.6 | -- N/A -- N/A
</TABLE>
<PAGE>
<PAGE>48
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------------
1993
------------------------------
Nine Months Three Months
Ended Ended
1996<F1> 1995<F2> 1994<F2> Dec. 31<F2> March 31<F3> 1992<F3>
---------- ---------- ---------- ------------- --------------- ----------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data: |
Sales . . . . . . . . . . . . . . . . . . . . $543.1 $166.8 $218.9 $200.0 | $67.8 $368.5
Operating income . . . . . . . . . . . . . . 43.7 4.7 8.4 12.4 | 5.1 49.3
Interest expense<F4> . . . . . . . . . . . . 24.2 4.5 5.5 4.1 | -- --
Provision (benefit) for income taxes<F4>. . . 7.8 1.2 2.3 3.8 | 2.0 19.8
Net earnings (loss) . . . . . . . . . . . . . 11.7 (1.0) 0.6 4.5 | 3.1 29.5
|
Other Data: |
EBITDA<F4> . . . . . . . . . . . . . . . . . $ 68.7 $ 16.2 $ 19.9 $ 23.4 | $ 7.0 $ 58.5
Depreciation expense . . . . . . . . . . . . 14.9 5.5 5.4 6.1 | 1.8 8.9
Amortization expense . . . . . . . . . . . . 10.1 6.1 6.1 4.9 | 0.1 0.3
Capital expenditures . . . . . . . . . . . . 13.5 5.5 3.7 2.6 | 0.8 3.9
Ratio of earnings to fixed charges . . . . . 1.72x 1.03x 1.40x N/A | N/A N/A
Cash from (used in) operating activities . . 40.0 9.4 21.8 N/A | N/A N/A
Cash from (used in) investing activities . . (298.2) (5.5) (3.7) N/A | N/A N/A
Cash from (used in) financing activities . . 267.3 (3.8) (18.1) N/A | N/A N/A
|
Balance Sheet Data: |
Working capital . . . . . . . . . . . . . . . $ 98.8 $ 21.1 $ 19.3 $ 24.7 | $22.8 $ 35.8
Total assets . . . . . . . . . . . . . . . . 593.3 228.5 233.3 241.7 | 93.5 105.1
Invested equity . . . . . . . . . . . . . . . 473.6 194.7 199.5 202.0 | 59.9 72.8
Shareholders' equity. . . . . . . . . . . . . -- -- -- -- | --
|
</TABLE>
<PAGE>
<PAGE>49
____________________
[FN]
<F1> Reflects ownership of Loral's Communication Systems -- Salt Lake
and Specialized Communication Products businesses commencing
April 1, 1996.
<F2> Reflects ownership of Communication Systems -- Camden by Lockheed
Martin commencing April 1, 1993.
<F3> Reflects ownership of Communication Systems -- Camden by GE
Aerospace for the periods indicated. The amounts shown herein
include only those amounts as reflected in the financial records of
Communication Systems -- Camden.
<F4> For periods prior to April 1, 1997, interest expense and income tax
(benefit) provision were allocated from Lockheed Martin.
<F5> EBITDA is defined as income before deducting interest expense,
income taxes, depreciation and amortization. EBITDA is not a
substitute for operating income, net earnings and cash flow from
operating activities as determined in accordance with generally
accepted accounting principles as a measure of profitability or
liquidity. EBITDA is presented as additional information because
management believes it to be a useful indicator of the Company's
ability to meet debt service and capital expenditure requirements
and because certain debt covenants of L-3 utilize EBITDA to measure
compliance with such covenants.
<F6> For the three months ended March 31, 1997 and 1996, earnings were
insufficient to cover fixed charges by $.5 million and $.4 million,
respectively.
<PAGE>
<PAGE>50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company is a supplier of sophisticated secure communication
systems and specialized communication products including secure, high
data rate communication systems commercial fixed wireless communication
products, microwave components, avionic displays and recorders and
instruments products. The Company's customers include the Department of
Defense, selected U.S. government intelligence agencies, major aerospace/
defense prime contractors and commercial customers. The Company operates
primarily in one industry segment, electronic components and systems.
Substantially all the Company's products are sold to agencies of
the U.S. Government, primarily the Department of Defense, to foreign
government agencies or to prime contractors or subcontractors thereof.
All domestic government contracts and subcontracts of the Businesses are
subject to audit and various cost controls, and include standard provisions
for termination for the convenience of the U.S. Government. Multi-year
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 government.
The decline in the U.S. defense budget since the mid 1980s has
resulted in program delays, cancellations and scope reduction for defense
contracts in general. These events may or may not have an effect on the
Company's programs; however, in the event that U.S. Government
expenditures for products of the type manufactured 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.
In response to the decline in the defense budget, the DoD has focused
its resources on enhancing its military readiness, joint operations and
multiple mission capabilities and on incorporating advanced electronics to
improve performance, reduce operating costs and extend life expectancy of
its existing and future platforms. The emphasis on system interoperability,
force multipliers and providing battlefield commanders with real-time data
is increasing the electronics content of nearly all of the major military
procurement and research programs. As a result, the DoD's budget for
communications and defense electronics is expected to grow. According to
Federal Sources, an independent private consulting group, the U.S. defense
budget for command, control, communications and intelligence ("C3I") is
projected to increase at a compound annual growth rate of 5.8% through
2002. Management believes that L-3 will benefit from this growth due to
its substantial position in the markets for secure communication systems,
antenna systems, display systems, microwave components and other related
areas.
<PAGE>
<PAGE>51
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
-----------------------------------------------
Three Months Three Months Six Months
Ended Ended Ended
June 30, March 31, Combined June 30,
1997 1997 Six Months 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Sales . . . . . . . . . . . . . . . . . . . $168.0 | $158.9 $326.9 $206.4
Cost of sales . . . . . . . . . . . . . . . 152.9 | 151.0 303.9 195.5
----- | ----- ----- -----
Operating income . . . . . . . . . . . . 15.1 | 7.9 23.0 10.9
Allocated interest expense . . . . . . . . 10.0 | 8.4 18.4 9.4
----- | ----- ----- -----
Income (loss) before income taxes . . . . 5.1 | <.5> 4.6 1.5
Income taxes (benefit) . . . . . . . . . . 2.0 | <.2> 1.8 1.3
----- | ----- ----- -----
Net earnings (loss) . . . . . . . . . . . $ 3.1 | $ <.3> $ 2.8 $ .2
===== | ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------ ----------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
($ in millions)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales . . . . . . . . . . . . . . . . . . . $158.9 $ 41.2 $543.1 $166.8 $218.9
Cost of sales . . . . . . . . . . . . . . . 151.0 39.5 499.4 162.1 210.5
----- ----- ----- ----- -----
Operating income . . . . . . . . . . . . 7.9 1.7 43.7 4.7 8.4
Allocated interest expense . . . . . . . . 8.4 2.0 24.2 4.5 5.5
----- ----- ----- ----- -----
Income (loss) before income taxes . . . . (.5) (.3) 19.5 0.2 2.9
Income taxes (benefit) . . . . . . . . . . (.2) .2 7.8 1.2 2.3
----- ----- ----- ----- -----
Net earnings (loss) . . . . . . . . . . . $ (.3) $ (.5) $ 11.7 $ (1.0) $ 0.6
===== ===== ===== ===== =====
</TABLE>
<PAGE>
<PAGE>52
Results of Operations
The Company's financial statements reflect operations since the
effective date of the acquisition (April 1, 1997); accordingly
comparisons for the six months ended June 30, 1997 to the prior period
of the Predecessor Company are not meaningful. To facilitate meaningful
comparisons of the operating results of the periods set forth below, the
results of operations for the six months June 30, 1997 were obtained by
combining, without adjustment, the results of operations of the Predecessor
Company for the period January 1, 1997 through March 31, 1997 and the
Company for the period April 1, 1997 through June 30, 1997. The results of
operations for the six months ended June 30, 1996 represent the results of
operations of the Predecessor Company. Interest expense and income taxes
expense for the periods are not comparable and the impact of interest
expense and income taxes expense on the Company is discussed below. See
the columns denoted "Predecessor Company" and "The Company," representing
the predecessor periods and successor periods, respectively, in the
statements of operations and cash flows for the periods included in this
report.
The results of operations of the Predecessor Company for the three
months ended March 31, 1997 and the six months ended June 30, 1996, include
certain costs and expenses allocated by Lockheed Martin for corporate
office expenses based primarily on the allocation methodology prescribed
by government regulations pertaining to government contractors. Interest
expense was allocated based on Lockheed Martin's actual weighted average
consolidated interest rate applied to the portion of the beginning of the
year invested equity deemed to be financed by consolidated debt based on
Lockheed Martin's debt to equity ratio on such date. The provision/benefit
for income taxes was allocated to the Predecessor Company as if they were
separate taxpayers, calculated by applying statutory rates to reported
pre-tax income after considering items that do not enter into the
determination of taxable income and tax credits related to the Predecessor
Company. Also pension and post employment benefit costs were allocated
based on employee headcount. Accordingly, the results of operations and
financial position hereinafter of the Predecessor Company discussed may
not be the same as would have occurred had the Predecessor Company
been an independent entity.
As an independent entity, actual corporate office expense are expected to
be about 10% to 20% or approximately $1 million to $2 million less than
corporate office expense allocated to the Businesses by Lockheed Martin
and Loral. Actuarial studies are being prepared regarding stand alone
employee benefit costs; however, the Company believes that such costs
will not vary materially from historical predecessor amounts. The
ultimate impact of the aforementioned items on the Company's future
results of operations will be mitigated due to the cost-plus nature
of certain of the Company's government contracts which comprised
approximately 42% of the 1996 pro forma sales. For the anticipated
impact of interest and income taxes on a stand-alone basis, refer to
pro forma financial information included elsewhere herein.
<PAGE>
<PAGE>53
<PAGE>
<PAGE>54
Three Months Ended June 30, 1997 and June 30, 1996
The following table sets forth selected income statement data for
the Company and the Predecessor Company for the periods indicated:
<TABLE>
<CAPTION>
Predecessor
The Company Company
------------- -------------
Three Months Three Months
Ended Ended
June 30, 1997 June 30, 1996
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . $168,030 $165,294
Cost and expenses . . . . . . . . . . . . 152,909 156,040
-------- --------
Operating income . . . . . . . . . . . . 15,121 9,254
Interest expense . . . . . . . . . . . . 9,970 7,386
-------- --------
Income before income taxes . . . . . . . 5,151 1,868
Income taxes . . . . . . . . . . . . . . 2,060 1,131
-------- --------
Net income . . . . . . . . . . . . . . . $ 3,091 $ 737
======== ========
</TABLE>
<PAGE>
<PAGE>55
Sales for the quarter ended June 30, 1997 increased to $168.0 million
from $165.3 million for the quarter ended June 30, 1996 (the "prior year
period"). Operating income increased to $15.1 million compared with $9.3
million in the prior year period. Net income increased to $3.1 million
compared to $0.7 million in the prior year period.
The sales increase was attributable to increased volume on sales of
the E2-C Trac-A antenna program, microwave components and Common
High-bandwidth Data Link (CHBDL) systems; partially offset by lower volume
on expendable countermeasures and U-2 Support program.
Operating income as a percentage of sales increased to 9.0% in the
quarter ended June 30, 1997 compared to 5.6% in the prior year period. The
increase is largely attributable to the improved operating margins in the
Telemetry product lines, increased sales volume on higher-margin microwave
components and the favorable impact of the Avionics product lines
discontinued in the prior year.
Interest expense is not comparable to prior year period as a result
of the financing related to the Acquisition. Interest expense for the
Company for the quarter ended June 30, 1997 was $10.0 million. Interest
expense for the three months ended June 30, 1996, represents an
allocation of Lockheed Martin's interest expense to the Predecessor
Company.
The effective income tax rate for the Company for the quarter ended
June 30, 1997 was 40% reflecting the estimated effective income tax rate
for the full year ended December 31, 1997. In the prior year period, the
effective income tax rate of the Predecessor Company was significantly
impacted by amortization of costs in excess of net assets acquired, which
were not deductible for income tax purposes.
Six Months Ended June 30, 1997 and June 30, 1996
The following table sets forth selected income statement data for
the Company and the Predecessor Company for the periods indicated.
<PAGE>
<PAGE>56
<TABLE>
<CAPTION>
Predecessor Predecessor
The Company Company Company
------------- ------------- -------------
Combined
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1997 March 31, 1997 June 30, 1997 June 30, 1996
------------- -------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . $168,030 $158,873 $326,903 $206,447
Cost and expenses . . . . . . . . . . . 152,909 150,937 303,846 195,517
-------- -------- -------- --------
Operating income . . . . . . . . . . . 15,121 7,936 23,057 10,930
Interest expense . . . . . . . . . . . 9,970 8,441 18,411 9,414
-------- -------- -------- --------
Income (loss) before income taxes . . . 5,151 (505) 4,646 1,516
Income taxes . . . . . . . . . . . . . 2,060 (247) 1,813 1,276
-------- -------- -------- --------
Net income (loss) . . . . . . . . . . . $ 3,091 ($258) $ 2,833 $ 240
======== ======== ======== ========
</TABLE>
Sales for the six months ended June 30, 1997 increased to $326.9
million from $206.5 million for the six months ended June 30, 1996 (the
"prior year period"). Operating income increased to $23.1 million from
$10.9 million in the prior year period. Net income increased to $2.8
million from $0.2 million in the prior year period.
The sales increase was attributable primarily to the sales of the
Loral Acquired Businesses which contributed $248.0 million for the six
months ended June 30, 1997 compared to $126.2 in the prior year period.
The acquisition of the Loral Acquired Businesses was effective April 1,
1996. Sales of Communication Systems - Camden decreased by $1.3 million
to $78.9 million compared to prior year period.
Operating income as a percentage of sales increased to 7.1% in the
six months ended June 30, 1997 compared to 5.3% in the prior year period.
The increase in operating income also was largely attributable to the
Loral Acquired Businesses, which contributed operating income of $23.8
million for the six months ended June 30, 1997 compared to $7.8 million
in the prior year period. Communication Systems - Camden's operating
income for the period compared to prior year decreased by $4.0 million
to a $0.8 million operating loss, primarily due to increased costs on
the Space Station, Baseband and ADODSM programs.
<PAGE>
<PAGE>57
Interest expense is not comparable to prior year period as a result
of the financing related to the Acquisition. Interest expense for the
Company for the three months ended June 30, 1997 was $10.0 million.
Interest expense for the six months ended June 30, 1996, represents an
allocation of Lockheed Martin's interest expense to the Predecessor
Company.
The effective income tax rate of the Company for the quarter ended
June 30, 1997 was 40%, reflecting the estimated effective income tax rate
for the full year ended December 31, 1997. In the prior year period, the
effective income tax rate of the Predecessor Company was significantly
impacted by amortization of costs in excess of net assets acquired, which
were not deductible for income tax purposes.
Three Months Ended March 31, 1997 Compared With Three Months Ended
March 31, 1996
The following table sets forth selected income statement data
for the Predecessor Company for the periods indicated.
<TABLE>
<CAPTION>
Predecessor Company
---------------------
Three Months Ended
---------------------
March 31, March 31,
1997 1996
--------- ---------
($ in millions)
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . $158.9 $ 41.2
Cost of expenses. . . . . . . . . . . . 151.0 39.5
----- ------
Operating income . . . . . . . . . . . 7.9 1.7
Allocated interest expense . . . . . . 8.4 2.0
----- -----
Income before income taxes . . . . . . (.5) (.3)
Allocated income taxes. . . . . . . . . (.2) .2
----- -----
Net income . . . . . . . . . . . . . . $ (.3) $ (.5)
====== ======
</TABLE>
Sales for the three months ended March 31, 1997 (the "1997 period")
increased to $158.9 million from $41.2 million for the three months ended
March 31, 1996 (the "1996 period"). Operating income in the 1997 period
increased to $7.9 million compared with $1.7 million in the 1996 period.
Net loss decreased to $.3 million from $.5 million. The Loral Acquired
Business contributed $3.3 million in net earnings for the 1997 period,
offset by net loss of $3.6 million in Communications Systems -- Camden.
<PAGE>
<PAGE>58
The sales increases was attributable to the Loral Acquired
Businesses which contributed $119.8 million of the increase. Sales of
Communications Systems -- Camden decreased by $2.1 million compared to the
1996 period primarily due to lower volume on the SIGINT production and
Secure Terminal Equipment (STE) development programs.
The increase in operating income also was largely attributable to
the Loral Acquired Business, which contributed $10.7 million of the
increase. Communication Systems - Camden's 1996 operating income for the
1997 period decreased by $4.4 million to a $2.8 million operating loss
for the 1997 period, primarily due to increased costs on the Space Station,
Baseband and AMODSM programs.
Operating income as a percentage of sales increased to 5.0% in the
1997 period compared to 4.1% in the 1996 period. The increase is
attributable to higher margins and operating improvements in the Loral
Acquired Businesses with operating income as a percentage of sales of
8.9%, offset by negative margins in Communications Systems -- Camden.
Allocated interest expense increased to $8.4 million from $2.0
million due primarily to the acquisition of the Loral Acquired Businesses,
which was assumed to be fully financed by debt, coupled with a higher
debt-to-equity ratio used in the allocation for Communications Systems --
Camden.
Year Ended December 31, 1996 Compared with Year Ended December 31,
1995
The following table sets forth selected income statement data for
the Predecessor Company for the periods indicated.
<TABLE>
<CAPTION>
Predecessor Company
---------------------------
Year Ended
---------------------------
December 31, December 31,
1996 1995
------------ ------------
($ in millions)
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . $543.1 $166.8
Cost and expenses . . . . . . . . . . . 499.4 162.1
----- ------
Operating income . . . . . . . . . . . 43.7 4.7
Allocated interest expense . . . . . . 24.2 4.5
----- -----
Income before taxes . . . . . . . . . . 19.5 .2
Allocated income taxes . . . . . . . . 7.8 1.2
----- -----
Net income . . . . . . . . . . . . . . $ 11.7 $ (1.0)
====== ======
</TABLE>
<PAGE>
<PAGE>59
During 1996, sales increased to $543.1 million from $166.8 million
in the prior year. Operating income increased to $43.7 million compared
with $4.7 million in the prior year. Net earnings increased to $11.7
million compared to a loss of $1.0 million in the prior year. The Loral
Acquired Businesses contributed $13.6 million to 1996 net earnings.
The sales increase was attributed to the sales of the Loral
Acquired Businesses which contributed $381.1 million of the increase.
Sales of Communication Systems -- Camden decreased by $4.8 million
compared to 1995 primarily due to lower volume on Aegis power supplies and
SIGINT system production, partially offset by Local Management Device/Key
Processor ("LMD/KP") production startup.
The increase in operating income also was largely attributable to
the Loral Acquired Businesses, which contributed $36.9 million of the
increase. Communication Systems -- Camden operating income increased $2.2
million primarily due to improved operating performance on the Shipboard
Telephone Communications ("STC-2") program partially offset by increased
costs on the Space Station contract. As a percentage of sales, operating
income increased to 8.0% from 2.8%. This increase is attributable to the
improvement in Communication Systems -- Camden noted above, higher margins
and operating improvements in the Loral Acquired Businesses.
Allocated interest expense increased to $24.2 million from $4.5
million in the prior year due primarily to the acquisition of the Loral
Acquired Businesses, which was assumed to be fully financed by debt,
coupled with a higher debt-to-equity ratio used in the allocation for
Communication Systems -- Camden.
The effective income tax rate declined to 40% as compared to 681%
in the prior year. The 1995 effective rate was significantly impacted by
amortization of costs in excess of net assets acquired, which is not
deductible for income tax purposes. As a percentage of income subject to
tax, such amortization declined significantly in 1996.
<PAGE>
<PAGE>60
Year Ended December 31, 1995 Compared with Year Ended December 31,
1994
The following table sets forth selected income statement data for
the Predecessor Company for the periods indicated.
<TABLE>
<CAPTION>
Predecessor Company
---------------------------
Year Ended
---------------------------
December 31, December 31,
1995 1994
------------ ------------
($ in millions)
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . $166.8 $218.9
Cost and expenses . . . . . . . . . . . 162.1 210.5
----- ------
Operating income . . . . . . . . . . . 4.7 8.4
Allocated interest expense . . . . . . 4.5 5.5
----- -----
Income before taxes . . . . . . . . . . .2 2.9
Allocated income taxes . . . . . . . . 1.2 2.3
----- -----
Net income . . . . . . . . . . . . . . $(1.0) $ .6
====== ======
</TABLE>
Results for 1995 and 1994 reflect only the results of Communication
Systems -- Camden. During 1995, sales decreased to $166.8 million from
$218.9 million in the prior year. Operating income decreased to $4.7
million from $8.4 million and the net loss for 1995 was $1.0 million
compared to net earnings of $0.6 million in 1994.
The decrease in sales was primarily due to the completion of the
IREMBASS and termination of the SCAMP program and lower volume on the
STC-2 program.
The decline in operating income was partially due to the sales
decrease described above. In addition, as a percentage of sales, operating
income decreased to 2.8% in 1995 from 3.8% in 1994. The decrease in 1995
margins is primarily due to a cost overrun on the STE program.
Allocated interest expense decreased to $4.5 million in 1995 from
$5.5 million in 1994 due to the lower invested equity balance at January
1, 1995 compared to January 1, 1994, offset by a slightly higher weighted
average consolidated interest rate.
The effective income tax rates in 1995 and 1994 were significantly
impacted by amortization of costs in excess of net assets acquired, which
is not deductible for income tax purposes. The effective income tax rate
in 1995 increased to 681% compared to 78% in 1994. The increase is
primarily the result of the above described amortization increasing as a
percent of pre-tax income in 1995 compared to the respective percent
relationship in 1994.
<PAGE>
<PAGE>61
Liquidity and Capital Resources
On April 30, 1997, effective April 1, 1997, the Company was purchased
from Lockheed Martin Corporation for approximately $525 million, before an
estimated purchase price adjustment of $20 million. The acquisition was
funded by a combination of debt and equity. The equity was provided by
Holdings who contributed $125 million, including $45 million retained by
Lockheed Martin, in exchange for all of the capital stock of the Company.
The funded debt consisted of $175 million of Term Loans under the Senior
Secured Credit Facility and $225 million of 10 3/8% Senior Subordinated
Notes. The required principal payments under the Term Loans are: $2 million
in the remainder of 1997, $5 million in 1998, $11 million in 1999, $19
million in 2000, $25 million in 2001, $33.2 million in 2002, $20 million in
2003, and $25.2 million in 2004, $24.9 million 2005, and $8.7 million in
2006. With respect to the Term Loans, interest payments vary in accordance
with the type of borrowings and are made at a minimum every three months.
Other than upon a change in control, the Company will not be required to
make principal payments in respect of the 10 3/8% Senior Subordinated Notes
until maturity on May 1, 2007. The Company is required to make semi-annual
interest payments with respect to the 10 3/8% Senior Subordinated Notes.
The Company typically makes capital expenditures related primarily to
improvement of manufacturing facilities and equipment.
The Senior Credit Facility Agreement contains financial covenants,
which remain in effect so long as any amount is owed by the Company under
the Senior Credit Facility. These financial covenants require that (i) the
Company's debt ratio be less than or equal to 5.75 for the quarter ending
September 30, 1997, and that the maximum allowable debt ratio thereafter
be further reduced to less than or equal to 3.1 for quarters ending after
June 30, 2002; and (ii) the Company's interest coverage ratio be at least
1.5 for the quarter ending September 30, 1997, and thereafter increase the
interest coverage ratio to at least 3.10 for any fiscal quarters ending
after June 30, 2002.
The Company has a substantial amount of indebtedness. Based upon the
current level of operation and anticipated improvements, management
believes that the Company's cash flow from operations, together with
available borrowings under the Revolving Credit Facility, will be adequate
to meet for the foreseeable future its anticipated requirements for working
capital, capital expenditures, research and development expenditures,
program and other discretionary investments, interest payments and
scheduled principal payments. There can be no assurance, however, that the
Company's that the Company's business will continue to generate cash flow
at or above current levels or that currently anticipated improvements will
be achieved. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt, it may be required to sell
assets, reduce capital expenditures, refinance all or a portion of its
existing debt or obtain additional financing. The Company's ability to make
scheduled principal payments of, to pay interest on or to refinance its
indebtedness depends on its future performance and financial results,
which, to a certain extent, are subject to general economic financial,
competitive, legislative, regulatory and other factors beyond its control.
There can be no assurance that sufficient funds will be available to
enable the Company to service its indebtedness, including the Notes, or
make necessary capital expenditures and program and other disciplinary
<PAGE>
<PAGE>62
investments. The Senior Credit Facilities and the 10 3/8% Senior
Subordinated Notes credit agreements contain financial and restrictive
covenants that limit, among other things, the ability of the Company to
borrow additional funds, dispose of assets, or pay cash dividends.
The following table sets forth selected cash flow statement data for
the Company and the Predecessor Company the periods indicated:
<TABLE>
<CAPTION>
Predecessor Predecessor
The Company Company Company
------------- ------------- -------------
Combined
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1997 March 31, 1997 June 30, 1997 June 30, 1996
------------- -------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net cash from operating activities . . $ 32,921 $(16,279) $ 16,642 $ (29,411)
Net cash from investing activities . . (473,609) (4,300) (477,909) (291,998)
Net cash from financing activities . . 463,311 20,579 483,890 321,409
--------- -------- --------- --------
Net change in cash . . . . . . . . . . $ 22,623 -- $ 22,623 --
========= ======== ========= ========
</TABLE>
Cash provided by operating activities of the Company for the quarter
ended June 30, 1997 was $32.9 million. Cash provided by operations
benefited from improved operating results and effective management of
contracts in process resulting in reduced levels of receivables.
Cash used for operating activities of the Predecessor Company was
$16.3 million for the quarter ended March 31, 1997, resulting primarily
from the increase in contracts in process and decrease in current
liabilities; offset by cash flows provided by the Loral Acquired
Businesses. Without the Loral Acquired Businesses, cash used for
operating activities for Communication Systems - Camden amounted to
$6.1 million.
The Company's current ratio at March 31, 1997 improved slightly to
2.2:1 from 2.0:1 at December 31, 1996. Compared to December 31, 1996, the
Company's current ratio at June 30, 1997 remained unchanged at 2.0:1.
<PAGE>
<PAGE>63
Cash used in investing activities for the quarter ended June 30,
1997 consisted primarily of $470.7 million paid by the Company for the
acquisition of Businesses from Lockheed Martin Corporation (See Note 1 to
condensed consolidated (combined) financial statements.). During the
quarter ended June 30, 1996, $287.8 million was paid by the Predecessor
Company for the acquisition of the Loral Acquired Businesses. In addition,
for the quarter ended June 30, 1997, $3.1 million was used for capital
expenditures as compared to $4.3 million for the same period in 1996. On a
pro forma basis, capital expenditures for 1996 was $17.2 million. The
Company expects its capital expenditures to remain at comparable levels
as in the past.
Prior to the Transaction, the Businesses participated in the Lockheed
Martin cash management system, under which all cash is received and all
payments are made by Lockheed Martin. All transactions between the
Businesses and Lockheed Martin have been accounted as settled in cash at
the time such transactions were recorded by the Businesses. In 1996,
cash flows reflect the purchase of the Loral Acquired Businesses.
The following table sets forth selected cash flow statement data
for the Predecessor Company for the periods indicated:
<TABLE>
<CAPTION>
Predecessor Company
-------------------------------------------------------------------------------
Three Months Three Months Years Ended December 31,
Ended Ended ---------------------------------------
March 31, 1997 March 31, 1996 1996 1995 1994
---------------- ---------------- ---------- ---------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net cash (used in) from operating
activities. . . . . . . . . . . $(16,279) $10,164 $ 30,999 $ 9,363 $ 21,808
Net cash (used in) investing
activities. . . . . . . . . . . (4,300) (413) (298,249) (5,532) (3,735)
Net cash (used in) from financing
activities . . . . . . . . . . . 20,579 (9,751) 267,250 (3,831) (18,073)
========= ======== ========= ======== =========
Net change in cash -- -- -- -- --
========= ======== ========= ======== =========
</TABLE>
Three Months Ended March 31, 1997 Compared with Three Months
Ended March 31, 1996.
<PAGE>
<PAGE>64
Net Cash Provided by Operating Activities: Cash used in operating
activities for the three months ended March 31, 1997 (the "1997 period")
was $16.3 million compared to cash provided by operating activities of
$10.2 million for the three months ended March 31, 1996 (the "1996
period"). The decrease for the 1997 period is due primarily to the
reduction in contracts in process and increase in current liabilities,
offset by increased profit and non-cash items provided by the Loral
Acquired Businesses. Without the Loral Acquired Businesses, cash used
in operating activities for Communication Systems -- Camden amounted
to $6.1 million.
Contracts in process, before reduction for unliquidated progress
payments, increased $8.9 million to $242.8 million at March 31, 1997
compared to December 31, 1996. See Notes 2 and 4 to the Combined
Financial Statements. As is customary in the defense industry, unbilled
contract receivables and inventoried costs are partially financed by
progress payments. The unliquidated balance of such progress amounted
to $27.2 million at March 31, 1997, compared with $35.8 million at
December 31, 1996. Net contracts in process amounted to $215.6 million
at March 31, 1997 from $198.1 million at December 31, 1996.
The Company's current ratio improved slightly to 2.2:1 at March 31,
1997 from 2.0:1 at December 31, 1996.
Net Cash Used in Investing Activities: Cash used in investing
activities, primarily for capital expenditures, increased to $4.3 million
for the 1997 period compared to $.4 million in the 1996 period.
Year Ended December 31, 1996 Compared to Year Ended December 31,
1995 and to Year Ended December 31, 1994
Net Cash Provided by Operating Activities: Cash provided by
operating activities was $31.0 million in 1996, $9.4 million in
1995 and $21.8 million in 1994. The increase of $21.6 million or 230% in
1996 is due primarily to the impact of the Loral Acquired Businesses.
Earnings after adjustment for non-cash items provided $37.0 million, offset
<PAGE>
<PAGE>65
by changes in other operating assets and liabilities. The decrease in 1995
of $12.4 million is attributable to an increase in contracts in process
compared to 1994, a net loss in 1995 and gain on sales of assets in 1994.
Without the Loral Acquired Businesses, cash provided by operating
activities for Communication Systems -- Camden increased to $13.7 million
in 1996, or 46% over the prior year.
Contracts in process, before reduction for unliquidated progress
payments, increased by $189.2 million to $233.9 million at December 31,
1996, primarily due to the addition of the Loral Acquired Businesses. See
Notes 2 and 4 to the Combined Financial Statements. As is customary in the
defense industry, unbilled contract receivables and inventoried costs are
partially financed by progress payments. The unliquidated balance of such
progress payments increased by $33.5 million to $35.8 million at December
31, 1996, compared with $2.3 million at December 31, 1995. As a result, net
contracts in process increased to $198.1 million in 1996 from $42.5 million
in the prior year.
The Businesses, current ratio improved slightly to 2.0:1 at December
31, 1996, from 1.9:1 at December 31, 1995, as a result of the acquisition
of the Loral Acquired Businesses.
Net Cash Used in Investing Activities: Cash used in investing
activities increased to $298.2 million in 1996 from $5.5 million in 1995
and $3.7 million in 1994. The purchase price allocated by Lockheed Martin
to the Loral Acquired Businesses was $287.8 million. Capital expenditures
during the year amounted to $13.5 million.
Backlog
The Company's funded backlog at December 31, 1996, was $542.5
million, compared with $96.3 million at December 31, 1995 and $120.4
million at December 31, 1994. New orders in 1996 totaled $619.5 million,
compared with $142.6 million in 1995 and $194.6 million in 1994. It is
expected that approximately 77% of the December 31, 1996 backlog will be
shipped in 1997. However, there can be no assurance that the Company's
backlog will become revenues in any particular period, if at all. See
"Risk Factors--Backlog". Approximately 81% of the total backlog was
directly or indirectly for defense contracts for end use by the
Government.
<PAGE>
<PAGE>66
Research and Development
Company-sponsored research and development, including bid and
proposal costs, increased to $36.5 million in 1996 from $9.8 million in
1995. In addition, customer-funded research and development was $153.5
million in 1996, compared with $74.9 million for 1995. The increase in
research and development in 1996 was due primarily to the Loral Acquired
Businesses.
Contingencies
Management does not believe there are any contingencies that, after
taking into account its existing reserves, would have a material adverse
effect on the Company's operations or financial condition. See Note 8 to
the Combined Financial Statements and "Risk Factors--Pension Plan
Liabilities".
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." SFAS No. 128 establishes accounting standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. In February 1997, the
FASB issued SFAS No. 129, "Disclosures of Information about Capital
Structure." SFAS No. 129 requires disclosure of for all type of securities
issued and applies to all entities that have issued securities. In June
1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosure about Segments of an Enterprise and related
Information." SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains and
losses) in a full set general-purpose financial statements. SFAS No. 131
establishes accounting standards for the way that public business
enterprises report information about operating segments and requires that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. SFAS No. 128 and SFAS
No. 129 are required to be adjusted for periods ending after December 15,
1997, and SFAS No. 130 and SFAS No. 131 are required to be adopted by 1998.
The Company is currently evaluating the impact, if any of these new FASB
statements.
Effective January 1, 1996, the Businesses adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 establishes the accounting standards for the impairment of
long-lived assets, certain intangible assets and cost in excess of net
assets acquired to be held and used for long-lived assets and certain
intangible assets to be disposed of. The impact of adopting SFAS 121 was
not material.
Effective January 1, 1994, the Businesses adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postretirement Benefits" ("SFAS 112"). SFAS 112 requires that the costs of
benefits provided to employees after employment but before retirement be
recognized on an accrual basis. The adoption of SFAS 112 did not have a
material impact on the combined results of operations of the Businesses.
<PAGE>
<PAGE>67
Inflation
The effect of inflation on the Company's sales and earnings is
minimal. Although a majority of the Company's sales are made under
long-term contracts, the selling prices of such contracts, established for
deliveries in the future, generally reflect estimated costs to be incurred
in these future periods. In addition, some contracts provide for price
adjustments through escalation clauses.
<PAGE>
<PAGE>68
BUSINESS
Company Overview
L-3 is a leading provider of sophisticated secure communication
systems and specialized communication products including secure, high data
rate communication systems, microwave components, avionics, and telemetry
and instrumentation products. 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 incorporated into the
transmission, processing, recording, monitoring and dissemination
functions of these communication systems. The Company's customers include
the DoD, selected Government intelligence agencies, major
aerospace/defense prime contractors, foreign governments and commercial
customers. In 1996, L-3 had pro forma sales of $675.3 million and pro
forma operating income of $56.0 million. The Company's funded backlog as
of December 31, 1996 was approximately $542.5 million.
All of the Company's business units enjoy proprietary technologies
and capabilities and are well positioned in their respective markets.
Management has organized the Company's operations into two business areas:
Secure Communication Systems and Specialized Communication Products. In
1996, these areas generated approximately $371.5 million and $303.8
million of pro forma sales, respectively, and $23.0 million and $33.0
million of pro forma operating income, respectively.
Secure Communication Systems. L-3 is the established leader in
secure, high data rate communications in support of military and other
national agency reconnaissance and surveillance applications. The
Company's Secure Communication Systems operations are located in Salt Lake
City, Utah and Camden, New Jersey. Both operations are predominantly cost
plus, sole source prime system contractors supporting long-term programs
for the U.S. Armed Forces and classified customers. The Company's major
secure communication programs and systems include: strategic and tactical
signal intelligence systems that detect, collect, identify, analyze and
disseminate information and related support contracts for military and
national agency intelligence efforts; secure data links for airborne,
satellite, ground and sea-based information collection and transmission;
as well as secure telephone and network equipment. The Company believes
that it has developed virtually every high bandwidth data link used by the
military for surveillance and reconnaissance in operation today. In
addition to these core Government programs, L-3 is expanding its business
base into related commercial communication equipment markets, including
applying its wireless communication expertise to develop local wireless
loop equipment primarily for emerging market countries and rural areas
where existing telecommunications infrastructure is inadequate or
non-existent.
Specialized Communication Products. This business area comprises
the Microwave Components, Avionics, and Telemetry and Instrumentation
Products operations of the Company.
<PAGE>
<PAGE>69
Microwave Components. L-3 is the preeminent worldwide supplier of
commercial off-the-shelf, high performance microwave components and
frequency monitoring equipment. L-3's microwave products are sold under
the industry-recognized Narda brand name through a standard catalog to
wireless, industrial and military communication markets. L-3 also provides
state-of-the-art communication components including channel amplifiers and
frequency filters for the commercial communications satellite market.
Avionics. Avionics includes the Company's Aviation Recorders,
Display Systems and Antenna Systems operations. L-3 is the world's leading
manufacturer of commercial cockpit voice and flight data recorders. These
recorders are sold under the Fairchild brand name both on an OEM basis to
aircraft manufacturers as well as directly to the world's major airlines
for their existing fleets of aircraft. L-3 also provides military and
high-end commercial displays for use on a number of DoD programs including
the F-14, V-22, F-117 and E-2C. Further, L-3 manufactures high performance
surveillance antennas and related equipment for U.S. Air Force and U.S.
Navy aircraft including the F-16, AWACS, E-2C and B-2, as well as the
U.K.'s Nimrod aircraft.
Telemetry and Instrumentation Products. The Company's Telemetry and
Instrumentation Products operations 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 parameter data and other critical
information and transmit it from air or space to the ground. Telemetry
products are also used for range safety and training applications to
simulate battlefield situations. Further, the Company is applying its
technical capabilities in high data rate transmission to the medical image
archiving market in partnership with GE Medical Systems.
The Company's systems and products are summarized in the following
tables:
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Secure Communication Systems (1996 Pro Forma Sales: $372 million)
Selected Platforms/End
Systems Selected Applications Uses
---------------------- ---------------------- ----------------------
Secure High Data Rate
Communications
-- Broad-band data links High performance, Used on aircraft and
secure communication naval ships,
links for unmanned aerial
interoperable tactical vehicles with
communication and military and
reconnaissance commercial
satellites
Satellite Communication
Terminals
-- Ground-based
satellite
communication
terminals Interoperable, Provide remote
transportable communication links
ground terminals to distant forces
for remote data
links to distant
segments via commercial
or military satellites
Satellite Communication
and Satellite Control
-- Satellite communication On-board satellite International Space
and tracking systems external Station; Earth
communications, video Observing Satellite;
systems, solid state Landsat-7; National
recorders and ground Oceanic and
support equipment Atmospheric
Administration
weather satellites
-- Satellite
command and Software integration, Air Force satellite
control test and maintenance network; Titan IV
sustainment support for Air Force launch system
and support satellite control
network; engineering
support for satellite
launch systems
Military
Communications
-- Shipboard
communication Shipboard and Shipboard voice
systems ship-to-ship communications
communications systems for Aegis
cruisers and
destroyers; fully
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Specialized Communication Products (1996 Pro Forma Sales: $304 million)
Selected Platforms/End
Productions Selected Applications Uses
---------------------- ---------------------- ----------------------
automated Integrated
Radio Room (IRR) for
ship-to-ship
communications on
Trident submarines
Information Security
Systems
-- Secure
Telephone Unit Secure and non-secure Office and
(STU III)/Secure voice, data and video battlefield secure
Terminal Equipment communication and non-secure
(STE) utilizing ISDN and ATM communication for
commercial network armed services,
technologies intelligence and
security agencies
-- Local
management Provides electronic User authorization
device/key key material and recognition and
processor accounting, system message encryption
(LMD/KP) management and audit for secure
support functions for communication
secure data
communication
-- Information
processing Custom designed Classified military
systems strategic and tactical and national agency
signal intelligence intelligence efforts
systems that detect,
collect, identify,
analyze and
disseminate
information and
related support
contracts
Microwave Components
-- Passive
components, Radio transmission, Broad-band and
mechanical switching and narrow-band
switches and conditioning; antennae commercial
wireless and base station applications (PCS,
assemblies testing and monitoring cellular, SMR,
and paging
infrastructure)
sold under the
Narda brand name;
broad-band military
applications
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Specialized Communication Products (1996 Pro Forma Sales: $304 million)
Selected Platforms/End
Productions Selected Applications Uses
---------------------- ---------------------- ----------------------
-- Safety
products Radio frequency (RF) Monitor cellular
monitoring and base station and
measurement industrial RF
emissions frequency
monitoring
-- Semiconductors
(diodes, Radio frequency Various industrial
capacitors) switches, limiters, and military end
voltage control, uses, including
oscillators, harmonic commercial
generators satellites, avionics
and specialty
communication
products
-- Satellite and
wireless Satellite transponder F-16, E-2C, China
components control, channel and Sat
(channel frequency separation
amplifiers,
transceivers,
converters,
filters and
multiplexers)
Avionics
Aviation Recorders
-- Solid state
cockpit voice Voice recorders Installed on all
and flight continuously record business and
data recorders most recent 30-120 commercial aircraft
minutes of voice and and certain military
sounds from cockpit transport aircraft;
and aircraft sold to both
inter-communications. aircraft OEMs and
Flight data recorders airlines under the
record the last 25 Fairchild brand name
hours of flight
parameters
Display Systems
-- Cockpit and
mission High performance, E-2C, V-22, F-14,
display ruggedized flat panel F-117, E-6B, C-130,
systems and cathode ray tube AWACS and JSTARS
displays
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Specialized Communication Products (1996 Pro Forma Sales: $304 million)
Selected Platforms/End
Productions Selected Applications Uses
---------------------- ---------------------- ----------------------
Antenna Systems
-- Ultra-wide
frequency Surveillance; radar F-15, F-16, F-18,
antennae detection E-2C, A-7, EF-111,
systems and P-3, C-130, B-2,
rotary joints AWACS, Apache,
Cobra, Mirage
(France), Nimrod
(U.K.) and Tornado
(U.K.)
Telemetry and Instrumentation
Telemetry
-- Aircraft,
missile and Real time data F-15, F-18, F-22,
satellite acquisition, Comanche, Nimrod
telemetry measurement, (U.K.), Tactical
systems processing, Hellfire Titan,
simulation, EELV, and A2100
distribution, display
and storage for flight
testing
-- Training range
telemetry Battlefield simulation Combat simulation
systems
Instrumentation and
Other
-- Medical
imaging and X-Ray cardiology, echo Filmless, high speed
archiving cardiology and image management and
radiology image archiving for
management, review and cardiology and
archiving radiology
Industry Overview
The defense industry has recently undergone significant change
precipitated by ongoing federal budget pressures and new roles and
missions to reflect changing strategic and tactical threats. Since the
mid-1980's, the overall U.S. defense budget has declined in real dollars.
In response, the DoD has focused its resources on enhancing its military
readiness, joint operations and multiple mission capabilities, and
incorporating advanced electronics to improve the performance, reduce
operating cost and extend the life expectancy of its existing and future
platforms. The emphasis on system interoperability, force multipliers and
providing battlefield commanders with real-time data is increasing the
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electronics content of nearly all of the major military procurement and
research programs. As a result, the DoD's budget for communications and
defense electronics is expected to grow. According to Federal Sources, an
independent private consulting group, the defense budget for C3I is
expected to increase from $30.0 billion in the fiscal year ended September
30, 1996 to $42.0 billion in the fiscal year ended September 30, 2002, a
compound annual growth rate of 5.8%.
The industry has also undergone dramatic consolidation resulting in
the emergence of four dominant prime system contractors. One outgrowth of
this consolidation among the remaining major prime contractors is their
desire to limit purchases of products and sub-systems from one another.
Despite this desire, there are numerous essential but non-strategic
products, components and systems that are not economical for the major
prime contractors to design, develop or manufacture for their own internal
use. As the prime contractors continue to evaluate their core competencies
and competitive position, focusing their resources on larger programs and
platforms, the Company expects the prime contractors will seek to exit
non-strategic business areas and procure these needed elements on more
favorable terms from independent, commercially oriented merchant
suppliers.
The focus on cost control is also driving increased use of
commercial off-the-shelf products for both upgrades of existing systems
and in new systems. The Company believes the prime contractors will
continue to be under pressure to reduce their costs and will increasingly
seek to focus their resources and capabilities on major systems, turning
to commercially oriented merchant suppliers to produce non-core
sub-systems, components and products. Going forward, the successful
merchant suppliers will use their resources to complement and support,
rather than compete with the prime contractors. L-3 anticipates the
relationship between the major prime contractors and their primary
suppliers will, as in the automotive industry, develop into 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. Early involvement in the upgrading of existing systems
and the design and engineering of new systems incorporating these
outsourced products will provide top-tier suppliers, including the
Company, 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
L-3 intends to leverage its market position, diverse program base
and favorable mix of cost plus to fixed price contracts to enhance its
profitability, reduce its indebtedness and to establish itself as the
premier merchant supplier of communication systems and products to the
major prime contractors in the aerospace/defense industry as well as the
Government. The Company's strategy to achieve these objectives includes:
-- Expand Merchant Supplier Relationships. Senior Management has
developed strong relationships with virtually all of the prime
contractors, the DoD and other major government agencies, enabling L-3 to
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identify business opportunities and anticipate customer needs. As an
independent merchant supplier, the Company anticipates its future growth
will be driven by expanding its share of existing programs and by
participating in new programs. Management has already identified several
opportunities where the Company believes it will be able to use its strong
relationships to increase its business presence and allow its customers to
reduce their costs. The Company also expects 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 L-3's
capabilities on a more favorable basis given its status as an independent
company.
-- Support Customer Requirements. A significant portion of L-3's
sales are derived from high-priority, long-term programs and from programs
for which the Company has been the incumbent supplier, and in many cases
acted as the sole provider, over many years. Approximately 67% of the
Company's total pro forma 1996 sales were generated from sole source
contracts. L-3's customer satisfaction and excellent performance record
are evidenced by its performance-based award fees exceeding 90% on average
over the past two years. Going forward, management believes prime
contractors will award long-term, sole source, outsourcing contracts to
the merchant supplier they believe is most capable on the basis of
quality, responsiveness, design, engineering and program management
support as well as cost. Reflecting L-3's strong competitive position, the
Company has experienced a contract award win rate over the past two years
of approximately 50% on new competitive contracts for which it competes
and approximately 90% on contracts for which it is the incumbent. The
Company intends to continue to align its research and development,
manufacturing and new business efforts to complement its customers'
requirements.
-- Leverage Technical and Market Leadership Positions. L-3 has
developed strong, proprietary technical capabilities that have enabled it
to capture a number one or two market position in most of its key business
areas, including secure, high data rate communication systems, solid state
aviation recorders, advanced antenna systems and high performance
microwave components. Over the past three years, the Company and its
Predecessors have invested over $100 million in Company-sponsored
independent research and development, including bid and proposal costs, in
addition to making substantial investments in its technical and
manufacturing resources. Further, the Company has a highly skilled
workforce including over 1,500 engineers. As an independent company,
management intends to leverage its technical expertise and capabilities
into several closely aligned commercial business areas and applications,
including opportunities in wireless telephony and medical imaging archive
management.
-- Maintain Diversified Business Mix. The Company enjoys a diverse
business mix with a limited program exposure, a favorable balance of cost
plus to fixed price contracts, a significant sole source business and an
attractive customer profile. The Company's largest program, representing
14% of 1996 pro forma sales, is a long-term, sole source, cost plus
support program for the U-2 program Directorate for the DoD. No other
program represented more than 7% of pro forma 1996 sales. Further, the
Company's pro forma sales mix of contracts in 1996 was 42% cost plus and
58% fixed price, providing the Company with a balanced mix of predictable
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<PAGE>76
profitability (cost plus) and higher margin (fixed price) business. L-3
also enjoys an attractive customer mix of defense and commercial business,
with DoD related sales accounting for 65% and commercial and federal
(non-DoD) sales accounting for 35% of 1996 pro forma sales. The Company
intends to leverage this favorable business profile to expand its merchant
supplier business base.
-- Enhance Operating Margins. As part of larger corporations (i.e.,
Lockheed Martin, Loral, GE, Unisys), the Businesses were historically
required to absorb significant corporate expense allocations. As an
independent company, L-3 believes that it will be able to leverage its
discretionary expenditures in a more focused and efficient manner, enhance
its operating performance and reduce overhead expenses reflecting Senior
Management's more flexible, entrepreneurial approach. The Company believes
that significant costs incurred by the Businesses under Lockheed Martin's
ownership will not be incurred going forward. These cost savings include
reduced corporate administrative and facilities expenses and certain
operating performance improvements.
-- Capitalize on Strategic Acquisition Opportunities. Recent
industry consolidation has virtually eliminated traditional middle-tier
aerospace/defense companies. This level of consolidation is now beginning
to draw the concern of the DoD and federal anti-trust regulators. As a
result, the Company anticipates the pending major mergers as well as
continued consolidation of the smaller participants in the defense
industry will create attractive complementary acquisition candidates for
L-3 in the future as these companies continue to evaluate their core
competencies and competitive position.
Products and Services
Secure Communication Systems
L-3 is a leader in communication systems for high performance
intelligence collection, imagery processing and ground, air, sea and
satellite communications for the DoD and other government agencies. The
Company's Secure Communication Systems operations are located in Salt Lake
City, Utah and Camden, New Jersey, and together had pro forma sales of
$371.5 million and EBITDA of $41.6 million in 1996. The Salt Lake City
operation provides secure, high data rate, real-time communication systems
for surveillance, reconnaissance and other intelligence collection
systems. The Camden operation designs, develops, produces and integrates
communication systems and support equipment for space, ground and naval
applications. Product lines of the Secure Communication Systems business
include high data rate communication links, satellite communication
("SATCOM") terminals, Navy 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
The Company is a technology leader in high data rate, covert,
jam-resistant microwave communications in support of military and other
national agency reconnaissance and surveillance applications. L-3's
product line covers a full range of tactical and strategic secure
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<PAGE>77
point-to-point and relay data transmission systems, products and support
services that conform to military and intelligence specifications. The
Company's 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.
During the 1980s, largely based on its prior experience with command
and control guidance systems for remotely-piloted vehicles, L-3 developed
its current family of strategic and tactical data links, including its
Modular Interoperable Data Link ("MIDL") systems and Modular Interoperable
Surface Terminals ("MIST"). MIDL and MIST technologies are considered
virtual DoD standards in terms of data link hardware. The Company's
primary focus is spread spectrum communication (based on CDMA technology),
which involves transmitting a signal as noise so as to make it difficult
to detect to others, and then re-capturing the signal and removing the
noise. The Company's data links are capable of providing information at
over 200 Mb/s.
L-3 provides these secure high band width services to the U.S. Air
Force, Navy, Army and various Government agencies, many through long-term
sole source programs. The scope of these programs include air-to-ground,
air-to-air, ground-to-air and satellite communications. Government
programs include: U-2 Support, Common High-Band Width Data Link Surface
Terminal ("CHBDL-ST"), Battle Group Passive Horizon Extension System
("BGPHES"), Light Airborne Multi-Purpose System (LAMPS), TriBand SATCOM
Subsystem ("TSS"), all unmanned aerial vehicle ("UAV") programs and Direct
Air-Satellite Relay ("DASR").
-- Satellite Communication Terminals
L-3 provides ground-to-satellite, high availability, real-time
global communications capability through a family of transportable field
terminals to communicate with commercial, military and international
satellites. These terminals provide remote personnel with anywhere,
anytime effective communication capability and provide communications
links to distant forces. The Company's TriBand SATCOM Subsystem ("TSS")
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. The Company also
offers an 11.3 meter dish which is transportable on two C-130 aircraft.
The SHF Portable Terminal System ("PTS") is a lightweight (28 lbs.),
manportable terminal, which communicates through DSCS, NATO or SKYNET
satellites and brings unprecedented connectivity to small military
tactical units and mobile command posts. L-3 recently delivered 14 of
these terminals for use by NATO forces in Bosnia.
-- Space Communications and Satellite Control
Continuing L-3's tradition of providing communications for every
manned U.S. space flight since Mercury, the Company is currently designing
and testing three communication subsystems for the International Space
Station ("ISS"). These systems will control all ISS radio frequency ("RF")
communications and external video activities. The Company also provides
solid-state recorders and memory units for data capture, storage, transfer
and retrieval for space applications. The standard NASA tape recorder,
which was developed and produced by the Company, has completed over three
million hours of service without a mission failure. Current programs
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include recorders for the National Oceanic & Atmospheric Administration
("NOAA") weather satellites, the Earth Observing Satellite ("EOS") AM
spacecraft and Landsat-7 Earth-monitoring spacecraft. The Company also
provides 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
The Company provides integrated, computer controlled switching
systems for the interior and exterior voice and data needs of today's Navy
military vessels. The Company's products include Integrated Voice
Communication Systems ("IVCS") for Aegis cruisers and destroyers and the
Integrated Radio Room ("IRR") for Trident class submarines, the first
computer controlled communications center in a submarine. These products
integrate the intercom, tactical and administrative communications network
into one system accessing various types of communication terminals
throughout the ship. The Company's MarCom 2000 secure digital switching
system is in development for the Los Angeles class attack submarine and
provides an integrated approach to the specialized voice and data
communications needs of a shipboard environment for internal and external
communications, command and control and air traffic control. The Company
also offers 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 terminal platforms.
-- Information Security Systems
The Company has produced more than 100,000 secure telephone units
("STU III") which are in use today by the U.S. Armed Forces to provide
secure telephone capabilities for classified confidential communication
over public commercial telephone networks. The Company has begun producing
the next-generation digital, ISDN-compatible STE. STE provides clearer
voice and seven-times faster data/fax transmission capability than the STU
III. STE also supports secure conference calls and secure video
teleconferencing. STE uses a CryptoCard security system which consists of
a small, portable, cryptographic module mounted on a PCMCIA card holding
the algorithms, keys and personalized credentials to identify its user for
secure communications access. The Company also provides LMD/KP which is
the workstation component of the Government's Electronic Key Management
System ("EKMS"), the next generation of information security systems. EKMS
is the Government system to replace current "paper" secret keys used to
secure government communications with "electronic" secret keys. LMD/KP is
the component of the EKMS which produces and distributes the electronic
keys. L-3 also develops specialized strategic and tactical SIGINT 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.
-- Tactical Security Systems
The Company manufactures the IREMBASS, an unattended ground sensor
system which uses sensors placed along likely avenues of enemy approach or
intrusion in a battlefield environment. The sensors respond to seismic and
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acoustic disturbances, infrared energy and magnetic field changes and thus
detect enemy activities. IREMBASS is currently in use by U.S. Special
Operations Forces, the U.S. Army's Light Divisions and several foreign
governments. The Company also provides the Intrusion Detection Early
Warning System ("IDEWS"), a sensor system designed for platoon-level
physical security applications. Weighing less than two pounds, this sensor
system is ideal for covert perimeter intrusion detection, border
protection and airfield or military installation security.
-- Commercial Communications
The Company is applying its wireless communication expertise to
introduce local wireless loop equipment using a synchronous Code Division
Multiple Access technology protocol ("CDMA") supporting terrestrial and
space based, fixed and mobile communication services. The system's
principal targeted customer base is emerging market countries and rural
areas where existing telecommunications infrastructure is inadequate or
non-existent. The Company's system will have the potential to interface
with low earth orbit ("LEO") PCS systems such as Globalstar, Iridium and
or any local public telephone network. The Company expects to manufacture
for sale certain of the infrastructure equipment and to license its
technology to third-party providers. The Company expects to partner with
third parties for service and distribution capabilities. The Company has
entered into product distribution agreements with Granger Telecom for
distribution in parts of Africa, the Middle East and the United Kingdom,
and with Unisys for distribution in parts of Mexico and South America.
Specialized Communication Products
Microwave Components
L-3 is the pre-eminent worldwide supplier of commercial
off-the-shelf, high performance radio frequency ("RF") microwave
components, assemblies and instruments supplying the wireless
communication, industrial and military markets. The Company is also a
leading provider of state-of-the-art space-qualified commercial satellite
and strategic military RF products. L-3 sells many of these components
under the well-recognized Narda brand name and through the world's most
comprehensive catalogue of standard, stocked hardware. L-3 also sells its
products through a direct sales force and an extensive network of premier
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. The Company operates from two sites, Hauppauge, New York
("Narda East"), and Sacramento, California ("Narda West").
Narda East represents approximately 62% of L-3's microwave sales
volume, offering high performance microwave components, networks and
instruments to the wireless, industrial and military communications
markets. Narda East's products can be divided into three major categories:
passive components, higher level wireless assemblies/monitoring systems
and safety instruments.
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Passive components are generally purchased in narrow frequency
configurations by wireless OEM equipment manufacturers and service
providers. Similar components are purchased in wide frequency
configurations by first tier military equipment suppliers. Commercial
applications for Narda components are primarily in cellular or PCS base
stations. Narda also manufactures higher level assemblies for wireless
base stations and the paging industry. These products include
communication antenna test sets, devices that monitor reflected power to
determine if a cellular base station is working. Military applications
include general procurement for test equipment or electronic surveillance
and countermeasure systems. RF safety products are instruments which are
used to measure the level of non-ionizing radiation in a given area, i.e.,
from an antenna, test set or other emitting source.
Narda West designs and manufactures state-of-the-art space-qualified
and wireless components. Space qualified components include channel
amplifiers for satellite transponder control and diplexers/ multiplexers,
which are used to separate various signals and direct them to the
appropriate other sections of the payload. Narda West's primary areas of
focus are communication satellite payload products. Channel amplifiers
constitute Narda West's main satellite product. These components amplify
the weak signals received from earth stations by a factor of 1 million,
and then drive the power amplifier tubes that broadcast the signal back to
earth. These products are sold to satellite manufacturers and offer lower
cost, lower weight and improved performance versus in-house alternatives.
On a typical satellite, for which there are 20 to 50 channel amps, Narda
West's channel amps offer cost savings of up to 60% (up to $1 million per
satellite) and decrease launch weight by up to 25 kilograms.
The operation also offers a wide variety of high-reliability power
splitters, combiners and filters for spacecraft and launch vehicles, such
as LLV, Tiros N, THAAD, Mars Surveyor, Peacekeeper, Galileo, Skynet,
Cassini, Milstar, Space Shuttle, LandSat, FltSatCom, GPS, GPS Block IIR,
IUS, ACE, SMEX and certain classified programs. Narda West also produces
ground transceivers for communication with satellites. These Very Small
Aperture Terminal ("VSAT") transceivers are used in medium and high data
rate applications in the C and Ku frequency bands normally used for
transmit/receiver applications. Other Narda West products include wireless
microwave components for cellular and PCS base station applications. These
products include filters used for transmit and receive channel separation
as well as ferrite components, which isolate certain microwave functions,
thereby preventing undesired signal interaction. The balance of the
operation's business is of a historical nature and involves wideband
filters used for electronic warfare applications and cavity oscillators
used in commercial test equipment and terrestrial radio applications.
Avionics
-- Aviation Recorders
L-3 manufactures commercial solid-state crash-protected aviation
recorders ("black boxes") under the Fairchild brand name, and has
delivered over 40,000 flight recorders to airplane manufacturers and
airlines around the world. Recorders are mandated and regulated by various
worldwide agencies for commercial airlines and a large portion of business
aviation aircraft. Management anticipates growth opportunities in Aviation
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Recorders as a result of the current high level of orders for new
commercial aircraft. Additional growth opportunities exist in the military
market as a result of recent military aircraft accidents. There are two
types of recorders: (i) the Cockpit Voice Recorder ("CVR") which records
the last 30 to 120 minutes of crew conversation and ambient sounds from
the cockpit and (ii) the Flight Data Recorder ("FDR") which records the
last 25 hours of aircraft flight parameters such as speed, altitude,
acceleration, thrust from each engine and direction of the flight in its
final moments. 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 resistance equal to 20,000 feet undersea for 30 days. Management
believes that the Company has the leading worldwide market position for
CVR's and FDR's.
-- Antenna Systems
Under the Randtron brand name, L-3 produces high performance
antennas designed for surveillance, high-resolution, ultra-wide frequency
bands, detection of low radar cross section ("LRCS") targets, LRCS
installations, severe environmental applications and polarization
diversity. L-3's main antenna product is a sophisticated 24-foot diameter
antenna operational on all E-2C aircraft. This airborne antenna consists
of a 24-foot rotating aerodynamic oblate spheroid radome containing a UHF
surveillance radar antenna, IFF antenna and forward and aft auxiliary
antennas. This antenna began production in the early 1980s, and production
is planned beyond 2000 for the E-2C, P3 and C-130 AEW aircraft. L-3 also
produces broad-band antennas for a variety of tactical aircraft and rotary
joints for the AWAC's and E-2C's antenna. Randtron has delivered
approximately 2,000 aircraft sets of antennas and has a current backlog
through 1999.
-- Display Systems
L-3 specializes in the design, development and manufacture of
ruggedized display system solutions for military and high-end commercial
applications. L-3's current product lines include cathode ray tubes
("CRTs") and the Actiview family of active matrix liquid crystal displays
("AMLCD"). L-3 manufactures flat-panel displays with diagonal screen sizes
of 10.4 and 20.1 inches that are in platforms such as E-2C (enhanced main
display unit and Q-70 advanced display system), F-14, F-117 and V-22.
Telemetry and Instrumentation
The Company is a leader in component products used in telemetry and
instrumentation for satellites, aircraft, UAVs, launch vehicles and
missiles. Telemetry involves the collection of data from these platforms,
its transmission to ground stations for analysis, and its further
dissemination or transportation to another platform. A principal use of
this telemetry data is to measure as many as 1,000 different parameters of
the platform's operation (in much the same way as a flight data recorder
on an airplane measures various flight parameters) and transmits this data
to the ground.
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Additionally, for satellite platforms, the equipment also provides
the command uplink that controls the satellite. In these applications,
high reliability of components is crucial because of the high cost of
satellite repair and the length of uninterrupted service required.
Telemetry also provides the data to terminate the flight of missiles and
rockets under errant conditions and/or at the end of mission.
-- Airborne, Ground and Space Telemetry
The Company provides airborne equipment and data link systems to
gather critical information and to process, format and transmit it to the
ground through communication data links from a communications satellite,
spacecraft, aircraft and/or missile. These products are available in both
COTS and custom configurations. Major customers are the major defense
contractors who manufacture aircraft, missiles, warheads, launch vehicles,
munitions and bombs. Ground instrumentation activity occurs at the ground
station where the serial stream of combined data is received and decoded
in real-time, as it is received from the airborne platform. Data can be
encrypted and decrypted during this process, an additional expertise that
the Company offers. L-3 offers the System 500 which interfaces with
airborne telemetry and helps determine if it is within certain parameters
of its flight pattern and displays the information graphically on a ground
station terminal. The Company is currently developing the NeTstar ground
station terminal which is capable of handling compressed satellite mission
time frames.
-- Range Instrumentation
A ground-based application for the Company is range instrumentation,
where equipment that is worn by soldiers or mounted in vehicles transmit
and receive data that is used for test and evaluation of training
missions. The Company's Digital Communication Network Subsystem ("DCNS")
product allows for more effective monitoring and control of training and
testing ranges.
-- Transportable Radios
The Company also manufactures transportable, tunable, microwave
radios used for commercial and military voice and data communication
service restoration and features rugged, modularized systems capable of
data rates up to 155 Mb/s. Frequencies are tunable in RF bands from 1.7
GHz to 19.7 GHz with simple plug-in radio frequency heads. The radios are
encased in portable, all-weather outdoor housing for use in restoration
and temporary service and military tactical communications.
-- Expendable Countermeasure Systems
L-3 designs, develops and produces radar, infrared, electro-optical
and acoustic expendable countermeasure systems, computer-controlled
launchers and dispensers for ships, aircraft, ground vehicles and base
defense. L-3 is the world leader in the design, development and production
of passive off-board ship defense countermeasures systems for the U.S.
Navy and international customers. The products include the MK 214 and MK
216 Sea Gnat Decoys, which are the seduction and distraction decoys used
by the U.S. Navy and NATO for ship defense against radar-guided threats.
L-3 also manufactures Automatic Launch of Expendables ("ALEX"), a
<PAGE>
<PAGE>83
completely automated ship-defense launch system that takes threat
information from the ship's warning system and speed, direction and wind
conditions from the ship's navigation system and initiates the optimum
countermeasure response and/or maneuver based on the decoy load-out
inventory.
-- Commercial Communication Products
The Company and GE Medical Systems have jointly developed
GEMnet(Trademark), a cardiac image management and archive system.
GEMnet(Trademark) eliminates the use of cinefilm in a cardiac
catheterization laboratory by providing a direct digital connection to the
laboratory. The system provides for acquisition, display, analysis and
short-and long-term archive of cardiac patient studies, providing
significant cost savings and process improvements to the hospital.
EchoNet(Trademark) is a digital archive management and review system
designed by the Company specifically for the echocardiology profession.
Echonet(Trademark) is the result of an exclusive strategic partnership
with Heartlab, Inc. and is distributed by Nova Microsonics. The system
accepts digital echocardiology studies from a variety of currently
available ultrasound systems, manages the studies, making them available
on a network, and allows the physicians and technicians to become more
productive. DICOMView(Trademark) is a multimodal, low-cost viewing station
designed by the Company for use with standard IBM-compatible and Macintosh
personal computer platforms. It makes full motion, full fidelity
diagnostic images accessible for the cardiologist, surgeon and referring
physician. EchoNet(Trademark) and DICOMView(Trademark) are trademarks of
Heartlab, Inc. GEMnet(Trademark) is a trademark of GE.
Major Customers
The Company's sales are predominantly derived from contracts with
agencies of, and prime contractors to, the Government. The various
Government customers exercise independent purchasing decisions. Sales to
the Government generally are not regarded as constituting sales to one
customer. Instead, each contracting entity is considered to be a separate
customer. In 1996, the Company performed under approximately 180 contracts
with value exceeding $1 million for the Government. Government pro forma
sales in 1996, including pro forma sales to the Government through prime
contractors, were $529 million. Historical sales to Lockheed Martin were
$70.7 million in 1996. The Company's largest program, representing 14% of
1996 pro forma sales, is a long-term, sole source cost plus support
program for the U-2 Directorate. No other program represented more than 7%
of pro forma 1996 sales.
Research and Development
The Company employs scientific, engineering and other personnel to
improve its existing product lines and to develop new products and
technologies in the same or related fields. As of December 31, 1996, the
Company employed approximately 1,580 engineers (of whom over 35% hold
advanced degrees). The pro forma amounts of research and development
performed under customer-funded contracts and Company-sponsored research
projects, including bid and proposal costs, for 1996 were $153.5 million
and $36.5 million, respectively.
<PAGE>
<PAGE>84
Competition
The Company's ability to compete for defense contracts depends to a
large extent on the effectiveness and innovativeness of its research and
development programs, its ability to offer better program performance than
its competitors at a lower cost to the Government customer, and its
readiness in facilities, equipment and personnel to undertake the programs
for which it competes. In some instances, programs are sole source or work
directed by the Government to a single supplier. 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 Government
should choose to reopen the particular program to competition.
Approximately 67% of the Company's 1996 pro forma sales related to sole
source contracts.
The Company experiences competition from industrial firms and U.S.
government agencies, some of which have substantially greater resources.
These competitors include: Allied Signal Inc., AMP, Inc., Aydin
Corporation, Cubic Corporation, GTE Corporation, Harris Corporation, GM
Hughes Electronics, Motorola, Inc., Raytheon Company and Titan
Corporation. A majority of the sales of the Company is derived from
contracts with the Government and its prime contractors, and such
contracts are awarded on the basis of negotiations or competitive bids.
Management does not believe any one competitor or a small number of
competitors is dominant in any of the business areas of the Company.
Management believes the Company will continue to be able to compete
successfully based upon the quality and cost competitiveness of its
products and services.
Patents and Licenses
Although the Company owns some patents and has filed applications
for additional patents, it does not believe that its operations depend
upon its patents. In addition, the Company's Government contracts
generally license it to use patents owned by others. Similar provisions in
the Government contracts awarded to other companies make it impossible for
the Company to prevent the use by other companies of its patents in most
domestic work.
Backlog
As of December 31, 1996, the Company's funded backlog was
approximately $542.5 million. This backlog provides management with a
useful tool to project sales and plan its business on an on-going basis;
however, no assurance can be given that the Company's backlog will become
revenues in any particular period or at all. Funded backlog does not
include the total contract value of multi-year, cost-plus reimbursable
contracts, which are funded as costs are incurred by the Company. Funded
backlog also does not include unexercised contract options which represent
the amount of revenue which would be recognized from the performance of
contract options that may be exercised by customers under existing
contracts and from purchase orders to be issued under indefinite quantity
contracts or basic ordering agreements. Backlog is a more relevant
predictor of future sales in the Secure Communication Systems business
area. Current funded backlog in Secure Communication Systems as of
December 31, 1996 was $331.5 million, of which approximately 81.3% is
<PAGE>
<PAGE>85
expected to be shipped in 1997. The Company believes backlog is a less
relevant factor in the Specialized Communication Products business area
given the nature of its catalog and commercial oriented business. Overall,
approximately 77% of the Company's December 31, 1996 funded backlog is
expected to be shipped in 1997.
<TABLE>
<CAPTION>
Funded Backlog as of
December 31, 1996
---------------------------
($ in millions)
<S> <C>
Secure Communication Systems . . . . . . . . $331.5
Communication Products . . . . . . . . . . . 211.0
------
$542.5
======
</TABLE>
Government Contracts
Approximately 78.4% of the Company's 1996 pro forma sales were made
to agencies of the Government or to prime contractors or subcontractors of
the Government.
Approximately 58% of the Company's pro forma 1996 sales mix of
contracts were firm fixed price contracts under which the Company agrees
to perform for a predetermined price. Although the Company's fixed price
contracts generally permit the Company to keep profits if costs are less
than projected, the Company does bear the risk that increased or
unexpected costs may reduce profit or cause the Company to sustain losses
on the contract. Generally, firm fixed price contracts offer higher margin
than cost plus type contracts. All domestic defense contracts and
subcontracts to which the Company is a party are subject to audit, various
profit and cost controls and standard provisions for termination at the
convenience of the Government. Upon termination, other than for a
contractor's default, the contractor will normally be entitled to
reimbursement for allowable costs and to an allowance for profit. Foreign
defense contracts generally contain comparable provisions relating to
termination at the convenience of the government. To date, no significant
fixed price contract of the Company has been terminated.
Companies supplying defense-related equipment to the Government are
subject to certain additional business risks peculiar to that industry.
Among these risks are the ability of the Government to unilaterally
suspend the Company from new contracts pending resolution of alleged
violations of procurement laws or regulations. Other risks include a
dependence on appropriations by the Government, changes in the
Government's procurement policies (such as greater emphasis on competitive
procurements) and the need to bid on programs in advance of design
completion. A reduction in expenditures by the Government for products of
the type manufactured by the Company, lower margins resulting from
<PAGE>
<PAGE>86
increasingly competitive procurement policies, a reduction in the volume
of contracts or subcontracts awarded to the Company or substantial cost
overruns would have an adverse effect on the Company's cash flow.
Properties
The table below sets forth, as of December 31, 1996, certain
information with respect to L-3's manufacturing facilities and properties.
Location Owned Leased
-------------------------------- --------------- --------------
(thousands of square feet)
L-3 Headquarters, NY . . . . . . . . . -- 58.5
Secure Communication Systems:
Camarillo, CA . . . . . . . . . . . . -- 1.8
El Segundo, CA . . . . . . . . . . . -- 1.4
Santa Clara, CA . . . . . . . . . . . -- 5.9
Santa Maria, CA . . . . . . . . . . . -- 9.8
Colorado Springs, CO . . . . . . . . -- 5.8
Camden, NJ . . . . . . . . . . . . . -- 588.6
Tinton Falls, NJ . . . . . . . . . . -- 0.8
Salt Lake City, UT . . . . . . . . . -- 457.6
Specialized Communication Products:
Folsom, CA . . . . . . . . . . . . . -- 57.5
Lancaster, CA . . . . . . . . . . . . -- 5.4
Menlo Park, CA . . . . . . . . . . . -- 93.0
Rancho Cordova, CA . . . . . . . . . -- 40.4
Redwood City, CA . . . . . . . . . . -- 5.2
San Diego, CA . . . . . . . . . . . . 196.0 68.9
San Mateo, CA . . . . . . . . . . . . -- 14.8
Santa Clara, CA . . . . . . . . . . . -- 2.0
Merrill Island, FL . . . . . . . . . -- 1.2
Sarasota, FL . . . . . . . . . . . . 303.6 --
Alpharetta, GA . . . . . . . . . . . 40.0 --
Atlanta, GA . . . . . . . . . . . . . 52.1 --
Norcross, GA . . . . . . . . . . . . -- 4.8
Haverhill, MA . . . . . . . . . . . . 8.0 --
Lowell, MA . . . . . . . . . . . . . -- 47.0
Woburn, MA . . . . . . . . . . . . . 106.0 --
Hauppauge, NY . . . . . . . . . . . . 150.0 --
Warminster, PA . . . . . . . . . . . 44.7 --
Slough, Berkshire (U.K.) . . . . . . -- 1.4
----- -------
Total . . . . . . . . . . . . . . . . . 900.4 1,471.8
===== =======
<PAGE>
<PAGE>87
Legal Proceedings
From time to time the Company is involved in legal proceedings
arising in the ordinary course of its business. As part of the
Acquisition, the Company has agreed to assume certain litigation relating
to the Businesses and Lockheed Martin has agreed to indemnify the Company,
up to certain limits, for a breach of its representations and warranties.
Management believes it is adequately reserved for these liabilities and
that there is no litigation pending that could have a material adverse
effect on the Company or its operations, except as discussed below.
As of June 30, 1997, the Company and Universal Avionics Systems
Corporation ("Universal") has reached a settlement with respect to a
lawsuit brought by Universal against the Company's Aviation Recorders
operation ("Aviation Recorders"). The terms of this settlement will not
have a material adverse effect on the Company's financial condition or
results of operations.
Environmental Matters
The Company's 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 or resulting from its operations.
The Company continually assesses its obligations and compliance with
respect to these requirements. Based on a review by an independent
environmental consulting firm and its own internal assessments, management
believes that the Company's current operations are in substantial
compliance with all existing applicable environmental laws and
regulations. New environmental protection laws that will be effective in
1997 and thereafter may require the installation of environmental
protection equipment at the Company's manufacturing facilities. However,
the Company does not believe that its environmental expenditures, if any,
will have a material adverse effect on its financial condition or results
of operations.
Pursuant to the Transaction Agreement, the Company has agreed to
assume certain on-site and off-site environmental liabilities related to
events or activities occurring prior to the consummation of the
Transaction. Lockheed Martin has agreed to retain all environmental
liabilities for all facilities not used by the Businesses as of the
Closing and to indemnify fully the Company for such prior site
environmental liabilities. Lockheed Martin has also agreed, for the first
eight years following the Closing, to pay 50% of all costs incurred by the
Company above those reserved for on the Company's balance sheet at Closing
relating to certain Company-assumed environmental liabilities and, for the
seven years thereafter, to pay 40% of certain reasonable operation and
maintenance costs relating to any environmental remediation projects
undertaken in the first eight years. The Company is aware of environmental
contamination at two of its facilities that will require ongoing
remediation. Management believes that the Company has established adequate
reserves for the potential costs associated with the assumed environmental
liabilities. However, there can be no assurance that any costs incurred
will be reimbursable from the Government or covered by Lockheed Martin
under the terms of the Transaction Agreement or that the Company's
environmental reserves will be sufficient.
<PAGE>
<PAGE>88
Pension Plans
The Transaction Agreement provides for transfer by Lockheed Martin
of certain assets to L-3 and assumption by L-3 of certain liabilities
relating to defined benefit pension plans for present and former employees
and retirees of certain businesses transferred to L-3. Lockheed Martin
received a letter from the Pension Benefit Guaranty Corporation (the
"PBGC") which requested information regarding the transfer of such pension
plans. The PBGC's letter indicated that it believed certain of the
employee pension plans were underfunded using the PBGC's actuarial
assumptions (which assumptions result in a larger liability for accrued
benefits than the assumptions used for financial reporting under Statement
of Financial Accounting Standards No. 87, "Accounting for Pension Costs"
("FASB 87")). The Company has calculated the net funding position of the
pension plans to be transferred and believes the plans to be overfunded by
approximately $1 million under ERISA assumptions, underfunded by
approximately $9 million under FASB 87 assumptions and, on a termination
basis, underfunded by as much as $51 million under PBGC assumptions.
Substantially all of the PBGC underfunding is related to two pension plans
covering employees at L-3's Communication Systems -- Salt Lake and
Aviation Recorders businesses (the "Salt Lake and Fairchild Plans").
Pursuant to the PBGC's inquiry, representatives of the Company and
Lockheed Martin met with the PBGC on April 7, 1997. At this meeting, the
PBGC stated that it would seek some form of commitment or undertaking from
Lockheed Martin acceptable to it with regard to the Salt Lake and
Fairchild Plans and the pension plan covering employees at Hycor, another
business being acquired by L-3 in the Acquisition (collectively, the
"Subject Plans"). Lockheed Martin has agreed to provide such a commitment
in an agreement (the "Lockheed Martin Commitment Agreement") among
Lockheed Martin, L-3 and the PBGC dated as of April 30, 1997. The material
terms and conditions of the Lockheed Martin Commitment Agreement include a
commitment by Lockheed Martin 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 Agreement
will continue until such time as the Subject Plans are no longer
underfunded on a PBGC basis for two consecutive years or, at any time
after May 31, 2002, the Company achieves investment grade credit ratings.
Pursuant to the Lockheed Martin Commitment Agreement, the PBGC has agreed
that it will take no further action in connection with the Transaction.
In return for the Lockheed Martin Commitment, the Company has
entered into an agreement with Lockheed Martin, dated as of April 30,
1997, pursuant to which the Company will provide certain assurances to
Lockheed Martin including, but not necessarily limited to, (i) continuing
to fund the Subject Plans consistent with prior practices and to the
extent deductible for tax purposes and, where appropriate, recoverable
under Government contracts, (ii) agreeing to not increase benefits under
the Subject Plans without the consent of Lockheed Martin,
(iii) restricting the Company from a sale of any businesses employing
individuals covered by the Subject Plans if such sale would not result in
reduction or elimination of the Lockheed Martin Commitment with regard to
the specific plan and (iv) if the Subject Plans were returned to Lockheed
Martin, granting Lockheed Martin the right to seek recovery from the
Company of those amounts actually paid, if any, by Lockheed Martin with
regard to the Subject Plans after their return. In addition, upon the
<PAGE>
<PAGE>89
occurrence of certain events, Lockheed Martin, at its option, will have
the right to decide whether to assume sponsorship of any or all of the
Subject Plans, even if the PBGC has not sought to terminate the Subject
Plans.
The Company believes, based in part upon discussions with its
consulting actuaries, that the increase in pension expenses and future
funding requirements, if any, from those currently anticipated for the
Subject Plans would not be material.
Employees
As of March 31, 1997, the Company employed approximately 5,000
full-time and part-time employees. The Company believes that its relations
with its employees are good.
Approximately 580 of the Company's employees at its Communication
Systems -- Camden operation in Camden, New Jersey are represented by four
unions, the Association of Scientists and Professional Engineering
Personnel, the International Federation of Professional and Technical
Engineers, the International Union of Electronic, Electrical, Salaried,
Machine and Furniture Workers and an affiliate of the International
Brotherhood of Teamsters. Three of the four collective bargaining
agreements expire in mid-1998. While the Company has not yet initiated
discussions with representatives of these unions, management believes it
will be able to negotiate, without material disruption to its business,
satisfactory new collective bargaining agreements with these employees.
However, there can be no assurance that a satisfactory agreement will be
reached with the covered employees or that a material disruption to the
Company's Camden operations will not occur.
<PAGE>
<PAGE>90
THE TRANSACTION
The Acquisition
Holdings and L-3 were formed by Mr. Frank C. Lanza, the former
President and Chief Operating Officer of Loral, Mr. Robert V. LaPenta, the
former Senior Vice President and Controller of Loral, the Lehman
Partnership and Lockheed Martin to acquire substantially all of the assets
and certain liabilities of (i) nine business units previously purchased by
Lockheed Martin as part of its acquisition of Loral in April 1996 and
(ii) one business unit, Communications Systems -- Camden, purchased by
Lockheed Martin as part of its acquisition of GE Aerospace in April 1993.
The total consideration paid to Lockheed Martin was $525 million,
comprised of $480 million of cash before an estimated $20 million
reduction related to a purchase price adjustment, and $45 million of
common equity being retained by Lockheed Martin. L-3 is a wholly-owned
subsidiary of Holdings. Holdings was capitalized with $125 million of
common equity, with Messrs. Lanza and LaPenta owning 15.0%, the Lehman
Partnership owning 50.1% and Lockheed Martin owning 34.9%.
Transaction Agreement
The Transaction Agreement provides for the transfer by Lockheed
Martin to Holdings of substantially all of the assets and certain of the
liabilities primarily related to the Businesses. The assets transferred
include, among other things, real property and leases for the business
units, all contracts including government contracts, and bids for such
contracts, all machinery and equipment used primarily in connection with
the Businesses and, subject to certain limitations, all intellectual
property used primarily in the Businesses. The Transaction Agreement
provides that L-3 be capitalized with $125 million of common entity
provided by Holdings and assume the liabilities and obligations of
Lockheed Martin relating to the Businesses other than certain income and
franchise tax liabilities arising prior to the closing of the Acquisition,
certain pension liabilities, certain environmental liabilities and certain
other excluded liabilities. As consideration for the transfer of the
assets by Lockheed Martin, Holdings paid Lockheed Martin $479.8 million
(subject to adjustment based on the difference between $269.1 million and
the audited combined net tangible assets (as defined in the Transaction
Agreement) of the Businesses at the end of the month immediately preceding
the Closing) and Holdings issued to Lockheed Martin 6,980,000 shares of
its Class A Common Stock.
The Transaction Agreement contains mutually agreed upon and
customary representations, warranties and covenants. Lockheed Martin has
agreed to indemnify Holdings, subject to certain limitations, for its
breach of (i) non-environmental representations and warranties up to $50
million (subject to a $5 million threshold) and (ii) for the first eight
years following the Closing, to pay 50% of all costs incurred by the
Company above those reserved for on the Company's balance sheet at Closing
relating to certain Company-assumed environmental liabilities and, for the
seven years thereafter, 40% of certain reasonable operation and
maintenance costs relating to any environmental remediation projects
undertaken in the first eight years (subject to a $6 million threshold).
In connection with the Transaction Agreement, Holdings, the Company
and Lockheed Martin have entered into a transition services agreement
<PAGE>
<PAGE>91
pursuant to which Lockheed Martin will provide to Holdings and its
subsidiaries (and Holdings will provide to Lockheed Martin) certain
corporate services of a type currently provided at costs consistent with
past practices until December 31, 1997 (or, in the case of Communication
Systems -- Camden, for a period of up to 18 months after the Closing) and
the parties also entered into supply agreements which reflect existing
intercompany work transfer agreements or similar support arrangements upon
prices and other terms consistent with the present arrangements. Holdings,
the Company and Lockheed Martin have entered into certain subleases of
real property and cross-licenses of intellectual property.
In addition, Holdings and Lockheed Martin have entered into a Limited
Noncompetition Agreement (the "Noncompetition Agreement") which, for up to
three years, in certain circumstances, precludes Lockheed Martin from
engaging in the sale of any products that compete with the products of the
Company that are set forth in the Noncompetition Agreement for specifically
identified application of the products. Under the Noncompetition Agreement,
Lockheed Martin is prohibited, with certain exceptions, from acquiring any
business engaged in the sale of the specified products referred to in the
preceding sentence, although Lockheed Martin may acquire such a business
under circumstances where the exceptions do not apply provided that it
offers to sell such business to L-3 within 90 days of its acquisition. The
Noncompetition Agreement does not, among other exceptions, (i) apply to
businesses operated and managed by Lockheed Martin on behalf of the United
States government, (ii) prohibit Lockheed Martin from engaging in any
existing businesses and planned businesses as of the closing of the
Transaction or businesses that are reasonably related to existing or planned
businesses or (iii) apply to selling competing products where such products
are part of a larger system sold by Lockheed Martin.
Stockholders Agreement
At Closing, Holdings, Lockheed Martin, the Lehman Partnership and
Messrs. Lanza and LaPenta entered into a stockholders agreement (the
"Stockholders Agreement") which, except for certain provisions including
those granting registration rights, terminates upon the consummation of an
initial public offering of equity securities by Holdings.
The Stockholders Agreement provides that the Board of Directors will
initially consist of 11 members including six designees of the Lehman
Partnership, three designees of Lockheed Martin, and Messrs. Lanza and
LaPenta. The number of directors which the Lehman Partnership and Lockheed
Martin have the right to designate will be reduced in proportion to any
reduction in their ownership of Common Stock, but as long as the Lehman
Partnership continues to own at least 35% of the outstanding Common Stock
and represents the largest single stockholder of Holdings, it may
designate a majority of the members of the Board of Directors.
Under the Stockholders Agreement Holdings is prohibited from
commencing an initial public offering for one year after the Closing
without the consent of each of the parties to the agreement. If an initial
public offering has not occurred five years after the Closing, the Lehman
Partnership and Lockheed Martin each have the right to require Holdings to
consummate an initial public offering, provided that they and their
permitted transferees own at least 50% of the Common Stock that they owned
on the date of the Closing.
<PAGE>
<PAGE>92
The Stockholders Agreement restricts the transfer of shares of
Common Stock by any party to the agreement for one year and requires that
any shares transferred thereafter first be offered for sale to the other
stockholders and Holdings. As to sales of shares by the Lehman Partnership
that occur one year after the Closing and prior to the consummation of an
initial public offering and that result in the Lehman Partnership no
longer owning at least 35% of the issued and outstanding Common Stock,
(i) Messrs. Lanza and LaPenta are permitted to "tag along" (as well as
Lockheed Martin, if either Lanza or LaPenta elects to "tag along") and
(ii) the Lehman Partnership has the right to "drag along" Messrs. Lanza
and LaPenta (and at the option of Lockheed Martin, Lockheed Martin may
sell shares in such transaction). Under the Stockholders Agreement
Lockheed Martin is subject to a standstill arrangement which generally
prohibits any increase in its share ownership percentage over 34.9%.
The Stockholders Agreement also provides that Lehman Brothers Inc.
has the exclusive right to provide investment banking services to Holdings
for the five-year period after the Closing (except that the exclusivity
period is three years as to cash acquisitions undertaken by L-3). In the
event that Lehman Brothers Inc. agrees to provide any investment banking
services to L-3, it will be paid fees that are mutually agreed upon based
on similar transactions and practices in the investment banking industry.
<PAGE>
<PAGE>93
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Holdings and L-3 were formed by Senior Management, the Lehman Partnership and
Lockheed Martin to acquire substantially all of the assets and liabilities of
the Businesses. The total consideration paid to Lockheed Martin was $525
million, comprising $480 million of cash before an estimated $20 million
reduction related to a purchase price adjustment, including $45 million of
common equity retained by Lockheed Martin. The Transaction Agreement provides
for the transfer by Lockheed Martin to Holdings of such assets and liabilities.
Under the Transaction Agreement, Lockheed Martin has agreed to indemnity L-3,
subject to certain limitations, for Lockheed Martin's breach of representations
and warranties and L-3 has assumed certain obligations relating to
environmental matters and benefits plans.
In connection with the Transaction Agreement, Holdings, L-3 and Lockheed Martin
have entered into a transition services agreement pursuant to which Lockheed
Martin will provide to L-3 and its subsidiaries (and L-3 will provide to
Lockheed Martin) until December 31, 1997 (or, in the case of Communications
Systems - Camden, for a period of up to 18 months after the closing) certain
corporate services of a type previously provided at costs consistent with
past practices. The parties also entered into supply agreements which
reflect existing intercompany work transfer agreements or similar support
arrangements based upon prices and other terms consistent with previously
existing arrangements. Holdings, L-3 and Lockheed Martin have entered into
certain subleases of real property and cross-licenses of intellectual property.
In addition, at closing, Holdings, Lockheed Martin, Lehman Partnership and
Messrs. Lanza and LaPenta entered into the Stockholders Agreement. See "Risk
Factors-Dependence on Lockheed Martin, "Business - Environmental Matters" and
"-Pension Plans" and "The Transaction - Transaction Agreement" and
"-Stockholders Agreement."
In the ordinary course of business L-3 sells products to Lockheed Martin and
its affiliates. Net sales for which were $18.6 million and $21.2 million for
the three month periods ended June 30, 1997 and March 31, 1997, respectively,
and $70.7 million, $25.9 million and $10.0 million for the years ended
December 31, 1996, 1995 and 1994, respectively. See Note 3 to the Lockheed
Martin Predecessor Businesses combined financial statements as of March 31,
1997 and for the three months ended March 31, 1997 and 1996, on page F-29.
Sales of products to Lockheed Martin after the closing of the Transaction,
excluding those under existing intercompany work transfer agreements, will
be on an arms length basis similar to sales by L-3 to other third-party
customers and, in many cases, will be the result of competitive bidding
procedures.
<PAGE>
<PAGE>94
MANAGEMENT
Directors and Executive Officers
The following table provides information concerning the directors
and executive officers of Holdings after giving effect to the Transaction.
All directors hold office until the next annual meeting of the
stockholders. All officers serve at the discretion of the Board of
Directors.
Name Age Position
---------------------- ---- ----------------------------------------
Frank C. Lanza 65 Chairman, Chief Executive Officer and
Director
Robert V. LaPenta 51 President, Chief Financial Officer and
Director
Michael T. Strianese 41 Vice President--Finance and Controller
Christopher C. Cambria 39 Vice President--General Counsel and
Secretary
Robert F. Mehmel 34 Vice President--Planning and Assistant
Secretary
Jimmie V. Adams 60 Vice President--Washington D.C. Operations
Robert RisCassi 61 Vice President--Washington D.C. Operations
Steven J. Berger 40 Director
David J. Brand 35 Director
Alberto M. Finali 43 Director
Eliot M. Fried 63 Director
Robert B. Millard 46 Director
Alan H. Washkowitz 56 Director
Thomas A. Corcoran 53 Director
Frank H. Menaker, Jr. 56 Director
John E. Montague 42 Director
Frank C. Lanza, Chairman and CEO. Mr. Lanza was Executive Vice
President of Lockheed Martin and a member of Lockheed Martin's Executive
Council and Board of Directors. Mr. Lanza was formerly President and COO
of Lockheed Martin's C3I and Systems Integration Sector, which comprised
many of the businesses acquired by Lockheed Martin from Loral in 1996. At
the time of the Loral acquisition, Mr. Lanza was President and COO of
Loral, a position he held since 1981. He joined Loral in 1972 as President
of its largest division, Electronic Systems. His earlier experience was
with Dalmo Victor and Philco Western Development Laboratory.
Robert V. LaPenta, President and Chief Financial Officer. Mr.
LaPenta was a Vice President of Lockheed Martin and was Vice President and
Chief Financial Officer of Lockheed's C3I and Systems Integration Sector.
Prior to Lockheed Martin's acquisition of Loral, he was Loral's Senior
Vice President and Controller since 1981. He joined Loral in 1972 and was
named Vice President and Controller of its largest division in 1974. He
became Corporate Controller in 1978 and was named Vice President in 1979.
Michael T. Strianese, Vice President--Finance and Controller. Mr.
Strianese was Vice President and Controller of Lockheed Martin's C3I and
Systems Integration Sector. From 1991 to the 1996 acquisition of Loral, he
<PAGE>
<PAGE>95
was Director of Special Projects at Loral. Prior to joining Loral,
he spent 11 years with Ernst & Young. Mr. Strianese is a Certified
Public Accountant.
Christopher C. Cambria, Vice President--General Counsel and
Secretary. Mr. Cambria joined Holdings in June 1997. From 1994
until joining Holdings, Mr. Cambria was associated with Fried,
Frank, Harris, Shriver & Jacobson. From 1986 until 1993, he was
associated with Cravath, Swaine & Moore.
Robert F. Mehmel, Vice President -- Planning and Assistant
Secretary. Mr. Mehmel was the Director of Financial Planning and Capital
Review for Lockheed Martin's C3I and Systems Integration Sector. From 1984
to 1996, Mr. Mehmel held several accounting and financial analysis
positions at Loral Electronic Systems and Loral. At the time of Lockheed
Martin's acquisition of Loral, he was Corporate Manager of Business
Analysis.
Jimmie V. Adams, Vice President -- Washington, D.C.
Operations. General Jimmie V. Adams (U.S.A.F.-ret.) was Vice President of
Lockheed Martin's Washington Operations for the C3I and Systems
Integration Sector. He held the same position at Loral and was an officer
of Loral, prior to its acquisition by Lockheed Martin. Before joining
Loral in 1993, he was Commander in Chief, Pacific Air Forces, Hickam Air
Force Base, Hawaii, capping a 35-year career with the U.S. Air Force. He
was also Deputy Chief of Staff for plans and operation for U.S. Air Force
headquarters and Vice Commander of Headquarters Tactical Air Command and
Vice Commander in Chief of the U.S. Air Forces Atlantic at Langley Air
Force Base. He is a command pilot with more than 141 combat missions.
Robert RisCassi, Vice President -- Washington, D.C.
Operations. General Robert W. RisCassi, Vice President, Land Systems (U.S.
Army-ret.) was Vice President of Land Systems for Lockheed Martin's C3I
and Systems Integration Sector. He held the same position for Loral, prior
to its acquisition by Lockheed Martin. He joined Loral in 1993 after
retiring as U.S. Army Commander in Chief, United Nations Command/Korea.
His 35-year military career included posts as Army Vice Chief of Staff;
Director, Joint Staff, Joint Chiefs of Staff; Deputy Chief of Staff for
Operations and Plans; and Commander of the Combined Arms Center.
Steven J. Berger, Director. Mr. Berger is a Managing Director of
Lehman Brothers, Co-Head of the Investment Banking Division and Head of
the Merchant Banking Group. Mr. Berger joined Lehman Brothers in 1983 in
the Investment Banking Division and spent the early part of his career
working on principal investment, merger-related advisory and corporate
finance transactions. Mr. Berger became a Managing Director and Head of
European Investment Banking in 1991, Head of the Merchant Banking Group in
1995 and Co-Head of the Investment Banking Division in 1996. Mr. Berger
holds an M.B.A. and an A.B. Economics, with honors, from Harvard
University.
David J. Brand, Director. Mr. Brand is a Managing Director of Lehman
Brothers and a principal in the Global Mergers & Acquisitions Group,
leading Lehman Brothers' Technology Mergers and Acquisitions business. Mr.
Brand joined Lehman Brothers in 1987 and has been responsible for merger
and corporate finance advisory services for many of Lehman Brothers'
technology and defense industry clients. Mr. Brand holds an M.B.A. from
<PAGE>
<PAGE>96
Stanford University's Graduate School of Business and a B.S. in Mechanical
Engineering from Boston University.
Alberto M. Finali, Director. Mr. Finali is a Managing Director of
Lehman Brothers and principal of the Merchant Banking Group, based in New
York. Prior to joining the Merchant Banking Group Mr. Finali spent four
years in Lehman Brothers' London office as a senior member of the M&A
Group. Mr. Finali joined Lehman Brothers in 1987 as a member of the M&A
Group in New York and became a Managing Director in 1997. Prior to joining
Lehman Brothers, Mr. Finali worked in the Pipelines and Production
Technology Group of Bechtel, Inc. in San Francisco. Mr. Finali holds an
M.E. and an M.B.A. from the University of California at Berkeley, and a
Laurea Degree in Civil Engineering from the Polytechnic School in Milan,
Italy.
Eliot M. Fried, Director. Mr. Fried is a Managing Director of Lehman
Brothers. Mr. Fried joined Shearson, Hayden Stone, a predecessor firm, in
1976 and became a Managing Director in 1982. Mr. Fried has extensive
experience in portfolio management and equity research. Mr. Fried is
currently a director of Bridgeport Machines, Inc., Energy Ventures, Inc.,
SunSource L.P., Vernitron Corporation and Walter Industries, Inc. Mr.
Fried holds an M.B.A. from Columbia University and a B.A. from Hobart
College.
Robert B. Millard, Director. Mr. Millard is a Managing Director of
Lehman Brothers, Head of Lehman Brothers' Principal Trading & Investments
Group and principal of the Merchant Banking Group. Mr. Millard joined Kuhn
Loeb & Co. in 1976 and became a Managing Director of Lehman Brothers in
1983. Mr. Millard is currently a director of GulfMark International, Inc.
and Energy Ventures, Inc. Mr. Millard holds an M.B.A. from Harvard
University and a B.S. from the Massachusetts Institute of Technology.
Alan H. Washkowitz, Director. Mr. Washkowitz is a Managing Director
of Lehman Brothers and principal of the Merchant Banking Group, and is
responsible for the oversight of Lehman Brothers Merchant Banking
Portfolio Partnership L.P. Mr. Washkowitz joined Lehman Brothers in 1978
when Kuhn Loeb & Co. was acquired by Lehman Brothers. Mr. Washkowitz is
currently a director of Illinois Central Corporation, K&F Industries,
Inc., Lear Corporation and McBride plc. Mr. Washkowitz holds an M.B.A.
from Harvard University, a J.D. from Columbia University and an A.B. from
Brooklyn College.
Thomas A. Corcoran, Director. Mr. Corcoran has been the President and
Chief Operating Officer of the Electronic Systems Sector of Lockheed Martin
Corporation since March 1995. From 1993 to 1995, Mr. Corcoran was President
of the Electronics Group of Martin Marietta Corporation. Prior to that he
worked for General Electric for 26 years and from 1983 to 1993 he held
various management positions with GE Aerospace; he was a company officer
from 1990 to 1993. Mr. Corcoran is a member of the Board of Trustees of
Worcester Polytechnic Institute, the Board of Trustees of Stevens
Institute of Technology, the Board of Governors of the Electronic
Industries Association, a Director of the U.S. Navy Submarine League
and a Director of REMEC Corporation.
Frank H. Menaker, Jr., Director. Mr. Menaker has served as Senior
Vice President and General Counsel of Lockheed Martin since July 1996. He
served as Vice President and General Counsel of Lockheed Martin from March
<PAGE>
<PAGE>97
1995 to July 1996, as Vice President of Martin Marietta Corporation from
1982 until 1995 and as General Counsel of Martin Marietta Corporation from
1981 until 1995. He is a director of Martin Marietta Materials, Inc., a
member of the American Bar Association and has been admitted to practice
before the United States Supreme Court. Mr. Menaker is a graduate of
Wilkes University and the Washington College of Law at American
University.
John E. Montague, Director. Mr. Montague has been Vice President,
Financial Strategies at Lockheed Martin responsible for mergers,
acquisitions and divestiture activities and shareholder value strategies
since March, 1995. Previously, he was Vice President, Corporate
Development and Investor Relations at Martin Marietta Corporation from
1991 to 1995. From 1988 to 1991, he was Director of Corporate Development
at Martin Marietta Corporation, which he joined in 1977 as a member of the
engineering staff. Mr. Montague is a director of Rational Software
Corporation. Mr. Montague received his B.S. from the Georgia Institute of
Technology and a M.S. in engineering from the University of Colorado.
Director Compensation and Arrangements
It is not currently contemplated that the directors of Holdings or
the Company will receive compensation for their services as directors.
Members of the Board of Directors will be elected pursuant to certain
voting agreements outlined in the Stockholders Agreement. See "The
Transaction--Stockholders Agreement".
Executive Compensation
Benefit Plans
Holdings and the Company intend to establish benefit plans, which
will provide substantially similar benefits to those provided by Lockheed
Martin, including a pension plan, a nonqualified supplemental retirement
plan, a defined contribution plan, a severance plan and a death benefit
plan.
Management Incentive Compensation Plans
Holdings and the Company will establish an incentive compensation
plan that will provide a bonus to selected employees based on the
participant's base salary, target level, individual performance rating and
organizational performance rating and a plan that will allow key
management employees with base salaries of at least $80,000 to defer
receipt of awards under the incentive compensation plan that exceed
$10,000.
Stock Option Plan
Holdings sponsors an option plan (the "Option Plan") for key
employees of Holdings and its subsidiaries, pursuant to which options to
purchase an aggregate of 14% of Holdings' fully-diluted Common Stock
outstanding at Closing will be granted (inclusive of the grants to Messrs.
Lanza and LaPenta, see below under "--Employment Agreements"). The
compensation committee of the Board of Directors of Holdings, in its sole
discretion, determines the terms of option agreements, including without
limitation the treatment of option grants in the event of a change of
control.
<PAGE>
<PAGE>98
Employment Agreements
Holdings entered into an employment agreement (the "Employment
Agreements") with each of Mr. Lanza, who will serve as Chairman and Chief
Executive Officer of the Company and Holdings and will receive a base
salary of $750,000 per annum and appropriate executive level benefits, and
Mr. LaPenta, who will serve as President and Chief Financial Officer of
Holdings and the Company and will receive a base salary of $500,000 per
annum and appropriate executive level benefits. The Employment Agreements
provide for an initial term of five years, which will automatically renew
for one-year periods thereafter, unless a party thereto gives notice of
its intent to terminate at least 90 days prior to the expiration of the
term. Upon a termination without cause (as defined) or resignation for
good reason (as defined), Holdings will be obligated, through the end of
the term, to (i) continue to pay the base salary and (ii) continue to
provide life insurance and medical and hospitalization benefits comparable
to those provided to other senior executives; provided, however, that any
such coverage shall terminate to the extent that Mr. Lanza or Mr. LaPenta,
as the case may be, is offered or obtains comparable benefits coverage
from any other employer. The Employment Agreements provide for
confidentiality during employment and at all times thereafter. There is
also a noncompetition and non-solicitation covenant which is effective
during the employment term and for one year thereafter; provided, however,
that if the employment terminates following the expiration of the initial
term, the noncompetition covenant will only be effective during the
period, if any, that Holdings pays the severance described above.
Holdings has granted each of Messrs. Lanza and LaPenta
(collectively, the "Equity Executives") nonqualified options to purchase,
at $6.47 per share of Class A Common Stock, 5% of Holdings' initial
fully-diluted common stock. In each case, half of the options will be
"Time Options" and half will be "Performance Options" (collectively, the
"Options"). The Time Options will become exercisable with respect to 20%
of the shares subject to the Time Options on each of the first five
anniversaries of the Closing if employment continues through and including
such date. The Performance Options will become exercisable nine years
after the Closing, but will become exercisable earlier with respect to up
to 20% of the shares subject to the Performance Options on each of the
first five anniversaries of the Closing, to the extent certain EBITDA
targets are achieved. The Options will become fully exercisable under
certain circumstances, including a change in control. The Option term is
ten years from the Closing; except that (i) if the Equity Executive is
fired for cause or resigns without good reason, the Options expire upon
termination of employment; (ii) if the Equity Executive is fired without
cause, resigns for good reason, dies, becomes disabled or retires, the
Options expire one year after termination of employment. Unexercisable
Options will terminate upon termination of employment, unless acceleration
is expressly provided for. Upon a change of control, Holdings may
terminate the Options, so long as the Equity Executives are cashed out or
permitted to exercise their Options prior to such change of control.
Puts/Calls. In the event that an Equity Executive (i) is terminated
without cause, (ii) resigns with good reason or (iii) retires
(collectively, a "Good Termination"), the Equity Executive will have the
right to require Holdings to, and Holdings will have the right to,
purchase at the fair market value per share a number of (A) shares
purchased upon exercise of Options ("Option Shares") and (B) Class B
<PAGE>
<PAGE>99
Common Stock purchased at Closing ("Purchased Shares", and collectively
with the Option Shares, the "Equity Shares") equal to the product of
(1) the total number of Equity Shares held and (2) the Put/Call
Percentage. The "Put/Call Percentage" will equal 75% at any time prior to
the first anniversary of the Closing and will be reduced by 15% on each
anniversary of the Closing thereafter. In addition, in the event of a Good
Termination, the Equity Executive will have the right to require Holdings
to, and Holdings will have the right to, purchase, at the fair market
value per share less the exercise price per share, the number of shares
subject to exercisable Options in an amount equal to the product of
(i) the total number of shares subject to exercisable Options held and
(ii) the Put/Call Percentage.
Following the termination of an Equity Executive's employment due to
death or disability, the Equity Executive will have the right to require
Holdings to, and Holdings will have the right to, purchase all of (i) the
Equity Shares held by the Equity Executive at a per share price equal to
the fair market value per share and (ii) the shares subject to Options
held by the Equity Executive at the fair market value per share less the
exercise price per share. Notwithstanding the foregoing, in the event of
the Equity Executive's death, the Equity Executive's estate will have the
right to retain 20% of the Purchased Shares.
In the event that an Equity Executive is terminated with cause or
quits without good reason (a "Bad Termination"), Holdings will have the
right to purchase any (i) Option Shares at the lesser of (A) the Equity
Executive's cost and (B) fair market value and (ii) Purchased Shares at
the lesser of (A) the Equity Executive's cost plus interest and (B) fair
market value. In addition, in the event of a Bad Termination all Options
will terminate without payment. The Equity Executive will not have the
right to put the Equity Shares to Holdings in the event of a Bad
Termination.
Notwithstanding the above, Holdings will not be required to purchase
for cash any Equity Shares or shares subject to Options if such purchase
would be or would result in a violation of the terms of its debt
agreements or applicable statutes. In addition, no such purchase for cash
will occur if in the reasonable opinion of the Board of Directors of
Holdings (excluding the Equity Executives) such purchase would be
reasonably likely to materially impact Holdings's available cash, require
unsuitable additional debt to be incurred or otherwise have a material
adverse effect on the financial condition of Holdings. If Holdings is
unable to purchase any Equity Shares or shares subject to Options for cash
due to any of the above reasons, Holdings will issue a subordinated note
in the appropriate principal amount to the Equity Executive or his estate,
as the case may be.
<PAGE>
<PAGE>100
OWNERSHIP OF CAPITAL STOCK
All of the outstanding capital stock of the Company is held by
Holdings. Class A Common Stock of Holdings ("Class A Common Stock")
possesses full voting rights and Class B Common Stock of Holdings ("Class
B Common Stock") and Class C Common Stock of Holdings ("Class C Common
Stock and, together with Class A Common Stock and Class B Common Stock,
"Common Stock") possess no voting rights except as otherwise required by
law. Each share of Class B Common Stock will convert into a share of Class
A Common Stock upon consummation of an initial public offering of equity
securities of Holdings and certain other events and will convert into a
share of Class C Common Stock upon certain other events. As of the
Closing, there were 17,000,000 shares of Class A Common Stock and
3,000,000 shares of Class B Common Stock outstanding. The following table
sets forth certain information regarding the beneficial ownership of the
shares of the Common Stock of Holdings, upon consummation of the
Transaction, by each person who beneficially owns more than five percent
the outstanding shares of Common Stock of Holdings and by the directors
and certain executive officers of the Company, individually and as a
group.
<TABLE>
<CAPTION>
Percentage
Class A Class B Ownership of
Name of Beneficial Owner Common Stock Common Stock Common Stock
-------------------------------------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Lehman Brothers Capital Partners III, L.P. and affiliates
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285 . . . . . . . . . . . . . . . . . 10,020,000 -- 50.1%
Lockheed Martin Corporation . . . . . . . . . . . . . . . . . 6,980,000 -- 34.9
Frank C. Lanza . . . . . . . . . . . . . . . . . . . . . . . -- 1,500,000 7.5
Robert V. LaPenta . . . . . . . . . . . . . . . . . . . . . . -- 1,500,000 7.5
All directors and executive officers as group (15 persons) . -- 3,000,000 15.0
</TABLE>
DESCRIPTION OF SENIOR CREDIT FACILITIES
The Senior Credit Facilities have been provided by a syndicate of
banks and other financial institutions led by Lehman Commercial Paper
Inc., as Arranger and Syndication Agent. The Senior Credit Facilities
provide for $175.0 million in term loans (the "Term Loan Facilities") and
for $100.0 million in revolving credit loans (the "Revolving Credit
Facility"). The Revolving Credit Facility includes borrowing capacity
available for letters of credit and for borrowings on same-day notice (the
"Swingline Loans"). The Term Loans are comprised of a Tranche A Term Loan
($100.0 million), which have a maturity of six years, a Tranche B Term
Loan ($45.0 million), which have a maturity of eight years, and a Tranche
C Term Loan ($30.0 million), which have a maturity of nine years. The
Revolving Credit Facility commitment terminates six years after the date
of initial funding of the Senior Credit Facilities.
<PAGE>
<PAGE>101
All borrowings under the Senior Credit Facilities bear interest, at
the Company's option, at either: (A) a "base rate" equal to, 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 Bank of America NT&SA, as Administrative Agent, in
San Francisco, California, as its "reference rate" plus (i) in the case of
the Tranche A Term Loan, the Revolving Credit Facility and the Swingline
Loans, a debt to EBITDA-dependent rate ranging from 0.50% to 1.25% per
annum, (ii) in the case of the Tranche B Term Loan, a rate of 1.50% per
annum or (iii) in the case of the Tranche C Term Loan, a rate of 1.75% per
annum or (B) a "LIBOR rate" equal to, for any Interest Period (as defined
in the Senior Credit Facilities), with respect to LIBOR Loans comprising
part of the same borrowing, the London interbank offered rate of interest
per annum for such Interest Period as determined by the Administrative
Agent, plus (i) in the case of the Tranche A Term Loan and the Revolving
Credit Facility, a debt to EBITDA-dependent rate ranging from 1.50% to
2.25% per annum, (ii) in the case of the Tranche B Term Loan, a rate of
2.50% per annum or (iii) in the case of the Tranche C Term Loan, a rate of
2.75% per annum.
The Company will pay a commitment fee calculated at a debt to
EBITDA-dependent rate ranging from 0.375% to 0.50% per annum of the
available unused commitment under the Revolving Credit Facility, in each
case in effect on each day. Such fee will be payable quarterly in arrears
and upon termination of the Revolving Credit Facility.
The Company will pay a letter of credit fee calculated at a debt to
EBITDA-dependent rate ranging from 1.50% to 2.25% per annum of the face
amount of each letter of credit and a fronting fee calculated at a rate
equal to 0.125% per annum of the face amount of each letter of credit.
Such fees will be payable quarterly in arrears and upon the termination of
the Revolving Credit Facility. In addition, the Company will pay customary
transaction charges in connection with any letters of credit.
The foregoing debt to EBITDA-dependent rates range from the low rate
specified if the ratio of debt to EBITDA is less than 3.75 to 1.0 to the
high rate specified if such ratio is at least equal to 4.75 to 1.0.
The Term Loans are subject to the following amortization schedule:
<TABLE>
<CAPTION>
Tranche A Term Loan Tranche B Term Loan Tranche C Term Loan
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Year 1 . . . . . . . . . . . . . . . . . . $ 4,000,000 $ 500,000 $ 500,000
Year 2 . . . . . . . . . . . . . . . . . . 5,000,000 500,000 500,000
Year 3 . . . . . . . . . . . . . . . . . . 15,000,000 500,000 500,000
Year 4 . . . . . . . . . . . . . . . . . . 21,000,000 500,000 500,000
Year 5 . . . . . . . . . . . . . . . . . . 27,000,000 500,000 500,000
Year 6 . . . . . . . . . . . . . . . . . . 28,000,000 500,000 500,000
Year 7 . . . . . . . . . . . . . . . . . . -- 20,000,000 500,000
Year 8 . . . . . . . . . . . . . . . . . . -- 22,000,000 500,000
Year 9 . . . . . . . . . . . . . . . . . . -- -- 26,000,000
</TABLE>
<PAGE>
<PAGE>102
Borrowings under the Senior Credit Facilities is subject to
mandatory prepayment (i) with the net proceeds of any incurrence of
indebtedness with certain exceptions to be agreed, (ii) with the proceeds
of certain asset sales and (iii) on an annual basis with (A) 75% of the
Company's excess cash flow (as defined in the Senior Credit Facilities) if
the ratio of the Company's debt to EBITDA is greater than 3.5 to 1.0 or
(B) 50% of such excess cash flow if the ratio is less than 3.5 to 1.0.
The Company's obligations under the Senior Credit Facilities is
secured by a lien on substantially all of the tangible and intangible
assets of Holdings, the Company, and their direct and indirect
subsidiaries, including: (i) a pledge by Holdings of the stock of the
Company and (ii) a pledge by the Company and its direct and indirect
subsidiaries of all of the stock of their respective domestic subsidiaries
and 65% of the stock of the Company's first-tier foreign subsidiaries. In
addition, indebtedness under the Senior Credit Facilities is guaranteed by
Holdings and by all of the Company's direct and indirect domestic
subsidiaries. See "Description of the Exchange Notes--Subordination",
"Risk Factors--Subordination".
The Senior Credit Facilities contain customary covenants and
restrictions on the Company's ability to engage in certain activities. In
addition, the Senior Credit Facilities provide that the Company must meet
or exceed certain interest coverage ratios and must not exceed a leverage
ratio. The Senior Credit Facilities also include customary events of
default.
<PAGE>
<PAGE>103
THE EXCHANGE OFFER
General
The Company hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the Exchange Offer), to exchange up
to $225 million aggregate principal amount of Exchange Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to
the Expiration Date and not withdrawn as permitted pursuant to the
procedures described below. The Exchange Offer is being made with respect
to all of the Old Notes.
As of the date of this Prospectus, $225 million aggregate principal
amount of the Old Notes is outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1997, to
all holders of Old Notes known to the Company. The Company's obligation
to accept Old Notes for exchange pursuant to the Exchange Offer is subject
to certain conditions set forth under "Certain Conditions to the Exchange
Offer" below. The Company currently expects that each of the conditions
will be satisfied and that no waivers will be necessary.
Purpose of the Exchange Offer
The Old Notes were issued on April 30, 1997 in a transaction exempt
from the registration requirements of the Securities Act. Accordingly, the
Old Notes may not be reoffered, resold, or otherwise transferred unless so
registered or unless an applicable exemption from the registration and
prospectus delivery requirements of the Securities Act is available.
In connection with the issuance and sale of the Old Notes, the
Company entered into the Registration Rights Agreement, which requires the
Company to file with the Commission a registration statement relating to
the Exchange Offer not later than 90 days after the date of issuance of
the Old Notes, and to use its best efforts to cause the registration
statement relating to the Exchange Offer to become effective under the
Securities Act not later than 150 days after the date of issuance of the
Old Notes and the Exchange Offer to be consummated not later than 30 days
after the date of the effectiveness of the Registration Statement (or use
its best efforts to cause to become effective by the 180th calendar day
after the Issuance Date (as defined) a shelf registration statement with
respect to resales of the Old Notes). A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement.
The Exchange Offer is being made by the Company to satisfy its
obligations with respect to the Registration Rights Agreement. The term
"holder," with respect to the Exchange Offer, means any person in whose
name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the
registered holder, or any person whose Old Notes are held of record by The
Depository Trust Company. Other than pursuant to the Registration Rights
Agreement, the Company is not required to file any registration statement
to register any outstanding Old Notes. Holders of Old Notes who do not
tender their Old Notes or whose Old Notes are tendered but not accepted
would have to rely on exemptions to registration requirements under the
securities laws, including the Securities Act, if they wish to sell their
Old Notes.
<PAGE>
<PAGE>104
The Company is making the Exchange Offer in reliance on the position
of the staff of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, the
Company has not sought its own interpretive letter and there can be no
assurance that the staff would make a similar determination with respect
to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the Staff, the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred
by a Holder (other than any Holder who is a broker-dealer or an
"affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such Holder's
business and that such Holder is not participating, and has no arrangement
or understanding with any person to participate, in a distribution (within
the meaning of the Securities Act) of such Exchange Notes. See "--Resale
of Exchange Notes". Each broker-dealer that receives Exchange Notes for
its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan
of Distribution".
Terms of the Exchange
The Company hereby offers to exchange, subject to the conditions set
forth herein and in the Letter of Transmittal accompanying this
Prospectus, $1,000 in principal amount of Exchange Notes for each $1,000
in principal amount of the Old Notes. The terms of the Exchange Notes are
identical in all material respects to the terms of the Old Notes for which
they may be exchanged pursuant to this Exchange Offer, except that the
Exchange Notes will generally be freely transferable by holders thereof
and will not be subject to any covenant regarding registration. The
Exchange Notes will evidence the same indebtedness as the Old Notes and
will be entitled to the benefits of the Indenture. See "Description of
Exchange Notes".
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Old Notes may be offered for sale, resold or otherwise transferred by any
holder without compliance with the registration and prospectus delivery
provisions of the Securities Act. Instead, based on an interpretation by
the staff of the Commission set forth in a series of no-action letters
issued to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered
for sale, resold and otherwise transferred by any holder of such Exchange
Notes (other than any such holder that is a broker-dealer or is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such holder's business and
<PAGE>
<PAGE>105
such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and neither such
holder nor any other such person is engaging in or intends to engage in a
distribution of such Exchange Notes. Since the Commission has not
considered the Exchange Offer in the context of a no-action letter, there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Any holder who is an
affiliate of the Company or who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes cannot
rely on such interpretation by the staff of the Commission and must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each holder,
other than a broker-dealer, must acknowledge that it is not engaged in,
and does not intend to engage in, a distribution of Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution".
Interest on the Exchange Notes will accrue from the last Interest
Payment Date on which interest was paid on the Old Notes so surrendered
or, if no interest has been paid on such Notes, from April 30, 1997.
Tendering holders of the Old Notes shall not be required to pay
brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of the
Old Notes pursuant to the Exchange Offer.
Expiration Date; Extension; Termination; Amendment
The Exchange Offer will expire at 5:00 p.m., New York City time, on
__________, 1997, unless the Company, in its sole discretion, has extended
the period of time for which the Exchange Offer is open (such date, as it
may be extended, is referred to herein as the "Expiration Date"). The
Expiration Date will be at least 20 business days after the commencement
of the Exchange Offer in accordance with Rule 14e-1(a) under the Exchange
Act. The Company expressly reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is
open, and thereby delay acceptance for exchange of any Old Notes, by
giving oral or written notice to the Exchange Agent and by timely public
announcement no later than 9:00 a.m. New York City time, on the next
business day after the previously scheduled Expiration Date. During any
such extension, all Old Notes previously tendered will remain subject to
the Exchange Offer unless properly withdrawn.
The Company expressly reserves the right to (i) terminate or amend
the Exchange Offer and not to accept for exchange any Old Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "Certain Conditions to the Exchange Offer" which
have not been waived by the Company and (ii) amend the terms of the
Exchange Offer in any manner which, in its good faith judgment, is
advantageous to the holders of the Old Notes, whether before or after any
tender of the Notes. If any such termination or amendment occurs, the
<PAGE>
<PAGE>106
Company will notify the Exchange Agent and will either issue a press
release or give oral or written notice to the holders of the Old Notes as
promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day
other than Saturday, Sunday or a date on which banking institutions are
required or authorized by New York State law to be closed, and consists of
the time period from 12:01 a.m. through 12:00 midnight, New York City
time. Unless the Company terminates the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date, the Company will exchange the
Exchange Notes for the Old Notes on the Exchange Date.
Procedures for Tendering Old Notes
The tender to the Company of Old Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the
terms and subject to the conditions set forth in this Prospectus and in
the accompanying Letter of Transmittal.
A holder of Old Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the Old Notes being tendered and
any required signature guarantees and any other documents required by the
Letter of Transmittal, to the Exchange Agent at its address set forth
below on or prior to the Expiration Date (or complying with the procedure
for book-entry transfer described below) or (ii) complying with the
guaranteed delivery procedures described below.
The method of delivery of Old Notes, Letters of Transmittal and all
other required documents is at the election and risk of the holders. If
such delivery is by mail, it is recommended that registered mail properly
insured, with return receipt requested, be used. In all cases, sufficient
time should be allowed to insure timely delivery. No Old Notes or Letters
of Transmittal should be sent to the Company.
If tendered Old Notes are registered in the name of the signer of
the Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Old Notes are to be
reissued) in the name of the registered holder (which term, for the
purposes described herein, shall include any participant in The Depository
Trust Company (also referred to as a "book-entry transfer facility") whose
name appears on a security listing as the owner of Old Notes), the
signature of such signer need not be guaranteed. In any other case, the
tendered Old Notes must be endorsed or accompanied by written instruments
of transfer in form satisfactory to the Company and duly executed by the
registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union,
savings association, clearing agency or other institution (each an
"Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Old Notes not exchanged are to
be delivered to an address other than that of the registered holder
appearing on the note register for the Old Notes, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
<PAGE>
<PAGE>107
The Exchange Agent will make a request within two business days
after the date of receipt of this Prospectus to establish accounts with
respect to the Old Notes at the book-entry transfer facility for the
purpose of facilitating the Exchange Offer, and subject to the
establishment thereof, any financial institution that is a participant in
the book-entry transfer facility's system may make book-entry delivery of
Old Notes by causing such book-entry transfer facility to transfer such
Old Notes into the Exchange Agent's account with respect to the Old Notes
in accordance with the book-entry transfer facility's procedures for such
transfer. Although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its
address set forth below on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within
the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Old Notes to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot
be completed on a timely basis, a tender may be effected if the Exchange
Agent has received at its address set forth below on or prior to the
Expiration Date, a letter, telegram or facsimile transmission (receipt
confirmed by telephone and an original delivered by guaranteed overnight
courier) from an Eligible Institution setting forth the name and address
of the tendering holder, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered,
and stating that the tender is being made thereby and guaranteeing that
within three business days after the Expiration Date, the Old Notes in
proper form for transfer (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer
facility), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the
above-described method are deposited with the Exchange Agent within the
time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of the notice of
guaranteed delivery ("Notice of Guaranteed Delivery") which may be used by
Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when
(i) the tendering holder's properly completed and duly signed Letter of
Transmittal accompanied by the Old Notes (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility) is received by the Exchange Agent, or (ii) a
Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible
Institution is received by the Exchange Agent. Issuances of Exchange Notes
in exchange for Old Notes tendered pursuant to a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect
(as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes.
<PAGE>
<PAGE>108
All questions as to the validity, form, eligibility (including time
of receipt) and acceptance of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination
shall be final and binding. The Company reserves the absolute right to
reject any and all tenders of any particular Old Notes not properly
tendered or not to accept any particular Old Notes which acceptance might,
in the judgment of the Company or its counsel, be unlawful. The Company
also reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either
before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto)
by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Notes for
exchange must be cured within such reasonable period of time as the
Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor
shall any of them incur any liability for failure to give such
notification.
If the Letter of Transmittal is signed by a person or persons other
than the registered holder or holders of Old Notes, such Old Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders
appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, proper evidence satisfactory
to the Company of their authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among
other things, the Exchange Notes acquired pursuant to the Exchange Offer
are being acquired in the ordinary course of business of the person
receiving such Exchange Notes, whether or not such person is the holder,
that neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the
Company, or if it is an affiliate it will comply with the registration and
prospectus requirements of the Securities Act to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of
Distribution."
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the
following terms and conditions, which are part of the Exchange Offer.
<PAGE>
<PAGE>109
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Old Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power
and authority to tender, exchange, assign and transfer the Old Notes and
to acquire Exchange Notes issuable upon the exchange of such tendered
Notes, and that, when the same are accepted for exchange, the Company will
acquire good and unencumbered title to the tendered Old Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon
request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by a
book-entry transfer facility. The Transferor further agrees that
acceptance of any tendered Old Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full
by the Company of certain of its obligations under the Registration Rights
Agreement. All authority conferred by the Transferor will survive the
death or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, legal representatives,
successors, assigns, executors and administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act and that
it is acquiring the Exchange Notes offered hereby in the ordinary course
of such Transferor's business and that such Transferor has no arrangement
with any person to participate in the distribution of such Exchange Notes.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of Exchange
Notes. Each Transferor which is a broker-dealer receiving Exchange Notes
for its own account must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. In
connection with the offering of the Old Notes, the Company agreed to file
and maintain, subject to certain limitations, a registration statement
that would allow Lehman Brothers Inc. to engage in market-making
transactions with respect to the Notes. The Company has agreed to bear
registration expenses incurred under such agreement.
Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal
sent by telegram, facsimile transmission (receipt confirmed by telephone)
or letter must be received by the Exchange Agent at the address set forth
herein prior to the Expiration Date. Any such notice of withdrawal must
(i) specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such
Old Notes), (iii) specify the principal amount of Notes to be withdrawn,
(iv) include a statement that such holder is withdrawing his election to
<PAGE>
<PAGE>110
have such Old Notes exchanged, (v) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which
such Old Notes were tendered or as otherwise described above (including
any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee under the Indenture register the
transfer of such Old Notes into the name of the person withdrawing the
tender and (vi) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. The Exchange Agent
will return the properly withdrawn Old Notes promptly following receipt of
notice of withdrawal. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility to
be credited with the withdrawn Old Notes or otherwise comply with the
book-entry transfer facility procedure. All questions as to the validity
of notices of withdrawals, including time of receipt, will be determined
by the Company and such determination will be final and binding on all
parties.
Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes
which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder
(or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the book-entry transfer facility pursuant to
the book-entry transfer procedures described above, such Old Notes will be
credited to an account with such book-entry transfer facility specified by
the holder) as soon as practicable after withdrawal, rejection of tender
or termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "Procedures
for Tendering Old Notes" above at any time on or prior to the Expiration
Date.
Acceptance of Old Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly on the Exchange Date, all Old
Notes properly tendered and will issue the Exchange Notes promptly after
such acceptance. See "Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Old Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note
will receive an Exchange Note having a principal amount equal to that of
the surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only
after timely receipt by the Exchange Agent of certificates for such Old
Notes or a timely book-entry confirmation of such Old Notes into the
Exchange Agent's account at the book-entry transfer facility, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Old Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer or if Old Notes
are submitted for a greater principal amount than the holder desires to
<PAGE>
<PAGE>111
exchange, such unaccepted or non-exchanged Old Notes will be returned
without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such non-exchanged Old Notes will be credited
to an account maintained with such book-entry transfer facility) as
promptly as practicable after the expiration of the Exchange Offer.
Certain Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any
extension of the Exchange Offer, the Company shall not be required to
accept for exchange, or to issue Exchange Notes in exchange for, any Old
Notes and may terminate or amend the Exchange Offer (by oral or written
notice to the Exchange Agent or by a timely press release) if at any time
before the acceptance of such Old Notes for exchange or the exchange of
the Exchange Notes for such Old Notes, any of the following conditions
exist:
(a) any action or proceeding is instituted or threatened
in any court or by or before any governmental agency or regulatory
authority or any injunction, order or decree is issued with respect
to the Exchange Offer which, in the sole judgment of the Company,
might materially impair the ability of the Company to proceed with
the Exchange Offer or have a material adverse effect on the
contemplated benefits of the Exchange Offer to the Company; or
(b) any change (or any development involving a
prospective change) shall have occurred or be threatened in the
business, properties, assets, liabilities, financial condition,
operations, results of operations or prospects of the Company that
is or may be adverse to the Company, or the Company shall have
become aware of facts that have or may have adverse significance
with respect to the value of the Old Notes or the Exchange Notes or
that may materially impair the contemplated benefits of the Exchange
Offer to the Company; or
(c) any law, rule or regulation or applicable
interpretations of the staff of the Commission is issued or
promulgated which, in the good faith determination of the Company,
do not permit the Company to effect the Exchange Offer; or
(d) any governmental approval has not been obtained,
which approval the Company, in its sole discretion, deems necessary
for the consummation of the Exchange Offer; or
(e) there shall have been proposed, adopted or enacted
any law, statute, rule or regulation (or an amendment to any
existing law statute, rule or regulation) which, in the sole
judgment of the Company, might materially impair the ability of the
Company to proceed with the Exchange Offer or have a material
adverse effect on the contemplated benefits of the Exchange Offer to
the Company; or
<PAGE>
<PAGE>112
(f) there shall occur a change in the current
interpretation by the staff of the Commission which permits the
Exchange Notes issued pursuant to the Exchange Offer in exchange for
Old Notes to be offered for resale, resold and otherwise transferred
by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that
such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any
person to participate in the distribution of such Exchange Notes; or
(g) there shall have occurred (i) any general suspension
of, shortening of hours for, or limitation on prices for, trading in
securities on any national securities exchange or in the
over-the-counter market (whether or not mandatory), (ii) any
limitation by any governmental agency or authority which may
adversely affect the ability of the Company to complete the
transactions contemplated by the Exchange Offer, (iii) a declaration
of a banking moratorium or any suspension of payments in respect of
banks by Federal or state authorities in the United States (whether
or not mandatory), (iv) a commencement of a war, armed hostilities
or other international or national crisis directly or indirectly
involving the United States, (v) any limitation (whether or not
mandatory) by any governmental authority on, or other event having a
reasonable likelihood of affecting, the extension of credit by banks
or other leading institutions in the United States, or (vi) in the
case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or
worsening thereof.
The Company expressly reserves the right to terminate the Exchange
Offer and not accept for exchange any Old Notes upon the occurrence of any
of the foregoing conditions (which represent all of the material
conditions to the acceptance by the Company of properly tendered Old
Notes). In addition, the Company may amend the Exchange Offer at any time
prior to the Expiration Date if any of the conditions set forth above
occur. Moreover, regardless of whether any of such conditions has
occurred, the Company may amend the Exchange Offer in any manner which, in
its good faith judgment, is advantageous to holders of the Old Notes.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise
to any such condition or may be waived by the Company in whole or in part
at any time and from time to time in its sole discretion. The failure by
the Company at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right and each such right shall be deemed
an ongoing right which may be asserted at any time and from time to time.
If the Company waives or amends the foregoing conditions, it will, if
required by law, extend the Exchange Offer for a minimum of five business
days from the date that the Company first gives notice, by public
announcement or otherwise, of such waiver or amendment, if the Exchange
Offer would otherwise expire within such five business-day period. Any
determination by the Company concerning the events described above will be
final and binding upon all parties.
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<PAGE>113
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Old Notes, if at such time any stop order shall be threatened or in effect
with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended. In any such event the Company is
required to use every reasonable effort to obtain the withdrawal of any
stop order at the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered for exchange.
Exchange Agent
The Bank of New York has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below:
By Hand/Overnight Courier: By Mail:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
Corporate Trust Services Window Corporate Trust Services Window
New York, New York 10286 New York, New York 10286
Attn: Reorganization Section Attn: Reorganization Section
By Facsimile: (212) 815-6339
Attn.: Reorganization Section
Telephone: (212) 815-4444
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices
of Guaranteed Delivery should be directed to the Exchange Agent at the
address and telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX
NUMBER OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL
NOT CONSTITUTE A VALID DELIVERY.
Solicitation of Tenders; Fees and Expenses
The Company has not retained any dealer-manager in connection with
the Exchange Offer and will not make any payments to brokers, dealers or
others soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services
and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this and other related documents
to the beneficial owners of the Old Notes and in handling or forwarding
tenders for their customers.
The estimated cash expenses to be incurred in connection with the
Exchange Offer will be paid by the Company and are estimated in the
aggregate to be approximately $500,000, which includes fees and expenses
of the Exchange Agent, Trustee, registration fees, accounting, legal,
printing and related fees and expenses.
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<PAGE>114
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the
respective dates as of which information is given herein. The Exchange
Offer is not being made to (nor will tenders be accepted from or on behalf
of) holders of Old Notes in any jurisdiction in which the making of the
Exchange Offer or the acceptance thereof would not be in compliance with
the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange
Offer in any such jurisdiction and extend the Exchange Offer to holders of
Old Notes in such jurisdiction. In any jurisdiction in which the
securities laws or blue sky laws of which require the Exchange Offer to be
made by a licensed broker or dealer, the Exchange Offer is being made on
behalf of the Company by one or more registered brokers or dealers which
are licensed under the laws of such jurisdiction.
Transfer Taxes
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be issued in the name of, any person other than the registered
holder of the Old Notes tendered, or if tendered Old Notes are registered
in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
with the Letter of Transmittal, the amount of such transfer taxes will be
billed directly to such tendering holder.
Accounting Treatment
The Exchange Notes will be recorded at the carrying value of the Old
Notes as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the exchange of Exchange Notes for Old
Notes. Expenses incurred in connection with the issuance of the Exchange
Notes will be amortized over the term of the Exchange Notes.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject
to the restrictions on transfer of such Old Notes as set forth in the
legend thereon. Old Notes not exchanged pursuant to the Exchange Offer
will continue to remain outstanding in accordance with their terms. In
general, the Old Notes may not be offered or sold unless registered under
the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state
<PAGE>
<PAGE>115
securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Old
Notes should carefully consider whether to participate. Holders of Old
Notes are urged to consult their financial and tax advisors in making
their own decision on what action to take.
As a result of the making of, and upon acceptance for exchange of
all validly tendered Old Notes pursuant to the terms of, this Exchange
Offer, the Company will have fulfilled a covenant contained in the
Registration Rights Agreement. Holders of Old Notes who do not tender
their Old Notes in the Exchange Offer will continue to hold such Old Notes
and will be entitled to all the rights and limitations applicable thereto
under the Indenture, except for any such rights under the Registration
Rights Agreement that by their terms terminate or cease to have further
effectiveness as a result of the making of this Exchange Offer. All
untendered Old Notes will continue to be subject to the restrictions on
transfer set forth in the Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the trading market for
untendered Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms
of the Indenture, untendered Old Notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise.
The Company has no present plan to acquire any Old Notes which are not
tendered in the Exchange Offer.
Resale of Exchange Notes
The Company is making the Exchange Offer in reliance on the position
of the staff of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, the
Company has not sought its own interpretive letter and there can be no
assurance that the Staff would make a similar determination with respect
to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff, the Company believes
that the Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred
by a Holder (other than any Holder who is a broker-dealer or an
"affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such Holder's
business and that such Holder is not participating, and has no arrangement
or understanding with any person to participate, in a distribution (within
the meaning of the Securities Act) of such Exchange Notes. However, any
holder who is an "affiliate" of the Company or who has an arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, or any broker-dealer who
purchased Old Notes from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act (i) could not rely
on the applicable interpretations of the staff and (ii) must comply with
the registration and prospectus delivery requirements of the Securities
Act. A broker-dealer who holds Old Notes that were acquired for its own
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account as a result of market-making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of Exchange Notes. Each such
broker-dealer that receives Exchange Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge in the Letter of Transmittal that it will deliver a prospectus
in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered or
sold unless they have been registered or qualified for sale in such
jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the Exchange Notes for offer or sale under
the securities or blue sky laws of such jurisdictions as any holder of the
Exchange Notes reasonably requests. Such registration or qualification may
require the imposition of restrictions or conditions (including
suitability requirements for offerees or purchasers) in connection with
the offer or sale of any Exchange Notes.
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DESCRIPTION OF THE EXCHANGE NOTES
General
The Old Notes were issued and the Exchange Notes offered hereby will
be issued under an indenture dated as of April 30, 1997 (the "Indenture")
between the Company, as issuer, and The Bank of New York, as trustee (the
"Trustee"). The terms of the Exchange 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 (the "Trust Indenture Act"). The
Exchange Notes are subject to all such terms, and holders of the Exchange
Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of the material provisions of the
Indenture describes the material terms of the Indenture but does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Indenture, including the definitions
of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act. For definitions of
certain capitalized terms used in the following summary, see "--Certain
Definitions". The Indenture is an exhibit to the Registration Statement of
which this Prospectus is a part.
On April 30, 1997, the Company issued $225.0 million aggregate
principal amount of Old Notes under the Indenture. The terms of the
Exchange Notes are identical in all material respects to the Old Notes,
except for certain transfer restrictions and registration and other rights
relating to the exchange of the Old Notes for Exchange Notes. The Trustee
will authenticate and deliver Exchange Notes for original issue only in
exchange for a like principal amount of Old Notes. Any Old Notes that
remain outstanding after the consummation of the Exchange Offer, together
with the Exchange Notes, will be treated as a single class of securities
under the Indenture. Accordingly, all references herein to specified
percentages in aggregate principal amount of the outstanding Exchange
Notes shall be deemed to mean, at any time after the Exchange Offer is
consummated, such percentage in aggregate principal amount of the Old
Notes and Exchange Notes then outstanding.
The Exchange Notes will be general unsecured obligations of the
Company and will be subordinated in right of payment to all current and
future Senior Debt. At December 31, 1996, on a pro forma basis giving
effect to the Acquisition and the initial borrowings under the Senior
Credit Facilities, the Company would have had Senior Debt of approximately
$175.0 million outstanding (excluding letters of credit). The Indenture
will permit the incurrence of additional Senior Debt in the future.
The Company will not have any Subsidiaries as of the Issue Date.
However, the Indenture will provide that the Company's payment obligations
under the Exchange Notes will be jointly and severally guaranteed (the
"Subsidiary Guarantees") by all of the Company's future Restricted
Subsidiaries, other than Foreign Subsidiaries (collectively, the
"Guarantors"). 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.
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Principal, Maturity and Interest
The Exchange Notes will be limited in aggregate principal amount to
$225.0 million and will mature on May 1, 2007. Interest on the Exchange
Notes will accrue at the rate of 10 3/8% per annum and will be payable
semi-annually in arrears on May 1 and November 1, commencing on November
1, 1997, to Holders of record on the immediately preceding April 15 and
October 15. Interest on the Exchange Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal,
premium, if any, and interest on the Exchange Notes will be payable at the
office or agency of the Company maintained for such purpose within the
City and State of New York or, at the option of the Company, payment of
interest may be made by check mailed to the Holders of the Exchange Notes
at their respective addresses set forth in the register of Holders of
Exchange Notes; provided that all payments of principal, premium and
interest with respect to Exchange Notes the Holders of which have given
wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by
the Holders thereof if such Holders shall be registered Holders of at
least $250,000 in principal amount of Exchange Notes. Until otherwise
designated by the Company, the Company's office or agency in New York will
be the office of the Trustee maintained for such purpose. The Exchange
Notes will be issued in denominations of $1,000 and integral multiples
thereof.
Optional Redemption
The Exchange Notes will not be redeemable at the Company's option
prior to May 1, 2002. Thereafter, the Exchange Notes will be subject to
redemption at any time at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest to the applicable redemption date, if redeemed
during the twelve-month period beginning on May 1 of the years indicated
below:
Year Percentage
-------------------------------- -----------------
2002 . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . 100.000%
Notwithstanding the foregoing, during the first 36 months after the
Issue Date, the Company may on any one or more occasions redeem up to an
aggregate of 35% of the Exchange Notes originally issued at a redemption
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price of 109.375% of the principal amount thereof, plus accrued and unpaid
interest to the redemption date, with the net cash proceeds of one or more
Equity Offerings by the Company or the net cash proceeds of one or more
Equity Offerings by Holdings that are contributed to the Company as common
equity capital; provided that at least 65% of the Exchange Notes
originally issued remain outstanding immediately after the occurrence of
each such redemption; and provided, further, that any such redemption must
occur within 120 days of the date of the closing of such Equity Offering.
Subordination
The payment of principal of, premium, if any, and interest on the
Exchange Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full of all Senior Debt, whether
outstanding on the Issue Date or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or
its property, an assignment for the benefit of creditors or any
marshalling of the Company's assets and liabilities, the holders of Senior
Debt will 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 Exchange Notes will be entitled to
receive any payment with respect to the Exchange Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution
to which the Holders of Exchange Notes would be entitled shall be made to
the holders of Senior Debt (except, in each case, that Holders of Exchange
Notes may receive Permitted Junior Securities and payments made from the
trust described under "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the
Exchange Notes (except from the trust described under "--Legal Defeasance
and Covenant Defeasance") if (i) a default in the payment of the principal
of, premium, if any, or interest on Designated Senior Debt occurs and is
continuing or (ii) any other default occurs and is continuing with respect
to Designated Senior Debt that permits holders of the Designated Senior
Debt as to which such default relates to accelerate its maturity (or that
would permit such holders to accelerate with the giving of notice or the
passage of time or both) and the Trustee receives a notice of such default
(a "Payment Blockage Notice") from the Company or the holders of any
Designated Senior Debt. Payments on the Exchange Notes may and shall be
resumed (A) in the case of a payment default, upon the date on which such
default is cured or waived and (B) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Debt has been
accelerated. No new period of payment blockage may be commenced unless and
until (i) 360 days have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice and (ii) all scheduled payments of
principal, premium, if any, and interest on the Exchange Notes that have
come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent
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Payment Blockage Notice unless such default shall have been waived for a
period of not less than 90 days.
The Indenture further requires that the Company promptly notify
holders of Senior Debt if payment of the Exchange Notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, Holders of Exchange Notes may
recover less ratably than creditors of the Company who are holders of
Senior Debt. On a pro forma basis, after giving effect to the Acquisition
and the initial borrowing under the Senior Credit Facilities, the
principal amount of Senior Debt outstanding (excluding letters of credit)
at December 31, 1996 would have been approximately $175.0 million.
Selection and Notice
If less than all of the Exchange Notes are to be redeemed at any
time, selection of Exchange Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Exchange Notes are listed, or,
if the Exchange 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 Exchange 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 Exchange Notes
to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. Exchange Notes
called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Exchange Notes or
portions of them called for redemption.
Mandatory Redemption
Except as set forth below under "--Repurchase at the Option of
Holders", the Company is not required to make mandatory redemption or
sinking fund payments with respect to the Exchange Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Exchange
Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Exchange 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 to the date of
purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Exchange Notes on the date specified in
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such notice, which date shall be no earlier than 30 days and no later than
60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Exchange Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the
extent lawful, (i) accept for payment all Exchange 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 Exchange Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee the
Exchange Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Exchange Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each
Holder of Exchange Notes so tendered the Change of Control Payment for
such Exchange Notes, and the Trustee will promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new Note equal
in principal amount to any unpurchased portion of the Exchange Notes
surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof.
The Indenture will provide that, prior to mailing a Change of
Control Offer, but in any event within 90 days following a Change of
Control, the Company will 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 Exchange Notes required by this covenant. The Company
will publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the
Exchange Notes to require that the Company repurchase or redeem the
Exchange Notes in the event of a takeover, recapitalization or similar
transaction.
The Senior Credit Facilities will prohibit the Company from
purchasing any Exchange Notes, and also provides that certain change of
control events with respect to the Company would constitute a default
thereunder. Any future credit agreements or other agreements relating to
Senior Debt to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a
time when the Company is prohibited from purchasing Exchange Notes, the
Company could seek the consent of its lenders to the purchase of Exchange
Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Exchange
Notes. In such case, the Company's failure to purchase tendered Exchange
Notes would constitute an Event of Default under the Indenture which
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<PAGE>122
would, in turn, constitute a default under the Senior Credit Facilities.
In such circumstances, the subordination provisions in the Indenture would
likely restrict payments to the Holders of Exchange Notes. See "Risk
Factors--Change of Control". Finally, the Company's ability to pay cash to
the holders of Notes upon a purchase may be limited by the Company's
then-existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
purchases. Even if sufficient funds were otherwise available, the terms of
the Senior Credit Facilities will prohibit, subject to certain exceptions,
the Company's prepayment of Notes prior to their scheduled maturity.
Consequently, if the Company is not able to prepay indebtedness outstanding
under the Senior Credit Facilities and any other Senior Indebtedness
containing similar restrictions or obtain requisite consents, the Company
will be unable to fulfill its repurchase obligations if holders of Notes
exercise their purchase rights following a Change of Control, thereby
resulting in a default under the Indenture. Furthermore, the Change of
Control provisions may in certain circumstances make more difficult or
discourage a takeover of the Company.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control
Offer made by the Company and purchases all Exchange Notes validly
tendered and not withdrawn under such Change of Control Offer.
"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.
"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 Issue Date 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.
"Principals" means any Lehman Investor, Lockheed Martin Corporation,
Frank C. Lanza and Robert V. LaPenta.
"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
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<PAGE>123
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).
"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.
With respect to the disposition of assets, the phrase "all or
substantially all" as used in the Indenture varies according to the facts
and circumstances of the subject transaction and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree
of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of the
Company.
Asset Sales
The Indenture will provide that the Company will not, and will 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 a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Trustee) 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 the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds". When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all Holders of
Exchange Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Exchange Notes that may be purchased out of the Excess Proceeds,
at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the
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procedures set forth in the Indenture. To the extent that the aggregate
amount of Exchange Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount
of Exchange Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Exchange 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.
The Senior Credit Facilities will substantially limit the Company's
ability to purchase subordinated Indebtedness, including the Exchange
Notes. Any future credit agreements relating to Senior Debt may contain
similar restrictions. See "Description of Senior Credit Facilities".
Certain Covenants
Restricted Payments
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company) or to the direct or
indirect holders of the Company's or any of its Restricted Subsidiaries'
Equity Interests in their capacity as such (other than (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 Exchange 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 the covenant described
below under caption "Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
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(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the Issue Date (excluding Restricted
Payments permitted by clauses (ii) through (vii) of the next
succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date to the end of the Company's most
recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or,
if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from a contribution to its common
equity capital or the issue or sale since the Issue Date of Equity
Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a
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 the Issue Date 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 will not prohibit:
(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of declaration such
payment would have complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement,
defeasance or other acquisition of 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
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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 will not be deemed to constitute a
Restricted Payment for purposes of this covenant or any other
provision of the 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 the Issue Date 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 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 will
be deemed to be Restricted Payments at the time of such designation and
will reduce the amount available for Restricted Payments under the first
paragraph of this covenant. All such outstanding Investments will 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 will 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 the covenant "Restricted
Payments" were computed.
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Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture will provide that the Company will not, and will 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 will not
issue any Disqualified Stock and will 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 forgoing limitation will not apply to the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company of term
Indebtedness under Credit Facilities (and the guarantee thereof by
the Guarantors); provided that the aggregate principal amount of all
term Indebtedness outstanding under all Credit Facilities after
giving effect to such incurrence, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (i), does
not exceed an amount equal to $175.0 million less the aggregate
amount of all repayments, optional or mandatory, of the principal of
any Indebtedness under a Credit Facility (or any such Permitted
Refinancing Indebtedness) that have been made since the Issue Date;
(ii) the incurrence by the Company of revolving
credit Indebtedness and letters of credit (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) under Credit Facilities (and the guarantee thereof by
the Guarantors); provided that the aggregate principal amount of all
revolving credit Indebtedness outstanding under all Credit
Facilities after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this clause
(ii), does not exceed an amount equal to $100.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied to repay
any such Indebtedness (including any such Permitted Refinancing
Indebtedness) pursuant to the covenant described above under the
caption "--Asset Sales";
(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company and the Guarantors
of the Exchange Notes and the Subsidiary Guarantees;
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(v) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in
each case incurred for the purpose of financing all or any part of
the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or
such Restricted Subsidiary, in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to
this clause (v), not to exceed $30.0 million at any time
outstanding;
(vi) 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 (vi), does not exceed $10.0
million;
(vii) 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 the
Indenture to be incurred;
(viii) 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;
(ix) 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 will 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
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without giving effect to any subsequent changes in value) actually
received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(x) 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
Exchange 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;
(xi) 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 the
Indenture to be outstanding or (B) protecting the Company and its
Restricted Subsidiaries against changes in currency exchange rates;
(xii) 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 covenant;
(xiii) 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 (xiii), and the issuance of preferred
stock by Unrestricted Subsidiaries;
(xiv) 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
(xv) 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
incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (xv), not to exceed $50.0 million.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through
(xv) above or is entitled to be incurred pursuant to the first paragraph
of this covenant, the Company shall, in its sole discretion, classify such
item of Indebtedness in any manner that complies with this covenant.
Accrual of interest, the accretion of accreted value and the payment of
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interest in the form of additional Indebtedness will not be deemed to be
an incurrence of Indebtedness for purposes of this covenant.
Liens
The Indenture will provide that the Company will not, and will 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.
Antilayering Provision
The Indenture will provide that (i) the Company will 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 Exchange
Notes, and (ii) no Guarantor will 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.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary 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 the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock,
(C) the Indenture and the Exchange 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 the
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 clause (iii) above on the property
so acquired, (H) Permitted Refinancing Indebtedness, provided that the
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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 the covenants described under "Limitations on Incurrence of
Indebtedness and Issuance of Preferred Stock" and "Liens" 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.
Merger, Consolidation or Sale of Assets
The Indenture will provide that 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 Exchange Notes and the 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 the covenant described
above under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock" 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 clause (iv), (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
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another State of the United States so long as the amount of Indebtedness
of the Company and its Restricted Subsidiaries is not increased thereby.
Transactions with Affiliates
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, make any payment to, or
sell, lease, transfer or otherwise dispose of any 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 $3.0 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
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The foregoing provisions will 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, 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 $1.0 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 Issue Date; and (vi) any Restricted Payment that is permitted by the
provisions of the Indenture described above under the caption "--
Restricted Payments".
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Payments for Consent
The Indenture will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder
of any Exchange Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the
Exchange Notes unless such consideration is offered to be paid or is paid
to all Holders of the Exchange Notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
Reports
The Indenture will provide that, whether or not required by the
rules and regulations of the Securities and Exchange Commission (the
"Commission"), so long as any Exchange Notes are outstanding, the Company
will furnish to the Holders of Exchange Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to
file such Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the
face of the financial statements or in the footnotes thereto and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the financial condition and results of operations of the
Company and its Restricted Subsidiaries separately from the financial
condition and results of operations of the Unrestricted Subsidiaries of
the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on
Form 8-K if the Company were required to file such reports, in each case
within the time periods specified in the Commission's rules and
regulations. In addition, whether or not required by the rules and
regulations of the Commission, following the consummation of the Exchange
Offer contemplated by the Registration Rights Agreement, the Company will
file a copy of all such information and reports with the Commission for
public availability within the time periods set forth in the Commission's
rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the
Subsidiary Guarantors have agreed that, for so long as any Old Notes
remain outstanding and are required to bear the transfer restriction
legend, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Future Subsidiary Guarantees
The Company will not have any Subsidiaries as of the Issue Date.
However, the Company's payment obligations under the Exchange Notes will
be jointly and severally guaranteed by all of the Company's future
Restricted Subsidiaries, other than Foreign Subsidiaries. The Indenture
will provide that 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 Issue Date, then such Subsidiary shall execute a
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Subsidiary Guarantee and deliver an opinion of counsel, in accordance with
the terms of the 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.
The Indenture will provide that 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 Exchange
Notes and the Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (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 the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"
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.
The Indenture will provide that in the event of a sale or other
disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Guarantor, then such Guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the
corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee; provided that
the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See
"Redemption or Repurchase at Option of Holders--Asset Sales".
Events of Default and Remedies
The Indenture will provide that each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the Exchange 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 Exchange Notes (whether or not prohibited by the
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subordination provisions of the Indenture); (iii) failure by the Company
to comply with the provisions described under the captions "--Change of
Control", "--Asset Sales" or "--Merger, Consolidation or Sale of Assets";
(iv) failure by the Company for 60 days after notice to comply with any of
its other agreements in the Indenture or the Exchange 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 Issue Date, 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 Restricted
Subsidiaries; 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
Exchange Notes may declare all the Exchange 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 Restricted Subsidiary, all outstanding Exchange Notes will
become due and payable without further action or notice. Holders of the
Exchange Notes may not enforce the Indenture or the Exchange Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Exchange Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Exchange 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.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem
the Exchange Notes pursuant to the optional redemption provisions of the
Indenture, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the
Exchange Notes. If an Event of Default occurs prior to May 1, 2002 by
reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Exchange Notes prior to May 1, 2002, then the premium
specified in the Indenture shall also become immediately due and payable
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to the extent permitted by law upon the acceleration of the Exchange
Notes.
The Holders of a majority in aggregate principal amount of the
Exchange Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Exchange 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 Exchange Notes.
The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of
Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the
Company under the Exchange Notes and the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Exchange Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Exchange 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.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Exchange Notes
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Exchange Notes to receive payments in respect of the principal of,
premium, if any, and interest and Liquidated Damages on such Exchange
Notes when such payments are due from the trust referred to below,
(ii) the Company's obligations with respect to the Exchange Notes
concerning issuing temporary Exchange Notes, registration of Exchange
Notes, mutilated, destroyed, lost or stolen Exchange Notes and the
maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and thereafter
any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Exchange Notes. In the
event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an
Event of Default with respect to the Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Exchange Notes, cash in U.S. dollars,
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non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest and Liquidated Damages on the outstanding Exchange
Notes on the stated maturity or on the applicable redemption date, as the
case may be, and the Company must specify whether the Exchange Notes are
being defeased to maturity or to a particular redemption date; (ii) in the
case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the
Issue Date, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Exchange Notes
will not recognize income, gain or loss for federal income tax purposes as
a result of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that the Holders of the outstanding Exchange
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a
default under any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound; (vi) the Company
must have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(vii) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Exchange Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to
the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Exchange Notes in accordance with
the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by
law or permitted by the Indenture. The Company is not required to transfer
or exchange any Note selected for redemption. Also, the Company is not
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required to transfer or exchange any Note for a period of 15 days before a
selection of Exchange Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it
for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture or the Exchange Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the
Exchange Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange
offer for, Exchange Notes), and any existing default or compliance with
any provision of the Indenture or the Exchange Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Exchange Notes (including consents obtained in connection with
a tender offer or exchange offer for Exchange Notes).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Exchange Notes held by a non-consenting
Holder): (i) reduce the principal amount of Exchange Notes whose Holders
must consent to an amendment, supplement or waiver, (ii) reduce the
principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Exchange Notes (other
than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of
or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal of or premium, if
any, or interest on the Exchange Notes (except a rescission of
acceleration of the Exchange Notes by the Holders of at least a majority
in aggregate principal amount of the Exchange Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Exchange Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Exchange Notes to receive payments of
principal of or premium, if any, or interest on the Exchange Notes,
(vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions. In addition, any amendment to
the provisions of Article 10 of the Indenture (which relates to
subordination) will require the consent of the Holders of at least 75% in
aggregate principal amount of the Exchange Notes then outstanding if such
amendment would adversely affect the rights of Holders of Exchange Notes.
Notwithstanding the foregoing, without the consent of any Holder of
Exchange Notes, the Company and the Trustee may amend or supplement the
Indenture or the Exchange Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Exchange Notes in addition to
or in place of certificated Exchange Notes, to provide for the assumption
of the Company's obligations to Holders of Exchange Notes in the case of a
merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of Exchange Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with requirements of the Commission in order to
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effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply
to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then
outstanding Exchange Notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy available
to the Trustee, subject to certain exceptions. The Indenture provides that
in case an Event of Default shall occur (which shall not be cured), the
Trustee will be required, in the exercise of its power, to use the degree
of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request of any Holder
of Exchange Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
Book-Entry, Delivery and Form
The certificates representing the Exchange Notes will be issued in
fully registered form and will be deposited with the Trustee as custodian
for The Depository Trust Company, New York, New York (The "Depository"),
and registered in the name of a nominee of the Depository.
Depository Procedures
The Depository has advised the Company that the Depository is a
limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those
securities between Participants through electronic book-entry changes in
accounts of Participants. The Participants include securities brokers and
dealers (including the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of the Depository
only through the Participants or Indirect Participants. The ownership
interest and transfer of ownership interest of each actual purchaser of
each security held by or on behalf of the Depository are recorded on the
records of the Participants and Indirect Participants.
The Depository has also advised the Company that pursuant to
procedures established by it, (i) upon deposit of the Global Exchange
Notes, the Depository will credit the accounts of Participants designated
by the Initial Purchasers with portions of the principal amount of Global
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Exchange Notes and (ii) ownership of such interests in the Global Exchange
Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depository (with respect
to Participants) or by Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Exchange
Notes).
Investors in the Global Note may hold their interests therein
directly through the Depository, if they are Participants in such system,
or indirectly through organizations (including Euroclear and CEDEL) that
are Participants in such system. Investors in the Regulation S Global Note
may hold their interests therein through Euroclear or CEDEL, if they are
participants in such systems, or indirectly through organizations that are
participants in such systems or in the Depository system. Euroclear and
CEDEL will hold interests in the Regulation S Global Note on behalf of
their Participants through customers' securities accounts in their
respective names on the books of their respective depositories, which are
Morgan Guaranty Trust Company of New York, Brussels office, as operator of
Euroclear, and Citibank, N.A. as operator of CEDEL. The depositories, in
turn, will hold such interests in the Regulation S Global Note in
customers' securities accounts in the depositories' names on the books of
the Depository. All interests in a Global Note, including those held
through Euroclear or CEDEL, may be subject to the procedures and
requirements of the Depository. Those interests held by Euroclear or CEDEL
may be also be subject to the procedures and requirements of such system.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interest in a Global Note to such persons
may be limited to that extent. Because the Depository can act only on
behalf of Participants, which in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having a
beneficial interest in a Global Note to pledge such interest to persons or
entities that do not participate in the Depository system, or otherwise
take actions in respect of such interests, may be affected by the lack of
physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Exchange Notes see, "--Exchange
of Book-Entry Exchange Notes for Certificated Exchange Notes".
Except as described below, owners of interests in the Global
Exchange Notes will not have Exchange Notes registered in their names,
will not receive physical delivery of Exchange Notes in certificated form
and will not be considered the registered owners or Holders thereof under
the Indenture for any purpose.
Payments in respect of the principal and premium and interest on a
Global Note registered in the name of the Depository or its nominee will
be payable by the Trustee to the Depository or its nominee in its capacity
as the registered Holder under the Indenture. Under the terms of the
Indenture, the Company and the Trustee will treat the persons in whose
names the Exchange Notes, including the Global Exchange Notes, are
registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently,
neither the Company, the Trustee nor any agent of the Company or the
Trustee has or will have any responsibility or liability for (i) any
aspect of the Depository's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
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beneficial ownership interests in the Global Exchange Notes, or for
maintaining, supervising or reviewing any of the Depository's records or
any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Exchange Notes or (ii) any
other matter relating to the actions and practices of the Depository or
any of its Participants or Indirect Participants.
The Depository has advised the Company that its current practices,
upon receipt of any payment in respect of securities such as the Exchange
Notes (including principal and interest), is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in principal amount of
beneficial interests in the relevant security such as the Global Exchange
Notes as shown on the records of the Depository. Payments by Participants
and the Indirect Participants to the beneficial owners of Exchange Notes
will be governed by standing instructions and customary practices and will
not be the responsibility of the Depository, the Trustee or the Company.
Neither the Company nor the Trustee will be liable for any delay by the
Depository or its Participants in identifying the beneficial owners of the
Exchange Notes, and the Company and the Trustee may conclusively rely on
and will be protected in relying on instructions from the Depository or
its nominee as the registered owner of the Exchange Notes for all
purposes.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Exchange Notes will trade in the Depository's
Same-Day Funds Settlement System and secondary market trading activity in
such interests will, therefore, settle in immediately available funds,
subject in all cases to the rules and procedures of the Depository and its
participants.
Transfers between Participants in the Depository will be effected in
accordance with the Depository's procedures, and will be settled in
same-day funds. Transfers between participants in Euroclear and CEDEL will
be effected in the ordinary way in accordance with their respective rules
and operating procedures.
Subject to compliance with the transfer restrictions applicable to
the Exchange Notes described herein, crossmarket transfers between
Participants in the Depository, on the one hand, and Euroclear or CEDEL
participants, on the other hand, will be effected through the Depository
in accordance with the Depository's rules on behalf of Euroclear or CEDEL,
as the case may be, by its respective depository; however, such
cross-market transactions will require delivery of instructions to
Euroclear or CEDEL, as the case may be, by the counterparty in such system
in accordance with the rules and procedures and within the established
deadlines (Brussels time) of such system. Euroclear or CEDEL, as the case
may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depository to take action to effect
final settlement on its behalf by delivering or receiving interests in the
relevant Global Note in the Depository, and making or receiving payment in
accordance with normal procedures for same-day fund settlement applicable
the Depository. Euroclear participants and CEDEL participants may not
deliver instructions directly to the Depositaries for Euroclear or CEDEL.
Because of time zone differences, the securities accounts of a
Euroclear or CEDEL participant purchasing an interest in a Global Note
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from a Participant in the Depository will be credited, and any such
crediting will be reported to the relevant Euroclear or CEDEL participant,
during the securities settlement processing day (which must be a business
day for Euroclear or CEDEL) immediately following the settlement date of
the Depository. Cash received in Euroclear or CEDEL as a result of sales
of interests in a Global Note by or through a Euroclear or CEDEL
participant to a Participant in the Depository will be received with value
on the settlement date of the Depository but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following the Depository's settlement date.
The Depository has advised the Company that it will take any action
permitted to be taken by a Holder of Exchange Notes only at the direction
of one or more Participants to whose account the Depository interests in
the Global Exchange Notes are credited and only in respect of such portion
of the aggregate principal amount of the Exchange Notes as to which such
Participant or Participants has or have given direction. However, if there
is an Event of Default under the Exchange Notes, the Depository reserves
the right to exchange Global Exchange Notes for legended Exchange Notes in
certificated form, and to distribute such Exchange Notes to its
Participants.
The information in this section concerning the Depository, Euroclear
and CEDEL and their book-entry systems has been obtained from sources that
the Company believes to be reliable, but the Company takes no
responsibility for the accuracy thereof.
Although the Depository, Euroclear and CEDEL have agreed to the
foregoing procedures to facilitate transfers of interests in the Global
Note among participants in the Depository, Euroclear and CEDEL, they are
under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. None of the Company,
the Initial Purchasers or the Trustee will have any responsibility for the
performance by the Depository, Euroclear or CEDEL or their respective
participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
Exchange of Book-Entry Exchange Notes for Certificated Exchange Notes
A Global Note is exchangeable for definitive Exchange Notes in
registered certificated form if (i) the Depository (A) notifies the
Company that it is unwilling or unable to continue as depository for the
Global Note and the Company thereupon fails to appoint a successor
depository or (B) has ceased to be a clearing agency registered under the
Exchange Act or (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause issuance of the Exchange Notes in
certificated form. In addition, beneficial interests in a Global Note may
be exchanged for certificated Exchange Notes upon request but only upon at
least 20 days prior written notice given to the Trustee by or on behalf of
the Depository in accordance with customary procedures. In all cases,
certificated Exchange Notes delivered in exchange for any Global Note or
beneficial interest therein will be registered in names, and issued in any
approved denominations, requested by or on behalf of the Depository (in
accordance with its customary procedures).
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Certificated Exchange Notes
Subject to certain conditions, any person having a beneficial
interest in the Global Note may, upon request to the Trustee, exchange
such beneficial interest for Exchange Notes in the form of certificated
Exchange Notes. Upon any such issuance, the Trustee is required to
register such certificated Exchange Notes in the name of, and cause the
same to be delivered to, such person or persons (or the nominee of any
thereof). In addition, if (i) the Company notifies the Trustee in writing
that the Depository is no longer willing or able to act as a depository
and the Company is unable to locate a qualified successor within 90 days
or (ii) the Company, at its option, notifies the Trustee in writing that
it elects to cause the issuance of Exchange Notes in the form of
certificated Exchange Notes under the Indenture, then, upon surrender by
the Global Note Holder of its Global Note, Exchange Notes in such form
will be issued to each person that the Global Note Holder and the
Depository identify as being the beneficial owner of the related Exchange
Notes.
Neither the Company nor the Trustee will be liable for any delay by
the Global Note Holder or the Depository in identifying the beneficial
owners of Exchange Notes and the Company and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the Global
Note Holder or the Depository for all purposes.
Same Day Settlement and Payment
The Indenture will require that payments in respect of the Exchange
Notes represented by the Global Note (including principal, premium, if
any, interest) be made by wire transfer of immediately available funds to
the accounts specified by the Global Note Holder. With respect to
certificated Exchange Notes, the Company will make all payments of
principal, premium, if any, and interest by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no
such account is specified, by mailing a check to each such Holder's
registered address. The Company expects that secondary trading in the
certificated Exchange Notes will also be settled in immediately available
funds.
Registration Rights; Liquidated Damages
The Company and the Initial Purchasers entered into the Registration
Rights Agreement on the Issue Date. Pursuant to the Registration Rights
Agreement, the Company agreed to file with the Commission the Exchange
Offer Registration Statement on the appropriate form under the Securities
Act with respect to the Exchange Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the
Holders of Transfer Restricted Securities pursuant to the Exchange Offer
who are able to make certain representations the opportunity to exchange
their Transfer Restricted Securities for Exchange Notes. If (i) the
Company is not required to file the Exchange Offer Registration Statement
or permitted to consummate the Exchange Offer because the Exchange Offer
is not permitted by applicable law or Commission policy or (ii) any Holder
of Transfer Restricted Securities notifies the Company prior to the 20th
day following consummation of the Exchange Offer that (A) it is prohibited
by law or Commission policy from participating in the Exchange Offer or
(B) that it may not resell the Exchange Notes acquired by it in the
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Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a
broker-dealer and owns Old Notes acquired directly from the Company or an
affiliate of the Company, the Company will file with the Commission a
Shelf Registration Statement to cover resales of the Exchange Notes by the
Holders thereof who satisfy certain conditions relating to the provision
of information in connection with the Shelf Registration Statement. The
Company will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the
Commission. For purposes of the foregoing, "Transfer Restricted
Securities" means each Old Note until (i) the date on which such Old Note
has been exchanged by a person other than a broker-dealer for an Exchange
Note in the Exchange Offer, (ii) following the exchange by a broker-dealer
in the Exchange Offer of an Old Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement,
(iii) the date on which such Old Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Old Note is
distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will
file an Exchange Offer Registration Statement with the Commission on or
prior to 90 days after the Issue Date, (ii) the Company will use its best
efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 150 days after the Issue Date,
(iii) unless the Exchange Offer would not be permitted by applicable law
or Commission policy, the Company will commence the Exchange Offer and use
its best efforts to issue on or prior to 30 business days after the date
on which the Exchange Offer Registration Statement was declared effective
by the Commission, New Exchange Notes in exchange for all Exchange Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file
the Shelf Registration Statement, the Company will use its best efforts to
file the Shelf Registration Statement with the Commission on or prior to
30 days after such filing obligation arises and to cause the Shelf
Registration Statement to be declared effective by the Commission on or
prior to 90 days after such obligation arises. If (A) the Company fails to
file any of the Registration Statements required by the Registration
Rights Agreement on or before the date specified above for such filing,
(B) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (C) the Company fails to consummate the
Exchange Offer within 30 business days of the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement, or (D) the
Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the
periods specified in the Registration Rights Agreement (each such event
referred to in clauses (A) through (D) above a "Registration Default"),
then the Company will pay Liquidated Damages to each Holder of Old Notes,
with respect to the first 90-day period immediately following the
occurrence of the first Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Old Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of Old Notes with respect to each
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subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of Liquidated Damages of $.50 per week per $1,000
principal amount of Old Notes. All accrued Liquidated Damages will be paid
by the Company on each Damages Payment Date to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and
to Holders of certificated Old Notes by wire transfer to the accounts
specified by them or by mailing checks to their registered addresses if no
such accounts have been specified. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain
representations to the Company (as described in the Registration Rights
Agreement) in order to participate in the Exchange Offer and will be
required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights
Agreement in order to have their Old Notes included in the Shelf
Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such
terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a 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.
"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.
"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 consistent with past practices (provided that the sale,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above under
the caption "--Change of Control" and/or the provisions described above
under the caption "--Merger, Consolidation or Sale of Assets" and not by
the provisions of the Asset Sale covenant), and (ii) the issue or sale by
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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 described above under the caption "--
Restricted Payments" and (iv) a disposition of Cash Equivalents in the
ordinary course of business will 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).
"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's 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.
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"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 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 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 Net Tangible Assets" means, as of any date of
determination, shareholders' equity of the Company and its Restricted
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Subsidiaries, determined on a consolidated basis in accordance with GAAP,
less goodwill and other intangibles (other than patents, trademarks,
licenses, copyrights and other intellectual property and prepaid assets).
"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.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"Designated 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 Exchange Notes mature; provided, however,
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.
"Existing Indebtedness" means any Indebtedness of the Company (other
than Indebtedness under the Senior Credit Facilities and the Exchange
Notes) in existence on the Issue Date, 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
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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 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.
"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
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other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on
the Issue Date.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters
of credit and reimbursement agreements in respect thereof), of all or any
part of any Indebtedness.
"Guarantors" means 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.
"Holdings" means L-3 Communications Holdings, Inc.
"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.
"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
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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 described above under the caption "--Restricted Payments".
"Issue Date" means the closing date for the sale and original
issuance of the Exchange Notes under the Indenture.
"Lehman Investor" means Lehman Brothers Holdings Inc. and any of its
Affiliates.
"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 $250.0 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.
"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.
"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
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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.
"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
Liquidated Damages), guarantees and other liabilities or amounts payable
under the documentation governing any Indebtedness or in respect thereto.
"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 the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales" 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 the covenant
described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; (ix) any Investment in a Similar Business
that is not a Restricted Subsidiary; provided that the aggregate fair
market value of all Investments made 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 exceed 5% of the Consolidated Net
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
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this clause (x) that are at the time outstanding, not to exceed $15.0
million.
"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 Exchange Notes and the
Subsidiary Guarantees are subordinated to Senior Debt pursuant to Article
10 of the Indenture.
"Permitted Liens" means (i) Liens securing Senior Debt of the
Company or any Guarantor that was permitted by the terms of the 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 (v) of the second paragraph of the covenant entitled
"Incurrence of Indebtedness and Issuance of Preferred Stock" covering only
the assets acquired with such Indebtedness -- ; (vii) Liens existing on
the Issue 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 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 the 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
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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 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
Exchange Notes, such Permitted Refinancing Indebtedness is subordinated in
right of payment to the Exchange Notes on terms at least as favorable to
the Holders of Exchange 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.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means, with respect to any Person, each
Subsidiary of such Person that is not an Unrestricted Subsidiary.
"Senior Credit Facilities" means the credit agreement, dated as of
the Issue Date among the Company and a syndicate of banks and other
financial institutions led by Lehman Commercial Paper Inc., as syndication
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 agreement or other credit agreements or
otherwise).
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"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 Exchange 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.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the 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.
"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.
"Transaction Documents" means the Indenture, the Exchange Notes, the
Purchase Agreement and the Registration Rights Agreement.
"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
<PAGE>
<PAGE>156
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 the covenant described above under the caption
"Certain Covenants -- Restricted Payments". If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as
an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness
of such Subsidiary shall be deemed to be incurred 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 the covenant described
under the caption "Incurrence of Indebtedness and Issuance of Preferred
Stock", 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 the covenant described under the
caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock", 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.
"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.
<PAGE>
<PAGE>157
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The exchange of Old Notes for Exchange Notes will not constitute a
recognition event for federal income tax purposes. Consequently, no gain
or loss will be recognized by Holders upon receipt of the Exchange
Notes. For purposes of determining gain or loss upon the subsequent sale
or exchange of Exchange Notes, a Holder's basis in Exchange Notes will
be the same as such Holder's basis in the Old Notes exchanged therefor.
Holders will be considered to have held the Exchange Notes from the time
of their original acquisition of the Old Notes.
In any event, persons considering the exchange of Old Notes for
Exchange Notes should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular
situations as well as any consequences arising under the laws of any other
taxing jurisdictions.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. To the
extent any such broker-dealer participates in the Exchange Offer and so
notifies the Company, or causes the Company to be so notified in writing,
the Company has agreed that a period of 180 days after the date of this
Prospectus, it will make this Prospectus, as amended or supplemented,
available to such broker-dealer for use in connection with any such
resale, and will promptly send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal.
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Notes or a combination of such methods of resale, at prevailing market
prices at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers or any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
<PAGE>
<PAGE>158
The Company has agreed to pay all expenses incident to the Exchange
Offer (other than commissions and concessions of any broker-dealers),
subject to certain prescribed limitations, and will indemnify the holders
of the Old Notes against certain liabilities, including certain
liabilities that may arise under the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that
receives Exchange Notes pursuant to the Exchange Offer hereby agrees to
notify the Company prior to using the Prospectus in connection with the
sale or transfer of Exchange Notes, and acknowledges and agrees that, upon
receipt of notice from the Company of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to
make the statements therein not misleading or which may impose upon the
Company disclosure obligations that may have a material adverse effect on
the Company (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the Prospectus
until the Company has notified such broker-dealer that delivery of the
Prospectus may resume and has furnished copies of any amendment or
supplement to the Prospectus to such broker-dealer.
<PAGE>
<PAGE>159
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Simpson
Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York.
EXPERTS
The combined financial statements of the Lockheed Martin Predecessor
Businesses as of March 31, 1997 and for the three months then ended, as of
December 31, 1996 and for the year then ended, the Loral Acquired
Businesses for the three months ended March 31, 1996 and for the years
ended December 31, 1995 and 1994 and the balance sheet of L-3
Communications Corporation as of April 29, 1997, included in this
Prospectus, have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent auditors, given on the authority
of that firm as experts in accounting and auditing. The report on the
combined financial statements of the Lockheed Martin Predecessor
Businesses for the year ended December 31, 1996 states that Coopers &
Lybrand L.L.P.'s opinion, insofar as it relates to the financial
statements of the Lockheed Martin Communications Systems Division
included in such combined financial statements, is based solely on
the report of other auditors.
The combined financial statements of Lockheed Martin Communications
Systems Division at December 31, 1996 (not presented separately herein)
and 1995, and the combined results of its operations and its cash flows
for the year ended December 31, 1996 (not presented separately herein),
and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995, which is referred to and made
a part of this Prospectus and Registration Statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and
auditing.
<PAGE>
<PAGE>F-1
INDEX TO FINANCIAL STATEMENTS
L-3 COMMUNICATIONS CORPORATION
Condensed Consolidated (Combined) Financial Statements
as of June 30, 1997 (unaudited) and December 31, 1996
and for the six months ended June 30, 1997 (unaudited)
and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . F-3
Condensed Consolidated (Combined) Balance Sheets as of
June 30, 1997 (unaudited) and December 31, 1996 . . . . . . F-4
Condensed Consolidated (Combined) Statements of Operations
for the Three and Six Months ended June 30, 1997 (unaudited)
and June 30, 1996 (unaudited) . . . . . . . . . . . . . . . F-6
Condensed Consolidated (Combined) Statements of Cash Flows
for the Six Months ended June 30, 1997 (unaudited)
and June 30, 1996 (unaudited) . . . . . . . . . . . . . . . F-8
Notes to Condensed Consolidated (Combined)
Financial Statements . . . . . . . . . . . . . . . . . . . . F-10
Balance Sheet as of April 29, 1997 . . . . . . . . . . . . . . . F-15
Report of Coopers & Lybrand L.L.P. . . . . . . . . . . . . . F-16
Balance Sheet of April 29, 1997 . . . . . . . . . . . . . . F-17
Notes to Balance Sheet . . . . . . . . . . . . . . . . . . . F-18
Lockheed Martin Predecessor Businesses
Combined Financial Statements as of March 31, 1997 and the three
months ended March 31, 1997 and 1996 (unaudited) . . . . . . . . F-21
Report of Coopers & Lybrand L.L.P. . . . . . . . . . . . . F-22
Balance sheet as of March 31, 1997 . . . . . . . . . . . . . F-23
Statements of Operations and Changes in Invested Equity for
the three months ended March 31, 1997 and March 31, 1996
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . F-24
Statements of Cash Flows for the three months ended
March 31, 1997 and March 31, 1996 (Unaudited) . . . . . . . . F-25
Notes to Combined Financial Statements . . . . . . . . . . . F-26
<PAGE>
<PAGE>F-2
Combined Financial Statements as of December 31, 1996, 1995 and
for the three years in the period ended December 31, 1996. . . . F-37
Report of Coopers & Lybrand L.L.P. on December 31, 1996
Combined Financial Statements . . . . . . . . . . . . . . . F-38
Report of Ernst & Young LLP on the financial statements of
Lockheed Martin Communications Systems Division as of
December 31, 1996 and 1995 and for the three
years ended December 31, 1996. . . . . . . . . . . . . . . . F-39
Balance Sheets as of December 31, 1996 and 1995 . . . . . . F-40
Statements of Operations and Changes in Invested Equity for
years ended December 31, 1996, 1995 and 1994 . . . . . . . . F-41
Statements of Cash Flows for years ended December 31,
1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . F-42
Notes to Combined Financial Statements . . . . . . . . . . F-43
Loral Acquired Businesses
Report of Coopers & Lybrand L.L.P. . . . . . . . . . . . . F-55
Statements of Operations for three months ended
March 31, 1996 and the years ended December 31, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . F-56
Statements of Cash Flows for three months ended March 31, 1996
and the years ended December 31, 1995 and 1994 . . . . . . F-57
Notes to Combined Financial Statements . . . . . . . . . . F-58
<PAGE>
<PAGE>F-3
L-3 COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED (COMBINED)
FINANCIAL STATEMENTS
As of June 30, 1997 (unaudited) and December 31,
1996 and for the six months ended June 30, 1997 (unaudited)
and 1996 (unaudited)
<PAGE>
<PAGE>F-4
L-3 COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED (COMBINED) BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
The Company Predecessor Company
----------------- ----------------------
June 30, 1997 December 31, 1996
------------------ ----------------------
(Unaudited)
<S> <C> <C>
|
ASSETS |
Current assets: |
Cash and cash equivalents . . . . . . . . $ 22,623 | --
Contracts in process . . . . . . . . . . . 214,740 | $198,073
Other current assets . . . . . . . . . . . 2,102 | 3,661
-------- | --------
Total current assets . . . . . . . . . . 239,465 | 201,734
-------- | --------
|
Property, plant and equipment . . . . . . . . 111,074 | 116,566
Less, accumulated depreciation and |
amortization . . . . . . . . . . . . . . 4,427 | 24,983
-------- | --------
106,647 | 91,583
-------- | --------
Intangibles, primarily cost in excess |
of net assets acquired, net of |
amortization . . . . . . . . . . . . . . . 301,254 | 282,674
Other assets . . . . . . . . . . . . . . . . 33,539 | 17,307
-------- | --------
$680,905 | $593,298
======== | ========
|
LIABILITIES AND INVESTED EQUITY |
Current liabilities: |
Current portion of long-term debt . . . $ 4,000 | --
Accounts payable, trade . . . . . . . . 35,999 | $ 34,163
Accrued employment costs . . . . . . . . 31,917 | 27,313
Billings and estimated earnings in |
excess of cost . . . . . . . . . . . . 16,541 | 14,299
Other current liabilities . . . . . . . 33,418 | 27,113
-------- | --------
Total current liabilities . . . . . . 121,875 | 102,888
-------- | --------
</TABLE>
<PAGE>
<PAGE>F-5
L-3 COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED (COMBINED) BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
The Company Predecessor Company
----------------- ----------------------
June 30, 1997 December 31, 1996
------------------ ----------------------
(Unaudited)
<S> <C> <C>
|
Pension and postretirement benefits . . . . 27,412 | --
Other liabilities . . . . . . . . . . . . . 16,027 | 16,801
Long-term debt . . . . . . . . . . . . . . 395,000 | --
Commitment and contingencies |
Shareholders' Equity at June 30, 1997 |
Common Stock, $.01 par value, authorized |
100 shares, issued 100 shares. . . . . 125,000 | --
Retained Earnings . . . . . . . . . . . 3,091 | --
Deemed Distribution . . . . . . . . . . (7,500) | --
Invested equity at December 31, 1996 . . . -- | 473,609
-------- | --------
$680,905 | $593,298
======== | ========
</TABLE>
See notes to condensed consolidated (combined) financial statements.
<PAGE>
<PAGE>F-6
L-3 COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED (COMBINED) STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
The Company Predecessor Company
------------------------ ------------------------
Three Months Three Months
Ended Ended
June 30, 1997 June 30, 1996
---------------------- ------------------------
<S> <C> <C>
|
Sales . . . . . . . . . . . . . . . $168,030 | $165,294
Cost and expenses . . . . . . . . . 152,909 | 156,040
-------- | --------
Operating income . . . . . . . . . 15,121 | 9,254
Net interest expense . . . . . . . 9,970 | 7,386
-------- | --------
Income before income taxes . . . . 5,151 | 1,868
Income taxes . . . . . . . . . . . 2,060 | 1,131
-------- | --------
Net income . . . . . . . . . . . . $ 3,091 | $ 737
======== | ========
</TABLE>
See notes to condensed consolidated (combined) financial statements.
<PAGE>
<PAGE>F-7
L-3 COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED (COMBINED) STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
The Company Predecessor Company
-------------------- ------------------------------------------
Three Months Three Months Six Months
Ended Ended Ended
June 30, 1997 March 31, 1997 June 30, 1996
-------------------- -------------------- --------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
|
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $168,030 | $158,873 $206,447
Cost and expenses . . . . . . . . . . . . . . . . . . . . . . . 152,909 | 150,937 195,517
-------- | -------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . . 15,121 | 7,936 10,930
Net Interest expense . . . . . . . . . . . . . . . . . . . . . 9,970 | 8,441 9,414
-------- | -------- --------
Income (loss) before income taxes . . . . . . . . . . . . . . . 5,151 | (505) 1,516
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 2,060 | (247) 1,276
-------- | -------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 3,091 | $ (258) $ 240
======== | ======== ========
</TABLE>
See notes to condensed consolidated (combined) financial statements.
<PAGE>
<PAGE>F-8
L-3 COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED (COMBINED) STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
The Company Predecessor Company
-------------------- ------------------------------------------
Three Months Three Months Six Months
Ended Ended Ended
June 30, 1997 March 31, 1997 June 30, 1996
-------------------- -------------------- --------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Operating activities: |
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 3,091 | $ (258) $ 240
Depreciation and amortization . . . . . . . . . . . . . . . . . 7,181 | 7,184 10,326
Changes in operating assets and liabilities |
Contracts in process . . . . . . . . . . . . . . . . . . . . 9,318 | (17,475) 10,780
Other current assets . . . . . . . . . . . . . . . . . . . . 480 | (481) 3,718
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 3,683 | (159) (10,220)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . (4,028) | (207) (5,631)
Accrued employment costs . . . . . . . . . . . . . . . . . . 6,783 | (625) 2,914
Billings and estimated earnings in excess of cost . . . . . 1,133 | (1,891) (17,238)
Other current liabilities . . . . . . . . . . . . . . . . . 3,742 | (1,867) (2,970)
Pension and postretirement benefits . . . . . . . . . . . . (1,088) | -- --
Other liabilities . . . . . . . . . . . . . . . . . . . . . 2,626 | (500) (21,330)
-------- | -------- --------
Net cash from (used in) operating activities . . . . . . . . . 32,921 | (16,279) (29,411)
-------- | -------- --------
|
Investing activities: |
Acquisition of business . . . . . . . . . . . . . . . . . . . . (470,700) | -- (287,803)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . (3,120) | (4,300) (4,692)
Disposition of property, plant and equipment . . . . . . . . . 211 | -- 497
-------- | -------- --------
Net cash used in investing activities . . . . . . . . . . . . . (473,609) | (4,300) (291,998)
-------- | -------- --------
|
</TABLE>
See notes to condensed consolidated (combined) financial statements.
<PAGE>
<PAGE>F-9
L-3 COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED (COMBINED) STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
The Company Predecessor Company
-------------------- ------------------------------------------
Three Months Three Months Six Months
Ended Ended Ended
June 30, 1997 March 31, 1997 June 30, 1996
-------------------- -------------------- --------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Financing activities: |
Advances from Lockheed Martin . . . . . . . . . . . . . . . . . -- | 20,579 321,409
Borrowings under senior credit facility . . . . . . . . . . . . 175,000 | -- --
Proceeds from sale of 10 3/8% subordinated notes . . . . . . . 225,000 | -- --
Proceeds from issuance of common stock . . . . . . . . . . . . 80,000 | -- --
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . (15,689) | -- --
Payment of debt . . . . . . . . . . . . . . . . . . . . . . . . (1,000) | -- --
-------- | -------- --------
Net cash from financing activities . . . . . . . . . . . . . . 463,311 | 20,579 321,409
-------- | -------- --------
Net change in cash . . . . . . . . . . . . . . . . . . . . . . 22,623 | -- --
Cash and cash equivalents, beginning of the period . . . . . . -- | -- --
-------- | -------- --------
Cash and cash equivalents, end of the period . . . . . . . . . $ 22,623 | -- --
======== | ======== ========
Supplemental information: |
Cash paid for interest during the period . . . . . . . . . . . -- | -- --
Cash paid for income taxes during the period . . . . . . . . . -- | -- --
Issuance of common stock to Lockheed Martin in connection |
with the acquisition of business . . . . . . . . . . . . . . $ 45,000 | -- --
</TABLE>
See notes to condensed consolidated (combined) financial statements.
<PAGE>
<PAGE>F-10
L-3 Communications Corporation
Notes to Condensed Consolidated (Combined) Financial Statements
1. Basis of Presentation
The accompanying condensed consolidated (combined) financial statements
include the assets, liabilities and results of operations of L-3
Communications Corporation, the successor company ("L-3" or the "Company")
following the change in ownership (see Note 2) effective as of April 1, 1997
and for the period from April 1, 1997 to June 30, 1997. The statements also
include on a combined basis, substantially all of the assets and certain
liabilities of (i) nine business units previously purchased by Lockheed
Martin Corporation ("Lockheed Martin") as part of its acquisition of Loral
Corporation ("Loral") in April 1996, and (ii) one business unit,
Communications Systems--Camden purchased by Lockheed Martin as part of its
acquisition of the aerospace business of GE in April 1993, (collectively, the
"Businesses" or the "Predecessor Company"), prior to the change in ownership
and for the periods of January 1, 1996 to June 30, 1996 and January 1, 1997
to March 31, 1997, and as of December 31, 1996.
The accompanying unaudited condensed consolidated (combined) financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulations S-X of the Securities
and Exchange Commission (SEC); accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. All significant intercompany
balances and transactions have been eliminated. The balance sheet data as of
December 31, 1996 and the financial statement data as of March 31, 1997 and
for the three months ended March 31,1997 have been derived from the audited
financial statements of the Predecessor Company for such periods. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for interim periods are not necessarily indicative of
results for the entire year.
2. Change in Ownership Transaction
L-3 was formed on April 8, 1997, and is a wholly-owned subsidiary of L-3
Communications Holdings, Inc. ("Holdings"). Holdings and L-3 were formed by
Mr. Frank C. Lanza, the former President and Chief Operating Officer of
Loral, Mr. Robert V. LaPenta, the former Senior Vice President and Controller
of Loral, Lehman Brothers Capital Partners III, L.P. and its affiliates (the
"Lehman Partnership") and Lockheed Martin to acquire the Businesses.
On March 28, 1997, Lanza, LaPenta, the Lehman Partnership, Holdings, and
Lockheed Martin entered into a Transaction Agreement whereby Holdings would
acquire the Businesses from Lockheed Martin. Also included in the
acquisition is a semiconductor product line of another business and certain
leasehold improvements in New York City which were not material. Pursuant to
the Transaction Agreement on April 30, 1997 (closing date), Holdings acquired
the Businesses from Lockheed Martin for $525 million, comprised of $480
<PAGE>
<PAGE>F-11
million of cash before an estimated $20 million reduction related to a
purchase price adjustment, and $45 million of common equity, representing a
34.9% interest in Holdings retained by Lockheed Martin. Also pursuant to the
Transaction Agreement, Lockheed Martin, on behalf and at the direction of
Holdings, transferred the Businesses to the Company. The acquisition was
financed with the debt proceeds of $400 million (see Note 5) and capital
contributions of $125 million from Holdings, including the $45 million
retained by Lockheed Martin.
In connection with the Transaction Agreement, Holdings, the Company and
Lockheed Martin have entered into a transition services agreement pursuant to
which Lockheed Martin will provide to L-3 and its subsidiaries (and L-3 will
provide to Lockheed Martin) certain corporate services of a type previously
provided at costs consistent with past practices until December 31, 1997 (or,
in the case of Communications Systems--Camden, for a period of up to 18
months after the Closing) and the parties also entered into supply agreements
which reflect existing intercompany work transfer agreements or similar
support arrangements upon prices and other terms consistent with previously
existing arrangements. Holdings, the Company and Lockheed Martin have
entered into certain subleases of real property and cross-licenses of
intellectual property.
Pursuant to the Transaction Agreement the Company also assumed certain
obligations relating to environmental liabilities and benefit plans.
In accordance with Accounting Principles Board Opinion No. 16, the
acquisition of the Businesses by Holdings and L-3 has been accounted for as a
purchase business combination effective as of April 1, 1997. The purchase
cost (including the fees and expenses related thereto) was allocated to the
tangible and intangible assets and liabilities of the Company based upon
their respective fair values. The assets and liabilities recorded in
connection with the purchase price allocation were $660.3 million and $152.1
million, respectively. The excess of the purchase price over the fair value
of net assets acquired of $306.2 million was recorded as good will, and is
being amortized on a straight-line basis over a period of 40 years. Also in
connection with the purchase price allocation estimated deferred tax assets
of $35 million, fully offset by a valuation allowance, were recorded related
principally to differences between book and tax bases of assumed liabilities.
As a result of the 34.9% ownership interest retained by Lockheed Martin, the
provisions of EITF 88-16 were applied in connection with the purchase price
allocation, which resulted in recording net assets at approximately 34.9% of
Lockheed Martin's carrying values in the Businesses plus 65.1% at fair value,
and the recognition of a deemed distribution of $7.5 million. The assets and
liabilities recorded in connection with the purchase price allocation, are
based on preliminary estimates of fair values; actual adjustments will be
based on final appraisals and other analyses of fair values which are
currently in progress. Changes between preliminary and financial allocations
for the valuation of contracts in process, inventories, pension liabilities,
fixed assets and deferred taxes could be material.
Had the acquisitions of the Businesses occurred on January 1, 1996, the
unaudited pro forma sales and net income for the six months ended June 30,
1997 and 1996 would have been $326.9 million and $2.6 million and $338.6
million and $0.4 million, respectively. The pro forma results, which are
based on various assumptions, are not necessarily indicative of what would
<PAGE>
<PAGE>F-12
have occurred had the acquisition been consummated on January 1, 1996. The
1996 pro forma sales and net income have been adjusted to include the
operations of the Loral Acquired Businesses from January 1, 1996 (See
Note 3).
3. Predecessor Company Acquisitions
Effective April 1, 1996, Lockheed Martin acquired substantially all the
assets and liabilities of the defense businesses of Loral, including the
Wideband Systems Division and the Products Group which are included in the
Businesses. The acquisition of the Wideband Systems Division and Products
Group businesses (the "Loral Acquired Businesses") has been accounted for as
a purchase by Lockheed Martin Communications Systems-Camden Division
("Divisions"). The acquisition has been reflected in the financial
statements based on the purchase price allocated to those acquired businesses
by Lockheed Martin. As such, the accompanying condensed combined financial
statements for periods prior to April 1, 1997 reflected the results of
operations of the Division and the Loral Acquired Businesses from the
effective date of acquisition including the effects of an allocated portion
of cost in excess of net assets acquired resulting from the acquisition. The
assets and liabilities recorded in connection with the purchase price
allocation were $401.0 million and $113.2 million, respectively.
4. Contracts and Progress
Billings and accumulated costs and profits on long-term contracts,
principally with the U.S. Government, comprise the following:
<TABLE>
<CAPTION>
The Company Predecessor Company
June 30, 1997 December 31, 1996
------------------------ -----------------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Billed contract receivables . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,715 $ 40,299
Unbilled contract receivables . . . . . . . . . . . . . . . . . . . . . . . . 84,339 91,053
Other billed receivables, principally commercial and affiliates . . . . . . . 37,555 41,154
Inventories costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,830 61,380
-------- --------
238,439 233,886
Less, unliquidated progress payments . . . . . . . . . . . . . . . . . . . . (23,699) (35,813)
-------- --------
Net contracts in progress . . . . . . . . . . . . . . . . . . . . . . . . . . $214,740 $198,073
======== ========
</TABLE>
<PAGE>
<PAGE>F-13
5. Debt
The Company obtained $275 million of senior secured credit facilities
which consisted of $175 million of term loan facilities and a $100 million
revolving credit facility.
The revolving credit facilities expires in 2003 and is available for
ongoing working capital and letter of credit needs. Substantially all of the
revolving credit facility is available at June 30, 1997. The Company pays a
commitment fee on the unused portion. The term loan facilities and revolving
credit facility have bene provided by a syndicate of banks and financial
institutions and bear interest at the option of the Company at a rate related
to (i) the higher of federal funds rate plus 0.50% per annum or the reference
rate published by Bank of America NT&SA or (ii) LIBOR. Interest payments
vary in accordance with the type of borrowing and are made at a minimum every
three months.
The aggregate principal payments for debt, excluding the revolving
credit borrowings for the years ending December 31, 1998 through 2002 are:
$5.0 million, $11.0 million, $19.0 million, $25.0 million and $33.2 million.
In April 1997, the Company also issued $225 million 10 3/8% senior
subordinated notes due May 1, 2007 with interest payable semi-annually
beginning November 1, 1997. The notes are redeemable under certain
circumstances.
The costs relating to the issuance of debt have been capitalized and are
being amortized as interest expense using a method that approximates the
effective interest method over the term of the related debt.
6. Contingencies
Management is continually assessing 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 of the Company 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 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.
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 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.
<PAGE>
<PAGE>F-14
A conviction could result in debarment from contracting with the federal
government for a specified term.
The Company is periodically subject to litigation, claims or assessments
and various contingent liabilities (including environmental matters)
incidental to its business. With respect to those investigative actions,
items of litigation, claims or assessments of which they are 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 financial position or results of operations of the
Company.
7. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." SFAS No. 128 establishes accounting standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. In February 1997,the
FASB issued SFAS No. 129, "Disclosures of Information about Capital
Structure." SFAS No. 129 requires disclosure of for all type of securities
issued and applies to all entities that have issued securities. In June
1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS
No. 131, "Disclosure about Segments of an Enterprise and related
Information." SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains and
losses) in a full set general-purpose financial statements. SFAS No. 131
establishes accounting standards for the way that public business enterprises
report information about operating segments and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. SFAS No. 128 and SFAS No. 129 are
required to be adopted for periods ending after December 15, 1997, and SFAS
No. 130 and SFAS No. 131 are required to be adopted by 1998. The Company is
currently evaluating the impact, if any of these new FASB statements.
<PAGE>
<PAGE>F-15
L-3 COMMUNICATIONS CORPORATION
Balance Sheet as of April 29, 1997
<PAGE>
<PAGE>F-16
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of L-3 Communications Corporation
We have audited the accompanying balance sheet of L-3 Communications
Corporation (a Delaware company) as of April 29, 1997. This financial
statement is the responsibility of L-3 Communications Corporation's
management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the balance sheet is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance
sheet. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly,
in all material respects, the financial position of L-3 Communications
Corporation as of April 29, 1997, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
July 16, 1997
<PAGE>
<PAGE>F-17
L-3 COMMUNICATIONS CORPORATION
BALANCE SHEET
April 29, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Cash $1.00
-----
Total Assets $1.00
=====
LIABILITIES AND SHAREHOLDER'S EQUITY
Shareholder's Equity
Common Stock, $.01 par value 100 shares authorized
and outstanding $1.00
-----
Total Shareholder's Equity $1.00
=====
</TABLE>
See notes to balance sheet.
<PAGE>
<PAGE>F-18
L-3 COMMUNICATIONS CORPORATION
NOTES TO BALANCE SHEET
1. Formation of L-3 Communications Corporation
On April 8, 1997, L-3 Communications Corporation (the "Company") was
incorporated under the Delaware General Corporation Law
as a wholly owned subsidiary of L-3 Communications Holdings Inc. for the
purpose of effectuating the transactions described below.
2. Acquisition
On January 31, 1997, Lockheed Martin Corporation ("Lockheed
Martin"), Lehman Brothers Holdings Inc. ("Lehman"), Frank C. Lanza
("Lanza") and Robert V. LaPenta ("LaPenta") entered into a Memorandum of
Understanding regarding the transfer of certain businesses of Lockheed
Martin to a newly formed corporation ("Newco") to be owned by Lockheed
Martin, Lehman, Lanza and LaPenta. The businesses included a Lockheed
Martin's Wideband Systems Division, Communications Systems Division and
Products Group, comprising eleven autonomous operations (collectively the
"Lockheed Martin Predecessor Business" or the "Businesses"). Also included
in the transaction is the acquisition of a semiconductor product line of
another business and certain leasehold improvements in New York City.
Closing of the transaction occurred on April 30, 1997. The total
consideration paid to Lockheed Martin was $525 million, comprised of $480
million of cash before an estimated $20 million reduction related to a
purchase price adjustment, and $45 million of common equity being retained
by Lockheed Martin. The Company is a wholly owned subsidiary of L-3
Communications Holdings, Inc. ("Holdings"), and Holdings is capitalized
with $125 million of common equity, with Lanza and LaPenta collectively
owning 15.0%, the Lehman Partnership owning 50.1% and Lockheed Martin
owning 34.9%. In connection with the Closing the Company has received
a $125 million capital contribution from Holdings and incurred debt of
$400 million.
3. Agreements
In connection with the acquisition, the Company entered into a
Transaction Agreement, senior credit facilities, and issued 10 3/8%
Senior Subordinated Notes Due 2007.
Pursuant to the Transaction Agreement, Holdings, the Company
and Lockheed Martin have entered into a transition services agreement
pursuant to which Lockheed Martin will provide to Holdings and its
subsidiaries (and Holdings will provide to Lockheed Martin) certain
corporate services of the types currently provided at costs consistent with
past practices until December 31, 1997 (or, in the case of Communication
Systems--Camden, for a period of up to 18 months after the Closing) and
the parties also entered into supply agreements which reflect existing
intercompany work transfer agreements or similar support arrangements upon
prices and other terms consistent with the present arrangements. Holdings,
the Company and Lockheed Martin have entered into certain subleases of
real property and cross-licenses of intellectual property.
<PAGE>
<PAGE>F-19
Pursuant to the Transaction Agreement the Company assumed certain
obligations relating to environmental liabilities and benefit plans.
The 10-3/8% Senior Subordinated Notes are due in May 1, 2007 with
interest payable semi-annually beginning November 1, 1997. The Notes are
redeemable under certain circumstances.
The Term Loans and Revolving Credit Facility have been provided by a
syndicate of banks and financial institution and bear interest at the
option of the Company at a rate related to the (i) Loan of Federal Funds
Rate, or the reference rate published by Bank of America NT&SA or
(ii) LIBOR.
<PAGE>
<PAGE>F-20
The Revolving Credit Facility terminates on March 31, 2003. The Term
Loans will be subject to the following Amortization schedule.
[CAPTION]
<TABLE>
Tranche A Term Loan Tranche B Term Loan Tranche C Term Loan
------------------- ------------------- -------------------
<S> <C> <C> <C>
Year 1 . . . . . . . . . . . . . . . . . $ 4,000,000 $ 500,000 $ 500,000
Year 2 . . . . . . . . . . . . . . . . . 5,000,000 500,000 500,000
Year 3 . . . . . . . . . . . . . . . . . 15,000,000 500,000 500,000
Year 4 . . . . . . . . . . . . . . . . . 21,000,000 500,000 500,000
Year 5 . . . . . . . . . . . . . . . . . 27,000,000 500,000 500,000
Year 6 . . . . . . . . . . . . . . . . . 28,000,000 500,000 500,000
Year 7 . . . . . . . . . . . . . . . . . -- 20,000,000 500,000
Year 8 . . . . . . . . . . . . . . . . . -- 22,000,000 500,000
Year 9 . . . . . . . . . . . . . . . . . -- -- 26,000,000
</TABLE>
<PAGE>
<PAGE>F-21
LOCKHEED MARTIN PREDECESSOR BUSINESSES
COMBINED FINANCIAL STATEMENTS
as of March 31, 1997
and for the three months ended March 31, 1997 and 1996 (Unaudited)
<PAGE>
<PAGE>F-22
Report of Independent Auditors
To the Board of Directors of
L-3 Communications Corporation
We have audited the accompanying combined balance sheet of the
Lockheed Martin Predecessor Businesses, as defined in Note 1 to the
financial statements, (the "Businesses") as of March 31, 1997 and the
related combined statements of operations and changes in invested equity
and cash flows for the three months then ended. These financial statements
are the responsibility of the Businesses' management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards required that we plan and perform our
audit in order to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Lockheed Martin Predecessor Businesses as of March 31, 1997 and their
combined results of operations and cash flows for the three months then
ended, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
July 11, 1997
<PAGE>
<PAGE>F-23
LOCKHEED MARTIN PREDECESSOR BUSINESSES
COMBINED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
March 31,
---------------------
1997
---------------------
ASSETS
<S> <C>
Current assets:
Contracts in process . . . . . . . . . . . $215,548
Other current assets . . . . . . . . . . . 4,142
--------
Total current assets . . . . . . . . . . 219,690
--------
Property, plant and equipment . . . . . . . . 120,423
Less, accumulated depreciation and
amortization . . . . . . . . . . . . . . . 29,069
--------
91,354
--------
Intangibles, primarily cost in excess
of net assets acquired, net of
amortization . . . . . . . . . . . . . . 280,145
Other assets . . . . . . . . . . . . . . . . 17,340
--------
$608,529
========
LIABILITIES AND INVESTED EQUITY
Current liabilities:
Accounts payable, trade . . . . . . . . . $ 33,956
Accrued employment costs . . . . . . . . 26,688
Billings and estimated earnings in excess
of cost . . . . . . . . . . . . . . . . . 12,408
Other current liabilities . . . . . . . . 25,246
--------
Total current liabilities . . . . . . . 98,298
--------
Other liabilities . . . . . . . . . . . . . 16,301
Commitments and contingencies (Note 8)
Invested equity . . . . . . . . . . . . . . . 493,930
--------
$608,529
========
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-24
LOCKHEED MARTIN PREDECESSOR BUSINESSES
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN INVESTED EQUITY
For the Three Months Ended March 31, 1997 and 1996 (unaudited)
(In thousands)
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
(Unaudited)
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $158,873 $ 41,153
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,937 39,477
-------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,936 1,676
Allocated interested expense . . . . . . . . . . . . . . . . . . . . . . . 8,441 2,028
-------- --------
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . (505) (352)
Income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . (247) 145
-------- --------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (258) (497)
Invested equity-beginning of period . . . . . . . . . . . . . . . . . . . . 473,609 194,663
Advances from (repayments to) Lockheed Martin . . . . . . . . . . . . . . . 20,579 (9,751)
-------- --------
Invested equity-end of period . . . . . . . . . . . . . . . . . . . . . . . $493,930 $184,415
======== ========
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-25
LOCKHEED MARTIN PREDECESSOR BUSINESSES
COMBINED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1997 and 1996 (unaudited)
(In thousands)
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
(Unaudited)
<S> <C> <C>
Operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ($258) ($497)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 7,184 3,062
Changes in operating assets and liabilities:
Contracts in process . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,475) 9,071
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (481) (326)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (159) 1,086
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (207) (4,498)
Accrued employment costs . . . . . . . . . . . . . . . . . . . . . . . . . (625) 2,180
Customer advances and amounts in excess of costs incurred . . . . . . . . . (1,891) 60
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . (1,867) (684)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (500) 710
------- ------
Net cash from (used in) operating activities . . . . . . . . . . . . . . . (16,279) 10,164
------- ------
Investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,300) (413)
------- ------
Financing activities:
Advances from (repayments to) Lockheed Martin . . . . . . . . . . . . . . . 20,579 (9,751)
------ ------
Net change in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
======= =======
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-26
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
March 31, 1997
(Dollars in thousands)
1. Background and Description of Businesses
On January 31, 1997, Lockheed Martin Corporation ("Lockheed
Martin"), Lehman Brothers Holdings Inc. ("Lehman"), Frank C. Lanza
("Lanza") and Robert V. LaPenta ("LaPenta") entered into a Memorandum of
Understanding regarding the transfer of certain businesses of Lockheed
Martin to a newly formed corporation ("Newco") owned by Lockheed Martin,
Lehman, Lanza and LaPenta. The businesses transferred include Lockheed
Martin's Wideband Systems Division, Communications Systems Division and
Products Group, comprising eleven autonomous operations (collectively the
"Lockheed Martin Predecessor Businesses" or the "Businesses"). Also
included in the transaction is the acquisition of a semiconductor product
line of another business and certain leasehold improvements in New York
City.
Effective April 1, 1996, Lockheed Martin acquired substantially all
the assets and liabilities of the defense businesses of Loral Corporation
("Loral"), including the Wideband Systems Division and the Products Group.
The acquisition of the Wideband Systems Division and Products Group
businesses (the "Acquired Businesses") has been accounted for as a
purchase by Lockheed Martin Communications Systems Division ("Division").
The acquisition has been reflected in these financial statements based on
the purchase price allocated to those acquired businesses by Lockheed
Martin. As such, the accompanying combined financial statements reflect
the results of operations of the Division and the Acquired Businesses from
the effective date of acquisition including the effects of an allocated
portion of cost in excess of net assets acquired resulting from the
acquisition. The assets and liabilities recorded in connection with the
purchase price allocation were $400,993 and $113,190, respectively.
Had the acquisition of Wideband Systems Division and the Products
Group occurred on January 1, 1996, the unaudited pro forma sales and net
income for the three months ended March 31, 1996 would have been $173,353
and $1,529, respectively. The pro forma results, which are based on
various assumptions, are not necessarily indicative of what would have
occurred had the acquisition been consummated on January 1, 1996.
The Businesses are suppliers of sophisticated secure communication
systems and specialized communication products including secure, high data
rate communication systems, commercial fixed wireless communication
products, microwave components, avionic displays and recorders and
instrument products. The Company's customers included the Department of
Defense, selected U.S. government intelligence agencies, major
aerospace/defense prime contractors and commercial customers. The
Businesses operate primarily in one industry segment, electronic
components and systems.
Substantially all the Businesses' products are sold to agencies of
the U.S. Government, primarily the Department of Defense, to foreign
government agencies or to prime contractors or subcontractors thereof. All
<PAGE>
<PAGE>F-27
domestic government contracts and subcontracts of the Businesses are
subject to audit and various cost controls, and include standard
provisions for termination for the convenience of the U.S. Government.
Multi-year 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
government.
The decline in the U.S. defense budget since the mid 1980s has
resulted in program delays, cancellations and scope reduction for defense
contracts in general. These events may or may not have an effect on the
Businesses' programs; however, in the event that U.S. Government
expenditures for products of the type manufactured by the Businesses 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 Businesses.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying combined financial statements reflect the
Businesses' assets, liabilities and operations included in Lockheed
Martin's historical financial statements that were transferred to Newco.
Intercompany accounts between Lockheed Martin and the Businesses have been
included in invested equity. Significant inter-business transactions and
balances have been eliminated. The assets and operations of the
semiconductor product line and certain other facilities, which are not
material to the combined financial statements, have been excluded from the
combined financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Businesses' 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 revenue and
expenses during the reporting period. The most significant of these
estimates and assumptions relate to contract estimates of sales and costs,
allocations from Lockheed Martin, recoverability of recorded amounts of
fixed assets and cost in excess of net assets acquired, litigation and
environmental obligations. Actual results could differ from these
estimates.
Sales and Earnings
Sales and profits on cost reimbursable contracts are recognized as
costs are incurred. Sales and estimated profits under long-term contracts
are recognized under the percentage of completion method of accounting
using the cost-to-cost method. Amounts representing contract change orders
or claims are included in sales only when they can be reliably estimated
and realization is probable. Sales under short-term production-type
contracts are recorded as units are shipped; profits applicable to such
shipments are recorded pro rata, based upon estimated total profit at
completion of the contract. Amounts representing contract change orders or
claims are included in sales only when they can be reliably estimated and
<PAGE>
<PAGE>F-28
realization is probable. Losses on contracts are recognized when
determined. Revisions in profit estimates are reflected in the period in
which the facts which require the revision become known.
Contracts In Process
Costs accumulated under long-term contracts include direct costs, as
well as manufacturing overhead, and for government contracts, general and
administrative costs, independent research and development costs and bid
and proposal costs. Contracts in process contain amounts relating to
contracts and programs for which the related operating cycles are longer
than one year. In accordance with industry practice, these amounts are
included in current assets.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
provided primarily using an accelerated method over the estimated useful
lives (5 to 20 years) of the related assets. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life
of the improvements.
Intangibles
Intangibles, primarily the excess of the cost of purchased
businesses over the fair value of the net assets acquired, is being
amortized using a straight-line method primarily over a 40-year period.
Other intangibles are amortized over their estimated useful lives which
range from 11-15 years. Amortization expense was $2,655 and $1,896
(unaudited) for the three months ended March 31, 1997 and 1996,
respectively. Accumulated amortization was $29,053 at March 31, 1997.
Intangibles include costs allocated to the Businesses relating to
the Request for Funding Authorization ("RFA"), consisting of over 20
restructuring projects to reduce operating costs, initiated by General
Electric ("GE") Aerospace in 1990 and to the REC Advance Agreement
("RAA"), a restructuring plan initiated after Lockheed Martin's
acquisition of GE Aerospace. The RAA was initiated to close two regional
electronic manufacturing centers. Restructure costs are reimbursable from
the U.S. Government if savings can be demonstrated to exceed costs. The
total cost of restructuring under the RFA and the RAA represented
approximately 15% of the estimated savings to the U. S. Government and,
therefore, a deferred asset has been recorded by Lockheed Martin. The
deferred asset is being allocated to all the former GE Aerospace sites,
including the Communications Systems Division, on a basis that includes
manufacturing labor, overhead, and direct material less non-hardware
subcontracts. As of March 31, 1997 and 1996, approximately $3,798 and
$6,755, (unaudited) respectively of unamortized RFA and RAA costs are
included on the Businesses' combined balance sheet in other current assets
and other assets.
The carrying values of intangible assets are reviewed if the facts
and circumstances indicate potential impairment of their carrying value.
If this review indicates that intangible assets are not recoverable, as
determined based on the undiscounted cash flows of the entity acquired
<PAGE>
<PAGE>F-29
over the remaining amortization period, the Division's carrying values
related to the intangible assets are reduced by the estimated shortfall of
cash flows.
Research and Development and Similar Costs
Research and development costs sponsored by the Businesses include
research and development and bid and proposal effort related to government
products and services. These costs are generally allocated among all
contracts and programs in progress under U. S. Government contractual
arrangements. Customer-sponsored research and development costs incurred
pursuant to contracts are accounted for as direct contract costs.
Financial Instruments
At March 31, 1997, the carrying value of the Businesses' financial
instruments, such as receivables, accounts payable and accrued
liabilities, approximate fair value, based on the short-term maturities of
these instruments.
New Accounting Pronouncements
Effective January 1, 1996, the Businesses adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 establishes the accounting standards for the impairment of
long-lived assets, certain intangible assets and cost in excess of net
assets acquired to be held and used for long-lived assets and certain
intangible assets to be disposed of. The impact of adopting SFAS 121 was
not material.
Effective January 1, 1994, the Businesses adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postretirement Benefits" ("SFAS 112"). SFAS 112 requires that the costs of
benefits provided to employees after employment but before retirement be
recognized on an accrual basis. The adoption of SFAS 112 did not have a
material impact on the combined results of operations of the Businesses.
Unaudited Financial Statements
The financial statements for the three months ended March 31, 1996
are unaudited but in the opinion of management include all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation.
3. Transactions with Lockheed Martin
The Businesses rely on Lockheed Martin for certain services,
including treasury, cash management, employee benefits, taxes, risk
management, internal audit, financial reporting, contract administration
and general corporate services. Although certain assets, liabilities and
expenses related to these services have been allocated to the Businesses,
the combined financial position, results of operations and cash flows
presented in the accompanying combined financial statements would not be
the same as would have occurred had the Businesses been independent
entities. The following describes the related party transactions.
<PAGE>
<PAGE>F-30
Sales of Products
The Businesses sell products to Lockheed Martin and its affiliates,
net sales of which were $21,171 and $6,425 (unaudited) for the three
months ended March 31, 1997 and 1996, respectively. Included in Contracts
in Process are receivables from Lockheed Martin and its affiliates of
$12,392 at March 31, 1997.
Allocation of Corporate Expenses
The amount of allocated corporate expenses reflected in these
combined financial statements has been estimated based primarily on an
allocation methodology prescribed by government regulations pertaining to
government contractors. Allocated costs to the Businesses were $5,208 and
$759 (unaudited) for the three months ended March 31, 1997 and 1996,
respectively.
Pensions
Certain of the Businesses participate in various Lockheed
Martin-sponsored pension plans covering certain employees. Eligibility for
participation in these plans varies, and benefits are generally based on
members' compensation and years of service. Lockheed Martin'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. Since the aforementioned pension
arrangements are part of certain Lockheed Martin defined benefit plans, no
separate actuarial data is available for the portion allocable to the
Businesses. Therefore, no liability or asset is reflected in the
accompanying combined financial statements. The Businesses have been
allocated pension costs based upon participant employee headcount. Pension
expense included in the accompanying financial statements was $1,848 and
$1,083 (unaudited) for the three months ended March 31, 1997 and 1996,
respectively.
Postretirement Health Care and Life Insurance Benefits
In addition to participating in Lockheed Martin-sponsored pension
plans, certain of the Businesses provide varying levels of health care and
life insurance benefits for retired employees and dependents. Participants
are eligible for these benefits when they retire from active service and
meet the pension plan eligibility requirements. 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.
Since the aforementioned postretirement benefits are part of certain
Lockheed Martin postretirement arrangements, no separate actuarial data is
available for the portion allocable to the Businesses. Accordingly, no
liability is reflected in the accompanying financial statements. The
Businesses have been allocated postretirement benefits cost based on
participant employee headcount. Postretirement benefit costs included in
the accompanying financial statements was $616 and $529 (unaudited) for
the three months ended March 31, 1997 and 1996, respectively.
<PAGE>
<PAGE>F-31
Employee Savings Plans
Under various employee savings plans sponsored by Lockheed Martin,
the Businesses match the contributions of participating employees up to a
designated level. The extent of the match, vesting terms and the form of
the matching contribution vary among the plans. Under these plans, the
matching contributions, in cash, common stock or both, were $1,241 and
$386 (unaudited) for the three months ended March 31, 1997 and 1996,
respectively.
Stock Options
Certain employees of the Businesses participate in Lockheed Martin's
stock option plans. All stock options granted have 10 year terms and vest
over a two year service period. Exercise prices of options awarded in both
years were equal to the market price of the stock on the date of grant.
Pro Forma information regarding net earnings (loss) as required by SFAS
No. 123 has been determined as if the Company had accounted for its
employee stock options under the fair value method. The fair value for
these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1995, respectively: risk-free interest rates
of 5.58% and 6.64%; divided yield of 1.70%; volatility factors related
to the expected market price of Lockheed Martin's common stock of .186
and .216; and weighted-average expected option life of five years. The
weighted average fair values of options granted during 1997 was $17.24.
For the purpose of pro forma disclosures, the options, estimated
fair values are amortized to expense over the options' vesting periods.
The Businesses' pro forma net loss for the three months ended March 31,
1997 was $386.
Interest Expense
Interest expense has been allocated to the Businesses by applying
Lockheed Martin's weighted average consolidated interest rate to the
portion of the beginning of the period invested equity account deemed to
be financed by consolidated debt, which has been determined based on
Lockheed Martin's debt to equity ratio on such date. Management of the
Businesses believes that this allocation methodology is reasonable.
Interest expense was calculated using the following balances and interest
rates:
<PAGE>
<PAGE>F-32
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------------
1997 1996
------------ --------------
(unaudited)
<S> <C> <C>
Invested Equity . . . . . . . . . . $ 473,609 $ 194,663
Interest Rate . . . . . . . . . . . 7.1% 7.4%
</TABLE>
Income Taxes
The Businesses are included in the consolidated Federal income tax
return and certain combined and separate state and local income tax
returns of Lockheed Martin. However, for purposes of these financial
statements, the provision for income taxes has been allocated to the
Businesses based upon combined income before income taxes. Income taxes,
current and deferred, are considered to have been paid or charged to
Lockheed Martin and are recorded through the invested equity account with
Lockheed Martin. The principal components of the deferred taxes are
contract accounting methods, property, plant and equipment, goodwill
amortization and timing of accruals and reserves.
Statements of Cash Flows
The Businesses participate in Lockheed Martin's cash management
system, under which all cash is received and payments are made by Lockheed
Martin. All transactions between the Businesses and Lockheed Martin have
been accounted for as settled in cash at the time such transactions were
recorded by the Businesses.
4. Contracts in Process
Billings and accumulated costs and profits on contracts, principally
with the U.S. Government, comprise the following:
<PAGE>
<PAGE>F-33
<TABLE>
<CAPTION>
March 31, 1997
---------------
<S> <C>
Billed contract receivables . . . . . . . . . . 35,664
Other billed receivables, principally
commercial and affiliates . . . . . . . . . . 42,693
Unbilled contract receivables . . . . . . . . . 93,494
Inventoried costs . . . . . . . . . . . . . . . 70,904
--------
242,755
Less, unliquidated progress payments . . . . . 27,207
--------
215,548
========
</TABLE>
The U.S. Government has title to, or a security interest in,
inventories to which progress payments are applied. Unbilled contract
receivables represent accumulated costs and profits earned but not yet
billed to customers at year-end. The Businesses believe that substantially
all such amounts will be billed and collected within one year.
The following data has been used in the determination of cost of
sales:
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------
1997 1996
----------- -------------
(unaudited)
<S> <C> <C>
General and administrative costs
included in inventoried costs . . . . . $ 14,536 $ 857
General and administrative costs
charged to inventory . . . . . . . . . . 8,680 1,529
Independent research and development
and bid and proposal costs charged
to inventory . . . . . . . . . . . . . 12,024 932
</TABLE>
<PAGE>
<PAGE>F-34
5. Property, Plant and Equipment
<TABLE>
<CAPTION>
March 31, 1997
----------------
<S> <C>
Land . . . . . . . . . . . . . . . . . . . . . . $ 9,200
Building and Improvements . . . . . . . . . . . . 27,000
Machinery, equipment, furniture and fixtures . . 75,711
Leasehold improvements . . . . . . . . . . . . . 8,512
---------
$ 120,423
=========
</TABLE>
Depreciation and amortization expense was $4,529 and $1,166
(unaudited) for the three months ended March 31, 1997 and 1996,
respectively. Included within property, plant and equipment is
approximately $15,000 of assets held for sale which approximates fair
value.
6. Income Taxes
The (benefit) provision for income taxes was calculated by applying
statutory tax rates to the reported loss before income taxes after
considering items that do not enter into the determination of taxable
income and tax credits reflected in the consolidated provision of Lockheed
Martin, which are related to the Businesses. For the three months ended
March 31, 1997 and 1996, it is estimated that the (benefit) provision for
deferred taxes represent $1,315 and $7 (unaudited), respectively.
Substantially all the income of the Businesses are from domestic
operations.
The effective income tax rate differs from the statutory Federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
----------------- ----------------
(unaudited)
<S> <C> <C>
Statutory Federal income tax rate . . . . . . . . . . . . . . . . . . . . . (35.0)% (34.0)%
Amortization of cost in excess of net assets acquired . . . . . . . . . . . (8.1) 65.3
Research and development and other tax credits . . . . . . . . . . . . . . (11.3)
State and local income taxes, net of Federal income tax benefit
and state and local income tax credits . . . . . . . . . . . . . . 4.8 6.3
Foreign sales corporation tax benefits . . . . . . . . . . . . . . . . . . (8.4)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 3.6
----- -----
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . (48.9%) 41.2%
===== =====
</TABLE>
<PAGE>
<PAGE>F-35
7. Sales to Principal Customers
The Businesses operate primarily in one industry segment, electronic
components and systems. Sales to principal customers are as follows:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
-------------- --------------
(unaudited)
<S> <C> <C>
U.S. Government Agencies . . . . . . $ 128,505 $41,153
Foreign (principally foreign
governments) . . . . . . . . . . . . 13,612
Other (principally U.S. Commercial) . 16,756
--------- -------
$ 158,873 $41,153
========= =======
</TABLE>
8. Commitments and Contingencies
The Businesses lease certain facilities and equipment under
agreements expiring at various dates through 2011. At March 31, 1997,
future minimum payments for noncancellable operating leases with initial
or remaining terms in excess of one year are $10,600 (nine months) for
1997 and 1998, $10,400 for each of the years 1999 and 2000, $10,200 and
2001, and $6,800 in total thereafter.
Leases covering major items of real estate and equipment contain
renewal and or purchase options which may be exercised by the Businesses.
Rent expense, net of sublease income from other Lockheed Martin entities,
was $2,553 and $1,150 (unaudited) for the three months ended March 31,
1997 and 1996, respectively.
Management is continually assessing the Businesses' obligations with
respect to applicable environmental protection laws. While it is difficult
to determine the timing and ultimate cost to be incurred by the Businesses
in order to comply with these laws, based upon available internal and
external assessments, with respect to those environmental loss
contingencies of which management of the Businesses is aware, the
Businesses 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 the Businesses'
results of operations. The Businesses accrue for these contingencies when
it is probable that a liability has been incurred and the amount of the
loss can be reasonably estimated.
The Businesses 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, 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 government procurement regulations, an
<PAGE>
<PAGE>F-36
indictment of the Businesses by a federal grand jury could result in the
Businesses 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.
The Businesses are periodically subject to litigation, claims or
assessments and various contingent liabilities (including environmental
matters) incidental to their business. With respect to those investigative
actions, items of litigation, claims or assessments of which they are
aware, management of the Businesses 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 combined financial position or
results of operations of the Businesses.
<PAGE>
LOCKHEED MARTIN PREDECESSOR BUSINESS
<PAGE>F-37
COMBINED FINANCIAL STATEMENTS
As of December 31, 1996 and 1995 and for the three
years in the period ended December 31, 1996
<PAGE>
<PAGE>F-38
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Lockheed Martin Corporation:
We have audited the accompanying combined balance sheet of the
Lockheed Martin Predecessor Businesses, as defined in Note 1 to the
financial statements, (the "Businesses") as of December 31, 1996 and the
related combined statements of operations and changes in invested equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Businesses' management. Our responsibility is to
express an opinion on these financial statements based on our audit. We
did not audit the financial statements of the Lockheed Martin
Communications Systems Division, which statements reflect total assets and
sales constituting 35 percent and 30 percent of the related combined
totals. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the
amounts included for the Communications Systems Division, is based solely
on the report of the other auditors.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit and the report of other auditors provide a reasonable basis for
our opinion.
In our opinion, based on our audit and the report of the other
auditors, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Lockheed
Martin Predecessor Businesses as of December 31, 1996 and their combined
results of operations and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
March 20, 1997
<PAGE>
<PAGE>F-39
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Lockheed Martin Corporation:
We have audited the combined balance sheets of Lockheed Martin
Communications Systems Division, as defined in Note 1 to the financial
statements, as of December 31, 1996 and 1995, and the related combined
statements of operations and changes in invested equity, and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Division's and Lockheed
Martin Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position
of Lockheed Martin Communications Systems Division at December 31, 1996
(not presented separately herein) and 1995, and the combined results of
its operations and its cash flows for the year ended December 31, 1996
(not presented separately herein), and the results of its operations and
its cash flows for each of the two years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Washington, D.C.
March 7, 1997
<PAGE>
<PAGE>F-40
LOCKHEED MARTIN PREDECESSOR BUSINESSES
COMBINED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Years Ended
December 31,
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Contracts in process . . . . . . . . . . . . . . . . . . . . . . $ 198,073 $ 42,457
Other current assets . . . . . . . . . . . . . . . . . . . . . . 3,661 3,100
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 201,734 45,557
--------- ---------
Property, plant and equipment . . . . . . . . . . . . . . . . . . . 116,566 31,657
Less, accumulated depreciation and amortization . . . . . . . . . 24,983 15,018
--------- ---------
91,583 16,639
--------- ---------
Intangibles, primarily cost in excess of net assets acquired, net
of amortization . . . . . . . . . . . . . . . . . . . . . . . . . 282,674 157,560
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,307 8,753
--------- ---------
$ 593,298 $ 228,509
========= =========
LIABILITIES AND INVESTED EQUITY
Current liabilities:
Accounts payable, trade . . . . . . . . . . . . . . . . . . . . . $ 34,163 $ 9,583
Accrued employment costs . . . . . . . . . . . . . . . . . . . . . 27,313 6,534
Customer advances and amounts in excess of costs incurred . . . . 14,299 1,363
Other current liabilities . . . . . . . . . . . . . . . . . . . . 27,113 6,983
--------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . 102,888 24,463
--------- --------
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,801 9,383
Commitments and contingencies (Note 8)
Invested equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473,609 194,663
--------- --------
$ 593,298 $ 228,509
========= =========
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-41
LOCKHEED MARTIN PREDECESSOR BUSINESSES
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN INVESTED EQUITY
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1996 1995 1994
------------- ----------- ---------
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 543,081 $ 166,781 $ 218,845
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . 499,390 162,132 210,466
--------- --------- ---------
Operating income . . . . . . . . . . . . . . . . . . . . . . 43,691 4,649 8,379
Allocated interest expense . . . . . . . . . . . . . . . . . 24,197 4,475 5,450
--------- --------- ---------
Earnings before income taxes . . . . . . . . . . . . . . . . 19,494 174 2,929
Income tax expense . . . . . . . . . . . . . . . . . . . . . 7,798 1,186 2,293
--------- --------- ---------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . 11,696 (1,012) 636
Invested equity--beginning of year . . . . . . . . . . . . . 194,663 199,506 216,943
Advances from (repayments to) Lockheed Martin . . . . . . . . 267,250 (3,831) (18,073)
--------- --------- ---------
Invested equity -- end of year . . . . . . . . . . . . . . . $ 473,609 $ 194,663 $ 199,506
========= ========= ==========
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-42
LOCKHEED MARTIN PREDECESSOR BUSINESSES
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1996 1995 1994
-------------- ----------- -------------
<S> <C> <C> <C>
Operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . $ 11,696 $(1,012) $ 636
Depreciation and amortization . . . . . . . . . . . . . . . . 25,039 11,578 11,467
Loss (gain) on disposition of property, plant and equipment . 265 26 (1,078)
Changes in operating assets and liabilities
Contracts in process . . . . . . . . . . . . . . . 26,103 (3,267) 14,002
Other current assets . . . . . . . . . . . . . . . 489 788 1,502
Other assets . . . . . . . . . . . . . . . . . . . (5,246) 1,245 2,044
Accounts payable . . . . . . . . . . . . . . . . . 3,198 (648) (3,099)
Accrued employment costs . . . . . . . . . . . . . . 2,282 (611) (528)
Customer advances and amounts in excess of costs
incurred . . . . . . . . . . . . . . . . . . . . . (11,586) (2,041) 917
Other current liabilities . . . . . . . . . . . . . 4,086 4,004 (3,304)
Other liabilities . . . . . . . . . . . . . . . . . (25,327) (699) (751)
--------- -------- ------
Net cash from operating activities . . . . . . . . . . . . . 30,999 9,363 21,808
--------- -------- ------
Investing activities:
Acquisition of business . . . . . . . . . . . . . . . . . . . (287,803) -- --
Capital expenditures . . . . . . . . . . . . . . . . . . . . (13,528) (5,532) (3,735)
Disposition of property, plant and equipment . . . . . . . . 3,082 -- --
--------- -------- ------
Net cash used in investing activities . . . . . . . . . . . . (298,249) (5,532) (3,735)
--------- -------- ------
Financing activities:
Advances from (repayments to) Lockheed Martin . . . . . . . . 267,250 (3,831) (18,073)
--------- -------- ------
Net change in cash . . . . . . . . . . . . . . . . . . . . . -- -- --
========= ======== ======
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-43
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1996
(Dollars in thousands)
1. Background and Description of Businesses
On January 31, 1997, Lockheed Martin Corporation ("Lockheed
Martin"), Lehman Brothers Holdings Inc. ("Lehman"), Frank C. Lanza
("Lanza") and Robert V. LaPenta ("LaPenta") entered into a Memorandum of
Understanding regarding the transfer of certain businesses of Lockheed
Martin to a newly formed corporation ("Newco") to be owned by Lockheed
Martin, Lehman, Lanza and LaPenta. The businesses proposed to be
transferred include Lockheed Martin's Wideband Systems Division,
Communications Systems Division and Products Group, comprising eleven
autonomous operations (collectively the "Lockheed Martin Predecessor
Businesses" or the "Businesses"). Also included in the transaction is the
acquisition of a semiconductor product line of another business and
certain leasehold improvements in New York City.
Effective April 1, 1996, Lockheed Martin acquired substantially all
the assets and liabilities of the defense businesses of Loral Corporation
(Loral), including the Wideband Systems Division and the Products Group.
The acquisition of the Wideband Systems Division and Products Group
businesses (the "Acquired Businesses") has been accounted for as a
purchase by Lockheed Martin Communications Systems Division ("Division").
The acquisition has been reflected in these financial statements based on
the purchase price allocated to those acquired businesses by Lockheed
Martin. As such, the accompanying combined financial statements reflect
the results of operations of the Division and the Acquired Businesses from
the effective date of acquisition including the effects of an allocated
portion of cost in excess of net assets acquired resulting from the
acquisition. The assets and liabilities recorded in connection with the
purchase price allocation were $400,993 and $113,190, respectively.
Had the acquisition of Wideband Systems Division and the Products
Group occurred on January 1, 1995, the unaudited pro forma sales and net
income for the years ending December 31, 1996 and 1995 would have been
$675,281 and $12,638, and $691,136 and $4,790, respectively. The pro forma
results, which are based on various assumptions, are not necessarily
indicative of what would have occurred had the acquisition been
consummated on January 1, 1995.
The Businesses are suppliers of sophisticated secure communication
systems and specialized communication products including secure, high data
rate communication systems, commercial fixed wireless communication
products, microwave components, avionic displays and recorders and
instrument products. The Company's customers included the Department of
Defense, selected U.S. government intelligence agencies, major
aerospace/defense prime contractors and commercial customers. The
Businesses operate primarily in one industry segment, electronic
components and systems.
Substantially all the Businesses' products are sold to agencies of
the U.S. Government, primarily the Department of Defense, to foreign
<PAGE>
<PAGE>F-44
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
government agencies or to prime contractors or subcontractors thereof. All
domestic government contracts and subcontracts of the Businesses are
subject to audit and various cost controls, and include standard
provisions for termination for the convenience of the U.S. Government.
Multi-year 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
government.
The decline in the U.S. defense budget since the mid 1980s has
resulted in program delays, cancellations and scope reduction for defense
contracts in general. These events may or may not have an effect on the
Businesses' programs; however, in the event that U.S. Government
expenditures for products of the type manufactured by the Businesses 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 Businesses.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying combined financial statements reflect the
Businesses' assets, liabilities and operations included in Lockheed
Martin's historical financial statements that will be transferred to
Newco. Intercompany accounts between Lockheed Martin and the Businesses
have been included in invested equity. Significant inter-business
transactions and balances have been eliminated. The assets and operations
of the semiconductor product line and certain other facilities, which are
not material to the combined financial statements, have been excluded from
the combined financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Businesses' 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 revenue and
expenses during the reporting period. The most significant of these
estimates and assumptions relate to contract estimates of sales and costs,
allocations from Lockheed Martin, recoverability of recorded amounts of
fixed assets and cost in excess of net assets acquired, litigation and
environmental obligations. Actual results could differ from these
estimates.
Sales and Earnings
Sales and profits on cost reimbursable contracts are recognized as
costs are incurred. Sales and estimated profits under long-term contracts
are recognized under the percentage of completion method of accounting
using the cost-to-cost method. Amounts representing contract change orders
or claims are included in sales only when they can be reliably estimated
and realization is probable. Sales under short-term production-type
contracts are recorded as units are shipped; profits applicable to such
shipments are recorded pro rata, based upon estimated total profit at
completion of the contract. Amounts representing contract change orders or
<PAGE>
<PAGE>F-45
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
claims are included in sales only when they can be reliably estimated and
realization is probable. Losses on contracts are recognized when
determined. Revisions in profit estimates are reflected in the period in
which the facts which require the revision become known.
Contracts In Process
Costs accumulated under long-term contracts include direct costs, as
well as manufacturing overhead, and for government contracts, general and
administrative costs, independent research and development costs and bid
and proposal costs. Contracts in process contain amounts relating to
contracts and programs for which the related operating cycles are longer
that one year. In accordance with industry practice, these amounts are
included in current assets.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
provided primarily using an accelerated method over the estimated useful
lives (5 to 20 years) of the related assets. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life
of the improvements.
Intangibles
Intangibles, primarily the excess of the cost of purchased
businesses over the fair value of the net assets acquired, is being
amortized using a straight-line method primarily over a 40-year period.
Other intangibles are amortized over their estimated useful lives which
range from 11-15 years. Amortization expense was $10,115, $6,086 and
$6,086 for 1996, 1995 and 1994, respectively. Accumulated amortization was
$26,524 and $16,738 at December 31, 1996 and 1995, respectively.
Intangibles include costs allocated to the Businesses relating to
the Request for Funding Authorization ("RFA"), consisting of over 20
restructuring projects to reduce operating costs, initiated by General
Electric ("GE") Aerospace in 1990 and to the REC Advance Agreement
("RAA"), a restructuring plan initiated after Lockheed Martin's
acquisition of GE Aerospace. The RAA was initiated to close two regional
electronic manufacturing centers. Restructure costs are reimbursable from
the U.S. Government if savings can be demonstrated to exceed costs. The
total cost of restructuring under the RFA and the RAA represented
approximately 15% of the estimated savings to the U.S. Government and,
therefore, a deferred asset has been recorded by Lockheed Martin. The
deferred asset is being allocated to all the former GE Aerospace sites,
including the Communications Systems Division, on a basis that includes
manufacturing labor, overhead, and direct material less non-hardware
subcontracts. As of December 31, 1996 and 1995, approximately $4,400 and
$7,500, respectively of unamortized RFA and RAA costs are incurred on the
Businesses' combined balance sheet in other current assets and other
assets.
<PAGE>
<PAGE>F-46
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
The carrying values of intangible assets are reviewed if the facts
and circumstances indicate potential impairment of their carrying value.
If this review indicates that intangible assets are not recoverable, as
determined based on the undiscounted cash flows of the entity acquired
over the remaining amortization period, the Division's carrying values
related to the intangible assets are reduced by the estimated shortfall of
cash flows.
Research and Development and Similar Costs
Research and development costs sponsored by the Businesses include
research and development and bid and proposal effort related to government
products and services. These costs generally are allocated among all
contracts and programs in progress under U.S. Government contractual
arrangements. Customer-sponsored research and development costs incurred
pursuant to contracts are accounted for as direct contract costs.
Financial Instruments
At December 31, 1996, the carrying value of the Businesses'
financial instruments, such as receivables, accounts payable and accrued
liabilities, approximate fair value, based on the short-term maturities of
these instruments.
New Accounting Pronouncements
Effective January 1, 1996, the Businesses adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 establishes the accounting standards for the impairment of
long-lived assets, certain intangible assets and cost in excess of net
assets acquired to be held and used for long-lived assets and certain
intangible assets to be disposed of. The impact of adopting SFAS 121 was
not material.
Effective January 1, 1994, the Businesses adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postretirement Benefits" ("SFAS 112"). SFAS 112 requires that the costs of
benefits provided to employees after employment but before retirement be
recognized on an accrual basis. The adoption of SFAS 112 did not have a
material impact on the combined results of operations of the Businesses.
3. Transactions with Lockheed Martin
The Businesses rely on Lockheed Martin for certain services,
including treasury, cash management, employee benefits, taxes, risk
management, internal audit, financial reporting, contract administration
and general corporate services. Although certain assets, liabilities and
expenses related to these services have been allocated to the Businesses,
the combined financial position, results of operations and cash flows
presented in the accompanying combined financial statements would not be
the same as would have occurred had the Businesses been independent
entities. The following describes the related party transactions.
<PAGE>
<PAGE>F-47
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
Sales of Products
The Businesses sell products to Lockheed Martin and its affiliates,
net sales for which were $70,658, $25,874, and $9,983 in 1996, 1995 and
1994, respectively. Included in Contracts in Process are receivables from
Lockheed Martin and its affiliates of $10,924 and $30 at December 31, 1996
and 1995, respectively.
Allocation of Corporate Expenses
The amount of allocated corporate expenses reflected in these
combined financial statements has been estimated based primarily on an
allocation methodology prescribed by government regulations pertaining to
government contractors. Allocated costs to the Businesses were $10,057,
$2,964 and $4,141 in 1996, 1995 and 1994, respectively.
Pensions
Certain of the Businesses participate in various Lockheed
Martin-sponsored pension plans covering certain employees. Eligibility for
participation in these plans varies, and benefits are generally based on
members' compensation and years of service. Lockheed Martin'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. Since the aforementioned pension
arrangements are part of certain Lockheed Martin defined benefit plans, no
separate actuarial data is available for the portion allocable to the
Businesses. Therefore, no liability or asset is reflected in the
accompanying combined financial statements. The Businesses have been
allocated pension costs based upon participant employee headcount. Net
pension expense included in the accompanying financial statements was
$7,027, $4,134 and $3,675 in 1996, 1995 and 1994, respectively.
Postretirement Health Care and Life Insurance Benefits
In addition to participating in Lockheed Martin-sponsored pension
plans, certain of the Businesses provide varying levels of health care and
life insurance benefits for retired employees and dependents. Participants
are eligible for these benefits when they retire from active service and
meet the pension plan eligibility requirements. 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. Since the aforementioned postretirement benefits are part of
certain Lockheed Martin postretirement arrangements, no separate actuarial
data is available for the portion allocable to the Businesses.
Accordingly, no liability is reflected in the accompanying financial
statements. The Businesses have been allocated postretirement benefits
cost based on participant employee headcount. Postretirement benefit costs
included in the accompanying financial statements were $2,787, $2,124 and
$1,694 in 1996, 1995 and 1994, respectively.
<PAGE>
<PAGE>F-48
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
Employee Savings Plan
Under various employee savings plans sponsored by Lockheed Martin,
the Businesses match the contributions of participating employees up to a
designated level. The extent of the match, vesting terms and the form of
the matching contribution vary among the plans. Under these plans, the
matching contributions, in cash, common stock or both, for 1996, 1995 and
1994 were $3,940, $1,478 and $1,842, respectively.
Stock Options
During 1996 and 1995, certain employees of the Businesses participated
in Lockheed Martin's stock option plans. All stock options granted in
1996 and 1995 have 10 year terms and vest over a two year service
period. Exercise prices of options awarded in both years were equal
to the market price of the stock on the date of grant. Pro forma
information regarding net earnings (loss) as required
by SFAS No. 123 has been determined as if the Company had accounted for its
employee stock options under the fair value method. The fair value for
these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for
1996 and 1995, respectively: risk-free interest rates of 5.58% and 6.64%;
dividend yield of 1.70%; volatility factors related to the expected market
price of the Lockheed Martin's common stock of .186 and .216; and
weighted-average expected option life of five years. The weighted average
fair values of options granted during 1996 and 1995 were $17.24 and $16.09,
respectively.
For the purposes of pro forma disclosures, the options' estimated
fair values are amortized to expense over the options' vesting periods.
The Businesses' pro forma net earnings (loss) for 1996 and 1995 were
$11,531 and $(1,040), respectively.
Interest Expense
Interest expense has been allocated to the Businesses by applying
Lockheed Martin's weighted average consolidated interest rate to the
portion of the beginning of the period invested equity account deemed to
be financed by consolidated debt, which has been determined based on
Lockheed Martin's debt to equity ratio on such date, except that the
acquisition of the defense business of Loral Corporation ("Loral") has
been assumed to be fully financed by debt.
Interest expense was calculated using the following balances and
interest rates:
<PAGE>
<PAGE>F-49
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
--------- ----------- -----------
<S> <C> <C> <C>
Invested Equity:
Communications Systems Division . . . . . . . . . . $ 194,663 $ 199,506 $ 216,943
Wideband Systems Division and Products Group . . . . $ 287,803 -- --
Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . 7.20% 7.40% 7.23%
</TABLE>
Income Taxes
The Businesses are included in the consolidated Federal income tax
return and certain combined and separate state and local income tax
returns of Lockheed Martin. However, for purposes of these financial
statements, the provision for income taxes has been allocated to the
Businesses based upon reported combined income before income taxes. Income
taxes, current and deferred, are considered to have been paid or charged
to Lockheed Martin and are recorded through the invested equity account
with Lockheed Martin. The principal components of the deferred taxes are
contract accounting methods, property, plant and equipment, goodwill
amortization and timing of actuals.
Statements of Cash Flows
The Businesses participate in Lockheed Martin's cash management
system, under which all cash is received and payments are made by Lockheed
Martin. All transactions between the Businesses and Lockheed Martin have
been accounted for as settled in cash at the time such transactions were
recorded by the Businesses.
4. Contracts in Process
Billings and accumulated costs and profits on contracts, principally
with the U.S. Government, comprise the following:
<PAGE>
<PAGE>F-50
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Billed contract receivables . . . . . . . . . . . . . . . . . . . . . . . . $ 40,299 $10,237
Other billed receivables, principally commercial . . . . . . . . . . . . . 41,154 --
Unbilled contract receivables . . . . . . . . . . . . . . . . . . . . . . . 91,053 23,643
Inventoried costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,380 10,830
-------- ------
233,886 44,710
Less, unliquidated progress payments . . . . . . . . . . . . . . . . . . . (35,813) (2,253)
-------- ------
$ 198,073 $42,457
========= =======
</TABLE>
The U.S. Government has title to, or a security interest in,
inventories to which progress payments are applied. Unbilled contract
receivables represent accumulated costs and profits earned but not yet
billed to customers at year-end. The Businesses believe that substantially
all such amounts will be billed and collected within one year.
The following data has been used in the determination of cost of
sales:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
General and administrative costs included in
inventoried costs . . . . . . . . . . . . . . . . . . . . $ 14,700 $ 1,156 $ 493
General and administrative costs charged to inventory . . . $ 25,400 $ 3,967 $ 3,640
Independent research and development and bid and
proposal costs incurred . . . . . . . . . . . . . . . . . $ 36,500 $ 9,800 $10,640
</TABLE>
<PAGE>
<PAGE>F-51
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
5. Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
--------- ----------
<S> <C> <C>
Land . . . . . . . . . . . . . . $ 9,200 --
Buildings and Improvements . . . 27,000 --
Machinery, equipment, furniture
and fixtures . . . . . . . . . 73,137 $29,216
Leasehold improvements . . . . . 7,229 2,441
-------- -------
$ 116,566 $31,657
========= =======
</TABLE>
Depreciation and amortization expense in 1996, 1995 and 1994 was
$14,924, $5,492 and $5,381, respectively.
6. Income Taxes
The provision for income taxes was calculated by applying statutory
tax rates to the reported pretax income after considering items that do
not enter into the determination of taxable income and tax credits
reflected in the consolidated provision of Lockheed Martin, which are
related to the Businesses. For the years ended December 31, 1996, 1995 and
1994, it is estimated that the provision for deferred taxes represent
($2,143), $3,994 and $1,252, respectively. Substantially all the income of
the Businesses are from domestic operations.
<PAGE>
<PAGE>F-52
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
The effective income tax rate differs from the statutory Federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
Statutory Federal income tax rate . . . . . . . . . . . . . . 35% 34% 34%
Amortization of cost in excess of net assets acquired . . . . 2 529 31
Research and development and other tax credits . . . . . . . (2) -- --
State and local income taxes, net of Federal income
tax benefit and state and local income tax
credits . . . . . . . . . . . . . . . . . . . . . . 6 101 12
Foreign sales corporation tax benefit . . . . . . . . . . . . (1) -- --
Other, net -- 17 1
-- --- --
Effective income tax rate . . . . . . . . . . . . . . . . . . 40% 681% 78%
== === ==
</TABLE>
<PAGE>
<PAGE>F-53
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS - (continued)
(Dollars in thousands)
7. Sales to Principal Customers
The Business operate primarily in one industry segment, communication
systems and products. Sales to principal customers are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
U.S. Government Agencies . . . . . . . . . . . . . . . . . . $425,033 $161,617 $216,084
Foreign (principally foreign governments) . . . . . . . . . . 33,475 4,945 1,623
Other (principally commercial) . . . . . . . . . . . . . . . 84,573 219 1,138
------- ------- -------
$543,081 $166,781 $218,845
======== ======== ========
</TABLE>
8. Commitments and Contingencies
The Businesses lease certain facilities and equipment under agreements
expiring at various dates through 2011. At December 31, 1996, future
minimum payments for noncancellable operating leases with initial or
remaining terms in excess of one year are $11,400 for each of the years
1997 through 2001, and $12,300 in total thereafter.
Leases covering major items of real estate and equipment contain
renewal and/or purchase options which may be exercised by the Businesses.
Rent expense, net of sublease income from other Lockheed Martin entities,
was $8,495, $4,772 and $5,597 in 1996, 1995 and 1994, respectively.
Management is continually assessing the Businesses' obligations
with respect to applicable environmental protection laws. While it is
difficult to determine the timing and ultimate cost to be incurred by
the Businesses in order to comply with these laws, based upon available
internal and external assessments, with respect to those environmental
loss contingencies of which management of the Businesses is aware, the
Businesses 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 the Businesses'
results of operations. The Businesses accrue for these contingencies when
it is probable that a liability has been incurred and the amount of the
loss can be reasonably estimated.
<PAGE>
<PAGE>F-54
LOCKHEED MARTIN PREDECESSOR BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(continued)
(Dollars in thousands)
The Businesses 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, 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 government procurement
regulations, an indictment of the Businesses by a federal grand jury
could result in the Businesses 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.
The Businesses are periodically subject to litigation, claims or
assessments and various contingent liabilities (including environmental
matters) incidental to its business. With respect to those investigative
actions, items of litigation, claims or assessments of which they are
aware, management of the Businesses 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 financial position or results
of operations of the Businesses.
<PAGE>
<PAGE>F-55
REPORT OF INDEPENDENT AUDITORS
Board of Directors of
Lockheed Martin Corporation:
We have audited the accompanying combined statements of operations and
cash flows for the Loral Acquired Businesses as defined in Note 1, (the
"Businesses") for the three months ended March 31, 1996 and the years ended
December 31, 1995 and 1994. These financial statements are the responsibility
of the Businesses' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined results of the operations and
cash flows of the Businesses for the three months ended March 31, 1996 and
the years ended December 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
March 20, 1997
<PAGE>
<PAGE>F-56
LORAL ACQUIRED BUSINESSES
COMBINED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Three Years Ended December 31,
Months Ended -----------------------------------------
March 31, 1996 1995 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $132,200 $448,165 $283,129
Cost and expenses . . . . . . . . . . . . . . . . . . . . . . . 124,426 424,899 273,181
--------- -------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . . 7,774 23,266 9,948
Allocated interest expense . . . . . . . . . . . . . . . . . . 4,365 20,799 8,375
--------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . . . . 3,409 2,467 1,573
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 1,292 854 560
--------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,117 $ 1,613 $ 1,013
========= ======== ========
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-57
LORAL ACQUIRED BUSINESSES
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Years Ended December 31,
Months Ended -----------------------------------------
March 31, 1996 1995 1994
------------------- ------------------- --------------------
<S> <C> <C> <C>
Operating Activities:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,117 $ 1,613 $ 1,013
Depreciation and amortization . . . . . . . . . . . . . . . . . 5,011 20,625 15,952
Changes in operating assets and liabilities
Contracts in process . . . . . . . . . . . . . . . . . . . (11,382) 7,327 4,499
Other current assets . . . . . . . . . . . . . . . . . . . (3,436) 890 (156)
Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,437 6,736 (3,633)
Accounts payable and accrued liabilities . . . . . . . . . 4,525 (4,533) (3,944)
Other current liabilities . . . . . . . . . . . . . . . . . 3,348 4,428 (3,150)
Other liabilities . . . . . . . . . . . . . . . . . . . . . (452) 117 (415)
--------- --------- -------
Net cash from operating activities . . . . . . . . . . . . . . 2,168 37,203 10,166
--------- --------- -------
Investing activities:
Acquisition of business . . . . . . . . . . . . . . . . . . . . -- (214,927) --
Capital expenditures . . . . . . . . . . . . . . . . . . . . . (3,962) (12,683) (7,390)
Disposition of property, plant and equipment . . . . . . . . . 187 4,342 144
--------- --------- -------
(3,775) (223,268) (7,246)
--------- --------- -------
Financing activities:
Advances from (repayments to) Loral . . . . . . . . . . . . . . 1,607 186,065 (2,920)
--------- ---------- -------
Net change in cash . . . . . . . . . . . . . . . . . . . . . . -- -- --
========= ========= =======
</TABLE>
See notes to combined financial statements.
<PAGE>
<PAGE>F-58
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Background and Description of Business
On January 31, 1997, Lockheed Martin Corporation ("Lockheed Martin"),
Lehman Brothers Holdings Inc. ("Lehman"), Frank C. Lanza ("Lanza") and Robert
V. LaPenta ("LaPenta") entered into a Memorandum of Understanding ("MOU")
regarding the transfer of certain businesses of Lockheed Martin to a newly
formed corporation ("Newco") to be owned by Lockheed Martin, Lehman, Lanza
and LaPenta. The businesses proposed to be transferred (the "Loral Acquired
Businesses" or "Businesses") include Lockheed Martin's Wideband Systems
Division and the Products Group, comprised of ten autonomous operations, all
of which were acquired by Lockheed Martin effective April 1, 1996 as part of
the acquisition by Lockheed Martin of the defense electronics business of
Loral Corporation ("Loral"). Also included in the transaction is the
acquisition of a semiconductor product line of another business and certain
leasehold improvements in New York City.
The Businesses are leading suppliers of sophisticated secure
communication systems, microwave communication components, avionic and
instrumentation products and other products and services to major aerospace
and defense contractors as well as the U.S. Government. The Businesses
operate primarily in one industry segment, communication systems and
products.
Substantially all the Business' products are sold to agencies of the
United States Government, primarily the Department of Defense, to foreign
government agencies or to prime contractors or subcontractors thereof. All
domestic government contracts and subcontracts of the Businesses are subject
to audit, various cost controls and include standard provisions for
termination for the convenience of the government. Multi-year 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 government.
The decline in the U.S. defense budget since the mid 1980s has resulted
in program delays, cancellations and scope reductions for defense contractors
in general. These events may or may not have an effect on the Businesses'
programs; however, in the event that expenditures for products of the type
manufactured by the Businesses are reduced, and not offset by greater foreign
sales or other new programs or products, or acquisitions, there may be a
reduction in the volume of contracts or subcontracts awarded to the
Businesses.
The Businesses' operations, as presented herein, include allocations and
estimates of certain expenses of Loral based upon estimates of services
performed by Loral that management of the Businesses believe are reasonable.
Such services include treasury, cash management, employee benefits, taxes,
risk management, internal audit and general corporate services. Accordingly,
the results of operations and cash flows as presented herein may not be the
same as would have occurred had the Businesses been independent entities.
<PAGE>
<PAGE>F-59
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
2. Basis of Presentation
Basis of Combination
The accompanying combined financial statements reflect the Businesses'
assets, liabilities and operations included in Loral Corporation's historical
financial statements that will be transferred to Newco. All significant
intercompany transactions and amounts have been eliminated. The combined
financial statements do not include the operations of telecommunications
switch product line which will not be transferred and was exited in 1995.
Also, the assets and operations of the semiconductor product line and certain
other facilities which are not material to the Businesses have been excluded
from the financial statements.
Allocation of Corporate Expenses
The amount of corporate office expenses reflected in these financial
statements has been estimated based primarily on the allocation methodology
prescribed by government regulations pertaining to government contractors,
which management of the Businesses believes to be a reasonable allocation
method.
Income Taxes
The Businesses were included in the consolidated Federal income tax
return and certain combined and separate state and local income tax returns
of Loral. However, for the purposes of these financial statements, the
provision for income taxes was allocated based upon reported income before
income taxes. Such provision was recorded through the advances from
(repayments to) Loral account.
Interest Expense
Interest expense has been allocated to the Businesses by applying
Loral's weighted average consolidated interest rate to the portion of the
beginning of the period invested equity account deemed to be financed by
consolidated debt, which amount has been determined based on the Loral's debt
to equity ratio on such date, except that the acquisition of Wideband Systems
has been assumed to be fully financed by debt.
Statements of Cash Flows
The Businesses participated in Loral's cash management system, under
which all cash was received and payments made by Loral. All transactions
between the Businesses and Loral have been accounted for as settled in cash
on the date such transactions were recorded by the Businesses.
<PAGE>
<PAGE>F-60
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
3. Summary of Significant Accounting Policies
Contracts In Process
Sales on long-term production-type contracts are recorded as units are
shipped; profits applicable to such shipments are recorded pro rata, based
upon estimated total profit at completion of the contract. Sales and profits
on cost reimbursable contracts are recognized as costs are incurred. Sales
and estimated profits under other long-term contracts are recognized under
the percentage of completion method of accounting using the cost-to-cost
method. Amounts representing contract change orders or claims are included in
sales only when they can be reliably estimated and realization is probable.
Incentive fees and award fees enter into the determination of contract
profits when they can be reliably estimated.
Costs accumulated under long-term contracts include direct costs as well
as manufacturing, overhead, and for government contracts, general and
administrative, independent research and development and bid and proposal
costs. Losses on contracts are recognized when determined. Revisions in
profit estimates are reflected in the period in which the facts which require
the revision become known.
Depreciation and Amortization
Depreciation is provided primarily on the straight-line method over the
estimated useful lives of the related assets. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life of
the improvements. The excess of the cost of purchased businesses over the
fair value of the net assets acquired is being amortized using a straight-
line method generally over a 40-year period.
The carrying amount of cost in excess of net assets acquired is
evaluated on a recurring basis. Current and future profitability as well as
current and future undiscounted cash flows, excluding financing costs, of the
underlying businesses are primary indicators of recoverability. There were no
adjustments to the carrying amount of cost in excess of net assets acquired
resulting from these evaluations during the periods presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Businesses' 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 revenue and expenses
during the reporting period. The most significant of these estimates and
assumptions relate to contract estimates of sales and costs, cost allocations
from Loral, including interest and income taxes, recoverability of recorded
amounts of fixed assets and cost in excess of net assets acquired, litigation
and environmental obligations. Actual results could differ from these
estimates.
<PAGE>
<PAGE>F-61
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
New Accounting Pronouncements
Effective January 1, 1996, the Businesses adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 establishes the accounting
standards for the impairment of long-lived assets, certain intangible assets
and cost in excess of net assets and certain intangible assets to be disposed
of. The impact of adopting SFAS 121 was not material.
Effective January 1, 1994, the Businesses adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). SFAS 112 requires that the costs of benefits provided
to employees after employment but before retirement be recognized on an
accrual basis. The adoption of SFAS 112 did not have a material impact on the
results of operations of the Businesses.
4. Acquisitions
Effective May 1, 1995, Loral acquired substantially all the assets and
liabilities of the Defense Systems operations of Unisys Corporation, which
included the Wideband Systems Division. The acquisition has been accounted
for as a purchase. As such, the accompanying combined financial statements
reflect the results of operations of the Wideband Systems Division from the
effective date of acquisition, including the amortization of an allocated
portion of cost in excess of net assets acquired resulting from the
acquisition. Such allocation was based on the sales and profitability of the
Wideband Systems Divisions relative to the aggregate sales and profitability
of the defense systems operations acquired by Loral. The assets and
liabilities recorded in connection with the purchase price allocation were
$240,525 and $25,598, respectively.
Had the acquisition of the Wideband Systems Division occurred on January
1, 1994, the unaudited pro forma sales and net income (loss) for the years
ending December 31, 1995 and 1994 would have been $524,355 and $700, and
$504,780 and ($963), respectively. The results, which are based on various
assumptions, are not necessarily indicative of what would have occurred had
the acquisition been consummated as of January 1, 1994.
<PAGE>
<PAGE>F-62
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
5. Operating Expenses
The following expenses have been included in the statements of
operations:
<TABLE>
<CAPTION>
Three Years Ended December 31,
Months Ended -----------------------------------------
March 31, 1996 1995 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
General and administrative expenses . . . . . . . . . . . . . . $23,558 $90,757 $74,205
Independent research and development, and bid and proposal
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,587 $21,370 $19,491
</TABLE>
6. Income Taxes
The provision for income taxes was calculated by applying Loral's
statutory tax rates to the reported pre-tax book income after considering
items that do not enter into the determination of taxable income and tax
credits reflected in the consolidated provision which are related to the
Businesses. It is estimated that deferred income taxes represent
approximately $714,000, $2,857,000 and $4,060,000 of the provisions for
income taxes reflected in these financial statements for the three months
ended March 31, 1996 and the years ended December 31, 1995 and 1994. The
principal components of deferred income taxes are contract accounting
methods, property plant and equipment, goodwill amortization, and timing of
accruals. Substantially all of the Businesses' income is from domestic
operations.
<PAGE>
<PAGE>F-63
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
The following is a reconciliation of the statutory rate to the effective
tax rates reflected in the financial statements:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------
1996 1995 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
Statutory Federal income tax rate . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Research and development and other tax credits . . . . . . . . -- (18.6) (43.4)
State and local income taxes, net of Federal income tax
benefit and state and local income tax credits . . . . . . 3.9 (.3) (15.5)
Foreign sales corporation tax benefit . . . . . . . . . . . . . (2.2) (3.0) (13.6)
Amortization of goodwill . . . . . . . . . . . . . . . . . . . 6.3 35.1 55.0
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . (5.1) (13.6) 18.1
----- ----- ----
Effective income tax rate . . . . . . . . . . . . . . . . . . . 37.9% 34.6% 35.6%
===== ===== ====
</TABLE>
7. Interest Expense
Interest expense was calculated using the following balances and
interest rates:
<TABLE>
<CAPTION>
Three Years Ended December 31,
Months Ended -----------------------------------------
March 31, 1996 1995 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
Invested Equity . . . . . . . . . . . . . . . . . . . . . . . . $453,062 $265,384 $267,291
Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . 7.40% 7.87% 6.56%
Wideband Systems Allocated Purchase Price . . . . . . . . . . . -- $214,927 --
Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . -- 7.40% --
</TABLE>
<PAGE>
<PAGE>F-64
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
8. Commitments and Contingencies
The Businesses lease certain facilities and equipment under agreements
expiring at various dates through 2011. Leases covering major items of real
estate and equipment contain renewal and/or purchase options which may be
exercised by the Businesses. Rent expense for the three months ended March
31, 1996 was $1,063. Rent expense for the years ended December 31, 1995 and
1994 was $4,276 and $4,027, respectively.
Management is continually assessing its obligations with respect to
applicable environmental protection laws. While it is difficult to determine
the timing and ultimate cost to be incurred by the Businesses in order to
comply with these laws, based upon available internal and external
assessments, the Businesses 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 the Businesses'
operations. The Businesses accrue for these contingencies when it is probable
that a liability has been incurred and the amount of the loss can be
reasonably estimated. The Businesses believe that it has adequately accrued
for future expenditures in connection with environmental matters and that
such expenditures will not have a material adverse effect on its financial
position or results of operations.
There are a number of lawsuits or claims pending against the Businesses
and incidental to its business. However, in the opinion of management, the
ultimate liability on these matters, if any, will not have a material adverse
effect on the financial position or results of operations of the Businesses.
<PAGE>
<PAGE>F-65
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
9. Pensions and Other Employee Benefits
Pensions
The Businesses participate in various Loral-sponsored pension plans both
contributory and non-contributory covering certain employees. Eligibility for
participation in these plans varies, and benefits are generally based on
members' compensation and years of service. Loral's funding policy was
generally to contribute in accordance with cost accounting standards that
affect government contractors, subject to the Internal Revenue code and
regulations thereon. Since the aforementioned pension arrangements were part
of certain Loral defined benefit or defined contribution plans, no separate
actuarial data was available for the Businesses. The Businesses have been
allocated their share of pension costs based upon participation employee
headcount. Net pension expense, which approximates the amount funded,
included in the accompanying financial statements was $1,234, $4,391 and
$3,150 for the three months ended March 31, 1996 and the years ended December
31, 1995 and 1994, respectively.
Postretirement Health Care and Life Insurance Benefits
In addition to participating in Loral-sponsored pension plans, the
Businesses provide certain health care 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
pension plan eligibility requirements. 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. Since the
aforementioned postretirement benefits were part of certain Loral
postretirement arrangements, no separate actuarial data is available for the
Businesses. The Businesses have been allocated postretirement benefit costs
based upon participant employee headcount. Postretirement benefit costs
included in the accompanying financial statements were $402, $1,646 and
$1,682 for the three months ended March 31, 1996 and the years ended December
31, 1995 and 1994, respectively.
Employee Savings Plans
Under various employee savings plans sponsored by Loral, the Businesses
matched the contributions of participating employees up to a designated
level. The extent of the match, vesting terms and the form of the matching
contribution vary among the plans. Under these plans, the matching
contributions, in cash, common stock or both, for the three months ended
March 31, 1996 and the years ended December 31, 1995 and 1994 were $634,
$1,879 and $1,844, respectively.
<PAGE>
<PAGE>F-66
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
10. Sales to Principal Customers
The Businesses operate primarily in one industry segment, electronic
components and systems. Sales to principal customers are as follows:
<TABLE>
<CAPTION>
Years Ended
Three December 31,
Months Ended -----------------------------------------
March 31, 1996 1995 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
U.S. Government Agencies . . . . . . . . . . . . . . . . . . $ 94,993 $328,476 $160,068
Foreign (principally foreign governments) . . . . . . . . . . 16,838 62,549 65,883
Other (principally commercial) . . . . . . . . . . . . . . . 20,369 57,140 57,178
--------- -------- --------
$132,200 $448,165 $283,129
========= ======== ========
</TABLE>
<PAGE>
<PAGE>F-67
LORAL ACQUIRED BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Foreign sales comprise the following:
<TABLE>
<CAPTION>
Years Ended
Three December 31,
Months Ended -----------------------------------------
March 31, 1996 1995 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
Export sales
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,056 $19,248 $30,790
Middle East . . . . . . . . . . . . . . . . . . . . . . . . 3,648 4,147 6,035
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . 6,275 26,283 18,368
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,859 12,871 10,690
-------- ------- -------
Total foreign sales . . . . . . . . . . . . . . . . . . . . $16,838 $62,549 $65,883
======== ======= =======
</TABLE>
11. Related Party Transactions
The Businesses had a number of transactions with Loral and its affiliates.
Management believes that the arrangements are as favorable to the Businesses
as could be obtained from unaffiliated parties. The following describe the
related party transactions.
Loral allocated certain operational, administrative, legal and other
services to the Businesses. Costs allocated to the Businesses were $1,827,
$6,535 and $5,123 for the three months ended March 31, 1996 and the years
ended December 31, 1995 and 1994, respectively. The Businesses sold products
to Loral and its affiliates. Net sales to Loral were $14,840 for the three
months ended March 31, 1996 and were $54,600 and $28,542 in 1995 and 1994,
respectively. Net sales to Space Systems/Loral were $2,471 for the three
months ended March 31, 1996 and were $4,596 and $1,678 in 1995 and 1994,
respectively. Net sales to K&F Industries were $1,173 for the three months
ended March 31, 1996 and were $2,415 and $3,962 in 1995 and 1994,
respectively.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if
given or made, such information or representations must not be relied upon
as having been authorized. This Prospectus does not constitute an offer
to sell or the solicitation of an offer to buy any securities other than
the securities to which it relates or any offer to sell or the solicitation
of an offer to buy such securities in any circumstances in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct
as of any time subsequent to its date.
_________________________
Table of Contents
Page
Available Information . . . . . . . . . . . . . . . . 7
Prospectus Summary . . . . . . . . . . . . . . . . . 8
Risk Factors . . . . . . . . . . . . . . . . . . . . 27
Use of Proceeds . . . . . . . . . . . . . . . . . . . 40
Capitalization . . . . . . . . . . . . . . . . . . . 40
Unaudited Pro Forma Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . 41
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . 43
Selected Financial Information . . . . . . . . . . . 46
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 50
Business . . . . . . . . . . . . . . . . . . . . . . 68
The Transaction . . . . . . . . . . . . . . . . . . . 90
Certain Relationships and Related Transactions . . . 93
Management . . . . . . . . . . . . . . . . . . . . . 94
Ownership of Capital Stock . . . . . . . . . . . . . 100
The Exchange Offer . . . . . . . . . . . . . . . . . 103
Description of the Exchange Notes . . . . . . . . . . 117
Certain United States Federal Tax Considerations . . 157
Plan of Distribution . . . . . . . . . . . . . . . . 157
Legal Matters . . . . . . . . . . . . . . . . . . . 159
Experts . . . . . . . . . . . . . . . . . . . . . . 159
Index to Financial Statements . . . . . . . . . . . . F-1
Until , 1997 (90 days after commencement of this offering), all
dealers effecting transactions in the exchange notes, whether or not
participating in the exchange offer, may be required to deliver a
prospectus.
<PAGE>
Preliminary Prospectus
$225,000,000
L-3 Communications Corporation
[LOGO OMITTED]
Offer to Exchange $225,000,000 of its 10 3/8% Series B Senior
Subordinated Notes due 2007, which have been registered
under the Securities Act, for $225,000,000 of its
outstanding 10 3/8% Senior Subordinated Notes
due 2007
<PAGE>
<PAGE>1
[ALTERNATE COVER FOR MARKET-MAKING PROSPECTUS]
PROSPECTUS
[LOGO OMITTED]
L-3 Communications Corporation
10 3/8% Series B Senior Subordinated Notes due 2007,
__________________
The 10 3/8% Series B Senior Subordinated Notes due 2007 (the "Exchange
Notes") of L-3 Communications Corporation (the "Company" or "L-3") were
issued in exchange for the 10 3/8% Senior Subordinated Notes due 2007 (the
"Old Notes" and together with the Exchange Notes, the "Notes") by the
Company.
Interest on the Exchange Notes will be payable semi-annually on May 1 and
November 1 of each year, commencing November 1, 1997. The Exchange Notes
will be redeemable at the option of the Company, in whole or in part, at
any time on or after May 1, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest to the date of redemption. In
addition, prior to May 1, 2000, the Company may redeem up to 35% of the
aggregate principal amount of Exchange Notes at the redemption price set
forth herein plus accrued and unpaid interest through the redemption date
with the net cash proceeds of one or more Equity Offerings (as defined).
The Exchange Notes will not be subject to any mandatory sinking fund. In
the event of a Change of Control (as defined), each holder of Exchange
Notes will have the right, at the holder's option, to require the Company
to purchase such holder's Exchange Notes at a purchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest to the
date of purchase. See "Description of the Exchange Notes". The Company's
ability to pay cash to the holders of Notes upon a purchase may be limited
by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make
any required purchases.
The Exchange Notes will be general unsecured obligations of the Company,
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company. As of March 31, 1997, after giving pro forma
effect to the Offering of the Old Notes, application of the net proceeds
therefrom and borrowings under the Senior Credit Facilities (as defined),
the Company would have had approximately $400.0 million of indebtedness
outstanding, of which $175.0 million would have been Senior Debt
(excluding letters of credit). See "Capitalization". On the date of
issuance of the Exchange Notes, the Company will not have any
subsidiaries; however, the Indenture (as defined) will permit the Company
to create subsidiaries in the future.
For a discussion of certain factors that should be considered in
connection with an investment in the Exchange Notes, see "Risk Factors"
beginning on page 13.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
<PAGE>
<PAGE>2
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus has been prepared for and is to be used by Lehman Brothers
Inc. in connection with offers and sales in market-making transactions of
the Exchange Notes. The Company will not receive any of the proceeds of
such sales. Lehman Brothers Inc. may act as a principal or agent in such
transactions. The Exchange Notes may be offered in negotiated transactions
or otherwise.
_________________________
LEHMAN BROTHERS INC.
_________________________
The date of this Prospectus is __________, 1997
<PAGE>
<PAGE>3
[ALTERNATE SECTION FOR MARKET-MAKING PROSPECTUS]
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
on Form S-4 (together with all amendments, exhibits, schedules and
supplements thereto, the "Registration Statement") under the Securities
Act with respect to the Exchange Notes being offered hereby. This
Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement.
For further information with respect to the Company and the Exchange
Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement
is qualified by the provisions in such exhibit, to which reference
is hereby made. As a result of the offering of the Exchange Notes,
the Company will become subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, in accordance therewith, will file reports and other information with
the Commission. The Registration Statement, such reports and other
information can be inspected and copied at the Public Reference Section of
the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington D.C. 20549 and at regional public reference facilities
maintained by the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material, including
copies of all or any portion of the Registration Statement, can be
obtained from the Public Reference Section of the Commission at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov).
So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, it is required to furnish the
information required to be filed with the Commission to the Trustee and
the holders of the Old Notes and the Exchange Notes. The Company has
agreed that, even if it is not required under the Exchange Act to furnish
such information to the Commission, it will nonetheless continue to
furnish information that would be required to be furnished by the Company
by Section 13 of the Exchange Act to the Trustee and the holders of the
Old Notes or Exchange Notes as if it were subject to such periodic
reporting requirements.
<PAGE>
<PAGE>4
[ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS]
TRADING MARKET FOR THE EXCHANGE NOTES
There is no existing trading market for the Exchange Notes, and
there can be no assurance regarding the future development of a market for
the Exchange Notes or the ability of the Holders of the Exchange Notes to
sell their Exchange Notes or the price at which such Holders may be able
to sell their Exchange Notes. If such market were to develop, the Exchange
Notes could trade at prices that may be higher or lower than their initial
offering price depending on many factors, including prevailing interest
rates, the Company's operating results and the market for similar
securities. Although it is not obligated to do so, Lehman Brothers Inc.
intends to make a market in the Exchange Notes. Any such market-making
activity may be discontinued at any time, for any reason, without notice
at the sole discretion of Lehman Brothers Inc. No assurance can be given
as to the liquidity of or the trading market for the Exchange Notes.
Lehman Brothers Inc. may be deemed to be an affiliate of the Company
and, as such, may be required to deliver a prospectus in connection with
its market-making activities in the Exchange Notes. Pursuant to the
Registration Rights Agreement, the Company agreed to file and maintain a
registration statement that would allow Lehman Brothers Inc. to engage in
market-making transactions in the Exchange Notes. Subject to certain
exceptions set forth in the Registration Rights Agreement, the
registration statement will remain effective for as long as Lehman
Brothers Inc. may be required to deliver a prospectus in connection with
market-making transactions in the Exchange Notes. The Company has agreed
to bear substantially all the costs and expenses related to such
registration statement.
<PAGE>
<PAGE>5
[ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS]
USE OF PROCEEDS
This Prospectus is delivered in connection with the sale of the
Exchange Notes by Lehman Brothers Inc. in market-making transactions. The
Company will not receive any of the proceeds from such transactions.
<PAGE>
<PAGE>6
[ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS]
PLAN OF DISTRIBUTION
This Prospectus is to be used by Lehman Brothers Inc. in connection
with offers and sales of the Exchange Notes in market-making transactions
effected from time to time. Lehman Brothers Inc. may act as a principal or
agent in such transactions, including as agent for the counterparty when
acting as principal or as agent for both counterparties, and may receive
compensation in the form of discounts and commissions, including from both
counterparties when it acts as agent for both. Such sales will be made at
prevailing market prices at the time of sale, at prices related thereto or
at negotiated prices.
Affiliates of Lehman Brothers Inc. currently own 50.1% of the Parent
Common Stock. See "Ownership of Capital Stock". Lehman Brothers Inc. has
informed the Company that it does not intend to confirm sales of the
Exchange Notes to any accounts over which it exercises discretionary
authority without the prior specific written approval of such transactions
by the customer.
The Company has been advised by Lehman Brothers Inc. that, subject
to applicable laws and regulations, Lehman Brothers Inc. currently intends
to make a market in the Exchange Notes following completion of the
Exchange Offer. However, Lehman Brothers Inc. is not obligated to do so
and any such market-making may be interrupted or discontinued at any time
without notice. In addition, such market-making activity will be subject
to the limits imposed by the Securities Act and the Exchange Act. There
can be no assurance that an active trading market will develop or be
sustained. See "Risk Factors--Trading Market for the Exchange Notes."
Lehman Brothers Inc. has provided investment banking services to the
Company in the past and may provide such services and financial advisory
services to the Company in the future. Lehman Brothers Inc. acted as
purchasers in connection with the initial sale of the Notes and received
an underwriting discount of approximately $ million in connection
therewith. See "Certain Transactions."
Lehman Brothers Inc. and the Company have entered into a
registration rights agreement with respect to the use by Lehman Brothers
Inc. of this Prospectus. Pursuant to such agreement, the Company agreed to
bear all registration expenses incurred under such agreement, and the
Company agreed to indemnify Lehman Brothers Inc. against certain
liabilities, including liabilities under the Securities Act.
<PAGE>
<PAGE>7
[ALTERNATE BACK COVER FOR MARKET-MAKING PROSPECTUS]
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if
given or made, such information or representations must not be relied
relied upon as having been authorized. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which it relates or any offer
to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither
the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to
its date.
-----------------------
Table of Contents
Page
Available Information . . . . . . . . . . . . . . . . 7
Prospectus Summary . . . . . . . . . . . . . . . . . 8
Risk Factors . . . . . . . . . . . . . . . . . . . . 27
Use of Proceeds . . . . . . . . . . . . . . . . . . . 40
Capitalization . . . . . . . . . . . . . . . . . . . 40
Unaudited Pro Forma Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . 41
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . 43
Selected Financial Information . . . . . . . . . . . 46
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 50
Business . . . . . . . . . . . . . . . . . . . . . . 68
The Transaction . . . . . . . . . . . . . . . . . . . 90
Certain Relationships and Related Transactions . . . 93
Management . . . . . . . . . . . . . . . . . . . . . 94
Ownership of Capital Stock . . . . . . . . . . . . . 100
The Exchange Offer . . . . . . . . . . . . . . . . . 103
Description of the Exchange Notes . . . . . . . . . . 117
Certain United States Federal Tax Considerations . . 157
Plan of Distribution . . . . . . . . . . . . . . . . 157
Legal Matters . . . . . . . . . . . . . . . . . . . 159
Experts . . . . . . . . . . . . . . . . . . . . . . 159
Index to Financial Statements . . . . . . . . . . . . F-1
<PAGE>
<PAGE>8
Prospectus
L-3 Communications Corporation
[LOGO OMITTED]
10 3/8% Series B Senior Subordinated Notes due 2007
LEHMAN BROTHERS INC.
<PAGE>
<PAGE>II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides for, among other things:
a. permissive indemnification for expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by designated persons, including
directors and officers of a corporation, in the event such persons
are parties to litigation other than stockholder derivative actions
if certain conditions are met;
b. permissive indemnification for expenses (including
attorneys' fees) actually and reasonably incurred by designated
persons, including directors and officers of a corporation, in the
event such persons are parties to stockholder derivative actions if
certain conditions are met;
c. mandatory indemnification for expenses (including
attorneys' fees) actually and reasonably incurred by designated
persons, including directors and officers of a corporation, in the
event such persons are successful on the merits or otherwise in
defense of litigation covered by a. and b. above; and
d. that the indemnification provided for by Section 145 is
not deemed exclusive of any other rights which may be provided under
any by-law, agreement, stockholder or disinterested director vote,
or otherwise.
In addition to the indemnification provisions of the DGCL described
above, the Registrant's certificate of incorporation (the "Certificate of
Incorporation") authorizes indemnification of the Registrant's officers
and directors, subject to a case-by-case determination that they acted in
good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the Company, and in the case of any
criminal proceeding, they had no reasonable cause to believe their conduct
was unlawful. In the event that a Change in Control (as defined in the
Certificate of Incorporation) shall have occurred, the proposed indemnitee
director or officer may require that the determination of whether he met
the standard of conduct be made by special legal counsel selected by him.
In addition, whereas the DGCL would require court-ordered indemnification,
if any, in cases in which a person has been adjudged to be liable to the
Registrant, the Certificate of Incorporation also permits indemnification
in such cases if and to the extent that the reviewing party determines
that such indemnity is fair and reasonable under the circumstances.
The Certificate of Incorporation requires the advancement of
expenses to an officer or director (without a determination as to his
conduct) in advance of the final disposition of a proceeding if such
person furnishes a written affirmation of his good faith belief that he
has met the applicable standard of conduct and furnishes a written
undertaking to repay any advances if it is ultimately determined that he
is not entitled to indemnification. In connection with proceedings by or
<PAGE>
<PAGE>II-2
in the right of the Registrant, the Certificate of Incorporation provides
that indemnification shall include not only reasonable expenses, but also
penalties, fines and amounts paid in settlement. Unless ordered by a
court, such indemnification shall not include judgments. Under the
Certificate of Incorporation, no officer or director is entitled to
indemnification or advancement of expenses with respect to a proceeding
brought by him against the Registrant other than a proceeding seeking or
defending such officer's or director's right to indemnification or
advancement of expenses. Finally, the Certificate of Incorporation
provides that the Company may, subject to authorization on a case by case
basis, indemnify and advance expenses to employees or agents to the same
extent as a director or to a lesser extent (or greater, as permitted by
law) as determined by the Board of Directors.
The Certificate of Incorporation purports to confer upon officers
and directors contractual rights to indemnification and advancement of
expenses as provided therein. In addition, as permitted by the DGCL, the
Registrant has entered into indemnity agreements with its directors and
selected officers that provide contract rights substantially identical to
the rights to indemnification and advancement of expenses set forth in the
Certificate of Incorporation, as described above.
The Certificate of Incorporation limits the personal liability of
directors to the Registrant or its stockholders for monetary damages for
breach of the duty as a director, other than liability as a director (i)
for breach of duty of loyalty to the Registrant or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
DGCL (certain illegal distributions), or (iv) for any transaction for
which the director derived an improper personal benefit.
The Registrant maintains officers' and directors' insurance covering
certain liabilities that may be incurred by officers and directors in the
performance of their duties.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit No. Description of Exhibit
---------- ----------------------
3.1 Certificate of Incorporation
3.2 By-Laws of L-3 Communications Corporation
4.1 Indenture dated as of April 30, 1997 between L-3
Communications Corporation and The Bank of
New York, as Trustee.
4.2 Form of 10 3/8% Senior Subordinated Note due 2007.
4.3 Form of 10 3/8% Series B Senior Subordinated Note due 2007.
5 Opinion of Simpson Thacher & Bartlett.
10.1 Credit Agreement, dated as of April 30, 1997, among L-3
Communications Corporation and lenders named therein.
10.2 Registration Rights Agreement, dated as of April 30, 1997,
among L-3 Communications Corporation, Lehman Brothers Inc.
and BancAmerica Securities, Inc.
<PAGE>
<PAGE>II-3
10.3 Purchase Agreement, dated as of April 25, 1997, among L-3
Communications Corporation, Lehman Brothers Inc. and
BancAmerica Securities, Inc..
10.4 Stockholders' Agreement between L-3 Communications Corporation
and the stockholders parties thereto.
10.5 Transaction Agreement dated as of March 28, 1997, as amended,
among Lockheed Martin Corporation, Lehman Brothers Capital
Partners III, L.P., Frank C. Lanza, Robert V. LaPenta and L-3
Communications Corporation.
10.6 Employment Agreement dated April 30, 1997 between Frank C.
Lanza and L-3 Communications Holdings, Inc.
10.61 Employment Agreement dated April 30, 1997 between Robert V.
LaPenta and L-3 Communications Holdings, Inc.
10.7 Form of Transition Services Agreement dated April 30, 1997
among L-3 Communications Holdings, Inc., L-3 Communications
Corporation and Lockheed Martin Corporation.
10.8 Lease dated as of April 29, 1997 among Lockheed Martin Tactical
Systems, Inc., L-3 Communications Corporation and KSL,
Division of Bonneville International
10.81 Lease dated as of April 29, 1997 among Lockheed Martin Tactical
Systems L-3 Communications Corporation and Unisys Corporation
10.82 Sublease dated as of April 29, 1997 among Lockheed Martin
Tactical Systems, Inc., L-3 Communications Corporation and
Unisys Corporation
10.9 Limited Noncompetition Agreement dated April 30, 1997 between
Lockheed Martin Corporation and L-3 Communications
Corporation.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Simpson Thacher & Bartlett (included as part of its
opinion filed as Exhibit 5 hereto).
23.2 Consent of Coopers & Lybrand L.L.P., independent
certified public accountants.
23.3 Consent of Ernst & Young LLP, independent certified public
accountants.
<F1>24 Powers of Attorney.
25 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Bank of New York, as Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
____________________
<F1> Previously filed.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereto, which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement;
<PAGE>
<PAGE>II-4
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed to be
underwriters, in addition to the information called for by the other Items
of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding undertaking or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
<PAGE>
<PAGE>II-5
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
<PAGE>II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused the Registration Statement or amendments thereto to be
signed on its behalf by the undersigned, thereunto duly authorized, on
September 11, 1997.
L-3 COMMUNICATIONS CORPORATION
By: *
------------------------------------
Chief Executive Officer and Chairman
of the Board of Directors
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 11th day of September, 1997 by the
following persons in the capacities indicated:
Signature Title
--------- ------
* Chairman, Chief Executive Officer
- ------------------------- Director (Principal Executive Officer)
Frank C. Lanza
* President, Chief Financial Officer
- ------------------------- (Principal Financial Officer) and Director
Robert V. LaPenta
/s/ Michael T. Strianese Vice President -- Finance and Controller
- ------------------------- (Principal Accounting Officer)
Michael T. Strianese
* Director
- -------------------------
Steven J. Berger
* Director
- -------------------------
David J. Brand
* Director
- -------------------------
Thomas A. Corcoran
* Director
- -------------------------
Alberto M. Finali
* Director
- -------------------------
Eliot M. Fried
<PAGE>
<PAGE>II-7
* Director
- -------------------------
Robert B. Millard
* Director
- -------------------------
Frank H. Menaker, Jr.
* Director
- -------------------------
John E. Montague
* Director
- -------------------------
Alan H. Washkowitz
*By: /s/ Michael T. Strianese
- -----------------------------
Attorney-In-Fact
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
L-3 COMMUNICATIONS CORPORATION
The undersigned, in order to form a corporation for the purpose
hereinafter stated, under and pursuant to the provisions of the Delaware
General Corporation Law, hereby certifies that:
FIRST: The name of the Corporation is L-3 Communications
Corporation.
SECOND: The registered office and registered agent of the
Corporation is The Corporation Trust Company, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the Delaware
General Corporation Law.
FOURTH: The total number of shares of stock that the Corporation
is authorized to issue is 100 shares of Common Stock, par value $.01 each.
FIFTH: The name and address of the incorporator is Janet Lapidus,
425 Lexington Avenue, New York City, New York 10017-3954.
SIXTH: The Board of Directors of the Corporation, acting by
majority vote, may alter, amend or repeal the By-Laws of the Corporation.
SEVENTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director
of the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation on April 8, 1997.
/s/ Janet Lapidus
------------------------------------
Janet Lapidus
EXHIBIT 3.2
BY-LAWS
of
L-3 COMMUNICATIONS CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
Offices and Records
Section 1.1 Delaware Office. The principal office of the
Corporation in the State of Delaware shall be located in the City of
Wilmington, County of New Castle, and the name and address of its registered
agent is The Corporation Trust Company, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.
Section 1.2 Other Offices. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time
to time require.
Section 1.3 Books and Records. The books and records of the
Corporation may be kept outside the State of Delaware at such place or places
as may from time to time be designated by the Board of Directors.
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. The annual meeting of the
stockholders of the Corporation shall be held on such date, and at such place
and time, as may be fixed by resolution of the Board of Directors.
Section 2.2 Special Meeting. Special meetings of the stockholders
may be called only by the Chairman of the Board, if there be one, or the
President, and shall be called by the Chairman of the Board or the President
at the request in writing of a majority of the Board of Directors. Such
request shall state the purpose or purposes of the proposed meeting.
Section 2.3 Place of Meeting. The Board of Directors may
designate the place of meeting for any meeting of the stockholders. If no
designation is made by the Board of Directors, the place of meeting shall be
the principal office of the Corporation.
Section 2.4 Notice of Meeting. Written or printed notice, stating
the place, day and hour of the meeting and, in the case of special meetings,
the purpose or purposes for which the meeting is called, shall be prepared
and delivered by the Corporation not less than ten days nor more than sixty
days before the date of the meeting, either personally or by mail, to each
stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail with postage thereon prepaid, addressed to the stockholder at his
address as it appears on the stock transfer books of the Corporation. Such
<PAGE>
further notice shall be given as may be required by law. Meetings may be
held without notice if all stockholders entitled to vote are present, or if
notice is waived by those not present. Any previously scheduled meeting of
the stockholders may be postponed by resolution of the Board of Directors
upon public notice given prior to the date previously scheduled for such
meeting of stockholders.
Section 2.5 Quorum and Adjournment. Except as otherwise provided
by law or by the Certificate of Incorporation, the holders of a majority of
the outstanding shares of the Corporation entitled to vote generally in the
election of directors, represented in person or by proxy, shall constitute a
quorum at a meeting of stockholders, except that when specified business is
to be voted on by a class or series voting as a class, the holders of a
majority of the shares of such class or series shall constitute a quorum for
the transaction of such business. The chairman of the meeting or a majority
of the shares so represented may adjourn the meeting from time to time,
whether or not there is such a quorum. No notice of the time and place of
adjourned meetings need be given except as required by law. The stockholders
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave
less than a quorum.
Section 2.6 Voting. Except as otherwise provided by the
Certificate of Incorporation or these Bylaws, any questions brought before
any meeting of stockholders shall be decided by a majority vote of the number
of shares entitled to vote and present in person or represented by proxy.
Such votes may be cast in person or by proxy but no proxy shall be voted on
after three years from its date, unless such proxy provides for a longer
period. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
Section 2.7 Inspectors of Elections; Opening and Closing the
Polls.
(A) The Board of Directors by resolution may appoint one or more
inspectors, which inspector or inspectors may include individuals who serve
the Corporation in other capacities, including, without limitation, as
officers, employees, agents or representatives of the Corporation, to act at
the meeting and make a written report thereof. One or more persons may be
designated as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate has been appointed to act, or if all inspectors
or alternates who have been appointed are unable to act, at a meeting of
stockholders, the chairman of the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or
her duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by the General
Corporation Law of the State of Delaware.
(B) The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at a meeting.
<PAGE>
ARTICLE III
Board of Directors
Section 3.1 General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws
expressly conferred upon them, the Board of Directors may exercise all such
powers of the Corporation and do all such lawful acts and things as are not
by law or by the Certificate of Incorporation or by these Bylaws required to
be exercised or done by the stockholders.
Section 3.2 Number, Tenure and Qualifications. The number of
directors shall be fixed from time to time exclusively pursuant to a
resolution adopted by Board of Directors. Each director elected shall hold
office until such director's successor is elected and qualified, except as
otherwise provided herein or in the Certificate of Incorporation or as
required by law.
Section 3.3 Regular Meetings. A meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at
the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the
place and time of the meetings.
Section 3.5 Notice. Notice of any special meeting shall be given
to each director at his business or residence in writing or by telephone or
facsimile communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with
postage thereon prepaid, at least three days before such meeting. If by
telephone or facsimile, the notice shall be given at least twenty-four hours
prior to the time set for the meeting. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice of such meeting, except for
amendments to these Bylaws, as provided under Section 7.1 of Article VII
hereof. A meeting may be held at any time without notice if all the
directors are present or if those not present waive notice of the meeting in
writing, either before or after such meeting.
Section 3.6 Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, but if at any meeting of
the Board of Directors there shall be less than a quorum present, a majority
of the directors present may adjourn the meeting from time to time without
further notice. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors. The directors present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
directors to leave less than a quorum.
Section 3.7 Vacancies. Unless the Board of Directors otherwise
determines, vacancies resulting from death, resignation, retirement,
disqualification, removal from office, an increase in the authorized number
of directors or other cause may be filled only by the affirmative vote of a
<PAGE>
majority of the remaining directors, though less than a quorum of the Board
of Directors, or by a sole remaining director. Any director elected in
accordance with the preceding sentence of this Section 3.7 shall hold office
for a term expiring at the next annual meeting of stockholders and until such
director's successor shall have been duly elected and qualified. No decrease
in the number of authorized directors constituting the Board of Directors
shall shorten the term of any incumbent director.
Section 3.8 Executive and Other Committees. The Board of
Directors may, by resolution adopted by a majority of the Board of Directors,
designate an Executive Committee to exercise, subject to applicable
provisions of law, all or part of the powers of the Board in the management
of the business and affairs of the Corporation when the Board is not in
session, including without limitation the power to declare dividends and to
authorize the issuance of the Corporation's capital stock, and may, by
resolution similarly adopted, designate one or more other committees. The
Executive Committee and each such other committee shall consist of two or
more directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. Any such committee
may, to the extent permitted by law, exercise such powers and shall have such
responsibilities as shall be specified in the designating resolution. In the
absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not constituting a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member. Each committee shall keep written minutes of
its proceedings and shall report such proceedings to the Board when required.
A majority of any committee may determine its action and fix the
time and place of its meetings, unless the Board shall otherwise provide.
Notice of such meetings shall be given to each member of the committee in the
manner provided for in Section 3.5 of these Bylaws. The Board shall have
power at any time to fill vacancies in, to change the membership of, or to
dissolve any such committee. Except as otherwise provided by law, the
presence of a majority of the then appointed members of a committee shall
constitute a quorum for the transaction of business by that committee, and in
every case where a quorum is present the affirmative vote of a majority of
the members of the committee present shall be the act of the committee.
ARTICLE IV
Officers
Section 4.1 Elected Officers. The elected officers of the
Corporation shall be a Chairman of the Board, a President, a Secretary, a
Treasurer, and such other officers as the Board of Directors from time to
time may deem proper, including one or more vice presidents, assistant
treasurers and assistant secretaries. The Chairman of the Board shall be
chosen from the directors. All officers chosen by the Board of Directors
shall each have such powers and duties as from time to time may be conferred
by the Board of Directors.
Section 4.2 Election and Term of Office. The elected officers of
the Corporation shall be elected annually by the Board of Directors at the
regular meeting of the Board of Directors held after each annual meeting of
the stockholders. If the election of officers shall not be held at such
<PAGE>
meeting such election shall be held as soon thereafter as convenient.
Subject to Section 4.5 of these By-Laws, each officer shall hold office until
his successor shall have been duly elected and shall have qualified or until
his death or until he shall resign.
Section 4.3 Secretary. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and Directors and all other
notices required by law or by these Bylaws, and in case of his or her absence
or refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman of the Board or the President, or by the
Board of Directors, upon whose request the meeting is called as provided in
these Bylaws. The Secretary shall record all the proceedings of the meetings
of the Board of Directors, any committees thereof and the stockholders of the
Corporation in a book to be kept for that purpose, and shall perform such
other duties as may be assigned to him or her by the Board of Directors, the
Chairman of the Board or the President. The Secretary shall have the custody
of the seal of the Corporation and see that the same is affixed to all
instruments requiring it.
Section 4.4 Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate account
of receipts and disbursements in books belonging to the Corporation. The
Treasurer shall deposit all moneys and other valuables in the name and to the
credit of the Corporation in the depository or depositaries of the
Corporation. The Treasurer shall disburse the funds of the Corporation,
taking proper vouchers for such disbursements. The Treasurer shall render to
the Chairman of the Board, the President and the Board of Directors, whenever
requested, an account of all his transactions as Treasurer and of the
financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond for the faithful
discharge of his duties in such amount and with such surety as the Board of
Directors shall prescribe.
Section 4.5 Removal. Any officer elected by the Board of
Directors may be removed by a majority of the Board of Directors, with or
without cause, whenever, in their judgment, the best interests of the
Corporation would be served thereby. No elected officer shall have any
contractual rights against the Corporation for compensation by virtue of such
election beyond the date of the election of his successor, his death, his
resignation or his removal, whichever event shall first occur, except as
otherwise provided in an employment contract or under an employee deferred
compensation plan.
Section 4.6 Vacancies. A newly created office and a vacancy in
any office because of death, resignation, or removal may be filled by the
Board of Directors for the unexpired portion of the term at any meeting of
the Board of Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1 Stock Certificates and Transfers.
(A) The interest of each stockholder of the Corporation shall be
evidenced by certificates for shares of stock in such form as the appropriate
<PAGE>
officers of the Corporation may from time to time prescribe. The shares of
the stock of the Corporation shall be transferred on the books of the
Corporation by the holder thereof in person or by his attorney, upon
surrender for cancellation of certificates for the same number of shares,
with an assignment and power of transfer endorsed thereon or attached
thereto, duly executed, with such proof of the authenticity of the signature
as the Corporation or its agents may reasonably require.
(B) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on such
certificates to be in facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
issue.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Fiscal Year. The fiscal year of the Corporation shall
be fixed by the Board of Directors.
Section 6.2 Dividends. The Board of Directors may from time to
time declare, and the Corporation may pay, dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and
its Certificate of Incorporation.
Section 6.3 Seal. The corporate seal shall be in such form as the
Board of Directors shall prescribe.
Section 6.4 Waiver of Notice. Whenever any notice is required to
be given to any stockholder or director of the Corporation under the
provisions of the General Corporation Law of the State of Delaware, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent
to the giving of such notice. Neither the business to be transacted at, nor
the purpose of, any annual or special meeting of the stockholders or the
Board of Directors need be specified in any waiver of notice of such meeting.
Section 6.5 Audits. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant, and it shall be the duty of the
Board of Directors to cause such audit to be made annually.
Section 6.6 Resignations. Any director or any officer, whether
elected or appointed, may resign at any time by serving written notice of
such resignation on the Chairman of the Board, the President or the
Secretary, and such resignation shall be deemed to be effective as of the
close of business on the date said notice is received by the Chairman of the
Board, the President, or the Secretary, unless otherwise specified in said
notice. No formal action shall be required of the Board of Directors or the
stockholders to make any such resignation effective.
<PAGE>
Section 6.7 Indemnification and Insurance. (A) Each person who
was or is made a party or is threatened to be made a party to or is involved
in any action, suit, or proceeding, whether civil, criminal, administrative
or investigative (hereinafter a "proceeding"), by reason of the fact that he
or she or a person of whom he or she is the legal representative is or was a
director, officer or employee of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the General
Corporation Law of the State of Delaware as the same exists or may hereafter
be amended, against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (B) of this Section 6.7 of this
Bylaw with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
(B) If a claim under paragraph (A) of this Section 6.7 of this
Bylaw is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance
of its final disposition where the required undertaking, if any is required,
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation
Law of the State of Delaware for the Corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall be on
the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification
of the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
(C) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Bylaw shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
<PAGE>
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
(D) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under the General Corporation Law of the State of
Delaware.
(E) The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and rights
to be paid by the Corporation the expenses incurred in defending any
proceeding in advance of its final disposition, to any agent of the
Corporation to the fullest extent of the provisions of this Bylaw with
respect to the indemnification and advancement of expenses of directors,
officers and employees of the Corporation.
(F) The right to indemnification conferred in this Bylaw shall be
a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that if the General Corporation Law of
the State of Delaware requires the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not
in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
such advancement shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Bylaw or otherwise.
ARTICLE VII
AMENDMENTS
Section 7.1 Amendments. These Bylaws may be altered, amended,
rescinded or repealed in whole or in part, or new Bylaws may be adopted by
the affirmative vote of a majority of the Board of Directors or a majority of
the votes entitled to be cast by the stockholders on the matter, provided
that the affirmative vote of two-thirds of the Board of Directors or of two-
thirds of the votes entitled to be cast by the stockholders on the matter is
required to amend Sections 2.5, 2.6, 3.2, 3.6, 3.7, 6.2, 6.7 and 7.1 of the
Bylaws, and provided that notice of the proposed change was given in the
notice of the meeting.
EXHIBIT 4.1
L-3 COMMUNICATIONS CORPORATION
As Issuer
$225,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
INDENTURE
Dated as of April 30, 1997
The Bank of New York,
As Trustee
<PAGE>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE . . . . . . . . . . . . . 1
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . 17
Section 1.03. Incorporation by Reference of Trust Indenture Act . 17
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . 17
ARTICLE 2
THE NOTES . . . . . . . . . . . . . . 18
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . 18
Section 2.02. Execution and Authentication . . . . . . . . . . . 19
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . 20
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . 20
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . 20
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . 20
Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . 33
Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . 33
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . 34
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . 34
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . 34
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . 34
Section 2.13. CUSIP Numbers . . . . . . . . . . . . . . . . . . . 35
ARTICLE 3
REDEMPTION AND PREPAYMENT . . . . . . . . . . 35
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . 35
Section 3.02. Selection of Notes to Be Redeemed . . . . . . . . . 35
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . 36
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . 36
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . 37
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . 37
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . 37
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 . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . 41
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.06. [Intentionally Omitted] . . . . . . . . . . . . . . 42
Section 4.07. Restricted Payments . . . . . . . . . . . . . . . . 42
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . 45
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock . . . . . . . . . . . . . . . . . 45
Section 4.10. Asset Sales . . . . . . . . . . . . . . . . . . . . 48
Section 4.11. Transactions with Affiliates . . . . . . . . . . . 49
Section 4.12. Liens . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.13. Future Subsidiary Guarantees . . . . . . . . . . . 50
Section 4.14. Corporate Existence . . . . . . . . . . . . . . . . 51
Section 4.15. Offer to Repurchase Upon Change of Control . . . . 51
<PAGE>
Section 4.16. No Senior Subordinated Debt . . . . . . . . . . . . 52
Section 4.17. Payments for Consent . . . . . . . . . . . . . . . 53
ARTICLE 5
SUCCESSORS . . . . . . . . . . . . . . 53
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . 53
Section 5.02. Successor Corporation Substituted . . . . . . . . . 54
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . 54
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . 54
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . 56
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . 56
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . 57
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . 57
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . 57
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 . . . . . . . . . 58
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . 58
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . 59
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . 59
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . 59
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . 60
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . 61
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . 61
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . 61
Section 7.06. Reports by Trustee to Holders of the Notes . . . . 62
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . 62
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . 63
Section 7.09. Successor Trustee by Merger, etc. . . . . . . . . 64
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . 64
Section 7.11. Preferential Collection of Claims Against Company . 64
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . 64
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . 64
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . 65
Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . 65
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 . . . . . . . . . . . . . . . 67
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . 68
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . 68
Section 9.01. Without Consent of Holders of Notes . . . . . . . . 68
Section 9.02. With Consent of Holders of Notes . . . . . . . . . 69
Section 9.03. Compliance with Trust Indenture Act . . . . . . . . 70
Section 9.04. Revocation and Effect of Consents . . . . . . . . . 70
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . 70
Section 9.06. Trustee to Sign Amendments, etc. . . . . . . . . . 71
<PAGE>
ARTICLE 10
SUBORDINATION . . . . . . . . . . . . . 71
Section 10.01. Agreement to Subordinate . . . . . . . . . . . . . 71
Section 10.02. Liquidation; Dissolution; Bankruptcy . . . . . . . 71
Section 10.03. Default on Designated Senior Debt . . . . . . . . . 71
Section 10.04. Acceleration of Securities . . . . . . . . . . . . 72
Section 10.05. When Distribution Must Be Paid Over . . . . . . . . 72
Section 10.06. Notice by Company . . . . . . . . . . . . . . . . . 73
Section 10.07. Subrogation . . . . . . . . . . . . . . . . . . . . 73
Section 10.08. Relative Rights . . . . . . . . . . . . . . . . . . 73
Section 10.09. Subordination May Not Be Impaired by Company . . . 74
Section 10.10. Distribution or Notice to Representative . . . . . 74
Section 10.11. Rights of Trustee and Paying Agent . . . . . . . . 74
Section 10.12. Authorization to Effect Subordination . . . . . . . 75
Section 10.13. Amendments . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 11
MISCELLANEOUS . . . . . . . . . . . . . 75
Section 11.01. Trust Indenture Act Controls . . . . . . . . . . . 75
Section 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . 75
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes . . . . . . . . . . . . . . . . 76
Section 11.04. Certificate and Opinion as to Conditions Precedent 76
Section 11.05. Statements Required in Certificate or Opinion . . . 77
Section 11.06. Rules by Trustee and Agents . . . . . . . . . . . . 77
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders . . . . . . . . . . . 77
Section 11.08. Governing Law . . . . . . . . . . . . . . . . . . . 77
Section 11.09. No Adverse Interpretation of Other Agreements . . . 77
Section 11.10. Successors . . . . . . . . . . . . . . . . . . . . 78
Section 11.11. Severability . . . . . . . . . . . . . . . . . . . 78
Section 11.12. Counterpart Originals . . . . . . . . . . . . . . . 78
Section 11.13. Table of Contents, Headings, etc. . . . . . . . . 78
<PAGE>
EXHIBITS
--------
EXHIBIT A-1 FORM OF NOTE (NON-REGULATION-S)
EXHIBIT A-2 FORM OF NOTE (REGULATION S)
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
<PAGE>
CROSS-REFERENCE TABLE<F1>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
N.A. means not applicable.
____________________
[FN]
<F1> This Cross-Reference Table is not part of the Indenture.
<PAGE>
This INDENTURE dated as of April 30, 1997, between L-3
Communications Corporation, a Delaware corporation (the "Company"), 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
10 3/8% Notes due 2007 (the "Initial Notes") and the 10 3/8% Senior Notes due
2007 (the "Exchange Notes" and, together with the Initial 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-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with and registered in the name of the Depositary or its nominee
that will be issued in a denomination equal to the outstanding principal
amount of the Notes sold in reliance on Rule 144A.
"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.
"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 Cedel that apply to such transfer
or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of
a sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (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
<PAGE>
<PAGE>2
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.
"Board of Directors" means the Board of Directors of the Company,
or any authorized committee of the Board of Directors.
"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
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financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
or S&P's 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.
"Cedel" means Cedel Bank, societe anonyme.
"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.
"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
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
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"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
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 Net Tangible Assets" means, as of any date of
determination, shareholders' equity of the Company and its Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
less goodwill and other intangibles (other than patents, trademarks,
licenses, copyrights and other intellectual property and prepaid assets).
"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 Issue Date 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
"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-1 hereto, except that such Note shall
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<PAGE>5
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 this 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 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.
"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 has the meaning set forth in the Registration Rights
Agreement.
"Existing Indebtedness" means any Indebtedness of the Company
(other than Indebtedness under the Senior Credit Facilities and the Notes) in
existence on the Issue Date, 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
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<PAGE>6
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 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 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 shall 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.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
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<PAGE>7
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 are in effect on the Issue Date.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in
the form of Exhibit A-1 or A-2 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 Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of this 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.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means L-3 Communications Holdings, Inc.
"IAI Global Note" means the global Note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with 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
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<PAGE>8
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 the closing date for the sale and original
issuance of the Notes under this Indenture.
"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 Initial 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
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<PAGE>9
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"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 $250.0 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.
"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.
"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
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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 Liquidated
Damages), 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.
"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 Cedel, a
Person who has an account with DTC, Euroclear or Cedel, respectively (and,
with respect to DTC, shall include Euroclear and Cedel).
"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 the covenant contained in Section
4.10 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 the covenant contained in Section 4.09; (ix) any Investment in a
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Similar Business that is not a Restricted Subsidiary; provided that the
aggregate fair market value of all Investments made 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 exceed 5% of the Consolidated
Net 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 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.
"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 (v) of the second paragraph of
Section 4.09 covering only the assets acquired with such Indebtedness; (vii)
Liens existing on the Issue 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
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
<PAGE>
<PAGE>12
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 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.
"Purchase Agreement" means the Purchase Agreement, dated April 25,
1997, among the Company, Lehman Brothers Inc. and BancAmerica Securities,
Inc.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
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<PAGE>13
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April, 30 1997, by and among the Company, Lehman
Brothers Inc. and BancAmerica Securities, Inc., as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a 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,
or a Regulation S Temporary Global Note or Regulation S Permanent Global
Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note
in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with 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 Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a single temporary
global Note in the form of Note attached hereto as Exhibit A-2 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).
"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.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Debt.
"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 Notes, each of which shall bear the
Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
<PAGE>
<PAGE>14
"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 credit agreement, dated as of
the Issue Date among the Company and a syndicate of banks and other financial
institutions led by Lehman Commercial Paper Inc., as syndication 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 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 this 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 shall 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 this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-
X, promulgated pursuant to the 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
<PAGE>
<PAGE>15
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.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Transaction Documents" means this Indenture, the Notes, the
Purchase 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-1 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 Subsidiaries" 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
<PAGE>
<PAGE>16
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-
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.
<PAGE>
<PAGE>17
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
"Event of Default" . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . 4.10
"incur" . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . 8.02
"Offer Amount" . . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . . 2.03
"Purchase Date" . . . . . . . . . . . . . . . . . 3.09
"Registrar" . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments" . . . . . . . . . . . . . . 4.07
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;
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<PAGE>18
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
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-1 or A-2 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-1 or A-2 attached hereto (including the Global Note Legend and the
"Schedule of Exchanges in the Global Note" attached thereto). Notes issued
in definitive form shall be substantially in the form of Exhibit A-1 or A-2
attached hereto (but without the Global Note Legend and without the "Schedule
of Exchanges of Interests in the Global Note" attached thereto). Each Global
Note shall represent such of the outstanding Notes as shall be specified
therein and each shall provide that it shall represent the aggregate
principal amount of outstanding Notes from time to time endorsed thereon and
that the aggregate principal amount of outstanding Notes represented thereby
may from time to time be reduced or increased, as appropriate, to reflect
exchanges and redemptions. Any endorsement of a Global Note to reflect the
amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Note Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note (attached
hereto as Exhibit A-2 and bearing the legend set forth in Section
2.06(g)(iii) hereof), which shall be deposited on behalf of the purchasers of
the Notes represented thereby with the Trustee, at its New York office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding
on behalf of Euroclear or Cedel Bank, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Restricted Period
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<PAGE>19
shall be terminated upon the receipt by the Trustee of (i) a written
certificate from the Depositary, together with copies of certificates from
Euroclear and Cedel Bank certifying that they have received certification of
non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest
in a 144A Global Note or an IAI Global Note, all as contemplated by Section
2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company.
Following the termination of the Restricted Period, beneficial interests in
the Regulation S Temporary Global Note shall be exchanged for beneficial
interests in Regulation S Permanent Global Notes pursuant to the Applicable
Procedures. Simultaneously with the authentication of Regulation S Permanent
Global Notes, the Trustee shall cancel the Regulation S Temporary Global
Note. The aggregate principal amount of the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee and
the Depositary or its nominee, as the case may be, in connection with
transfers of interest as hereinafter provided.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the
"General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel
Bank shall be applicable to interests in the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes that are held by the Agent
Members through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that
the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by
two Officers, authenticate Notes for original issue 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.
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<PAGE>20
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 Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making
any such payment. While any such default continues, the Trustee may require
a Paying Agent to pay all money held by it to the Trustee. The Company at
any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than
the Company or a Subsidiary) shall have no further liability for the money.
If the Company or a Subsidiary acts as Paying Agent, it shall segregate and
hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent. Upon any bankruptcy or reorganization proceedings
relating to the Company, the Trustee shall serve as Paying Agent for the
Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of all Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall 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
Section 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not
be transferred as a whole except by the Depositary to a nominee of the
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<PAGE>21
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; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Company for Definitive Notes prior
to (x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon the occurrence of either of the preceding events in (i)
or (ii) above, Definitive Notes shall be issued in such names as the
Depositary shall instruct the Trustee. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.11 hereof.
Every Note authenticated and 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 thereof in the form of a beneficial interest
in the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided,
however, that prior to the expiration of the Restricted Period transfers
of beneficial interests in the Temporary Regulation S Global Note may
not be made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred only to Persons who take
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this
Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of
beneficial interests (other than transfers of beneficial interests in a
<PAGE>
<PAGE>22
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 ore exchange referred to in
(1) above; provided that in no event shall Definitive Notes be issued
upon the transfer or exchange of beneficial interests in the Regulation
S Temporary Global Note prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates required
pursuant to Rule 903 under the Securities Act. Upon an Exchange Offer by
the Company in accordance with Section 2.06(f) hereof, the requirements
of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture, the Notes and otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of the
relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. 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 Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; 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
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<PAGE>23
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;
(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
<PAGE>
<PAGE>24
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) 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;
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<PAGE>25
(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 Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
(A) exchanged for a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities Act or
(B) transferred to a Person who takes delivery thereof in the form of a
Definitive Note prior to the conditions set forth in clause (A) above or
unless the transfer is pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
(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
<PAGE>
<PAGE>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
<PAGE>
<PAGE>27
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 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
<PAGE>
<PAGE>28
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:
(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.
<PAGE>
<PAGE>29
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication order
in accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to
subparagraphs (ii)(B), (ii)(D) or (iii) above.
(e) Transfer and Exchange of Definitive Notes. 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
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<PAGE>30
and the holder, in the case of an exchange, or the transferee, in
the case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(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
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<PAGE>31
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.
(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:
"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
<PAGE>
<PAGE>32
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."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE
PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time
as all beneficial interests in a particular Global Note have been exchanged
for Definitive Notes or a particular Global Note has been redeemed,
repurchased or cancelled in whole and not in part, each such Global Note
shall be returned to or retained and cancelled 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.
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(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register
the transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of
such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
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 cancelled 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.
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If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date
such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by
the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Trustee knows are so owned
shall be so disregarded.
Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written
order of the Company signed by two Officers of the Company. Temporary Notes
shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes and as
shall be reasonably acceptable to the Trustee. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Notes
in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11. Cancellation.
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 cancelled Notes (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all cancelled 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
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<PAGE>35
Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Company shall notify
the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Note and the date of the proposed payment. The Company shall
fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days
before the special record date, the Company (or, upon the written request of
the Company, the Trustee in the name and at the expense of the Company) shall
mail or cause to be mailed to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
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. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date,
an Officers' Certificate setting forth (i) the clause of this Indenture
pursuant to which the redemption shall occur, (ii) the redemption date, (iii)
the principal amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption shall be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any,
on which the Notes are listed, or, if the Notes are not so listed, on a pro
rata basis, by lot or 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
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<PAGE>36
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.
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
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redemption date at the redemption price. A notice of redemption may not be
conditional.
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. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.7, the
Notes shall not be redeemable at the Company's option prior to May 1, 2002.
Thereafter, the Notes shall be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on May 1 of the years
indicated below:
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing clause (a), during the first 36
months after the Issue Date, the Company may on any one or more occasions
redeem up to an aggregate of 35% of the Notes originally issued at a
redemption price of 109.375% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
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date, with the net cash proceeds of one or more Equity Offerings by the
Company or the net cash proceeds of one or more Equity Offerings by Holdings
that are contributed to the Company as common equity capital; provided that
at least 65% of the Notes originally issued remain outstanding immediately
after the occurrence of each such redemption; and provided, further, that any
such redemption must occur within 120 days of the date of the closing of such
Equity Offering.
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.
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;
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<PAGE>39
(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).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company
in accordance with the terms of this Section 3.09. The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in
any case not later than five days after the Purchase Date) mail or deliver to
each tendering Holder an amount equal to the purchase price of the Notes
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written
request from the Company shall authenticate and mail or deliver such new Note
to such Holder, in a principal amount equal to any unpurchased portion of the
Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
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ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the
due date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Company shall pay all Liquidated Damages, if any, in
the same manner on the dates and in the amounts set forth in the Registration
Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the
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 Liquidated Damages
(without regard to any applicable grace period) at the same rate to the
extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Company shall give prompt written notice to the Trustee
of the location, and any change in the location, of such office or agency.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with
Section 2.03.
Section 4.03. Reports.
Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any Notes
are outstanding, the Company shall furnish to the Holders of Notes:
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<PAGE>41
(a) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in
the footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition
and results of operations of the Company and its Restricted Subsidiaries
separately from the financial condition and results of operations of the
Unrestricted Subsidiaries of the Company) and, with respect to the
annual information only, a report thereon by the Company's certified
independent accountants, and
(b) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such
reports, in each case within the time periods specified in the
Commission's rules and regulations.
In addition, whether or not required by the rules and regulations
of the Commission, following the consummation of the Exchange Offer
contemplated by the Registration Rights Agreement, the Company shall file a
copy of all such information and reports with the Commission for public
availability within the time periods set forth in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request. In addition, the Company and the Subsidiary Guarantors have
agreed that, for so long as any Notes remain outstanding and are required to
bear the Private Placement Legend, they shall furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Subject to the provisions of Article 7, delivery of such reports,
information and documents to the Trustee is for informational proposes 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
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<PAGE>42
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.
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
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<PAGE>43
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 after the Issue Date (excluding Restricted Payments
permitted by clauses (ii) through (vii) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the
Issue Date to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (ii) 100% of
the aggregate net cash proceeds received by the Company from a
contribution to its common equity capital or the issue or sale since the
Issue Date of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to
a 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 the Issue Date 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
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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
the Issue Date 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 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.
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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) this Indenture and
the 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,
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
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<PAGE>46
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 term Indebtedness under
Credit Facilities (and the guarantee thereof by the Guarantors);
provided that the aggregate principal amount of all term Indebtedness
outstanding under all Credit Facilities after giving effect to such
incurrence, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (i), does not exceed an amount equal to $175.0 million less
the aggregate amount of all repayments, optional or mandatory, of the
principal of any Indebtedness under a Credit Facility (or any such
Permitted Refinancing Indebtedness) that have been made since the Issue
Date;
(ii) the incurrence by the Company of revolving credit Indebtedness
and letters of credit (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) under Credit Facilities (and
the guarantee thereof by the Guarantors); provided that the aggregate
principal amount of all revolving credit Indebtedness outstanding under
all Credit Facilities after giving effect to such incurrence, including
all Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this clause (ii),
does not exceed an amount equal to $100.0 million less the aggregate
amount of all Net Proceeds of Asset Sales applied to repay any such
Indebtedness (including any such Permitted Refinancing Indebtedness)
pursuant to Section 4.10;
(iii) the incurrence by the Company and its Restricted Subsidiaries
of the Existing Indebtedness;
(iv) the incurrence by the Company and the Guarantors of the Notes
and the Subsidiary Guarantees;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment used
in the business of the Company or such Restricted Subsidiary, in an
aggregate principal amount, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (v), not to exceed $30.0
million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of
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<PAGE>47
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
(vi), does not exceed $10.0 million;
(vii) 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;
(viii) 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;
(ix) 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;
(x) 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;
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(xi) 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;
(xii) 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;
(xiii) 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 (xiii), and the issuance of preferred stock by Unrestricted
Subsidiaries;
(xiv) 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
(xv) 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 incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this clause (xv),
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 (xv) above
or is entitled to be incurred pursuant to the first paragraph of this Section
4.09, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this 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.
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 a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) 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
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<PAGE>49
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
be required to make an offer to all Holders of Notes (an "Asset Sale Offer")
to purchase the maximum principal amount of Notes that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in this Indenture. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company may use any remaining Excess Proceeds
for general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
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 $3.0
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 $10.0 million, an opinion as
to the fairness to the Holders of such Affiliate Transaction from a financial
point of view issued by an 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
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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, 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 $1.0 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 Issue Date; and (vi) any Restricted Payment that is
permitted by the provisions of Section 4.07.
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 Issue Date, 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
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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 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 organ-
izational 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 Liquidated Damages 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
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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
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
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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.
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 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.
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
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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 Liquidated Damages, 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 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, together with the principal
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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.
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.
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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 Restricted 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.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of this Indenture, an
equivalent premium shall also become and be immediately due and payable to
the extent permitted by law upon the acceleration of the Notes. If an Event
of Default occurs prior to May 1, 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Notes prior to May
1, 2002, then the premium specified below shall also become immediately due
and payable to the extent permitted by law upon the acceleration of the Notes
during the twelve-month period ending on May 1 of the years indicated below:
Year Percentage
---- ----------
1997 . . . . . . . . . . . . . . . . . 115.562%
1998 . . . . . . . . . . . . . . . . . 113.833%
1999 . . . . . . . . . . . . . . . . . 112.104%
2000 . . . . . . . . . . . . . . . . . 110.375%
2001 . . . . . . . . . . . . . . . . . 108.646%
2002 . . . . . . . . . . . . . . . . . 106.917%
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.
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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 Liquidated Damages, 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 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.
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Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due
dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own
name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and 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:
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First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages,
if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the 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 man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the 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
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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
(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.
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(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.
(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 Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of
the Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice
of the Default or Event of Default within 90 days after it occurs. Except in
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the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice
if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of
the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted).
The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall
also transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee when the Notes
are listed on any stock exchange.
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 Trustee shall have a lien prior to the Notes as to all property
and funds held by it hereunder for any amount owing it or any predecessor
Trustee pursuant to this Section 7.07, except with respect to funds held in
trust for the benefit of the Holders of particular Notes.
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The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(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
Section 313(b)(2) to the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Company. The Holders of
Notes of a majority in principal amount of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under 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
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jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee,
provided all sums owing to the Trustee hereunder have been paid and subject
to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement
of the Trustee pursuant to this Section 7.08, the Company's obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States
of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or
examination by federal or state authorities and that has a combined capital
and surplus of at least $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 Section 310(a)(1), (2) and (5). The Trustee is subject
to TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes
upon compliance with the conditions set forth below in this Article 8.
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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 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.
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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
Liquidated Damages, 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 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,
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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 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,
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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.
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 supple-
mental 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
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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).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supple-
mental 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 cancelled 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
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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);
(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
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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.
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 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, 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 Indebtedness and (b) any securities issued in exchange
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for Senior Indebtedness 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 Indebtedness have
been paid in full if:
(i) a default in the payment of any principal or other Obligations
with respect to Designated Senior Indebtedness occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Senior Indebtedness; or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of the
Designated Senior Indebtedness to accelerate its maturity and the
Trustee receives a notice of the default (a "Payment Blockage Notice")
from 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 365 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 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
180 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 Indebtedness 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
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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 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
Indebtedness (or a trustee or agent on behalf of such holder) to establish
that such notice has been given by a holder of Senior Indebtedness (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 Indebtedness 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 Indebtedness 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 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:
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(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.
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.
<PAGE>
<PAGE>75
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.
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 Section 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:
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: Andrew R. Keller (Fax: 212-455-2502)
<PAGE>
<PAGE>76
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: 212-815-5915)
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 acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also
be so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder
or any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection
of TIA Section 312(c).
Section 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.
<PAGE>
<PAGE>77
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 Section 314(a)(4)) shall comply with the
provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes 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.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
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.
<PAGE>
<PAGE>78
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.
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.
[Signatures on following pages]
<PAGE>
<PAGE>S-1
SIGNATURES
Dated as of April 30, 1997
L-3 Communications Corporation
By:____________________________
Name:
Title:
The Bank of New York
By: /s/ Marie E. Trimboli
Name: Marie E. Trimboli
Title: Assistant Treasurer
<PAGE>
<PAGE>S-2
SIGNATURES
Dated as of April 30, 1997
L-3 Communications Corporation
By: /s/ M.T. Strianese
Name: Michael T. Strianese
Title: Vice President and Controller
The Bank of New York
By:______________________________
Name:
Title:
<PAGE>
<PAGE>A1-1
EXHIBIT A-1
(Face of Note)
CUSIP/CINS ____________
10 3/8% Senior Subordinated Notes due 2007
No. ___ $__________
L-3 COMMUNICATIONS CORPORATION
promises to pay to __________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on May 1, 2007.
Interest Payment Dates: May 1, and November 1
Record Dates: April 15, and October 15
Dated: _______________, 199__
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:
The Bank of New York,
as Trustee
By:__________________________________
<PAGE>
<PAGE>A1-2
(Back of Note)
10 3/8% Senior Subordinated Notes due 2007
[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.]<F1>
[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.]<F2>
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
____________________
[FN]
<F1> This paragraph should be included only if the Note is issued in global
form.
<F2> This paragraph should be included only if applicable pursuant to the
terms of the Indenture.
<PAGE>
<PAGE>A1-3
1. Interest. L-3 Communications Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Note at 10 3/8% per annum from April 30, 1997 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages, if any, semi-annually on May 1 and November 1 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 the date of issuance; provided that if there is
no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1997. 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 the
rate then in effect 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 Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 15 or
October 15 next (whether or not a Business Day) preceding the Interest
Payment Date, even if such Notes are cancelled after such record date and on
or before such Interest Payment Date, except as provided in Section 2.12 of
the Indenture with respect to defaulted interest. The Notes will be payable
as to principal, premium and Liquidated Damages, if any, and interest at the
office or agency of the Company maintained for such purpose within The City
and State of New York, or, at the option of the Company, payment of interest
and Liquidated Damages may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Liquidated Damages on, all Global
Notes and all other Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent 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 April 30, 1997 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
<PAGE>
<PAGE>A1-4
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited
to $225.0 million in aggregate principal amount, plus amounts, if any, issued
to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2
hereof.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this paragraph 5, the
Notes shall not be redeemable at the Company's option prior to May 1, 2002.
Thereafter, the Notes shall be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on May 1 of the years
indicated below:
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing, during the first 36 months
after the date of the Indenture, the Company may on any one or more occasions
redeem up to an aggregate of 35% of the Notes originally issued at a
redemption price of 109.375% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds of one or more Equity Offerings by the
Company or the net cash proceeds of one or more Equity Offerings by Holdings
that are contributed to the Company as common equity capital; provided that
at least 65% of the Notes originally issued remain outstanding immediately
after the occurrence of each such redemption; and provided, further, that any
such redemption must occur within 120 days of the date of the closing of such
Equity Offering.
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 principle 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.
<PAGE>
<PAGE>A1-5
(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 Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% thereof on the date fixed for the closing of such offer or 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to
the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset
Sale Offer from the Company prior to any related purchase date and may elect
to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. 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
<PAGE>
<PAGE>A1-6
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 Liquidated
Damages 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 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 Issue Date, 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; 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 Restricted 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.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted
by law upon the acceleration of the Notes. If an Event of Default occurs
<PAGE>
<PAGE>A1-7
prior to May 1, 2002 by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to May 1, 2002, then the premium
specified in the Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
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, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
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 A/B Exchange Registration Rights Agreement dated as of April 30,
1997, 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. The internal law of the State of New York shall govern and be used
to construe this Note, without regard to the principles of conflicts of laws.
<PAGE>
<PAGE>A1-8
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)
<PAGE>
<PAGE>A1-9
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.
<PAGE>
<PAGE>A1-10
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.
<PAGE>
<PAGE>A1-11
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE<F3>
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 Amount of Amount of this Signature of
decrease in increase in Global Note authorized
Principal Principal following such officer of
Date of Amount of this Amount of this decrease (or Trustee or Note
Exchange Global Note Global Note increase) Custodian
- -------- --------------- --------------- --------------- --------------
____________________
[FN]
<F3> This should be included only if the Note is issued in global form.
<PAGE>
<PAGE>A2-1
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
CUSIP/CINS __________
10 3/8% Senior Subordinated Notes due 2007
No. ___ $__________
L-3 Communications Corporation
promises to pay to ____________________________________________________
or registered assigns,
the principal sum of ___________________________________________________
Dollars on ___________, 2007.
Interest Payment Dates: May 1, and November 1
Record Dates: April 15, and October 15
Dated: _______________, 199__
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:
The Bank of New York,
as Trustee
By:__________________________________
<PAGE>
<PAGE>A2-2
(Back of Regulation S Temporary Global Note)
10 3/8% Senior Subordinated Notes due 2007
[THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.]<F1>
[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.]<F2>
[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.]<F3>
____________________
[FN]
<F1> This paragraph should be included only if applicable pursuant to the
terms of the Indenture.
<F2> This paragraph should be included only if the Note is issued in global
form.
<F3> This paragraph should be included only if applicable pursuant to the
terms of the Indenture.
<PAGE>
<PAGE>A2-3
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. L-3 Communications Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Note at 10 3/8% per annum from April 30, 1997 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages, if any, semi-annually on May 1 and November 1 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 the date of issuance; provided that if there is
no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1997. 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 the
rate then in effect 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 Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one
or more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be
entitled to the same benefits as other Senior Subordinated Notes under the
Indenture.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 15 or
October 15 (whether or not a Business Day) next preceding the Interest
Payment Date, even if such Notes are cancelled 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, interest and Liquidated Damages at the office or
agency of the Company maintained for such purpose within The City and State
of New York, or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Liquidated Damages on, all Global
Notes and all other Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent if such Holders
shall be registered Holders of at least $25,000 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.
<PAGE>
<PAGE>A2-4
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 April 30, 1997 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited
to $225.0 million in aggregate principal amount, plus amounts, if any, issued
to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2
hereof.
5. Optional Redemption.
The Notes shall not be redeemable at the Company's option prior to
May 1, 2002. Thereafter, the Notes shall be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on May 1 of the
years indicated below:
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . 100.000%
Notwithstanding the foregoing, during the first 36 months after the
date of the Indenture, the Company may on any one or more occasions redeem up
to an aggregate of 35% of the Notes originally issued at a redemption price
of 109.375% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the redemption date, with the net
cash proceeds of one or more Equity Offerings by the Company or the net cash
proceeds of one or more Equity Offerings by Holdings that are contributed to
the Company as common equity capital; provided that at least 65% of the Notes
originally issued remain outstanding immediately after the occurrence of each
such redemption; and provided, further, that any such redemption must occur
within 120 days of the date of the closing of such Equity Offering.
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
<PAGE>
<PAGE>A2-5
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% thereof on the date of purchase or 101% of the
aggregate principal amount at maturity 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 Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% thereof on the date fixed for the closing of such offer or 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to
the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset
Sale Offer from the Company prior to any related purchase date and may elect
to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. 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.
This Regulation S Temporary Global Note is exchangeable in whole or
in part for one or more Global Notes only (i) on or after the termination of
the 40-day restricted period (as defined in Regulation S) and (ii) upon
presentation of certificates (accompanied by an Opinion of Counsel, if
applicable) required by Article 2 of the Indenture. Upon exchange of this
Regulation S Temporary Global Note for one or more Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.
<PAGE>
<PAGE>A2-6
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 Liquidated
Damages 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 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 Issue Date, 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; 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 Restricted Subsidiary, all outstanding
<PAGE>
<PAGE>A2-7
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.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted
by law upon the acceleration of the Notes. If an Event of Default occurs
prior to May 1, 2002 by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to May 1, 2002, then the premium
specified in the Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
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, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
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 A/B Exchange Registration Rights Agreement dated as of April 30,
1997, between the Company and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
<PAGE>
<PAGE>A2-8
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. The internal law of the State of New York shall govern and be used
to construe this Note, without regard to the principles of conflicts of laws.
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)
<PAGE>
<PAGE>A2-9
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.
____________________________________________________________________________
Your Signature:____________________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
<PAGE>
<PAGE>A2-10
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.
<PAGE>
<PAGE>A2-11
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE<F4>
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
Principal
Amount of Amount of Amount of this Signature of
decrease in increase in Global Note authorized
Principal Principal following such officer of
Date of Amount of this Amount of this decrease (or Trustee or Note
Exchange Global Note Global Note increase) Custodian
- -------- --------------- --------------- --------------- --------------
____________________
[FN]
<F4> This should be included only if the Note is issued in global form.
<PAGE>
<PAGE>1
FORM OF CERTIFICATE OF TRANSFER
L-3 Communications Corporation
600 Third Avenue, 34th Floor,
New York, New York 10016
[Registrar address block]
Re: 10 3/8% Senior Subordinated Notes, Due 2007.
Reference is hereby made to the Indenture, dated as of April 30,
1997 (the "Indenture"), between L-3 Communications Corporation, as issuer
(the "Company"), 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 securities market and neither such Transferor nor any
<PAGE>
<PAGE>2
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 Indenture, the
<PAGE>
<PAGE>3
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.
<PAGE>
<PAGE>4
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: ______________, ____
<PAGE>
<PAGE>5
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.
<PAGE>
<PAGE>1
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:10 3/8% Senior Subordinated Notes, Due 2007
(CUSIP ________)
Reference is hereby made to the Indenture, dated as of April __,
1997 (the "Indenture"), between L-3 Communications Corporation, as issuer
(the "Company"), 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
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.
<PAGE>
<PAGE>2
(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
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
<PAGE>
<PAGE>3
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 Holder]
By: _________________________
Name:
Title:
Dated: _____________, ______
<PAGE>
<PAGE>1
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: 10 3/8% Senior Subordinated Notes, Due 2007
Reference is hereby made to the Indenture, dated as of April 30,
1997 (the "Indenture"), between L-3 Communications Corporation, as issuer
(the "Company"), 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 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.
<PAGE>
<PAGE>2
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: _____________, ______
<PAGE>
<PAGE>E-1
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"), 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 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 Senior 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
<PAGE>
<PAGE>E-2
(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 Senior 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 Senior 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 Senior Note
on which a Subsidiary Guarantee is endorsed, the Subsidiary
Guarantee shall be valid nevertheless.
(d) The delivery of any Senior 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 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) 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
<PAGE>
<PAGE>E-3
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.
(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
<PAGE>
<PAGE>E-4
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; 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.
<PAGE>
<PAGE>E-5
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 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
<PAGE>
<PAGE>E-6
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 Senior 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. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
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.
<PAGE>
<PAGE>E-7
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:
Dated: ____________ ___, ____ The Bank of New York
as Trustee
By: _______________________________
Name:
Title:
<PAGE>
<PAGE>F-1
EXHIBIT F
Form of Notation on Senior Subordinated Note Relating to Subsidiary Guarantee
Each Guaranteeing Subsidiary (as defined in the Supplemental
Indenture (the "Supplemental Indenture") among _______________ and
_________________, (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 Senior 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 Senior Note upon which
this Subsidiary Guarantee is noted have been executed by the Trustee under
<PAGE>
<PAGE>F-2
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.
[GUARANTEEING SUBSIDIARY]
By:_______________________
Name:
Title:
EXHIBIT 4.2
CUSIP/CINS ____________
10 3/8% Senior Subordinated Notes due 2007
No. ___ $__________
L-3 COMMUNICATIONS CORPORATION
promises to pay to __________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on May 1, 2007.
Interest Payment Dates: May 1, and November 1
Record Dates: April 15, and October 15
Dated: _______________, 199__
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:
The Bank of New York,
as Trustee
By:__________________________________
<PAGE>
<PAGE>2
(Back of Note)
10 3/8% Senior Subordinated Notes due 2007
[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.]<F1>
[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.]<F2>
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
____________________
[FN]
<F1> This paragraph should be included only if the Note is issued in global
form.
<F2> This paragraph should be included only if applicable pursuant to the
terms of the Indenture.
<PAGE>
<PAGE>3
1. Interest. L-3 Communications Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Note at 10 3/8% per annum from April 30, 1997 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages, if any, semi-annually on May 1 and November 1 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 the date of issuance; provided that if there is
no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1997. 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 the
rate then in effect 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 Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 15 or
October 15 next (whether or not a Business Day) preceding the Interest
Payment Date, even if such Notes are cancelled after such record date and on
or before such Interest Payment Date, except as provided in Section 2.12 of
the Indenture with respect to defaulted interest. The Notes will be payable
as to principal, premium and Liquidated Damages, if any, and interest at the
office or agency of the Company maintained for such purpose within The City
and State of New York, or, at the option of the Company, payment of interest
and Liquidated Damages may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Liquidated Damages on, all Global
Notes and all other Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent 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 April 30, 1997 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
<PAGE>
<PAGE>4
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited
to $225.0 million in aggregate principal amount, plus amounts, if any, issued
to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2
hereof.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this paragraph 5, the
Notes shall not be redeemable at the Company's option prior to May 1, 2002.
Thereafter, the Notes shall be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on May 1 of the years
indicated below:
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing, during the first 36 months
after the date of the Indenture, the Company may on any one or more occasions
redeem up to an aggregate of 35% of the Notes originally issued at a
redemption price of 109.375% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds of one or more Equity Offerings by the
Company or the net cash proceeds of one or more Equity Offerings by Holdings
that are contributed to the Company as common equity capital; provided that
at least 65% of the Notes originally issued remain outstanding immediately
after the occurrence of each such redemption; and provided, further, that any
such redemption must occur within 120 days of the date of the closing of such
Equity Offering.
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 principle 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.
<PAGE>
<PAGE>5
(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 Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% thereof on the date fixed for the closing of such offer or 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to
the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset
Sale Offer from the Company prior to any related purchase date and may elect
to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. 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
<PAGE>
<PAGE>6
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 Liquidated
Damages 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 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 Issue Date, 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; 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 Restricted 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.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted
by law upon the acceleration of the Notes. If an Event of Default occurs
<PAGE>
<PAGE>7
prior to May 1, 2002 by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to May 1, 2002, then the premium
specified in the Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
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, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
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 A/B Exchange Registration Rights Agreement dated as of April 30,
1997, 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. The internal law of the State of New York shall govern and be used
to construe this Note, without regard to the principles of conflicts of laws.
<PAGE>
<PAGE>A8
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)
<PAGE>
<PAGE>9
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.
<PAGE>
<PAGE>10
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.
<PAGE>
<PAGE>11
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE<F3>
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 Amount of Amount of this Signature of
decrease in increase in Global Note authorized
Principal Principal following such officer of
Date of Amount of this Amount of this decrease (or Trustee or Note
Exchange Global Note Global Note increase) Custodian
- -------- --------------- --------------- --------------- --------------
____________________
[FN]
<F3> This should be included only if the Note is issued in global form.
EXHIBIT 4.3
CUSIP/CINS ____________
10 3/8% Series B Senior Subordinated Notes due 2007
No. ___ $__________
L-3 COMMUNICATIONS CORPORATION
promises to pay to __________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on May 1, 2007.
Interest Payment Dates: May 1, and November 1
Record Dates: April 15, and October 15
Dated: _______________, 199__
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:
The Bank of New York,
as Trustee
By:__________________________________
<PAGE>
<PAGE>2
(Back of Note)
10 3/8% Senior Subordinated Notes due 2007
[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.]<F2>
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
____________________
[FN]
<F1> This paragraph should be included only if the Note is issued in global
form.
<F2> This paragraph should be included only if applicable pursuant to the
terms of the Indenture.
<PAGE>
<PAGE>3
1. Interest. L-3 Communications Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Note at 10 3/8% per annum from April 30, 1997 until maturity and shall pay
the Liquidated Damages payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages, if any, semi-annually on May 1 and November 1 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 the date of issuance; provided that if there is
no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be November 1, 1997. 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 the
rate then in effect 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 Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 15 or
October 15 next (whether or not a Business Day) preceding the Interest
Payment Date, even if such Notes are cancelled after such record date and on
or before such Interest Payment Date, except as provided in Section 2.12 of
the Indenture with respect to defaulted interest. The Notes will be payable
as to principal, premium and Liquidated Damages, if any, and interest at the
office or agency of the Company maintained for such purpose within The City
and State of New York, or, at the option of the Company, payment of interest
and Liquidated Damages may be made by check mailed to the Holders at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Liquidated Damages on, all Global
Notes and all other Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent 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 April 30, 1997 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such
<PAGE>
<PAGE>4
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited
to $225.0 million in aggregate principal amount, plus amounts, if any, issued
to pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2
hereof.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this paragraph 5, the
Notes shall not be redeemable at the Company's option prior to May 1, 2002.
Thereafter, the Notes shall be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on May 1 of the years
indicated below:
Year Percentage
---- ----------
2002 . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing, during the first 36 months
after the date of the Indenture, the Company may on any one or more occasions
redeem up to an aggregate of 35% of the Notes originally issued at a
redemption price of 109.375% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds of one or more Equity Offerings by the
Company or the net cash proceeds of one or more Equity Offerings by Holdings
that are contributed to the Company as common equity capital; provided that
at least 65% of the Notes originally issued remain outstanding immediately
after the occurrence of each such redemption; and provided, further, that any
such redemption must occur within 120 days of the date of the closing of such
Equity Offering.
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 principle 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.
<PAGE>
<PAGE>5
(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 Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% thereof on the date fixed for the closing of such offer or 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to
the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset
Sale Offer from the Company prior to any related purchase date and may elect
to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. 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
<PAGE>
<PAGE>6
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 Liquidated
Damages 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 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 Issue Date, 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; 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 Restricted 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.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted
by law upon the acceleration of the Notes. If an Event of Default occurs
<PAGE>
<PAGE>7
prior to May 1, 2002 by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to May 1, 2002, then the premium
specified in the Indenture shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
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, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
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 A/B Exchange Registration Rights Agreement dated as of April 30,
1997, 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. The internal law of the State of New York shall govern and be used
to construe this Note, without regard to the principles of conflicts of laws.
<PAGE>
<PAGE>A8
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)
<PAGE>
<PAGE>9
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.
<PAGE>
<PAGE>10
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.
<PAGE>
<PAGE>11
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE<F3>
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 Amount of Amount of this Signature of
decrease in increase in Global Note authorized
Principal Principal following such officer of
Date of Amount of this Amount of this decrease (or Trustee or Note
Exchange Global Note Global Note increase) Custodian
- -------- --------------- --------------- --------------- --------------
____________________
[FN]
<F3> This should be included only if the Note is issued in global form.
Exhibit 5
September 10, 1997
L-3 Communications Corporation
600 Third Avenue
New York, New York 10016
Ladies and Gentlemen:
We have acted as special counsel for L-3 Communications
Corporation, a Delaware corporation (the "Company"), in connection with the
Registration Statement on Form S-4 (the "Registration Statement") filed by
the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the issuance by the Company of $225,000,000 aggregate principal amount of
its 10-3/8% Series B Senior Subordinated Notes due 2007 (the "Exchange
Notes"). The Exchange Notes are to be offered by the Company in exchange for
(the "Exchange") $225,000,000 aggregate principal amount of its outstanding
10-3/8% Senior Subordinated Notes due 2007 (the "Notes"). The Notes have
been, and the Exchange Notes will be, issued under an Indenture dated as of
April 30, 1997 (the "Indenture") between the Company and The Bank of New
York, as Trustee (the "Trustee").
We have examined the Registration Statement and the Indenture
which has been filed with the Commission as an Exhibit to the Registration
Statement. In addition, we have examined, and have relied as to matters of
fact upon, the originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such other
<PAGE>
<PAGE>
and further investigations, as we have deemed relevant and necessary as a
basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, assuming the Indenture has been duly authorized
and validly executed and delivered by the parties thereto, when (i) the
Indenture has been duly qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and (ii) the Exchange Notes have been duly
executed, authenticated, issued and delivered in accordance with the provisions
of the Indenture upon the Exchange, we are of the opinion that the Exchange
Notes will constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms and entitled
to the benefits of the Indenture.
Our opinion set forth in the preceding sentence is 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.
We are members of the Bar of the State of New York and we do
not express any opinion herein concerning any law other than the law of the
State of New York, the federal law of the United States and the Delaware
General Corporation Law.
<PAGE>
<PAGE>
We hereby consent to the use of this opinion as an Exhibit to
the Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus included therein.
Very truly yours,
/s/SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
===============================================================================
EXHIBIT 10.1
L-3 COMMUNICATIONS CORPORATION,
a Delaware corporation
_________________________
CREDIT AGREEMENT
dated as of April 30, 1997
_________________________
$275,000,000
Credit Facility
________________________
LEHMAN COMMERCIAL PAPER INC.,
as Arranger, Syndication Agent and Documentation Agent,
and
BANK OF AMERICA NT & SA
as Administrative Agent
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . .
1.2 Other Definitional Provisions . . . . . . . . . . . . . . .
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . .
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . .
2.2 Procedure for Borrowing . . . . . . . . . . . . . . . . . .
2.3 Commitment Fee . . . . . . . . . . . . . . . . . . . . . .
2.4 Termination or Reduction of Revolving Credit
Commitments . . . . . . . . . . . . . . . . . . . . . .
2.5 Repayment of Loans; Evidence of Debt . . . . . . . . . . .
2.6 Optional Prepayments; Mandatory Prepayments and
Reduction of Commitments . . . . . . . . . . . . . . .
2.7 Conversion and Continuation Options . . . . . . . . . . . .
2.8 Minimum Amounts and Maximum Number of Tranches . . . . . .
2.9 Interest Rates and Payment Dates . . . . . . . . . . . . .
2.10 Computation of Interest and Fees . . . . . . . . . . . . .
2.11 Inability to Determine Interest Rate . . . . . . . . . . .
2.12 Pro Rata Treatment and Payments . . . . . . . . . . . . .
2.13 Illegality . . . . . . . . . . . . . . . . . . . . . . . .
2.14 Requirements of Law . . . . . . . . . . . . . . . . . . .
2.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
2.16 Indemnity . . . . . . . . . . . . . . . . . . . . . . . .
2.17 Replacement of Lenders . . . . . . . . . . . . . . . . . .
2.18 Certain Fees . . . . . . . . . . . . . . . . . . . . . . .
2.19 Certain Rules Relating to the Payment of Additional
Amounts . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . .
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . .
3.2 Procedure for Issuance of Letters of Credit . . . . . . . .
3.3 Fees, Commissions and Other Charges . . . . . . . . . . . .
3.4 L/C Participation . . . . . . . . . . . . . . . . . . . . .
3.5 Reimbursement Obligation of the Borrower . . . . . . . . .
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . .
3.7 Letter of Credit Payments . . . . . . . . . . . . . . . . .
3.8 Application . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . .
4.1 Financial Condition . . . . . . . . . . . . . . . . . . . .
4.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . .
4.3 Corporate Existence; Compliance with Law . . . . . . . . .
4.4 Corporate Power; Authorization; Enforceable Obligations . .
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . .
4.6 No Material Litigation . . . . . . . . . . . . . . . . . .
4.7 No Default . . . . . . . . . . . . . . . . . . . . . . . .
4.8 Ownership of Property; Liens . . . . . . . . . . . . . . .
4.9 Intellectual Property . . . . . . . . . . . . . . . . . . .
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
4.11 Federal Regulations . . . . . . . . . . . . . . . . . . .
4.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . .
4.13 Investment Company Act; Other Regulations . . . . . . . .
4.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . .
4.15 Purpose of Loans . . . . . . . . . . . . . . . . . . . . .
4.16 Environmental Matters . . . . . . . . . . . . . . . . . .
4.17 Collateral Documents . . . . . . . . . . . . . . . . . . .
4.18 Accuracy and Completeness of Information . . . . . . . . .
4.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . .
4.20 Labor Matters . . . . . . . . . . . . . . . . . . . . . .
4.21 Transaction Documents . . . . . . . . . . . . . . . . . .
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . .
5.1 Conditions to Initial Loans . . . . . . . . . . . . . . . .
5.2 Conditions to Each Extension of Credit . . . . . . . . . .
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . .
6.1 Financial Statements . . . . . . . . . . . . . . . . . . .
6.2 Certificates; Other Information . . . . . . . . . . . . . .
6.3 Payment of Obligations . . . . . . . . . . . . . . . . . .
6.4 Conduct of Business and Maintenance of Existence . . . . .
6.5 Maintenance of Property; Insurance . . . . . . . . . . . .
6.6 Inspection of Property; Books and Records; Discussions . .
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . .
6.8 Environmental Laws . . . . . . . . . . . . . . . . . . . .
6.9 Further Assurances . . . . . . . . . . . . . . . . . . . .
6.10 Additional Collateral . . . . . . . . . . . . . . . . . .
6.11 Interest Rate Protection . . . . . . . . . . . . . . . . .
6.12 Foreign Jurisdictions . . . . . . . . . . . . . . . . . .
6.13 Novation; Federal Assignment of Claims . . . . . . . . . .
6.14 Maintenance of Collateral; Alterations . . . . . . . . . .
6.15 Arrangements with the Seller . . . . . . . . . . . . . . .
SECTION 7. NEGATIVE COVENANTS
7.1 Financial Condition Covenants . . . . . . . . . . . . . . .
7.2 Limitation on Indebtedness . . . . . . . . . . . . . . . .
7.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . .
7.4 Limitation on Guarantee Obligations . . . . . . . . . . . .
7.5 Limitation on Fundamental Changes . . . . . . . . . . . . .
7.6 Limitation on Sale of Assets . . . . . . . . . . . . . . .
7.7 Limitation on Dividends . . . . . . . . . . . . . . . . . .
7.8 Limitation on Capital Expenditures . . . . . . . . . . . .
7.9 Limitation on Investments, Loans and Advances . . . . . . .
7.10 Limitation on Optional Payments and Modifications of
Instruments and Agreements . . . . . . . . . . . . . .
7.11 Limitation on Transactions with Affiliates . . . . . . . .
7.12 Limitation on Sales and Leasebacks . . . . . . . . . . . .
7.13 Limitation on Changes in Fiscal Year . . . . . . . . . . .
7.14 Limitation on Negative Pledge Clauses . . . . . . . . . .
7.15 Limitation on Lines of Business . . . . . . . . . . . . .
7.16 Designated Senior Debt . . . . . . . . . . . . . . . . . .
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
SECTION 9. THE AGENTS; THE ARRANGER . . . . . . . . . . . . . . . . . .
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . .
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . .
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . .
9.4 Reliance by Agents . . . . . . . . . . . . . . . . . . . .
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . .
9.6 Non-Reliance on Agents and Other Lenders . . . . . . . . .
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . .
9.8 Agents, in Their Individual Capacities . . . . . . . . . .
9.9 Successor Administrative Agent . . . . . . . . . . . . . .
9.10 The Arranger . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . .
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . .
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . .
10.4 Survival of Representations and Warranties . . . . . . . .
10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . .
10.6 Successors and Assigns; Participation and Assignments . .
10.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . .
10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . .
10.9 Severability . . . . . . . . . . . . . . . . . . . . . . .
10.10 Integration . . . . . . . . . . . . . . . . . . . . . . .
10.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . .
10.12 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . .
10.13 Acknowledgements . . . . . . . . . . . . . . . . . . . .
10.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . .
10.15 Confidentiality . . . . . . . . . . . . . . . . . . . . .
<PAGE>
EXHIBITS
Exhibit A-1 Form of Tranche A Term Note
Exhibit A-2 Form of Tranche B Term Note
Exhibit A-3 Form of Tranche C Term Note
Exhibit A-4 Form of Revolving Credit Note
Exhibit A-5 Form of Swing Line Note
Exhibit B-1 Form of Parent Guarantee
Exhibit B-2 Form of Subsidiary Guarantees
Exhibit B-3 Form of Parent Pledge and Security Agreement
Exhibit B-4 Form of Borrower Pledge and Security Agreement
Exhibit B-5 Form of Subsidiary Pledge and Security Agreement
Exhibit C-1 Form of Mortgage
Exhibit C-2 Form of Deed of Trust
Exhibit D-1 Form of Legal Opinion of Simpson Thacher and
Bartlett
Exhibit D-2 Form of Legal Opinion of Fried, Frank, Harris,
Shriver & Jacobson
Exhibit E Form of Borrowing Certificate
Exhibit F Form of Certificate of Non-U.S. Lender
Exhibit G Form of Assignment and Acceptance
SCHEDULES
Schedule I Lenders and Commitments
Schedule II Pricing Grid
Schedule III Real Property to be Mortgaged
Schedule IV Transaction Documents
Schedule 4.4 Required Consents
Schedule 4.5 No Legal Bar
Schedule 4.6 Material Litigation
Schedule 4.8 Real Property
Schedule 4.9 Intellectual Property Claims
Schedule 4.10 Taxes
Schedule 4.14 Subsidiaries
Schedule 4.17 Filing Jurisdictions
Schedule 6.5 Insurance
Schedule 6.10 Certain Real Property
Schedule 7.2(f) Existing Indebtedness
Schedule 7.3(f) Existing Liens
Schedule 7.4 Existing Guarantee Obligations
Schedule 7.9(c) Officers
Schedule 7.9(g) Existing Investments
<PAGE>
CREDIT AGREEMENT, dated as of April 30, 1997, 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 lenders from time to time parties hereto (the
"Lenders"), Lehman Commercial Paper Inc. ("LCPI") as arranger (in such
capacity, the "Arranger"), LCPI, as syndication agent (in such capacity, the
"Syndication Agent"), LCPI, as documentation agent (in such capacity, the
"Documentation Agent") and Bank of America NT & SA ("BOA"), as administrative
agent for the Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower is a party to the Transaction Agreement,
dated as of March 28, 1997 (as amended through the date hereof the
"Transaction Agreement"), by and among Lockheed Martin Corporation, a
Maryland corporation (the "Seller"), the Borrower, Lehman Brothers Capital
Partners III, L.P. ("Capital Partners") and its Affiliates, Frank C. Lanza
and Robert V. LaPenta;
WHEREAS, pursuant to the Transaction Agreement, on the Closing
Date: (i) the Seller, on behalf of itself and its various transferor
subsidiaries, will transfer (the "Asset Contribution") to the Borrower, on
behalf of and at the direction of Holdings, the Transferred Assets (as
defined in the Transaction Agreement); (ii) Holdings will issue to the Seller
6,980,000 shares of its Class A Common Stock par value $.01 per share; (iii)
Holdings will pay the Seller $479,835,000 in cash (subject to adjustment as
provided in the Transaction Agreement) (the "Cash Consideration"); and (iv)
the Borrower, on behalf of and at the direction of Holdings, will assume the
Assumed Liabilities (as defined in the Transaction Agreement);
WHEREAS, Holdings' obligation to pay the Cash Consideration will be
financed with (i) an investment of not less than $79,835,000 in Holdings
Class A Common Stock (the "Equity Investment"), of which (x) $64,835,000 will
be provided by Capital Partners and (y) $7,500,000 will be provided by each
of Frank C. Lanza and Robert J. LaPenta, (ii) the issuance and sale by the
Borrower of senior subordinated debt securities for cash proceeds of at least
$225.0 million (the "Securities Offering") and (iii) senior debt financing;
WHEREAS, the Borrower has requested the Lenders to extend credit to
it (i) to finance a portion of the Cash Consideration to be paid by Holdings
in connection with the Asset Contribution and (ii) for working capital and
general corporate purposes of the Borrower and its Subsidiaries after the
Closing Date; and
WHEREAS, the Lenders are willing to extend such credit to the
Borrower upon and subject to the terms and conditions hereafter set forth;
NOW, THEREFORE, parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
<PAGE>
"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(a) or (b),
as the case may be, and the compliance certificate with respect to such
financial statements furnished pursuant to subsection 6.2(c). For
purposes of determining the Applicable Margin and the Commitment Fee
Rate, the first "Adjustment Date" shall mean the date on which the
financial statements for the fiscal quarter ended September 30, 1997
furnished pursuant to subsection 6.1(b) and the related compliance
certificate furnished pursuant to subsection 6.2(c) are delivered to the
Administrative Agent pursuant to subsection 6.1(b) and 6.2(c),
respectively.
"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) in the case of Revolving Credit
Loans, 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.
"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) the Applicable
Margins commencing on the Closing Date shall be those set forth in
Schedule II opposite a Debt Ratio captioned "greater than or equal to
4.75" until the first Adjustment Date, (b) the Applicable Margins
determined for any Adjustment Date (including the first Adjustment Date)
shall remain in effect until a subsequent Adjustment Date for which the
Debt Ratio falls within a different level and (c) 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 or equal to 4.75," 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.
<PAGE>
"Asset Contribution": as defined in the recitals to this
Agreement.
"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.
"Base Rate": means, 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
San Francisco, California, 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.)
"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 and Security Agreement": the Borrower Pledge and
Security Agreement substantially in the form of Exhibit B-4, 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, any day on which dealings are
carried on in the applicable London interbank market.
<PAGE>
"Capital Expenditures" shall mean, 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": as defined in the recitals to this Agreement.
"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.
"Cash Consideration": as defined in the recitals to this
Agreement.
"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 Rating 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, 60% of the
Capital Stock of Holdings, determined on a fully diluted basis; or
<PAGE>
(ii) the Principals or their Related Parties, as a whole,
shall at any time cease to own, determined on a fully diluted
basis, sufficient shares of the Capital Stock of Holdings,
determined on a fully diluted basis, to elect a majority of the
Board of Directors of Holdings and the Borrower or otherwise cease
to have the right or ability, by voting power, contract or
otherwise, to elect or designate for election a majority of the
Board of Directors of Holdings and the Borrower; or
(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.
"Class": (i) Lenders having Tranche A Term Loan Exposure and/or
Revolving Loan Exposure (taken together as a single class), (ii) Lenders
having Tranche B Term Loan Exposure and (iii) Lenders having Tranche C
Term Loan Exposure.
"Closing Date": the date on which the conditions precedent set
forth in subsection 5.1 shall be 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 Security Document.
"Commitment": as to any Lender, such Lender's Tranche A Term Loan
Commitment, Tranche B Term Loan Commitment, Tranche C Term Loan
Commitment and Revolving Credit Commitment.
"Commitment Letter": the Commitment Letter, dated as of April 2,
1997, among Holdings, the Borrower and LCPI, as the same may be amended,
supplemented or otherwise modified from time to time.
"Commitment Fee Rate": at any time, the rates per annum set forth
on Schedule II under the relevant column heading opposite the level of
the Debt Ratio most recently determined; provided that (a) the
Commitment Fee Rate commencing on the Closing Date shall be that set
forth in Schedule II opposite a Debt Ratio captioned "greater than or
equal to 4.75" until the first Adjustment Date, (b) the Commitment Fee
Rate determined for any Adjustment Date (including the first Adjustment
Date) shall remain in effect until a subsequent Adjustment Date for
which the Debt Ratio falls within a different level and (c) 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 or equal to 4.75," in either case, until the
date of delivery of such financial statements and compliance
certificate.
<PAGE>
"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).
"Commitment Period": the period from and including the date hereof
to but not including the Revolving Loan Termination Date or such earlier
date on which the Revolving Credit Commitments shall terminate as
provided herein.
"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.
"Consolidated EBITDA": as of the last day of any fiscal quarter,
Consolidated Net Income (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 such period, plus (i) Consolidated Cash Interest Expense
for such period, plus (ii) to the extent deducted in computing such
Consolidated Net Income, the sum of income taxes, depreciation and
amortization for the four fiscal quarters ended on such date; provided
that for any calculation of Consolidated EBITDA for any fiscal period
ending during the first three full fiscal quarters following March 31,
1997, Consolidated EBITDA shall be deemed to be Consolidated EBITDA from
March 31, 1997 to the last day of such period multiplied by a fraction
the numerator of which is 365 and the denominator of which is the number
of days from March 31, 1997 to the last day of 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 such period, determined on a
consolidated basis in accordance with GAAP for the four fiscal quarters
ended on such date; provided that for any calculation of Consolidated
Cash Interest Expense for any fiscal period ending during the first
three full fiscal quarters following March 31, 1997, Consolidated Cash
Interest Expense shall be deemed to be Consolidated Cash Interest
Expense from March 31, 1997 to the last day of such period multiplied by
a fraction the numerator of which is 365 and the denominator of which is
the number of days from March 31, 1997 to the last day of such period.
"Consolidated Net Income": for any fiscal period, net income of
the Borrower and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Debt": at any date, all Indebtedness of the
Borrower and its Subsidiaries outstanding on such date for borrowed
money or the deferred purchase price of property, including, without
<PAGE>
limitation, in respect of Financing Leases but excluding Indebtedness
permitted pursuant to subsection 7.2(h).
"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).
"Constitutional Documents": as to any Person, the articles or
certificate of incorporation and by-laws, partnership agreement or other
organizational documents of such Person.
"Contingent Purchase Price Receipts": at any date, the aggregate
cash received by Holdings, the Borrower or any of their Subsidiaries in
respect of any purchase price adjustment made pursuant to, or in
connection with, the Transaction Agreement subsequent to the date
hereof.
"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.
"Credit Documents": this Agreement, the Notes, the Applications,
the Guarantees and the Security Documents.
"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 on such date to (b) Consolidated EBITDA.
"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.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"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. Sections 9601 et
seq.; the Toxic Substance Control Act, 15 U.S.C. Sections 9601
<PAGE>
et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section
1802 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq.; the Clean Water Act; 33 U.S.C. Sections 1251
et seq.; the Clean Air Act, 42 U.S.C. Sections 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 Stockholder Agreement, the Subscription
Agreements and the Option Agreements.
"Equity Investment": as defined in the recitals to this Agreement.
"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 Loans": Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.
"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 1/16th of 1%) determined
by the Administrative Agent as follows:
Eurodollar Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage": 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").
"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 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, non-cash
<PAGE>
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 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, (vii) non-cash ordinary losses
and (viii) Contingent Purchase Price Receipts in excess of $10,000,000
over (b) the sum, without duplication, of (i) the aggregate amount of
permitted 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 Revolving Credit Loans not accompanied by reductions of the
Commitments), (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 such fiscal
year, (vi) non-cash gains in connection with asset dispositions whether
or not constituting extraordinary gains and (vii) non-cash ordinary
gains.
"Excess Cash Flow Payment Date": in respect of any fiscal year,
the date on which the Borrower is required to deliver audited financial
statements for such fiscal year to each Lender pursuant to subsection
6.1(a).
"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.
"Final Maturity Date": March 31, 2006.
"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 from on the Closing Date.
"GC Notice Recipient": with respect to any Government Contract,
the true and correct (x) contracting officer, or the head of the
respective U.S. government department or agency, (y) surety or sureties
upon the bond or bonds, if any, in connection with such Government
Contract, and (z) disbursing officer, if any designated in such
Government Contract to make payment.
"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
<PAGE>
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, 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 Guarantees.
"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, (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.
"Indenture": the Indenture between the Borrower and The Bank of
New York, as trustee, pursuant to which the Subordinated Notes are
issued.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.
<PAGE>
"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 or six 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; and
(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 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;
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 Termination Date of such Loan shall end on the
Termination Date of such Loan;
(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
<PAGE>
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.
"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
agree to act as Issuing Lender at the request of the Company.
"LCPI": as defined in the recitals to this Agreement.
"L/C Commitment": $15,000,000.
"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 aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under Letters
of Credit which have not then been reimbursed pursuant to subsection
3.5.
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
"Lender" and "Lenders": the persons identified as Lenders and
listed on the signature pages of this Agreement (including the Issuing
Bank and the Swing Line 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.
"Letters of Credit": as defined in subsection 3.1.
"LIBOR": the rate of interest per annum determined by the
Administrative Agent to be the arithmetic mean (rounded upward to the
next 1/16th of 1%) of the rates of interest per annum notified to the
Administrative Agent by each Reference Bank as the rate of interest at
which dollar deposits in the approximate amount of the amount of the
Loan to be made or continued as, or converted into, a Eurodollar Rate
Loan by such Reference Bank and having a maturity comparable to such
Interest Period would be offered to major banks in the London interbank
market at their request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of 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
<PAGE>
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.
"Lockheed Martin Predecessor Businesses": the businesses to be
transferred by the Seller and its Subsidiaries to the Borrower
pursuant to the Transaction Agreement.
"Loral Acquired Businesses": that portion of the Lockheed Martin
Predecessor Businesses consisting of the Seller's Wide Band Systems
Division and Products Group, comprised of ten autonomous
operations, acquired by the Seller effective April 1, 1996, as part
of the acquisition by the Seller of the defense electronics
business of Loral 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, (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 or (c) the Transaction.
"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.
"Mortgages": the collective reference to the mortgages and deeds
of trust to be executed and delivered by the Borrower or the appropriate
Subsidiary, substantially in the forms of Exhibit C-1 and C-2 (with such
changes therein as may be required to reflect different laws and
practices in the various jurisdictions in which the Mortgages are to be
recorded), covering the parcels of real property identified in Schedule
III, as the same may be amended, supplemented or otherwise modified from
time to time.
"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 the Borrower 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;
<PAGE>
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.
"Non-Excluded Taxes": as defined in subsection 2.15.
"Non-U.S. Lender": as defined in subsection 2.15(b).
"Notes": The Tranche A Term Notes, the Tranche B Term Notes, the
Tranche C Term Notes, the Revolving Credit Notes and the Swing Line Note
(or any of them).
"Novation Agreement": as defined in the Transaction Agreement.
"Obligations": as defined in the Guarantees and the Security
Documents.
"Option Agreements": the Option Agreements between Holdings and
each of Frank C. Lanza and Robert V. LaPenta, each dated as of the
Closing Date.
"Parent Distributions": as defined in the Parent Guarantee.
"Parent Guarantee": the 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 and Security Agreement": the Parent Pledge and
Security 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.
"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 pay
franchise taxes and other fees required to maintain its legal existence
and 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
<PAGE>
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 (C) from and
after May 1, 1999, dividends by the Borrower to Holdings payable solely
out of Excess Cash Flow which is not required to be applied to the
prepayment of Loans and the permanent reduction of Commitments pursuant
to subsection 2.6(a)(iii), provided that (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, (ii) the aggregate amount of dividends paid by the
Borrower to Holdings under this clause (C) since the date of this
Agreement does not exceed $5,000,000 and (iii) Holdings promptly uses
the proceeds of such dividends to repurchase Capital Stock of Holdings.
"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.
"Principals": each of Lehman Brothers Holdings, Inc., Capital
Partners, the Seller, Frank C. Lanza and Robert V. LaPenta.
"Pro Forma Financial Statements": as defined in subsection 4.1(c).
"Properties": as defined in subsection 4.17.
"Purchase Agreement": the Purchase Agreement, dated as of April
25, 1997, among the Borrower and each of Lehman Brothers, Inc. and
BancAmerica Securities, Inc.
"Receivables": as defined in the Security Documents.
"Reference Bank": the Bank of America NT & SA.
"Register": as defined in subsection 10.6(d).
"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.
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 3.5 for amounts
drawn under Letters of Credit.
"Refunded Swing Line Loan": as defined in subsection 2.1(b)(iii).
"Related Party": with respect to the Principals, (a) any
controlling stockholder, 51% (or more) owned Subsidiary, or spouse or
<PAGE>
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 Lenders": at any time, Lenders the Commitment
Percentages 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 Lenders
having Tranche A Term Loan Exposure, Lenders having or holding 66 2/3%
of the aggregate Tranche A Term Loan Exposure of all Lenders, (b) for
the Class Lenders having Revolving Credit Loan Exposure, Lenders having
or holding 66 2/3% of the aggregate Revolving Credit Loan Exposure of
all Lenders, (c) for the Class Lenders having Tranche B Term Loan
Exposure, Lenders having or holding 66 2/3% of the aggregate Tranche B
Term Loan Exposure of all Lenders and (d) for the Class Lenders having
Tranche C Term Loan Exposure, Lenders having or holding 66 2/3% of the
aggregate Tranche C Term Loan Exposure of all 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 or treasurer of the
Borrower.
"Restricted Government Contracts": as defined in the Security
Documents.
"Revolving Credit Commitment": the commitment of a Lender, as set
forth on Schedule I hereto, to make Revolving Credit Loans to the
Borrower pursuant to Subsection 2.1(a)(iv) 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 initially be $100,000,000.
"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)(iv).
<PAGE>
"Revolving Credit Loan Exposure": with respect to any Lender as of
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 aggregate Letter of Credit
Usage in respect of all Letters of Credit issued by that Lender (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 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.
"Revolving Credit Notes": (i) the promissory notes of the Borrower
issued pursuant to subsection 2.5(i)(iv) on the Closing Date to evidence
the Revolving Credit Loans of any Lender and (ii) any promissory notes
issued by the Borrower pursuant to Section 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-4 annexed hereto, as they may be amended, supplemented or otherwise
modified from time to time.
"Revolving Loan Termination Date": March 31, 2003.
"Security Documents": the collective reference to the Parent
Pledge and Security Agreement, the Borrower Pledge and Security
Agreement and the Subsidiary Pledge and Security Agreement, the
Mortgages and all 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.
"Securities Offering": as defined in the recitals to this
Agreement.
"Seller": as defined in the recitals to this Agreement.
"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, 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 Seller, the
Principals and any other party that may from time to time become a party
<PAGE>
thereto as provided therein, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subordinated Debt": indebtedness outstanding under the
Subordinated Notes.
"Subordinated Debt Documents": the Indenture, the Registration
Rights Agreement, the Purchase Agreement and the Subordinated Notes.
"Subordinated Notes": the Borrower's 10 3/8% Senior Subordinated
Notes, due 2007 (the "Initial Subordinated Notes"), issued on the
Closing Date, and the 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 Subordinated Debt
Documents.
"Subscription Agreements": the Common Stock Subscription
Agreements between Holdings and each of Frank C. Lanza, Robert V.
LaPenta, Capital Partners and the Seller, each dated as of the Closing
Date.
"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 Guarantees": the Subsidiary Guarantees substantially
in the form of Exhibit B-2, to be executed and delivered by the
Borrower's Subsidiaries, as the same may be amended, supplemented or
otherwise modified.
"Subsidiary Pledge and Security Agreement": the Subsidiary Pledge
and Security Agreement substantially in the form of Exhibit B-5, to be
executed and delivered by the Borrower's Subsidiaries, as the same may
be amended, supplemented or otherwise modified.
"Swing Line Lender": means Bank of America NT & SA.
"Swing Line Loans": as defined in Section 2.1(b).
"Term Loan Commitment or Term Loan Commitments": the commitments
of a Lender to make any Term Loans pursuant to subsection 2.1(a); and
Term Loan Commitments means such commitments of all Lenders in the
aggregate, which shall initially be $175,000,000.
"Term Loan Exposure": with respect to a Lender of a Type of Term
Loan as of any date of determination, (i) prior to the termination of
all of a Lender's Commitment with respect to the Term Loans of such
Type, that Lender's Commitment with respect to Term Loans of such Type
(or any portion thereof that has not been terminated) plus the
outstanding principal amount of the Term Loan of such Type of that
Lender, and (ii) after the termination of all of a Lender's Commitment
<PAGE>
with respect to the Term Loans of such Type, the outstanding principal
amount of the Term Loan of such Type of that Lender.
"Term Loans": one or more of the Tranche A Term Loans, the Tranche
B Term Loans or the Tranche C Term Loans.
"Termination Date": (i) with respect to Tranche A Term Loans,
March 31, 2003; (ii) with respect to Tranche B Term Loans, March 31,
2005; (iii) with respect to Tranche C Term Loans, March 31, 2006; and
(iv) with respect to Revolving Credit Loans and Swing Line Loans, the
Revolving Credit Termination Date.
"Tranche": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall
originally have been made on the same day); Tranches may be identified
as "Eurodollar Tranches".
"Tranche A Term Lender": any Lender having a Tranche A Term Loan
Commitment or a Tranche A Term Loan outstanding.
"Tranche A Term Loans": the Loans made by Tranche A Term Lenders
to the Borrower pursuant to subsection 2.1(a)(i).
"Tranche A Term Loan Commitment": the commitment of a Tranche A
Term Lender, as set forth on Schedule I hereto, to make a Tranche A Term
Loan to the Borrower pursuant to subsection 2.1(a)(i); and "Tranche A
Term Loan Commitments" means such commitments of all Tranche A Term
Lenders in the aggregate, which shall initially be $100,000,000.
"Tranche A Term Notes": (i) the promissory notes of the Borrower
issued pursuant to subsection 2.5(i)(i) on the Closing Date to evidence
the Tranche A 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 Tranche A Term Loan Commitments and Tranche A Term
Loans of any Lender, 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.
"Tranche B Term Lenders": any Lender having a Tranche B Term Loan
Commitment or a Tranche B Term Loan outstanding.
"Tranche B Term Loans": the Loans made by Tranche B Term Lenders
to the Borrower pursuant to subsection 2.1(a)(ii).
"Tranche B Term Loan Commitment": the commitment of a Tranche B
Term Lender to make a Tranche B Term Loan to the Borrower pursuant to
subsection 2.1(a)(ii); and "Tranche B Term Loan Commitments" means such
commitments of all Tranche B Term Lenders in the aggregate, which shall
initially be $45,000,000.
"Tranche B Term Notes": (i) the promissory notes of the Borrower
issued pursuant to subsection 2.5(i)(ii) on the Closing Date to evidence
the Tranche B 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 Tranche B Term Loan Commitments and Tranche B Term
Loans of any Lender, in each case substantially in the form of
<PAGE>
Exhibit A-2 annexed hereto, as they may be amended, supplemented or
otherwise modified from time to time.
"Tranche C Term Lender": any Lender having a Tranche C Term Loan
Commitment or a Tranche C Term Loan outstanding.
"Tranche C Term Loan Commitment": the commitment of a Tranche C
Term Lender, as set forth on Schedule I hereto, to make a Tranche C Term
Loan to the Borrower pursuant to subsection 2.1(a)(iii); and "Tranche C
Term Loan Commitments" means such commitments of all Tranche C Term
Lenders in the aggregate, which shall initially be $30,000,000.
"Tranche C Term Loans": the Loans made by Tranche C Term Lenders to
the Borrower pursuant to subsection 2.1(a)(iii).
"Tranche C Term Notes": (i) the promissory notes of the Borrower
issued pursuant to subsection 2.5(i)(iii) on the Closing Date to
evidence the Tranche C 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 Tranche C Term Loan Commitments and
Tranche C Term Loans of any Lender, in each case substantially in the
form of Exhibit A-3 annexed hereto, as they may be amended, supplemented
or otherwise modified from time to time.
"Transaction": the transactions contemplated by the Transaction
Documents.
"Transaction Agreement": as defined in the recitals to this
Agreement.
"Transaction Documents": (i) the Transaction Agreement, the
Schedules thereto and the documents set forth on Schedule IV hereto,
(ii) the Equity Documents and (iii) the Subordinated Debt Documents.
"Transferee": as defined in subsection 10.6(f).
"Type": a Revolving Loan, a Tranche A Term Loan, a Tranche B Term
Loan, a Tranche C Term Loan or a Swing Line Loan.
"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.
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
<PAGE>
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.
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 Section
2.1(a) as applicable to the Borrower.
(i) Tranche A Term Loans. Each Tranche A Term Lender
severally agrees to make a term loan to the Borrower on the Closing
Date in an aggregate principal amount which does not exceed the
amount of such Lender's Tranche A Term Loan Commitment. Amounts
borrowed under this subsection 2.1(a)(i) and subsequently repaid
may not be reborrowed.
(ii) Tranche B Term Loans. Each Tranche B Term Lender
severally agrees to make a term loan to the Borrower on the Closing
Date in an aggregate principal amount which does not exceed the
amount of such Lender's Tranche B Term Loan Commitment. Amounts
borrowed under this subsection 2.1(a)(ii) and subsequently repaid
may not be reborrowed.
(iii) Tranche C Term Loans. Each Tranche C Term Lender
severally agrees to make a term loan to the Borrower on the Closing
Date in an aggregate principal amount which does not exceed the
amount of such Lender's Tranche C Term Loan Commitment. Amounts
borrowed under this subsection 2.1(a)(iii) and subsequently repaid
may not be reborrowed.
(iv) Revolving Credit Loans. Each Revolving Credit Lender
severally agrees to make revolving credit loans to the Borrower,
from time to time during the 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 made
by such Lender (or in which such Lender has purchased a
participation) and such Lender's Revolving Credit Commitment
Percentage of the then outstanding L/C Obligations, does not exceed
the amount of such Lender's Revolving Credit Commitment. During
the 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.
(b) (i) Subject to the terms and conditions hereof, the Swing
Line Lender agrees to make swing line loans (individually, a "Swing Line
Loan"; collectively, the "Swing Line Loans") to the Borrower from time to
<PAGE>
time during the Commitment Period in an aggregate principal amount at any one
time outstanding not to exceed $10,000,000; provided, that no Swing Line Loan
shall be made if, after giving effect thereto and to the simultaneous use of
the proceeds thereof, 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 then
outstanding 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 $500,000 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 promissory
note of the Borrower, substantially in the form of Exhibit A-5 (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 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 with respect to Revolving Credit Loans of such Revolving Credit
Loan (the "Refunded Swing Line Loans") outstanding on the date such notice is
given. Unless any of the events described in subsection 8(f) 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
Lender 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 subsection
8(f) 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 with respect to
<PAGE>
Revolving Credit Loans. 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 by the Swing Line Lender 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 with respect to such
Loan.
2.2 Procedure for Borrowing. The Borrower may borrow under the
Commitments during the 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 Swing Line Loan or 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 (other than
Swing Line Loans), $2,000,000 or a whole multiple of $500,000 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 $1,000,000 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
<PAGE>
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 crediting the account of the
Borrower on the books of such office 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
Commitment Period to and including the Revolving Loan Termination Date,
computed at the Commitment Fee Rate on the average 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 Revolving Loan
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.
2.5 Repayment of Loans; Evidence of Debt.
(a) Scheduled Payments of Tranche A Term Loans. The
Borrower shall make principal payments on the Tranche A Term Loans on March
31, June 30, September 30 and December 31 of each year, commencing on June
30, 1997, in the amounts set forth opposite the corresponding Payment Period
as follows:
Scheduled Repayment
Payment Period of Tranche A Term Loans
-------------- -----------------------
Closing Date - 6/30/97 $ 800,000
7/1/97 - 9/30/97 800,000
10/1/97 - 12/31/97 800,000
1/1/98 - 3/31/98 800,000
4/1/98 - 6/30/98 800,000
7/1/98 - 9/30/98 1,250,000
10/1/98 - 12/31/98 1,250,000
1/1/99 - 3/31/99 1,250,000
4/1/99 - 6/30/99 1,250,000
<PAGE>
7/1/99 - 9/30/99 3,750,000
10/1/99 - 12/31/99 3,750,000
1/1/00 - 3/31/00 3,750,000
4/1/00 - 6/30/00 3,750,000
7/1/00 - 9/30/00 5,250,000
10/1/00 - 12/31/00 5,250,000
1/1/01 - 3/31/01 5,250,000
4/1/01 - 6/30/01 5,250,000
7/1/01 - 9/30/01 6,750,000
10/1/01 - 12/31/01 6,750,000
1/1/02 - 3/31/02 6,750,000
4/1/02 - 6/30/02 6,750,000
7/1/02 - 9/30/02 9,333,333.33
10/1/02 - 12/31/02 9,333,333.33
1/1/03 - 3/31/03 9,333,333.34
$ 100,000,000;
provided that the scheduled installments of principal of the Tranche A Term
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term Loans in accordance with subsection 2.6 (as
provided in such subsection); and provided further that the Tranche A Term
Loans and all other amounts owed hereunder with respect to the Tranche A Term
Loans shall be paid in full no later than March 31, 2003, and the final
installment payable by the Borrower in respect of the Tranche A Term Loans on
such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by the Borrower under
this Agreement with respect to the Tranche A Term Loans.
(b) Scheduled Payments of Tranche B Term Loans. The
Borrower shall make principal payments on the Tranche B Term Loans on March
31, June 30, September 30 and December 31 of each year, commencing on June
30, 1997, in the amounts set forth opposite the corresponding Payment Period
as follows:
Scheduled Repayment
Payment Period of Tranche B Term Loans
-------------- -----------------------
Closing Date - 6/30/97 $ 100,000
7/1/97 - 9/30/97 100,000
10/1/97 - 12/31/97 100,000
1/1/98 - 3/31/98 100,000
4/1/98 - 6/30/98 100,000
7/1/98 - 9/30/98 125,000
10/1/98 - 12/31/98 125,000
1/1/99 - 3/31/99 125,000
4/1/99 - 6/30/99 125,000
7/1/99 - 9/30/99 125,000
10/1/99 - 12/31/99 125,000
<PAGE>
1/1/00 - 3/31/00 125,000
4/1/00 - 6/30/00 125,000
7/1/00 - 9/30/00 125,000
10/1/00 - 12/31/00 125,000
1/1/01 - 3/31/01 125,000
4/1/01 - 6/30/01 125,000
7/1/01 - 9/30/01 125,000
10/1/01 - 12/31/01 125,000
1/1/02 - 3/31/02 125,000
4/1/02 - 6/30/02 125,000
7/1/02 - 9/30/02 125,000
10/1/02 - 12/31/02 125,000
1/1/03 - 3/31/03 125,000
4/1/03 - 6/30/03 125,000
7/1/03 - 9/30/03 5,000,000
10/1/03 - 12/31/03 5,000,000
1/1/04 - 3/31/04 5,000,000
4/1/04 - 6/30/04 5,000,000
7/1/04 - 9/30/04 7,333,333.33
10/1/04 - 12/31/04 7,333,333.33
1/1/05 - 3/31/05 7,333,333.33
$ 45,000,000;
provided that the scheduled installments of principal of the Tranche B Term
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term Loans in accordance with subsection 2.6 (as
provided in such subsection); and provided further that the Tranche B Term
Loans and all other amounts owed hereunder with respect to the Tranche B Term
Loans shall be paid in full no later than March 31, 2005, and the final
installment payable by the Borrower in respect of the Tranche B Term Loans on
such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by the Borrower under
this Agreement with respect to the Tranche B Term Loans.
(c) Scheduled Payments of Tranche C Term Loans. The
Borrower shall make principal payments on the Tranche C Term Loans on March
31, June 30, September 30 and December 31 of each year, commencing on June
30, 1997, in the amounts set forth opposite the corresponding Payment Period
as follows:
Scheduled Repayment
Payment Period of Tranche C Term Loans
-------------- -----------------------
Closing Date - 6/30/97 $ 100,000
7/1/97 - 9/30/97 100,000
10/1/97 - 12/31/97 100,000
1/1/98 - 3/31/98 100,000
4/1/98 - 6/30/98 100,000
<PAGE>
7/1/98 - 9/30/98 125,000
10/1/98 - 12/31/98 125,000
1/1/99 - 3/31/99 125,000
4/1/99 - 6/30/99 125,000
7/1/99 - 9/30/99 125,000
10/1/99 - 12/31/99 125,000
1/1/00 - 3/31/00 125,000
4/1/00 - 6/30/00 125,000
7/1/00 - 9/30/00 125,000
10/1/00 - 12/31/00 125,000
1/1/01 - 3/31/01 125,000
4/1/01 - 6/30/01 125,000
7/1/01 - 9/30/01 125,000
10/1/01 - 12/31/01 125,000
1/1/02 - 3/31/02 125,000
4/1/02 - 6/30/02 125,000
7/1/02 - 9/30/02 125,000
10/1/02 - 12/31/02 125,000
1/1/03 - 3/31/03 125,000
4/1/03 - 6/30/03 125,000
7/1/03 - 9/30/03 125,000
10/1/03 - 12/31/03 125,000
1/1/04 - 3/31/04 125,000
4/1/04 - 6/30/04 125,000
7/1/04 - 9/30/04 125,000
10/1/04 - 12/31/04 125,000
1/1/05 - 3/31/05 125,000
4/1/05 - 6/30/05 125,000
7/1/05 - 9/30/05 8,666,666.66
10/1/05 - 12/31/05 8,666,666.67
1/1/06 - 3/31/06 8,666,666.67
$ 30,000,000;
provided that the scheduled installments of principal of the Tranche C Term
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term Loans in accordance with subsection 2.6 (as
provided in such subsection); and provided further that the Tranche C Term
Loans and all other amounts owed hereunder with respect to the Tranche C Term
Loans shall be paid in full no later than March 31, 2006, and the final
installment payable by the Borrower in respect of the Tranche C Term Loans on
such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by the Borrower under
this Agreement with respect to the Tranche C Term Loans.
(d) Payments on Revolving Credit and Swing Line Loans. The
Borrower hereby unconditionally promises to pay to the Administrative Agent
on the Revolving Credit Termination Date (or such earlier date on which the
Loans become due and payable pursuant to Section 8) (i) for the account of
each Revolving Credit Lender the then unpaid principal amount of each
Revolving Credit Loan of such Lender and (ii) for the account of the Swing
<PAGE>
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.
(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) Register. The Administrative Agent shall maintain the
Register pursuant to subsection 10.6(d), and a subaccount therein for each
Lender, in which shall be recorded (i) the amount of each Loan and each
Obligation evidenced by a Note made hereunder, the Type thereof, whether each
such Loan is a Base Rate Loan or a Eurodollar 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.
(h) Prima Facie Evidence. The entries made in the Register
and the 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 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.
(i) Notes. The Borrower agrees that the Borrower will
execute and deliver to each Lender a promissory note of the Borrower
evidencing (i) the Tranche A Term Loans of such Lender, substantially in the
form of Exhibit A-1 with appropriate insertions as to date and principal
amount (a "Tranche A Term Note"), (ii) the Tranche B Term Loans of such
Lender, substantially in the form of Exhibit A-2 with appropriate insertions
as to date and principal amount (a "Tranche B Term Note"), (iii) the Tranche
C Term Loans of such Lender substantially in the form of Exhibit A-3 with
appropriate insertions as to date and principal amount (a "Tranche C Term
Note") and (iv) the Revolving Credit Loans of such Lender, substantially in
the form of Exhibit A-4 with appropriate insertions as to date and principal
amount ("Revolving Credit Note"). A Note and the Obligation evidenced
thereby may be assigned or otherwise transferred in whole or in part only by
registration of such assignment or transfer of such Note and the Obligation
evidenced thereby in the Register (and each Note shall expressly so provide).
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 and the old Note shall be returned
by the Administrative Agent to the Borrower marked "cancelled." No
<PAGE>
assignment of a Note and the Obligation evidenced thereby shall be effective
unless it shall have been recorded in the Register by the Administrative
Agent as provided in this subsection 2.5(i).
2.6 Optional Prepayments; Mandatory Prepayments and
Reduction of Commitments. (a) Subject to subsection 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, 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 $1,000,000 in excess
thereof.
(b) (i) If, subsequent to the 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 applied toward the prepayment of the
Loans and permanent reduction of the Commitments as set forth in clause (iv)
of this subsection 2.6(b). 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, such Net
Proceeds shall be promptly applied toward the prepayment of the Loans and
permanent reduction of the Commitments as set forth in clause (iv) of this
subsection 2.6(b); provided that Net Proceeds from any Asset Sales 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 are not so used, 100% of such Net Proceeds
shall be applied toward the prepayment of the Loans and the permanent
reduction of the Commitments as set forth in clause (iv) 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.
(iii) If there is Excess Cash Flow for any fiscal year and
the Debt Ratio as of the last day of such fiscal year is greater than 3.5 to
1.0, 75% of such Excess Cash Flow shall be applied toward the prepayment of
the Loans and the permanent reduction of the Commitments as set forth in
clause (iv) of this subsection 2.6(b) on the Excess Cash Flow Payment Date
for such fiscal year. If there is Excess Cash Flow for any fiscal year and
the Debt Ratio as of the last day of such fiscal year is less than or equal
to 3.5 to 1.0, 50% of such Excess Cash Flow shall be applied toward the
prepayment of the Loans and the permanent reduction of the Commitments as set
forth in clause (iv) of this subsection 2.6(b) on the Excess Cash Flow
Payment Date for such fiscal year.
<PAGE>
(iv) Any mandatory prepayments of the Loans pursuant to
subsection 2.6 shall be applied (x) to the Tranche A Term Loans, the Tranche
B Term Loans and the Tranche C Term Loans on a pro rata basis to reduce the
unpaid scheduled installments of principal of each such Tranche of Term Loans
on a pro rata basis, and (y) thereafter to the permanent reduction of the
Revolving Credit Commitment; provided that, in the case of Tranche B Term
Loans and Tranche C Term Loans, so long as any Tranche A Term Loans are
outstanding, each of the Tranche B Term Lenders and the Tranche C Term
Lenders shall have the right to waive such Lender's right to receive any
portion of such prepayment. The Administrative Agent shall notify the
Tranche B Term Lenders and the Tranche C Term Lenders of such receipt and the
amount of the prepayment to be applied to each such Lender's Term Loans;
provided, that the Borrower shall use its reasonable efforts to notify the
Tranche B Term Lenders and the Tranche C Term Lenders of such waivable
mandatory prepayment three (3) Business Days prior to the payment to the
Administrative Agent of such waivable mandatory prepayment (it being
understood that the Borrower shall have no liabilities for failing to so
notify such Lenders). In the event any such Tranche B Term Lender or Tranche
C Term Lender desires to waive such Lender's right to receive any such
waivable mandatory prepayment, such Lender shall so advise the Administrative
Agent no later than the close of business on the Business Day immediately
following the date of such notice from the Administrative Agent. In the
event that any such Lender waives such Lender's right to any such waivable
mandatory prepayment, the Administrative Agent shall apply 50% of the amount
so waived by such Lender to prepay the Tranche A Term Loans to reduce unpaid
scheduled installments of principal of the Tranche A Term Loans on a pro rata
basis. The Administrative Agent shall return the remainder of the amount so
waived by such Lender to the Borrower. Revolving Credit Commitment
reductions made pursuant to subsections 2.6(b)(i), (ii) and (iii) shall be
applied to each Lender's Revolving Credit Commitment on a pro rata basis and
shall reduce permanently such Commitments.
(v) If after giving effect to any reduction of the
Revolving Credit Commitments under subsection 2.4, 2.5 or 2.6 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 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 satisfactory to the Administrative Agent established for the benefit
of the Revolving Credit Lenders.
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
on 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.
<PAGE>
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 on 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 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 $1,000,000 in excess
thereof. In no event shall there be more than 10 Eurodollar Tranches
outstanding 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.
(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
<PAGE>
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
(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
<PAGE>
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. Each payment (including each prepayment) by the Borrower on
account of principal of and interest on any Term Loans or the Revolving
Credit Loans 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, fees 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. The
Administrative Agent shall distribute such payments to the applicable Lenders
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 cancelled and (b) such Lender's Loans then outstanding as
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 1001 (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 4224 (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 F (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
<PAGE>
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 1001 or 4224, 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 F (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 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
<PAGE>
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 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
<PAGE>
subsections, or any Lender ceases to make Eurodollar Loans pursuant to
subsection 2.13, (b) any Lender becomes insolvent and its assets become
subject to a receiver, liquidator, trustee, custodian or other Person having
similar powers or (c) any Lender becomes a "Nonconsenting Lender"
(hereinafter defined), then the Borrower may, on ten 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 or other such entity,
(iii) in the event of a replacement of a Nonconsenting Lender or a Lender to
which the Borrower becomes obligated to pay additional amounts pursuant to
this subsection 2.17, 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 this subsection
2.17, as the case may be, and (iv) in no event shall the Lender hereby
replaced be required to pay or surrender to such 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 Company agrees to pay to the
Administrative Agent, for its own account, a non-refundable administration
fee in an amount previously agreed to with the Administrative Agent, payable
in advance on the Closing Date and annually in advance on each anniversary
thereof prior to the earlier of (x) the Final Maturity Date and (y) the
payment in full of all Loans and all other amounts owing under this
Agreement.
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 Section 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 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
<PAGE>
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 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, (i) the L/C Obligations would exceed the L/C
Commitment or (ii) 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 Letter of Credit shall (i) be denominated in
Dollars, (ii) be a standby letter of credit issued to support obligations of
the Borrower or any of its Subsidiaries, contingent or otherwise and (iii)
expire no later than the earlier of (x) the date that is 12 months after the
date of its issuance and (y) the fifth Business Day prior to the Revolving
Loan Termination Date; provided that any Letter of Credit with an expiration
date occurring up to twelve months after such Letter of Credit's date of
issuance may be automatically renewable for subsequent 12-month periods (but
in no event later than the fifth Business Day prior to the Revolving Loan
Termination Date).
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State
of New York.
(d) The Issuing Lender shall not at any time be obligated
to issue any Letter of Credit hereunder if 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.
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
Loan Termination Date by delivering to the Issuing Lender with a copy to the
<PAGE>
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 the Applicable Margin then in effect for Eurodollar
Loans, of the aggregate face amount of Letters of Credit outstanding, payable
in arrears on each L/C Fee Payment Date and on the Revolving Loan Termination
Date. Such fee shall be payable to the Administrative Agent to be shared
ratably among the Revolving Credit Lenders in accordance with their
respective Commitment Percentages with respect to Revolving Credit Loans. In
addition, the Borrower shall pay to the Administrative Agent, for the sole
account of the Issuing Lender, a fee equal to 0.1250% per annum of the
aggregate face amount of outstanding Letters of Credit payable quarterly in
arrears on each L/C Fee Payment Date and on the Revolving Loan Termination
Date.
(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 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 Credit
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
<PAGE>
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand
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 Credit Loans of the amount of such draft, or any part thereof,
which is not so 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 unreimbursed 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 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 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 Par-
ticipant, 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 and paid by the Issuing Lender
indicating the amount of (i) such draft so paid and (ii) any taxes, fees,
<PAGE>
charges or other costs or expenses incurred by the Issuing Lender in
connection with such payment. 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.
(b) Interest shall be payable on 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 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.
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), or (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
amount thereof. 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.
<PAGE>
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.
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. (a) The combined balance sheets
of the Lockheed Martin Predecessor Businesses as at December 31, 1996 and
December 31, 1995 and the related combined statements of operations and
changes in invested equity and cash flows for each of the three years in the
period ended December 31, 1996, audited by Coopers & Lybrand L.L.P., copies
of which have heretofore been furnished to each Lender, present fairly, in
all material respects, in accordance with GAAP the combined financial
condition of the Lockheed Martin Predecessor Businesses as of such dates, and
the combined results of their operations and changes in invested equity and
cash flows for each of the years in the period ended December 31, 1996. All
such financial statements have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
auditors and as disclosed therein). To the best of the Borrower's knowledge,
none of the Lockheed Martin Predecessor Businesses had, at the date of each
balance sheet referred to above, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or
unusual forward or long-term commitment, including, without limitation, any
material interest rate or foreign currency swap or exchange transaction,
which is not reflected in the foregoing statements or in the notes thereto or
expressly permitted to be incurred hereunder. To the best of the Borrower's
knowledge, during the period from December 31, 1996 to and including the date
hereof there has been no sale, transfer or other disposition by the Lockheed
Martin Predecessor Businesses of any material part of its business or
property (except as disclosed in the Transaction Documents) other than
pursuant to the Asset Contribution and no purchase or other acquisition of
any business or property (including any capital stock of any other Person)
material in relation to the consolidated financial condition of the Lockheed
Martin Predecessor Businesses at December 31, 1996.
(b) The combined statements of operations and cash flows
for the three months ended March 31, 1996 and the years ended December 31,
1995 and 1994 of the Loral Acquired Businesses, audited by Coopers & Lybrand
L.L.P., copies of which have heretofore been furnished to each Lender,
present fairly, in all material respects, in accordance with GAAP the
combined results of operations and cash flows of the Loral Acquired
Businesses for the three months ended March 31, 1996, and the years ended
December 31, 1995 and 1994. All such financial statements have been prepared
in accordance with GAAP applied consistently throughout the periods involved
(except as approved by such accountants and as disclosed therein). To the
best of the Borrower's knowledge, during the period from December 31, 1996 to
and including the date hereof, there has been no sale, transfer or other
disposition by any of the Loral Acquired Businesses of any material part of
its business or property (except as disclosed in the Transaction Documents)
other than pursuant to the Asset Contribution and no purchase or other
acquisition of any business or property (including any capital stock of any
<PAGE>
other Person) material in relation to the consolidated financial condition of
Loral Acquired Businesses at December 31, 1996.
(c) The unaudited pro forma condensed consolidated
financial statements of the Borrower, as of December 31, 1996 and for the
year then ended, certified by a Responsible Officer (the "Pro Forma Financial
Statements"), copies of which have been furnished to each Lender, comprise
the unaudited combined financial statements of (x) the Lockheed Martin
Predecessor Businesses as of December 31, 1996 and for the year then ended
and (y) the Loral Acquired Businesses for the three months ended March 31,
1996, adjusted to give effect (as if such events had occurred on such dates)
to the Asset Contribution and each of the other transactions contemplated by
the Transaction Documents. The Pro Forma Financial Statements have been
prepared based on good faith assumptions in accordance with Regulation S-X
under the Securities Exchange Act of 1934, as amended, and based on the best
information available to the Borrower, as of the date of delivery thereof,
and reflect on a pro forma basis the financial position and results of
operations of the Borrower and its Subsidiaries, as of December 31, 1996, and
for the year then ended.
4.2 No Change. Since December 31, 1996 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, or will
be on or before the date set forth in subsection 6.12, 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.
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
and Transaction 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 and Transaction Documents to which the Borrower and each
other Credit Party is a party, except those referred to in subsections 4.17
and 6.13 and those set forth on Schedule 4.4. This Agreement has been, and
each other Credit Document and Transaction 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 and Transaction
Document to which it is a party when executed and delivered will constitute,
<PAGE>
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 and
the Transaction 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 Security Documents.
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
(including after giving effect to the Asset Contribution and the other
transactions contemplated by the Transaction Documents) 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 all the real property listed on Schedule 4.8, (ii) has good record
and insurable title in fee simple to, or a valid leasehold interest in, all
its other material real property, (iii) has good title to, or a valid
leasehold interest in, all its other material property and (iv) none of such
property in clauses (i) through (iii) 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
<PAGE>
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 G or
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 the Seller 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 foregoing Sections with respect to any
Plan; no termination or, 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
<PAGE>
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 not 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. After giving effect to the consummation
of the Transaction, 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 finance a portion of the Transaction and related
fees and expenses in an aggregate amount not to exceed $185,000,000 and (ii)
for working capital purposes in the ordinary course of business of the
Borrower and its Subsidiaries.
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) 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,
<PAGE>
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. (a) Upon execution and
delivery thereof by the parties thereto, each of the Borrower Pledge and
Security Agreement, the Subsidiary Pledge and Security Agreement and the
Parent Pledge and Security 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, 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.
(b) Upon execution and delivery thereof by the parties
thereto, each of the Borrower Pledge and Security Agreement, the Subsidiary
Pledge and Security Agreement and the Parent Pledge and Security 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 collateral described therein. Uniform Commercial Code
financing statements have been filed in each of the jurisdictions listed on
Schedule 4.17, each such Agreement has been filed in each of the government
<PAGE>
offices listed on Schedule 4.17 or arrangements have been made for such
filing in such jurisdictions, and upon such filings, and upon the taking of
possession by the Administrative Agent of any such collateral the security
interests in which may be perfected only by possession, such security
interests will, subject to the existence of liens as permitted by the
definition of Permitted Liens, constitute perfected first priority liens on,
and security interests in, all right, title and interest of the debtor party
thereto in the collateral described therein, except, in the case of each of
the Borrower Pledge and Security Agreement, the Subsidiary Pledge and
Security Agreement and the Parent Pledge and Security Agreement, to the
extent that a security interest cannot be perfected therein by the filing of
a financing statement or the taking of possession under the Uniform
Commercial Code of the relevant jurisdiction.
(c) Upon (a) execution and delivery of the Mortgages by the
parties thereto, (b) the recording of such Mortgages in the jurisdiction
listed on Schedule 4.17 and (c) the payment of any required mortgage
recording taxes, each of the Mortgages will be effective to create in favor
of the Administrative Agent, for the ratable benefit of the Lenders, a legal,
valid and enforceable lien on the real property described therein and such
liens will, as of the Closing Date, subject to the existence of liens as
permitted by clauses (a), (e), (f) and (g) of the definition of Permitted
Liens, constitute first priority liens on the real property 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. No document furnished or statement made
in writing to the Lenders by Holdings, the Borrower, any Subsidiary or any
party to any of the Transaction Documents in connection with the negotiation,
preparation or execution of this Agreement or any of the other Credit
Documents, taken as a whole, (including the Confidential Offering Memorandum
dated April 1997 relating to this facility but excluding all projections
(including industry forecasts and statistical data) and pro forma financial
statements (whether or not contained therein) which shall have been prepared
in good faith and based upon reasonable assumptions) contains any untrue
statement of a material fact or omits to state any such material fact
necessary in order to make the statements contained therein not misleading in
the context in which such statements are made. The Equity Documents
constitute all of the agreements relating to the Equity Investment and the
Subordinated Debt Documents constitute all of the agreements relating to the
Subordinated Debt.
4.19 Solvency. On the Closing Date and after giving effect
to the Asset Contribution and the other transactions contemplated by the
Transaction Documents including borrowings hereunder on such date and the
incurrence of all other Indebtedness and Guarantee Obligations being incurred
on such date, the Borrower is "Solvent," in that (a) the property, at a fair
valuation, of Holdings and its Subsidiaries, individually and taken together
as a single entity, will exceed their debts, (b) the present fair salable
value of the assets of Holdings and its Subsidiaries, individually and taken
together as a single entity, is not less than the amount that will be
required to pay their probable liabilities as such debts become absolute and
matured, and (c) the Borrower does not intend to, and does not believe that
Holdings and its Subsidiaries, individually and taken together as a single
<PAGE>
entity, will, incur debts or liabilities beyond the their ability to pay as
such debts and liabilities mature. For purposes of this subsection, "debt"
means "liability on a claim" and "claim" means any (i) right to payment,
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed, secured, or
unsecured.
4.20 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.
4.21 Transaction Documents. To the best of the Borrower's
knowledge, the representations and warranties contained in the Transaction
Documents, taken as a whole, are true and correct in all material respects as
of the Closing Date. On the Closing Date, the Asset Contribution will have
been consummated in accordance with the Transaction Documents.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Loans. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, immediately prior to or concurrently with the
making of such extension of credit (including the making of any Loan or the
issuance of any Letter of Credit) on the Closing Date, of the following
conditions precedent:
(a) Credit Documents. The Administrative Agent shall have
received (i) this Agreement, (ii) the Guarantees, (iii) the Mortgages
and (iv) the Security Documents, 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 Foreign Subsidiary of Holdings or
the Borrower shall be required to execute a Subsidiary Guarantee or
Subsidiary Pledge and Security Agreement, and no more than 65% of the
capital stock of or equity interests in any Foreign Subsidiary of the
Borrower, Holdings or any of their Subsidiaries, or any other of
their 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) Related Agreements. The Administrative Agent shall
have received, with a copy for each Lender, true and correct copies,
certified as to authenticity by the Borrower, of each of the
Transaction Documents and such other documents or instruments as may
be reasonably requested by the Administrative Agent, including,
<PAGE>
without limitation, a copy of any debt instrument, security agreement
or other material contract to which the Borrower or any of its
Subsidiaries may be a party (after giving effect to the Asset
Contribution).
(c) Asset Contribution. The Asset Contribution shall have
been consummated pursuant to the Transaction Agreement, and no
material provision of the Transaction Agreement shall have been
amended, supplemented, waived or otherwise modified without the prior
written consent of the Agents. The Agents shall be reasonably
satisfied with the aggregate amount of fees and expenses payable by
the Borrower and its Subsidiaries in connection with the transactions
contemplated hereby and by the Transaction Documents.
(d) Capitalization; Capital Structure (i) After giving
effect to the Asset Contribution and the other transactions
contemplated by the Transaction Documents, the Borrower shall have
the capital structure set forth in the Pro Forma Financial
Statements.
(ii) The Subordinated Debt Documents shall have been
executed and delivered by the parties thereto (and shall be in form
and substance reasonably satisfactory to the Agents), shall be in
full force and effect and none of the provisions thereof shall have
been amended, waived, supplemented or otherwise modified without the
prior written consent of the Agents; and the Borrower shall have
issued the Subordinated Debt in a principal amount, and received
gross proceeds in the amount of $225,000,000.
(iii) The Equity Documents shall have been executed and
delivered by the parties thereto (and shall be in form and substance
reasonably satisfactory to the Agents), shall be in full force and
effect and none of the provisions thereof shall have been amended,
waived, supplemented or otherwise modified without the prior written
consent of the Agents; and the Borrower shall have received at least
$79,850,000 in net cash proceeds in accordance with the terms of the
Equity Documents.
(e) Fees. The Agents, the Arranger and the Lenders shall
have received all fees, expenses and other consideration required to
be paid on or before the Closing Date.
(f) Lien Searches. The Administrative Agent shall have
received the results of a search of Uniform Commercial Code, tax and
judgment filings made with respect to each of the Borrower and its
Subsidiaries (after giving effect to the Asset Contribution) and,
without duplication, the Lockheed Martin Predecessor Businesses and
the Loral Acquired Businesses in the jurisdictions set forth on
Schedule 4.17 together with copies of financing statements disclosed
by such searches, and such searches shall disclose no Liens on any
assets encumbered by any Security Document, except for Liens
permitted hereunder or, if unpermitted Liens are disclosed, the
Administrative Agent shall have received satisfactory evidence of the
release of such Liens.
(g) Consents, Authorizations and Filings, etc. Except for
the financing statements contemplated by the Security Documents and
<PAGE>
the filing of the Security Documents and the Assignment Consent, 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.
(h) Insurance. The Lenders shall have received (i) a
reasonably satisfactory schedule describing all insurance maintained
by the Borrower and its Subsidiaries (after giving effect to the
Asset Contribution) 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.
(i) Litigation. On the Closing Date, there shall be no
actions, suits or proceedings pending or threatened 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 (including the Asset Contribution) or (b) which the
Agents or the Required Lenders shall determine could reasonably be
expected to have a Material Adverse Effect.
(j) Borrowing Certificate. 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 E, 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.
(k) 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, (iii) the granting by it of the
Liens created pursuant to the Security Documents to which it is a
party and (iv) the execution, delivery and performance of the
Transaction Documents to which it is a party, 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.
(l) 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
<PAGE>
President and the Secretary or any Assistant Secretary of the
Borrower.
(m) 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, (ii) the granting by it of the Liens created pursuant to the
Security Documents to which it is a party and (iii) the execution,
delivery and performance of the Transaction Documents 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.
(n) 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.
(o) 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.
(p) Legal Opinions. The Administrative Agent shall have
received, with a counterpart for each Lender, the following executed
legal opinions:
(i) the executed legal opinion of each of
Simpson Thacher and Bartlett and Fried, Harris, Shriver &
Jacobson, counsel to the Borrower and the other Credit
Parties, substantially in the form of Exhibits D-1 and D-2,
respectively; and
(ii) the executed legal opinions of each of
Simpson Thacher and Bartlett and Miles & StockBridge,
counsel to the Seller delivered pursuant to the Transaction
Agreement, each accompanied by a reliance letter in favor of
the Lenders.
Each such legal opinion shall cover such other matters incident to
the transactions contemplated by this Agreement as the Agents may
reasonably require.
(q) Pledged Stock; Stock Powers. The Administrative Agent
shall have received the certificates representing the shares pledged
pursuant to each of the Security Documents together with an undated
<PAGE>
stock power for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof.
(r) Actions to Perfect Liens. (i) The Administrative Agent
shall have received evidence in form and substance reasonably
satisfactory to it that all filings, recordings, registrations and
other actions, including, without limitation, the filing of duly
executed financing statements on form UCC-1, necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Liens
created by the Security Documents shall have been completed. The
Borrower shall have delivered to the Administrative Agent (A) each
Mortgage, each executed and delivered by a duly authorized officer of
the mortgagor party thereto, with a counterpart or a conformed copy
for each Lender and (B) legal opinions from local counsel in the
jurisdictions of such Mortgage relating to such Mortgage and the
perfection of Liens created by the Security Documents on personal
property located in such jurisdiction, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(ii) The Borrower shall have delivered to the
Administrative Agent and the title insurance company issuing
the policy referred to below (the "Title Insurance Company")
maps or plats of an as-built survey of the sites of the
property covered by each Mortgage (other than as set forth
on Schedule 6.10) certified to the Administrative Agent and
the Title Insurance Company in a manner satisfactory to
them, dated a date reasonably satisfactory to the
Administrative Agent and the Title Insurance Company by an
independent professional licensed land surveyor reasonably
satisfactory to the Administrative Agent and the Title
Insurance Company, which maps or plats and the surveys on
which they are based shall be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and
Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps,
plats or surveys the following: (A) the locations on such
sites of all the buildings, structures and other
improvements and the established building setback lines; (B)
the lines of streets abutting the sites and width thereof;
(C) all access and other easements appurtenant to the sites
or necessary or desirable to use the sites; (D) all
roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting
the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor;
(E) any encroachments on any adjoining property by the
building structures and improvements on the sites; and (F)
if the site is described as being on a filed map, a legend
relating the survey to said map.
(iii) The Borrower shall deliver to the
Administrative Agent in respect of each parcel covered by
each Mortgage (other than as set forth on Schedule 6.10) a
mortgagee's title policy (or policies) or marked up
<PAGE>
unconditional binder for such insurance dated a date
reasonably satisfactory to the Agents. Each such policy
shall (A) be in an amount reasonably satisfactory to the
Agents; (B) be issued at ordinary rates; (C) insure that the
Mortgage insured thereby creates a valid first Lien on such
parcel free and clear of all defects and encumbrances,
except for liens permitted by clauses (a), (e), (f) and (g)
of the definition of Permitted Liens and such other liens
and defects as may be approved by the Agents; (D) name the
Administrative Agent for the benefit of the Lenders as the
insured thereunder; (E) be in the form of ALTA Loan Policy -
1992; (F) contain such endorsements and affirmative coverage
as the Agents may reasonably request and (G) be issued by
title companies satisfactory to the Agents (including any
such title companies acting as co-insurers or reinsures, at
the option of the Agents). The Administrative Agent shall
have received evidence reasonably satisfactory to it that
all premiums in respect of each such policy, and all charges
for mortgage recording tax, if any, have been paid.
(iv) If required pursuant to Regulation H of
the Board of Governors of the Federal Reserve System
("Regulation H") the Borrower shall deliver to the
Administrative Agent (A) a policy of flood insurance which
(1) covers any parcel of improved real property which is
encumbered by any Mortgage, (2) is written in an amount not
less than the outstanding principal amount of the
indebtedness secured by such Mortgage which is reasonably
allocable to such real property or the maximum limit of
coverage made available with respect to the particular type
of property under the National Flood Insurance Act of 1968,
whichever is less, and (3) has a term ending not earlier
than the maturity of the indebtedness secured by such
Mortgage and (B) confirmation that the Borrower has received
the notice required pursuant to Section 208(e)(3) of
Regulation H.
(v) The Borrower shall deliver to the
Administrative Agent a copy of all recorded documents
referred to, or listed as exceptions to title in, the title
policy or policies referred to in this subsection 3.1(r) and
a copy, certified by such parties as the Agents may
reasonably deem appropriate, of all other documents
affecting the property covered by each Mortgage (other than
as set forth on Schedule 6.10).
(vi) With respect to any parcel of real
property owned in fee by the Borrower or any Subsidiary on
which fixtures having an aggregate book value exceeding
$250,000 are located, take all actions that the Agents may
reasonably require, including (if such property is not
covered by a recorded Mortgage) the filing of UCC fixture
filing financing statements, to cause the security interest
created by the Security Documents in such fixtures to be
perfected and with respect to any parcel of real property
leased by the Borrower or any Subsidiary on which fixtures
having an aggregate book value exceeding $250,000 are
<PAGE>
located, use commercially reasonable efforts to obtain the
consent of the landlord of such property to the filing of
UCC fixture filing financing statements and make such
filings if such consent is obtained.
(s) Solvency Opinion. The Administrative Agent shall have
received, with a counterpart for each Lender, a solvency opinion
reasonably satisfactory to the Agents from an independent valuation
firm reasonably satisfactory to the Agents which shall document the
solvency of Holdings and its Subsidiaries (including the Borrower)
individually and taken together as a single entity, after giving
effect to the Asset Contribution, the making of the Loans, the
issuance of the Subordinated Debt and the other transactions
contemplated hereby and by the Transaction Documents.
(t) Environmental Report. The Administrative Agent shall
have received an environmental report prepared by H2M Associates,
Inc., dated April 1997, regarding Holdings and its Subsidiaries, and
a letter that entitles the Administrative Agent, the other Agents and
the Lenders to rely on such report as if prepared for and addressed
to each of them.
(u) Business Plan. The Lenders shall have received a
reasonably satisfactory business plan for Holdings and its
Subsidiaries for the period beginning January 1, 1997 and ending
December 31, 2006, which plan shall include a written analysis of the
business and prospects of Holdings and its Subsidiaries.
5.2 Conditions to Each Extension of Credit. The agreement
of each Lender to make any extension of credit requested to be made by it on
any date (including, without limitation, its initial Loan 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 the Borrower and each 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.
(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.
<PAGE>
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 Financial Statements. Furnish to the Administrative
Agent with copies for each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, (i) a copy of the
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidated
statements of income and retained earnings and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope
of the audit, by independent certified public accountants of
nationally recognized standing and (ii) an unaudited unconsolidated
balance sheet of Holdings prepared on an equity basis (without
footnote disclosure) certified by a Responsible Officer of Holdings
as being fairly stated in all material respects;
(b) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of
each fiscal year of the Borrower, the unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated statements of
income and retained earnings and of cash flows of the Borrower and
its consolidated Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each
case in comparative form the figures for the previous year, certified
by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments).
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), 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
<PAGE>
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 subsections 6.1(a) and (b), 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), (ii) none of Holdings, the Borrower nor any of its
Subsidiaries has changed its name, its principal place of business,
its chief executive office or the location of any material item of
tangible Collateral without complying with the requirements of this
Agreement and the Security Documents with respect thereto and (iii)
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) or (b), a certificate of the chief
financial officer of the Borrower setting forth, in reasonable
detail, the computations, as applicable, of (i) the Debt Ratio, (ii)
Excess Cash Flow and (iii) 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 within five days after the same are filed,
copies of all financial statements and other reports which the
Borrower or Holdings may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental
Authority; and
(f) promptly, such additional financial and other
information as any Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case
may be, all its material obligations of whatever nature, except where the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or its Subsidiaries,
as the case may be; provided that, notwithstanding the foregoing, the
Borrower and each of its Subsidiaries shall have the right not to pay any
such obligation and in good faith contest, by proper legal actions or
proceedings, the invalidity or amount of such claims.
<PAGE>
6.4 Conduct of Business and Maintenance of Existence.
Except as permitted by subsection 7.5 and subsection 7.6, continue to engage
in business of the same general type as now conducted by it (after giving
effect to the Transaction); 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; and keep all property useful and necessary in its
business in good working order and condition 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; 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 Maintenance of Property; Insurance. (a) Maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but
including in any event public liability, cargo loss and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business; and furnish to the
Administrative Agent with copies for each Lender, upon written request, full
information as to the insurance carried except to the extent that the failure
to do any of the foregoing with respect to any such property could not
reasonably be expected to materially adversely affect the value or usefulness
of such property; provided that in any event the Borrower will maintain, and
will cause each of its Subsidiaries to maintain, to the extent obtainable on
commercially reasonable terms, (i) property and casualty insurance on all
real and personal property on an all risks basis (including the perils of
flood and quake), covering the repair or replacement cost of all such
property and consequential loss coverage for business interruption and extra
expense (which shall be limited to fixed construction expenses and such other
business interruption expenses as are otherwise generally available to
similar businesses), covering such risks, for such amounts not less than
those, and with deductible and self-insurance amounts not greater than those,
set forth in Schedule 6.5, (ii) public liability insurance (including
products liability coverage) covering such risks, for such amounts no less
than those, and with deductible amounts not greater than those, set forth in
Schedule 6.5 and (iii) such other insurance coverage in such amounts and with
respect to such risks as the Required Lenders may reasonably request. All
such insurance shall be provided by insurers or reinsurers which (x) in the
case of the United States insurers and reinsurers have an A.M. Best
policyholders rating of not less than A- with respect to primary insurance
and B+ with respect to excess insurance and (y) in the case of non-United
States insurers or reinsurers, the providers of at least 80% of such
insurance have either an ISI policyholders rating of not less than A, an A.M.
Best policyholders rating of not less than A- or a surplus of not less than
$500,000,000 with respect to primary insurance, and an ISI policyholders
rating of not less than BBB with respect to excess insurance, or, if the
relevant insurance is not available from such insurers, such other insurers
as the Administrative Agent may approve in writing. Such insurers may
include a Subsidiary of the Borrower; provided that such Subsidiary need not
satisfy the foregoing requirements if all but $15,000,000 of the insurance
<PAGE>
provided by such Subsidiary is reinsured by one or more reinsurers which
satisfy such requirements.
(b) The Borrower will deliver to the Administrative Agent
on behalf of the Lenders, (i) on the Closing Date, a certificate dated such
date showing the amount of coverage as of such date, (ii) upon request of any
Lender through the Administrative Agent from time to time full information as
to the insurance carried, (iii) promptly following receipt of notice from any
insurer, a copy of any notice of cancellation or material change in coverage
from that existing on the Closing Date, (iv) forthwith, notice of any
cancellation or nonrenewal of coverage by the Borrower or any Subsidiary, and
(v) promptly after such information is available to the Borrower, full
information as to any claim for an amount in excess of $2,500,000 which
respect to any property and casualty insurance policy maintained by the
Borrower or any Subsidiary. The Administrative Agent shall be named as
additional insured on all property and casualty insurance policies and a loss
payee on all property insurance policies. Any proceeds from any such
insurance policy in respect of any claim, or any condemnation award or other
compensation in respect of a condemnation (or any transfer or disposition of
property in lieu of condemnation) for which the Borrower or any of its
Subsidiaries receives a condemnation award or other compensation shall be
paid to the Borrower or the Subsidiary; provided that: (A) the Borrower or
the Subsidiary will use such proceeds, condemnation award or other
compensation to repair, restore or replace the assets which were the subject
of such claim within 6 months (or in the case of real property, 12 months)
after receipt thereof (and a Responsible Officer shall deliver a certificate
specifying in reasonable detail such usage not later than the last day of
such relevant period), and (B) if, at the time of the receipt of such
proceeds, condemnation award or other compensation, an Event of Default has
occurred and is continuing, the aggregate amount of all such proceeds,
condemnation award or other compensation shall be paid to the Administrative
Agent and held as collateral for application in accordance with the Security
Documents; and provided further that, to the extent that any amount of such
proceeds, condemnation award or other compensation are not used or committed
during the time periods specified in proviso (A) above, then, if requested by
notice from the Required Lenders to the Borrower, all such remaining
uncommitted proceeds, condemnation award or other compensation shall be paid
to the Administrative Agent and held as Collateral for application in
accordance with the Security Documents.
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.
<PAGE>
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 the Seller 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
<PAGE>
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 any and all documents (including,
without limitation, financing statements and continuation statements) for
filing under the provisions of the Uniform Commercial Code or any other
Requirement of Law 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
assets acquired after the Closing Date by the Borrower or any of its
Subsidiaries (including the Stock of newly created or acquired Subsidiaries)
that are intended to be subject to the Lien created by any of the Security
Documents but which are not so subject (other than (x) any assets described
in paragraph (b) of this Section and (y) immaterial assets a Lien on which
cannot be perfected by filing UCC-1 financing statements), 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 Security
Documents 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 assets, (ii) take all actions necessary or
advisable to cause such Lien to be duly perfected in accordance with all
applicable Requirements of Law, including, without limitation, the filing of
financing statements in such jurisdictions as may be requested by the
Administrative Agent, and (iii) if requested by the Administrative Agent,
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.
(b) With respect to any Person that, subsequent to the
Closing Date, becomes a direct or indirect Subsidiary, promptly: (i) execute
and deliver to the Administrative Agent, for the benefit of the Lenders, such
amendments to the Subsidiary Pledge and Security Agreement as the
Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a Lien on the Capital
Stock of such Subsidiary which is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers executed
and delivered in blank by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become
<PAGE>
a party to the Subsidiary Pledge and Security Agreement, the Subsidiary
Guarantee and the Mortgages delivered pursuant to clause (B) below, in each
case pursuant to documentation which is in form and substance reasonably
satisfactory to the Administrative Agent, (B) to deliver to the Documentation
Agent Mortgages in form and substance reasonably satisfactory to the
Documentation Agent with respect to all real property of such Subsidiary, and
(C) to take all actions necessary or advisable to cause each Lien created by
the Subsidiary Pledge and Security Agreement and the Mortgages delivered
pursuant to clause (B) above to be duly perfected in accordance with all
applicable Requirements of Law, including, without limitation, the filing of
financing statements in such jurisdictions as may be requested by the
Administrative Agent and (iv) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described in clauses (i), (ii) and (iii) immediately preceding, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent. Notwithstanding the foregoing, no
Foreign Subsidiary of Holdings or the Borrower shall be required to execute a
Subsidiary Guarantee or Subsidiary Pledge and Security Agreement, and no more
than 65% of the capital stock of or equity interests in any Foreign
Subsidiary of the Borrower, Holdings or any of their Subsidiaries, or any
other of their 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.
(c) As promptly as practicable, but in any event within 120
days following the Closing Date, the Borrower shall have delivered to the
Administrative Agent (A) a Mortgage with respect the real property described
in Part I of Schedule 6.10, executed and delivered by a duly authorized
officer of the mortgagor party thereto, with a counterpart or a conformed
copy for each Lender and (B) legal opinions from local counsel in the
jurisdiction of such Mortgage relating to such Mortgage and the perfection of
Liens created by the Security Documents on personal property located in such
jurisdiction, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
(d) As promptly as practical, but in any event within 120
days following the Closing Date, the Borrower shall have delivered to the
Administrative Agent and the Title Insurance Company maps or plats of an
as-built survey of the sites of the property covered by each Mortgage set
forth on Part II of Schedule 6.10 certified to the Administrative Agent and
the Title Insurance Company in a manner satisfactory to them, dated a date
reasonably satisfactory to the Administrative Agent and the Title Insurance
Company by an independent professional licensed land surveyor reasonably
satisfactory to the Administrative Agent and the Title Insurance Company,
which maps or plats and the surveys on which they are based shall be made in
accordance with the Minimum Standard Detail Requirements for Land Title
Surveys jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and Mapping in 1992, and,
without limiting the generality of the foregoing, there shall be surveyed and
shown on such maps, plats or surveys the following: (A) the locations on such
sites of all the buildings, structures and other improvements and the
established building setback lines; (B) the lines of streets abutting the
sites and width thereof; (C) all access and other easements appurtenant to
the sites or necessary or desirable to use the sites; (D) all roadways,
paths, driveways, easements, encroachments and overhanging projections and
similar encumbrances affecting the site, whether recorded, apparent from a
physical inspection of the sites or otherwise known to the surveyor; (E) any
<PAGE>
encroachments on any adjoining property by the building structures and
improvements on the sites; and (F) if the site is described as being on a
filed map, a legend relating the survey to said map.
(e) As promptly as practical, but in any event within 120
days following the Closing Date, the Borrower shall deliver to the
Administrative Agent in respect of each parcel covered by each Mortgage set
forth on Part II Schedule 6.10 a mortgagee's title policy (or policies) or
marked up unconditional binder for such insurance dated a date reasonably
satisfactory to the Agents. Each such policy shall (A) be in an amount
reasonably satisfactory to the Agents; (B) be issued at ordinary rates; (C)
insure that the Mortgage insured thereby creates a valid first Lien on such
parcel free and clear of all defects and encumbrances, except for liens
permitted by clauses (a), (e), (f) and (g) of the definition of Permitted
Liens and such other liens and defects as may be approved by the Agents; (D)
name the Administrative Agent for the benefit of the Lenders as the insured
thereunder; (E) be in the form of ALTA Loan Policy - 1992; (F) contain such
endorsements and affirmative coverage as the Agents may reasonably request
and (G) be issued by title companies satisfactory to the Agents (including
any such title companies acting as co-insurers or reinsures, at the option of
the Agents). The Administrative Agent shall have received evidence
reasonably satisfactory to it that all premiums in respect of each such
policy, and all charges for mortgage recording tax, if any, have been paid.
(f) As promptly as possible, but in any event within 120
days following the Closing Date, the Borrower shall deliver to the
Administrative Agent a copy of all recorded documents referred to, or listed
as exceptions to title in, the title policy or policies referred to in
subsection 6.10(d) and a copy, certified by such parties as the Agents may
reasonably deem appropriate, of all other documents affecting the property
covered by each Mortgage set forth on Schedule 6.10.
(g) As promptly as possible, but in any event within 120
days following the Closing Date, if required pursuant to Regulation H of the
Board of Governors of the Federal Reserve System ("Regulation H") the
Borrower shall deliver to the Administrative Agent (A) a policy of flood
insurance which (1) covers the parcel of improved real property which is
encumbered by the Mortgage with respect to the real property set forth on
Part I of Schedule 6.10, (2) is written in an amount not less than the
outstanding principal amount of the indebtedness secured by such Mortgage
which is reasonably allocable to such real property or the maximum limit of
coverage made available with respect to the particular type of property under
the National Flood Insurance Act of 1968, whichever is less, and (3) has a
term ending not earlier than the maturity of the Indebtedness secured by such
Mortgage and (B) confirmation that the Borrower has received the notice
required pursuant to Section 208(e)(3) of Regulation H.
(h) As promptly as possible, but in any event within 120
days following the Closing Date, with respect to the parcel of real property
described in Part I of Schedule 6.10, the Borrower shall take all actions
that the Agents may reasonably require, including (if such property is not
covered by a recorded Mortgage) the filing of UCC fixture filing financing
statements, to cause the security interest created by the Security Documents
in such fixtures to be perfected and with respect to any parcel of real
property leased by the Borrower or any Subsidiary on which fixtures having an
aggregate book value exceeding $250,000 are located, use commercially
reasonable efforts to obtain the consent of the landlord of such property to
<PAGE>
the filing of Ucc fixture filing financing statements and make such filings
if such consent is obtained.
(i) Use reasonable efforts to take any action reasonably
requested by the Agents with respect to any ground lease still in effect on
the real property described in Part III of Schedule 6.10.
6.11 Interest Rate Protection. Within 180 days after the
Closing Date, obtain interest rate protection for a period through June 30,
1999 for a notional amount of at least $59,000,000 on terms and conditions
reasonably satisfactory to the Agents.
6.12 Foreign Jurisdictions. Within 60 days following the
Closing Date, (i) be 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 (ii) deliver to the Administrative Agent certificates of good standing
issued by the Secretary of State (or other relevant officers) of each
jurisdiction referred to in clause (i) of this subsection 6.12.
6.13 Novation; Federal Assignment of Claims. (a) (i) Use
commercially reasonable efforts to cause the Seller to perform its
obligations under subsection 7.08 of the Transaction Agreement, (ii) use best
efforts to perform its obligations under subsection 8.07 of the Transaction
Agreement and (iii) use its best efforts to obtain as soon as practicable
after the Closing Date the completion and effectiveness of the novation of
each Government Contract (as defined in the Transaction Agreement) and the
consent under the Assignment of Claims Act to the security interest of the
Agents and the Lenders in all of the right, title and interest of the
Borrower and its Subsidiaries in the Government Contracts (other than the
Restricted Government Contracts) sold, assigned, transferred and conveyed by
the Seller under the Transaction Agreement.
(b) Within ninety (90) days of the creation of a Government
Contract or, upon the occurrence and during the continuance of a Default or
an Event of Default, the Borrower and its Subsidiaries shall notify the
Administrative Agent thereof, which notice shall set forth (i) each GC Notice
Recipient with respect to such Government Contract and (ii) the anticipated
annual gross revenue under such Government Contract and shall execute and
deliver to the Administrative Agent all documents, in form and substance
reasonably satisfactory to the Administrative Agent, and take all such other
action (other than the transmittal of the notice of assignment to the U.S.
Government) reasonably required by the Administrative Agent to assign the
Receivables arising under such Government Contract (other than any Restricted
Government Contract), to the Administrative Agent pursuant to the Assignment
of Claims Act. The Borrower agrees that promptly upon obtaining knowledge
that any of the information provided pursuant to the first sentence of
subsection 6.13(b) has changed, it shall give written notice of such change
to the Administrative Agent. Upon the occurrence and during the continuance
of an Event of Default, the Administrative Agent may, and shall at the
direction of the Required Lenders, transmit any such notice of assignment
received by it from the Borrower and its Subsidiaries to the U.S. Government.
(c) The Borrower and its Subsidiaries shall apply for and
maintain all material facility security clearances and personnel security
<PAGE>
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.
6.14 Maintenance of Collateral; Alterations. Refrain from
committing any waste on any Collateral, except in the ordinary course of its
business, or make any material change in the use of any Collateral, provided
that any Credit Party may sell or lease to any other Person all or any
portion of any item of Collateral that the Borrower has determined in good
faith is not used or useful in such Credit Party's operating business. Each
Credit Party granting a security interest in Collateral constituting real
property represents and warrants that, to the best of its knowledge: (a) such
Collateral is served by all utilities required or necessary for the current
use thereof; (b) all streets (or public rights-of-way) necessary to serve
such Collateral are completed and serviceable and have been dedicated and
accepted as such by the appropriate governmental entities or such Collateral
is served by insurable easements (or rights-of-way) for ingress and egress to
and from such streets (or rights-of-way); and (c) such Credit Party has
access to such Collateral from public roads (or rights-of-way), either
directly or by insurable easements (or rights-of-way), sufficient to allow
such Credit Parties to conduct its business at such Collateral in accordance
with sound commercial and industrial practices. The Credit Parties shall, at
all times, maintain all non-possessory collateral and all real estate
collateral that is materially useful or necessary in their respective
businesses, in good operating order, condition and repair, ordinary wear and
tear and damage by fire and/or other casualty or taking by condemnation
excepted, and in accordance with all applicable laws, rules and regulations,
(including, without limitation, Environmental Laws) the failure to comply
with which would have a material adverse effect on the value or usefulness of
such Collateral, except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings. Each Credit Party shall
do what is deemed commercially reasonable to maintain and preserve the value
of the Collateral.
6.15 Arrangements with the Seller.
(a) As promptly as practicable, but in any event within 90
days following the Closing Date, the Borrower shall have delivered to
the Administrative Agent the Supply Agreement, the License Agreement
and the Interim Services Agreement (each as defined in the
Transaction Agreement) executed and delivered by the Seller and the
Borrower which shall be reasonably satisfactory in form and substance
to the Agents; and
(b) As promptly as practicable, but in any event within 120
days following the Closing Date, the Borrower shall have delivered to
the Administrative Agent the executed consents of the lessors of the
real property leased by the Seller (which leaseholds constitute
Transferred Assets (as defined in the Transaction Agreement)) to the
transfer of such leaseholds to the Borrower, which consents shall be
reasonably satisfactory in form and substance to the Agents.
<PAGE>
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 fiscal quarter during which such fiscal quarter occurs:
Fiscal Quarter Ending Ratio
--------------------- -----
September 30, 1997 5.75
December 31, 1997 5.50
March 31, 1998 5.50
June 30, 1998 5.50
September 30, 1998 5.25
December 31, 1998 5.25
March 31, 1999 5.25
June 30, 1999 5.25
September 30, 1999 4.75
December 31, 1999 4.75
March 31, 2000 4.75
June 30, 2000 4.75
September 30, 2000 4.25
December 31, 2000 4.25
March 31, 2001 4.25
June 30, 2001 4.25
September 30, 2001 3.60
December 31, 2001 3.60
March 31, 2002 3.60
June 30, 2002 3.60
September 30, 2002 3.10
December 31, 2002 3.10
March 31, 2003 3.10
June 30, 2003 3.10
September 30, 2003 3.10
December 31, 2003 3.10
March 31, 2004 3.10
June 30, 2004 3.10
September 30, 2004 3.10
December 31, 2004 3.10
March 31, 2005 3.10
June 30, 2005 3.10
<PAGE>
September 30, 2005 3.10
December 31, 2005 3.10
and thereafter
(b) Interest Coverage. Permit the ratio of (i)
Consolidated EBITDA to (ii) Consolidated Cash Interest Expense during
any Test Period to be less than the ratio set forth opposite such
period below (such ratio, the "Interest Coverage Ratio"):
Test Period Interest Coverage Ratio
----------- -----------------------
7/1/97 - 9/30/97 1.50
10/1/97 - 12/31/97 1.85
1/1/98 - 3/31/98 1.85
4/1/98 - 6/30/98 1.85
7/1/98 - 9/30/98 1.90
10/1/98 - 12/31/98 1.90
1/1/99 - 3/31/99 1.90
4/1/99 - 6/30/99 1.90
7/1/99 - 9/30/99 2.15
10/1/99 - 12/31/99 2.15
1/1/00 - 3/31/00 2.15
4/1/00 - 6/30/00 2.15
7/1/00 - 9/30/00 2.35
10/1/00 - 12/31/00 2.35
1/1/01 - 3/31/01 2.35
4/1/01 - 6/30/01 2.35
7/1/01 - 9/30/01 2.75
10/1/01 - 12/31/01 2.75
1/1/02 - 3/31/02 2.75
4/1/02 - 6/30/02 2.75
7/1/02 - 9/30/02 3.10
10/1/02 - and thereafter 3.10
7.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness (including in respect of Interest
Rate Agreements, except:
(a) Indebtedness of the Borrower under this Agreement;
(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 $15,000,000 at any time outstanding;
(c) Indebtedness of a corporation which becomes a
Subsidiary after the date hereof, provided that (i) such indebtedness
existed at the time such corporation became a Subsidiary and was not
created in anticipation thereof and (ii) immediately after giving
<PAGE>
effect to the acquisition of such corporation by the Borrower no
Default or Event of Default shall have occurred and be continuing;
(d) additional Indebtedness of the Borrower not exceeding
$15,000,000 in aggregate principal amount at any one time
outstanding;
(e) Indebtedness of the Borrower in respect of not more
than $225,000,000 principal amount of Subordinated Debt issued on the
Closing Date;
(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) Indebtedness in respect of the Interest Rate Agreements
required by subsection 6.11;
(h) Guarantee Obligations permitted by subsection 7.4;
(i) 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;
(j) Indebtedness secured by Permitted Liens;
(k) Up to $25,000,000 of purchase money Indebtedness the
proceeds of which are utilized to acquire the real property
(including improvements thereon) and related assets currently
utilized by the Wide Band Systems division in Salt Lake City, Utah,
on terms reasonably satisfactory to the Lenders.
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;
<PAGE>
(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, or which are set forth in title insurance
policies or commitments delivered to Administrative Agent pursuant to
the terms of this Agreement;
(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) and subsection 7.2(k)
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 of
such property at the time it was acquired;
(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)
$2,500,000 in aggregate amount at any time outstanding;
<PAGE>
(j) Liens created pursuant to the Security Documents;
(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 subsection 8(h), 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 incurred after the date hereof in
an aggregate amount not to exceed $15,000,000 at any one time
outstanding for the Borrower and its Subsidiaries;
(c) guarantees made by the Subsidiaries of the Borrower
pursuant to the Subordinated Debt Documents;
(d) Guarantee Obligations under the Credit Documents;
(e) the L/C Obligations;
(f) Guarantee Obligations of the Borrower or any Subsidiary
in respect of obligations of a Subsidiary permitted to be incurred by
such Subsidiary by this Agreement;
(g) Guarantee Obligations in respect of surety bonds which
shall not exceed $10,000,000 at any time;
<PAGE>
(h) indemnities in favor of the companies issuing title
insurance policies insuring the Mortgages to induce such issuance;
and
(i) indemnities made in the Commitment Letter, the Credit
Documents and the Transaction Documents and in the Constitutional
Documents of the Borrower and its Subsidiaries.
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);
(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; and
(c) the Asset Contribution.
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 Section 7.6; provided that the Net Proceeds thereof
shall be applied pursuant to subsection 2.6(b)(ii); provided,
further, that (i) the aggregate amount of proceeds of all such Asset
Sales does not exceed (x) $20,000,000 in fiscal year 1997 or (y)
$30,000,000 since the date of this Agreement and (ii) the aggregate
amount of non-cash consideration received from such Asset Sales under
shall not exceed $5,000,000 since the date of this Agreement;
(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) subject to subsection 6.5, transfers resulting from any
casualty or condemnation of property or assets;
<PAGE>
(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) (i) the sale of the real property used by the
Borrower's Aviation Recorder Division on the date hereof (including
all improvements thereto) in Sarasota, Florida, solely for cash
proceeds of at least $7,500,000 and (ii) the sale of all or
substantially all of the assets of the Borrower's Hycor Division (as
constituted on the date hereof) solely for cash proceeds of at least
$5,000,000, provided that (x) the first $20,000,000 of the proceeds
of such sales are applied pursuant to subsection 2.6(b)(ii) and (y)
to the extent the aggregate proceeds of asset sales permitted by this
clause (j) exceed $20,000,000, the Borrower shall utilize such excess
proceeds for the prepayment of Loans and the reduction of Commitments
pursuant to subsection 2.6(b)(ii) (without giving effect to the
proviso thereto).
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 Limitation on Capital Expenditures. Make or commit to
make (by way of the acquisition of securities of a Person or otherwise) any
expenditure in respect of the purchase or other acquisition of fixed or
capital assets (excluding any such asset acquired in connection with normal
replacement and maintenance programs properly charged to current operations)
except for capital expenditures in the ordinary course of business not
exceeding, in the aggregate for the Borrower and its Subsidiaries during any
of the fiscal years of the Borrower set forth below, the amount set forth
opposite such fiscal year below:
Fiscal Year Amount
----------- ------
1997 $18,500,000
1998 27,500,000
1999 27,500,000
2000 30,000,000
2001 32,500,000
2002 32,500,000
2003 35,000,000
<PAGE>
2004 37,500,000
2005 and thereafter 40,000,000;
provided, that up to 25% of any such amount not so expended in the fiscal
year for which it is permitted above may be carried over for expenditure in
the next following fiscal year.
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 and (ii) management stock purchase plans,
in an aggregate amount not to exceed $3,000,000;
(g) Investments in existence on the Closing Date set forth
on Schedule 7.9(g) and extensions, renewals, modifications or
restatements or replacements thereof; provided that no such
extension, renewal, modification or restatement shall increase the
amount of the original loan, advance or investment;
(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 required by subsection 6.11 and 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; and
<PAGE>
(k) so long as no Event of Default has occurred and is
continuing, in addition to the foregoing, Investments in an aggregate
amount not exceeding $15,000,000 (at cost, without regard to any
write down or write up thereof) at any one time outstanding.
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 (b) 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;
(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.
<PAGE>
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, (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, except for Similar
Businesses.
7.16 Designated Senior Debt. Designate any Indebtedness or
other obligation, other than Indebtedness under the Credit Documents, as
"Designated Senior Debt," as such term is defined in the Indenture as in
effect on the Closing Date, 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 Indenture or
any other Indebtedness or other obligation of the Borrower and its
Subsidiaries(other than as a result of a payment default).
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; or
(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
<PAGE>
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; or
(c) The Borrower or any other Credit Party shall default in
the observance or performance of any agreement contained in Section 7
or subsection 6.5(a) of this Agreement, Section 4 of the Parent
Guarantee, Section 4 of the Subsidiary Guarantee, Section 4 of the
Parent Pledge and Security Agreement, Section 4 of the Borrower
Pledge and Security Agreement, or Section 4 of the Subsidiary Pledge
and Security Agreement; or
(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; or
(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
$7,500,000 and (ii) such default continues for a period in excess of
10 days; or
(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
<PAGE>
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 the
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; or
(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; or
(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 $7,500,000 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; or
(i) (i) Any of the Security Documents 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
<PAGE>
party to any of the Security Documents shall so assert or (ii) the
Lien created by any of the Security Documents 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); or
(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) either (i) the novation of any Government Contract
existing on the date of this Agreement shall not be complete and
effective prior to October 31, 1998 if such failures, individually or
in the aggregate, could reasonably be expected to have a Material
Adverse Effect, (ii) the consent to assignment of claims under any
Government Contract (other than any Restricted Government Contract)
existing on the date of this Agreement to the Administrative Agent on
behalf of the Lenders shall not have been obtained prior to October
31, 1998 if such failures, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, or (iii)
the Governmental Authority authorized to approve any such novation or
consent to any such assignment requires a condition to the
effectiveness to any such novation or consent which, if agreed to by
the Company, could reasonably be expected to have a Material Adverse
Effect;
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.
<PAGE>
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 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, a security interest
in such cash collateral to secure all obligations of the Borrower under this
Agreement and the other Credit Documents. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully
drawn upon, if any, shall be applied to repay other obligations of the
Borrower hereunder and under the Notes. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrower hereunder
and under the Notes shall have been paid in full, the balance, if any, in
such cash collateral account shall be returned to the Borrower. The Borrower
shall execute and deliver to the Administrative Agent, for the account of the
Issuing Lender and the L/C Participants, 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 ARRANGER
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 Agreement or any
<PAGE>
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 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.
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
<PAGE>
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 credit
worthiness 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 credit worthiness of the Borrower 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 solely
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 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 Agents and
Documentation Agent. The Administrative Agent, the Syndication Agent or the
<PAGE>
Documentation Agent may resign as Administrative Agent, Syndication Agent or
Documentation Agent, as the case may be, upon 30 days' notice to the Lenders.
If the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Credit Documents or if Syndication Agent or the
Documentation Agent shall resign as Syndication Agent or Documentation Agent
under this Agreement and the other Credit Documents, then the Required
Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent (provided that it shall have been approved by
the Borrower, which approval shall not be unreasonably withheld), shall
succeed to the rights, powers and duties of the Administrative Agent or a
Syndication Agent or the Documentation Agent, as the case may be, hereunder.
Effective upon such appointment and approval, the term "Administrative Agent"
or a "Syndication Agent" or "Documentation Agent," as the case may be, shall
mean or include such successor agent, and the former Administrative Agent's
or Syndication Agent's or Documentation Agent's, as the case may be, rights,
powers and duties as Administrative Agent or Syndication Agent or
Documentation Agent, as the case may be, shall be terminated, without any
other or further act or deed on the part of such former Administrative Agent
or Syndication Agent or Documentation Agent, as the case may be, or any of
the parties to this Agreement or any holders of the Loans. After any
retiring Administrative Agent's or Syndication Agent's or Documentation
Agent's resignation as Administrative Agent or Syndication Agent or
Documentation Agent, as the case may be, 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 or Syndication Agent or Documentation
Agent, as the case may be, under this Agreement and the other Credit
Documents.
9.10 The Arranger. Except as expressly set forth herein,
the Arranger, in its capacity 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 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 Credit
Termination Date, or reduce the stated rate 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, or (ii) amend, modify or waive any
<PAGE>
provision of this subsection or reduce the percentage specified in the
definition of Required Lenders or Requisite Class 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, or (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 Document without the
consent of all Lenders, or (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 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 Arranger, the Agents or
the Issuing Lender or the Swing Line Lender, as the case may be. In addition
to the foregoing, no amendment, modification, termination or waiver of any
provision of subsection 2.5 or subsection 2.6 which has the effect of
changing any interim scheduled payments, voluntary or mandatory prepayments
(or the applications thereof) or 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). 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,
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:
The Borrower or
any of its
Subsidiaries: L-3 Communications Corporation
600 Third Avenue, 34th Floor
New York, NY 10016
<PAGE>
Attention: Robert LaPenta
Fax: (212) 805-5470
Simpson Thacher & Bartlett
425 Lexington Avenue, 14th Floor
New York, NY 10017-3954
Attention: Marissa C. Wesely, Esq.
Fax: (212) 455-2502
The Administrative
Agent: Bank of America NT & SA
335 Madison Avenue
New York, NY 10017
Attention: Linda Carper
Fax: (212) 503-7502
The Documentation
Agent: Lehman Commercial Paper Inc.
3 World Financial Center, 9th Floor
New York, New York 10285
Attention: Michelle Swanson
Fax: (212) 528-0819
The Syndication
Agent: Lehman Commercial Paper Inc.
3 World Financial Center, 9th Floor
New York, New York 10285
Attention: Michelle Swanson
Fax: (212) 528-0819
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
<PAGE>
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 its 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 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.
<PAGE>
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, 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) and (ii)
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 Sections 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 Section; 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, any other such fund which is under common
management with such Lender, or, with the consent of the Borrower and the
Agents (which in each case shall not be unreasonably withheld), to an
additional bank, fund which is regularly engaged in making, purchasing or
investing in loans or securities, 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 G, executed by such Assignee, such
<PAGE>
assigning Lender (and, in the case of an Assignee that is not then a Lender
or an affiliate thereof, by the Borrower and the Agents) 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 Agents) 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 Section 8(f) 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. 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 or other obligation evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made in
the Register. 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 and the old
Note shall be returned by the Administrative Agent to the Borrower marked
"cancelled."
<PAGE>
(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
and the Agents) together with payment to the Administrative Agent of a
registration and processing fee of $3,000 (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.
(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.
10.7 Adjustments; Set-off. (a) If any Lender (a
"benefitted 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 Section 8(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans or the Reimbursement Obligations owing
to it, or interest thereon, such benefitted Lender shall purchase for cash
from the other Lenders a participating interest in such portion of each such
other Lender's Loans or the Reimbursement Obligations owing to it, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to
<PAGE>
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from such benefitted
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without 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.
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;
<PAGE>
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO 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 Acknowledgements. 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; 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
contractual counterparties' professional advisors which receives such
information and agrees to be bound by the confidentiality provisions hereof,
<PAGE>
(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.
<PAGE>
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:
Lehman Commercial Paper Inc.,
as Documentation Agent, Syndication Agent,
Arranger and as a Lender
By:__________________________________
Title:
Bank of America NT & SA
as Administrative Agent
and as a Lender
By:__________________________________
Title:
CITIBANK, N.A.
as a Lender
By:__________________________________
Title:
CREDIT LYONNAIS, NEW YORK BRANCH
as Co-Agent and as a Lender
By:__________________________________
Title:
FLEET NATIONAL BANK,
as Co-Agent and Lender
By:__________________________________
Name:
Title:
<PAGE>
MARINE MIDLAND BANK
as Co-Agent and as a Lender
By:__________________________________
Title:
BANK OF NOVA SCOTIA
as Co-Agent and as a Lender
By:__________________________________
Name:
Title:
BANKBOSTON, N.A.
By:__________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
as Co-Agent and as a Lender
By:__________________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO
as Co-Agent and as a Lender
By:__________________________________
Title:
THE FUJI BANK, LIMITED NEW YORK BRANCH
as Co-Agent and as a Lender
By:__________________________________
Title:
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE
By:__________________________________
Name:
Title:
CITIBANK, N.A.
as Co-Agent and as a Lender
By:__________________________________
Title:
THE ING CAPITAL SENIOR SECURED
HIGH INCOME FUND, L.P.
as a Lender
By:__________________________________
Title:
KZH HOLDING CORPORATION II
By:__________________________________
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC., as a Lender
By:__________________________________
Title:
KZH HOLDING CORPORATION
By:__________________________________
Name:
Title:
METROPOLITAN LIFE INSURANCE COMPANY
By:__________________________________
Name:
Title:
<PAGE>
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P.
its General Partner
By: Oak Hill Securities MGP, Inc.,
its General Partner
By:__________________________________
Name:
Title:
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of the Chase
Manhattan Bank)
By:__________________________________
Name:
Title:
PARIBAS CAPITAL FUNDING LLC
as a Lender
By:__________________________________
Title:
PILGRIM AMERICA PRIME RATE TRUST
as a Lender
By:__________________________________
Title:
PRIME INCOME TRUST
as a Lender
By:__________________________________
Title:
ROYALTON COMPANY
as a Lender
By:__________________________________
Title:
<PAGE>
CRESCENT/MACHI PARTNERS L.P.
By TCW Asset Management Company
its Investment Manager,
as a Lender
By:__________________________________
Name:
Title:
TCW Asset Management Company
as Attorney-in Fact for United
Companies Life Insurance Company,
as a Lender
By:__________________________________
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:__________________________________
Name:
Title:
BANK OF MONTREAL
as a Lender
By:__________________________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
as a Lender
By:__________________________________
Title:
<PAGE>
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
BHF BANK AKTIENGESELLSCHAFT
GRAND CAYMAN BRANCH
By:__________________________________
Name:
Title:
CORESTATES BANK, N.A.
as a Lender
By:__________________________________
Title:
GOLDMAN SACHS CREDIT PARTNERS, L.P.
as a Lender
By:__________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
as a Lender
By:__________________________________
Name:
Title:
<PAGE>
SKANDINAVISKA ENSKILDA BANKEN
CORPORATION
as a Lender
By:__________________________________
Title:
SOCIETE GENERALE, NEW YORK BRANCH
By:__________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
as a Lender
By:__________________________________
Title:
THE BANK OF NEW YORK
as a Lender
By:__________________________________
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
as a Lender
By:__________________________________
Title:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:__________________________________
Name:
Title:
U.S. BANK
as a Lender
By:__________________________________
Title:
_____________________________________________________________________________
_____________________________________________________________________________
EXHIBIT 10.2
A/B Exchange
Registration Rights Agreement
Dated as of April 30, 1997
by and among
L-3 Communications Corporation,
Lehman Brothers Inc.
and
BancAmerica Securities, Inc.
_____________________________________________________________________________
_____________________________________________________________________________
<PAGE>
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement")
is made and entered into as of April 30, 1997 by and among L-3 Communications
Corporation, a Delaware corporation (the "Company"), and Lehman Brothers Inc.
and BancAmerica Securities, Inc. (together, the "Initial Purchasers"), each
of whom has agreed to purchase the Company's 10 3/8% Senior Subordinated
Notes due 2007 (the "Series A Notes") pursuant to the Purchase Agreement (as
defined below).
This Agreement is made pursuant to the Purchase
Agreement, dated April 25, 1997 (the "Purchase Agreement"), by and among the
Company and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Series A Notes, the Company has agreed to provide
the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized
terms shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under
the Exchange Act.
Broker-Dealer Transfer Restricted Securities: Series B
Notes (including any Subsidiary Guarantees) that are acquired by a Restricted
Broker-Dealer for its own account as a result of market-making activities or
other trading activities.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be
deemed "Consummated" for purposes of this Agreement upon the occurrence of
(i) the filing and effectiveness under the Act of the Exchange Offer
Registration Statement relating to the Series B Notes to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer open for a
period not less than the minimum period required pursuant to Section 3(b)
hereof, and (iii) the delivery by the Company to the Registrar under the
Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes that were tendered by Holders
thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A
Notes, each Interest Payment Date.
<PAGE>
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Exchange Offer: The registration by the Company under
the Act of the Series B Notes (including any Subsidiary Guarantees) pursuant
to a Registration Statement pursuant to which the Company offers the Holders
of all outstanding Transfer Restricted Securities the opportunity to exchange
all such outstanding Transfer Restricted Securities held by such Holders for
Series B Notes and registered Subsidiary Guarantees in an aggregate principal
amount equal to the aggregate principal amount of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The
Registration Statement relating to the Exchange Offer, including the related
Prospectus.
Exempt Resales: The transactions in which the Initial
Purchasers propose to sell the Series A Notes to (i) certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act,
(ii) to certain institutional "accredited investors," as such term is defined
in Rule 501(a)(1), (2), (3) and (7) under the Act ("Accredited Institutions")
and (iii) outside the United States to Persons other than U.S. Persons in
offshore transactions meeting the requirements of rule 904 of Regulation S
under the Act.
Guarantor: Any subsidiary of the Company that executes
a Subsidiary Guarantee under the Indenture.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of the date hereof,
1997, among the Company and The Bank of New York, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and
the Notes.
Market-Maker Prospectus: As defined in Section 4
hereof.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
<PAGE>
Prospectus: The prospectus included in a Registration
Statement including, without limitation, a Market-Maker Prospectus, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Record Holder: With respect to any Damages Payment
Date relating to Notes, each Person who is a Holder of Notes on the record
date with respect to the Interest Payment Date on which such Damages Payment
Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any Registration Statement of
the Company relating to (a) an offering of Series B Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, which is filed
pursuant to the provisions of this Agreement including the registration for
resale of Broker-Dealer Transfer Restricted Securities, in each case
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer that is an
affiliate of the Company that the holds Broker-Dealer Transfer Restricted
Securities.
Series B Notes: The Company's 10 3/8% Senior
Subordinated Notes due 2007 to be issued pursuant to the Indenture in the
Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4
hereof.
Subsidiary Guarantee: The Guarantee by a Guarantor of
the Company's obligations under the Notes and Indenture.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note (including
any Subsidiary Guarantee), until the earliest to occur of (a) the date on
which such Note is exchanged in the Exchange Offer and entitled to be resold
to the public by the Holder thereof without complying with the prospectus
delivery requirements of the Act, (b) the date on which such Note (including
any Subsidiary Guarantee) has been effectively registered under the Act and
disposed of in accordance with a Shelf Registration Statement and (c) the
date on which such Note (including any Subsidiary Guarantee) is distributed
to the public pursuant to Rule 144 under the Act or by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained
therein).
<PAGE>
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter
for reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities and Broker-Dealer
Transfer Restricted Securities. The securities entitled to the benefits of
this Agreement are the Transfer Restricted Securities and Broker-Dealer
Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A
Person is deemed to be a holder of Transfer Restricted Securities (each, a
"Holder") whenever such Person owns Transfer Restricted Securities.
(c) Holders of Broker-Dealer Transfer Restricted
Securities. A Restricted Broker-Dealer is deemed to be a holder of Broker-
Dealer Transfer Restricted Securities (each, a "Holder") whenever such
Restricted Broker-Dealer owns Broker-Dealer Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible
under applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with), the Company shall (i) cause to
be filed with the Commission as soon as practicable after the Closing Date,
but in no event later than 90 days after the Closing Date, a Registration
Statement under the Act relating to the Series B Notes (including any
Subsidiary Guarantees) and the Exchange Offer, (ii) use all commercially
reasonable efforts to cause such Registration Statement to become effective
at the earliest possible time, but in no event later than 150 days after the
Closing Date (which 150-day period shall be extended for a number of days
equal to the number of business days, if any, the Commission is officially
closed during such period), (iii) in connection with the foregoing, file
(A) all pre-effective amendments to such Registration Statement as may be
necessary in order to cause such Registration Statement to become effective,
(B) if applicable, a post-effective amendment to such Registration Statement
pursuant to Rule 430A under the Act and (C) cause all necessary filings in
connection with the registration and qualification of the Series B Notes
(including any Subsidiary Guarantees) to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Registration Statement,
commence the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes (including any Subsidiary
Guarantees) to be offered in exchange for the Transfer Restricted Securities
and to permit resales of Notes held by Broker-Dealers as contemplated by
Section 3(c) below.
(b) The Company shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
business days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
<PAGE>
Notes (including any Subsidiary Guarantees) shall be included in the Exchange
Offer Registration Statement. The Company shall use its best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in
no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in the Exchange
Offer Registration Statement that any Broker-Dealer who holds Series A Notes
that are Transfer Restricted Securities and that were acquired for its own
account as a result of market-making activities or other trading activities
(other than Transfer Restricted Securities acquired directly from the
Company), may exchange such Series A Notes pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a Prospectus meeting the
requirements of the Act in connection with any resales of the Series B Notes
received by such Broker-Dealer in the Exchange Offer, which Prospectus
delivery requirement may be satisfied by the delivery by such Broker-Dealer
of the Prospectus contained in the Exchange Offer Registration Statement.
Such "Plan of Distribution" section shall also contain all other information
with respect to such resales by Broker-Dealers that the Commission may
require in order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission.
The Company shall use all commercially reasonable
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(d) below to the extent necessary to ensure that it is available for resales
of Notes acquired by Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities, and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of 180 days from the date on which the Exchange Offer Registration
Statement is declared effective.
The Company shall provide sufficient copies of the
latest version of such Prospectus to Broker-Dealers promptly upon request at
any time during such 180 day period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION; MARKET-MAKER PROSPECTUS
(a) Shelf Registration. If (i) the Company is not
required to file an Exchange Offer Registration Statement or to Consummate
the Exchange Offer because the Exchange Offer is not permitted by applicable
law or Commission policy (after the procedures set forth in Section 6(a)
below have been complied with) or (ii) if any Holder of Transfer Restricted
Securities that is a "qualified institutional buyer," as such term is defined
in Rule 144A under the Act or an institutional "accredited investor," as such
term is defined in Rule 501(a)(1), (2), (3) and (7) under the Act shall
notify the Company prior to the 20th business day following the Consummation
of the Exchange Offer that such Holder alone or together with holders who
hold in the aggregate at least $1.0 million in principal amount of Series A
Notes (A) is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) may not resell the Series B Notes
<PAGE>
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by
such Holder, or (C) is a Broker-Dealer and holds Series A Notes acquired
directly from the Company or one of its affiliates, then the Company shall
(x) cause to be filed a shelf
Registration Statement pursuant to Rule 415
under the Act, which may be an amendment to
the Exchange Offer Registration Statement
(in either event, the "Shelf Registration
Statement") on or prior to the earliest to
occur of (1) the 30th day after the date on
which the Company determines that it is not
required to file the Exchange Offer
Registration Statement, or permitted to
Consummate the Exchange Offer and (2) the
30th day after the date on which the
Company receives notice from a Holder of
Transfer Restricted Securities as
contemplated by clause (ii) of paragraph
(a) above (such earliest date being the
"Shelf Filing Deadline"), which Shelf
Registration Statement shall provide for
resales of all Transfer Restricted
Securities the Holders of which shall have
provided the information required pursuant
to Section 4(b) hereof; and
(y) use all commercially
reasonable efforts to cause such Shelf
Registration Statement to be declared
effective by the Commission on or before
the 90th day after the Shelf Filing
Deadline.
The Company shall use all commercially reasonable to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (d) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders
of Transfer Restricted Securities entitled to the benefit of this Section
4(a), and to ensure that it conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years following the
Closing Date or such shorter period that will terminate when all Notes
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or become eligible for resale pursuant to Rule
144 without volume or other restrictions.
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted Securities
in any Shelf Registration Statement pursuant to this Agreement unless and
until such Holder furnishes to the Company in writing, within 10 business
days after receipt of a request therefor, such information as the Company may
reasonably request for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No
<PAGE>
Holder of Transfer Restricted Securities shall be entitled to Liquidated
Damages pursuant to Section 5 hereof unless and until such Holder shall have
used its best efforts to provide all such reasonably requested information.
Each Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
(c) Market-Maker Prospectus. The Company acknowledges
that any Restricted Broker-Dealer holding Broker-Dealer Transfer Restricted
Securities may not resell such Broker-Dealer Transfer Restricted Securities
without delivering a Prospectus. Consequently, on the date that the Exchange
Offer Registration Statement is filed with the Commission, the Company shall
file a Registration Statement (which may be the Exchange Offer Registration
Statement or the Shelf Registration Statement if permitted by the rules and
regulations of the Commission) and shall use their best efforts to cause such
Registration Statement to be declared effective by the Commission on or prior
to the Consummation of the Exchange Offer. The Company shall use all
commercially reasonable efforts to keep such Registration Statement
continuously effective, supplemented and amended as required by the
provisions of Sections 6(c) and (d) hereof to the extent necessary to ensure
that it is available for resales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that it conforms with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, until such time
as all Restricted Broker-Dealers determine in their judgment that they are no
longer required to deliver a Prospectus in connection with sales of Broker-
Dealer Transfer Restricted Securities. The Prospectus included in such
Registration Statement is referred to in this Agreement as a "Market-Maker
Prospectus."
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by
this Agreement is not filed with the Commission on or prior to the date
specified for such filing in sections 3(a), 4(a), and 4(c), as applicable,
(ii) any of such required Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in sections 3(a), 4(a), and 4(c), as applicable, (the
"Effectiveness Target Date"), (iii) the Exchange Offer has not been
Consummated within 30 business days after the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement or (iv) any Registration
Statement required by this Agreement is filed and declared effective but
shall thereafter cease to be effective or fail to be usable for its intended
purpose without being succeeded immediately by a post-effective amendment to
such Registration Statement that cures such failure and that is itself
immediately declared effective (each such event referred to in clauses (i)
through (iv), a "Registration Default"), the Company agrees to pay liquidated
damages to each Holder of Transfer Restricted Securities with respect to the
first 90-day period immediately following the occurrence of such Registration
Default, in an amount equal to $.05 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000
in principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up
<PAGE>
to a maximum amount of liquidated damages of $.50 per week per $1,000
principal amount of Transfer Restricted Securities. All accrued liquidated
damages shall be paid to Record Holders by the Company by wire transfer of
immediately available funds or by federal funds check on each Damages Payment
Date, as provided in the Indenture. Following the cure of all Registration
Defaults relating to any particular Transfer Restricted Securities, the
accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
All payment obligations of the Company set forth in the
preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such payment
obligations with respect to such Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In
connection with the Exchange Offer, the Company shall comply with all of the
provisions of Section 6(d) below, shall use all commercially reasonable
efforts to effect such exchange to permit the sale of Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the
Company there is a question as to whether the Exchange Offer
is permitted by applicable law, the Company hereby agrees to
seek a no-action letter or other favorable decision from the
Commission allowing the Company to Consummate an Exchange
Offer for such Series A Notes. The Company hereby agrees to
pursue the issuance of such a decision to the Commission
staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy.
The Company hereby agrees, however, to (A) participate in
telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which
such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursue a resolution
(which need not be favorable) by the Commission staff of
such submission.
(ii) As a condition to its participation in the
Exchange Offer pursuant to the terms of this Agreement, each
Holder of Transfer Restricted Securities shall furnish, upon
the request of the Company, prior to the Consummation
thereof, a written representation to the Company (which may
be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Company, (B) it is
not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate
in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in
its ordinary course of business. In addition, all such
Holders of Transfer Restricted Securities shall otherwise
<PAGE>
cooperate in the Company's preparations for the Exchange
Offer. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement
rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon
Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters
(including any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection
with a secondary resale transaction and that such a
secondary resale transaction should be covered by an
effective Registration Statement containing the selling
security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes
acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a
supplemental letter to the Commission (A) stating that the
Company is registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause
(i) above and (B) including a representation that the
Company has not entered into any arrangement or
understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series
B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate
in the distribution of the Series B Notes received in the
Exchange Offer.
(b) Shelf Registration Statement. In connection with
the Shelf Registration Statement, the Company shall comply with all the
provisions of Section 6(d) below and shall use all commercially reasonable
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and pursuant thereto the Company will as
expeditiously as possible prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof.
(c) Market-Maker Prospectus. In connection with any
Registration Statement filed pursuant to Section 4(c) of this Agreement, the
Company will comply with all of the provisions of Section 6(d) below (other
than sub-sections (xiii), (xiv), (xv), (xvii) and (xx)) until such time as
all Restricted Broker-Dealers determine in their judgment that they are no
<PAGE>
longer required to deliver Market-Maker Prospectuses in connection with sales
of Broker-Dealer Transfer Restricted Securities. The Company shall use all
commercially reasonable efforts to deliver Market-Maker Prospectuses to all
Restricted Broker-Dealers immediately upon the effectiveness of the
Registration Statement and from time to time thereafter upon request, in such
quantities as such Restricted Broker-Dealer shall require.
(d) General Provisions. In connection with any
Registration Statement and any Prospectus required by this Agreement to
permit the sale or resale of Transfer Restricted Securities (including,
without limitation, any Registration Statement and the related Prospectus
required to permit resales of Notes by Broker-Dealers) and Broker-Dealer
Transfer Restricted Securities, the Company shall:
(i) use all commercially reasonable efforts to
keep such Registration Statement continuously effective and
provide all requisite financial statements (including, if
required by the Act or any regulation thereunder, financial
statements of any Guarantors) for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the
occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B)
not to be effective and usable for resale of Transfer
Restricted Securities or Broker-Dealer Transfer Restricted
Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the
case of either clause (A) or (B), use all commercially
reasonable efforts to cause such amendment to be declared
effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter. Notwithstanding the
foregoing, at any time after Consummation of the Exchange
Offer, the Company may allow the Shelf Registration
Statement or Market-Maker Prospectus and the related
Registration Statement to cease to become effective and
usable if (x) the board of directors of the Company
determines in good faith that it is in the best interests of
the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate
transaction involving the Company, and the Company notifies
the Holders within two business days after the Board of
Directors makes such determination, or (y) the Prospectus
contained in the Shelf Registration Statement or the Market-
Maker Prospectus, as the case may be, contains an untrue
statement of the material fact or omits to state a material
fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading; provided that the two-year period referred to in
Section 4(a) hereof during which the Shelf Registration
Statement is required to be effective and usable shall be
extended by the number of days during which such
Registration Statement was not effective or usable pursuant
to the foregoing provisions;
<PAGE>
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration
Statement effective for the applicable period set forth in
Section 3 or 4 hereof, as applicable; cause the Prospectus
to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in
accordance with the intended method or methods of
distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders of Transfer Restricted Securities and, following the
Consummation of the Exchange Offer, Holders of Broker
Dealer Transfer Restricted Securities, promptly and, if
requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and,
with respect to any Registration Statement or any post-
effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by
any state securities commission of the qualification of the
Transfer Restricted Securities or Broker-Dealer Transfer
Restricted Securities, as applicable, for offering or sale
in any jurisdiction, or the initiation of any proceeding for
any of the preceding purposes, (D) of the existence of any
fact or the happening of any event that makes any statement
of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the
Registration Statement or the Prospectus 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 or
Broker-Dealer Transfer Restricted Securities, as applicable,
under state securities or Blue Sky laws, the Company shall
use all commercially reasonable efforts to obtain the
withdrawal or lifting of such order at the earliest possible
time;
(iv) furnish to each of the selling Holders of
Transfer Restricted Securities or Holders of Broker-Dealer
Transfer-Restricted Securities and each of the
<PAGE>
underwriter(s), if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing
of such Registration Statement), which documents will be
subject to the review of such Holders and underwriter(s), if
any, for a period of at least five business days, and the
Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such
documents incorporated by reference) if a selling Holder of
Transfer Restricted Securities or a Holder of Broker-Dealer
Transfer Restricted Securities, as applicable, covered by
such Registration Statement or the underwriter(s), if any,
shall not have had an opportunity to participate in the
preparation thereof;
(v) promptly prior to the filing of any document
that is to be incorporated by reference into a Registration
Statement or Prospectus, provide copies of such document to
the selling Holders or the Holders of Broker-Dealer Transfer
Restricted Securities, as applicable, and to the
underwriter(s), if any, make the Company's representatives
available for discussion of such document and other
customary due diligence matters, and include such
information in such document prior to the filing thereof as
such selling Holders or the Holders of Broker-Dealer
Transfer Restricted Securities, as applicable, or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times at the
Company's principal place of business for inspection by the
selling Holders of Transfer Restricted Securities, any
underwriter participating in any disposition pursuant to
such Registration Statement, and any attorney or accountant
retained by such selling Holders or any of the
underwriter(s) who shall certify to the Company that they
have a current intention to sell Transfer Restricted
Securities or Broker-Dealer Transfer Restricted Securities
pursuant to a Shelf Registration Statement or Market-Maker
Prospectus, and, following the Consummation of the Exchange
Offer, the Holders of Broker-Dealer Transfer Restricted
Securities, such financial and other information of the
Company as reasonably requested and cause the Company's
officers, directors and employees to respond to such
inquiries as shall be reasonably necessary, in the
reasonable judgment of counsel to such Holders, to conduct a
reasonable investigation; provided, however, that each such
party shall be required to maintain in confidence and not to
disclose to any other person any information or records
reasonably designated by the Company in writing as being
confidential, until such time as (A) such information
becomes a matter of public record (whether by virtue of its
inclusion in such Registration Statement or otherwise), or
(B) such person shall be required so to disclose such
information pursuant to the subpoena or order of any court
<PAGE>
or other governmental agency or body having jurisdiction
over the matter (subject to the requirements of such order,
and only after such person shall have given the Company
prompt prior written notice of such requirement), or (C)
such information is required to be set forth in such
Registration Statement or the Prospectus included therein or
in an amendment to such Registration Statement or an
amendment or supplement to such Prospectus in order that
such Registration Statement, Prospectus, amendment or
supplement, as the case may be, does not contain an untrue
statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading;
(vii) if requested by any selling Holders of
Transfer Restricted Securities or Holders of Broker-Dealer
Transfer Restricted Securities, as applicable, or the
underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if
any, may reasonably request to have included therein,
including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities
or Broker-Dealer Transfer Restricted Securities, as
applicable, information with respect to the principal
amount of Transfer Restricted Securities or Broker-Dealer
Transfer Restricted Securities, as applicable, being sold to
such underwriter(s), the purchase price being paid therefor
and any other terms of the offering of the Transfer
Restricted Securities or Broker-Dealer Transfer-Restricted
Securities, as applicable, to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment;
(viii) furnish to each selling Holder of Transfer
Restricted Securities or Holders of Broker-Dealer Transfer
Restricted Securities, as applicable, and each of the
underwriter(s), if any, without charge, at least one copy of
the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(ix) deliver to each selling Holder of Transfer
Restricted Securities and each of the underwriter(s), if
any, and each Holder of Broker-Dealer Transfer Restricted
Securities, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus and
any amendment or supplement thereto by each of the selling
Holders and each of the underwriter(s), if any, and each
Holder of Broker-Dealer Transfer Restricted Securities, in
connection with the offering and the sale of the Transfer
<PAGE>
Restricted Securities and Broker-Dealer Transfer Restricted
Securities, as applicable, covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an
underwriting agreement), and make such representations and
warranties, and take all such other actions in connection
therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities and Broker-Dealer
Transfer Restricted Securities, as applicable, pursuant to
any Registration Statement contemplated by this Agreement,
all to such extent as may be requested by the Initial
Purchaser or, in the case of registration for resale of
Transfer Restricted Securities pursuant to the Shelf
Registration Statement, by any Holder or Holders of Transfer
Restricted Securities who hold at least 25% in aggregate
principal amount of such class of Transfer Restricted
Securities or, in the case of Broker-Dealer Transfer
Restricted Securities, by any Holder of Broker-Dealer
Transfer Restricted Securities; provided, that, the Company
shall not be required to enter into any such agreement more
than once with respect to all of the Transfer Restricted
Securities and, in the case of a Shelf Registration
Statement, may delay entering into such agreement if the
Board of Directors of the Company determines in good faith
that it is in the best interests of the Company not to
disclose the existence of or facts surrounding any proposed
or pending material corporate transaction involving the
Company; and whether or not an underwriting agreement is
entered into and whether or not the registration is an
Underwritten Registration, the Company shall:
(A) furnish to the Initial Purchaser, the Holders
of Transfer Restricted Securities who hold at least 25%
in aggregate principal amount of such class of Transfer
Restricted Securities (in the case of a Shelf
Registration Statement), each Holder of Broker-Dealer
Transfer Restricted Securities and each underwriter, if
any, in such substance and scope as they may request
and as are customarily made in connection with an
offering of debt securities pursuant to a Registration
Statement (i) upon the effective date of any
Registration Statement (and if such Registration
Statement contemplates an Underwritten Offering of
Transfer Restricted Securities or Broker-Dealer
Transfer Restricted Securities, as applicable, upon the
date of the closing under the underwriting agreement
related thereto) and (ii) upon the filing of any
amendment or supplement to any Registration Statement
or any other document that is incorporated in any
Registration Statement by reference and includes
financial data with respect to a fiscal quarter or
year:
(1) a certificate, dated the date of
effectiveness of the Shelf Registration Statement
signed by (y) the Chairman of the Board, the
<PAGE>
President or any Vice President and (z) the Chief
Financial Officer of the Company confirming, as of
the date thereof, the matters set forth in
paragraph (j) of Section 7 of the Purchase
Agreement and such other matters as such parties
may reasonably request;
(2) an opinion, dated the date of
effectiveness of the Shelf Registration Statement,
as the case may be, of counsel for the Company
covering the matters set forth in paragraphs (c),
(d) and (e) of Section 7 of the Purchase Agreement
and such other matter as such parties may
reasonably request, and in any event including a
statement to the effect that such counsel has
participated in conferences with officers and
other representatives of the Company,
representatives of the independent public
accountants for the Company, the Initial
Purchasers' representatives and the Initial
Purchasers' counsel in connection with the
preparation of such Registration Statement and the
related Prospectus and have considered the matters
required to be stated therein and the statements
contained therein, although such counsel has not
independently verified the accuracy, completeness
or fairness of such statements; and that such
counsel advises that, on the basis of the
foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by
officers and other representatives of the Company
and without independent check or verification), no
facts came to such counsel's attention that caused
such counsel to believe that the applicable
Registration Statement, at the time such
Registration Statement or any post-effective
amendment thereto became effective, and, in the
case of the Exchange Offer Registration Statement,
as of the date of Consummation, contained an
untrue statement of a material fact or omitted to
state a material fact required to be stated
therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in such Registration Statement as of its
date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of
the date of Consummation, contained an untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading. Such
counsel may state further that such counsel
assumes no responsibility for, and has not
independently verified, the accuracy, completeness
or fairness of the financial statements, notes and
schedules and other financial data included in any
<PAGE>
Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of
the date of Consummation of the Exchange Offer or
the date of effectiveness of the Shelf
Registration Statement, as the case may be, from
the Company's independent accountants, in the
customary form and covering matters of the type
customarily covered in comfort letters by
underwriters in connection with primary
underwritten offerings, and affirming the matters
set forth in the comfort letters delivered
pursuant to Section 7 of the Purchase Agreement,
without exception;
(B) set forth in full or incorporated by
reference in the underwriting agreement, if any, the
indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified
pursuant to said Section; and
(C) deliver such other documents and certificates
as may be reasonably requested by such parties to
evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting
agreement or other agreement entered into by the
Company pursuant to this clause (x), if any.
(xi) prior to any public offering of Transfer
Restricted Securities, or Broker-Dealer Transfer Restricted
Securities, as applicable, cooperate with the selling
Holders of Transfer Restricted Securities, the Holders of
Broker-Dealer Transfer Restricted Securities, the
underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the
Transfer Restricted Securities or Broker-Dealer Transfer
Restricted Securities, as applicable, under the securities
or Blue Sky laws of such jurisdictions as the selling
Holders of Transfer Restricted Securities or Holders of
Broker-Dealer Transfer Restricted Securities or
underwriter(s) may reasonably request and do any and all
other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted
Securities or Broker-Dealer Transfer Restricted Securities,
as applicable, covered by the Shelf Registration Statement
filed pursuant to Section 4 hereof; provided, however, that
the Company shall not be required to register or qualify as
a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of
process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in
any jurisdiction where it is not now so subject;
(xii) shall issue, upon the request of any Holder of
Series A Notes covered by the Shelf Registration Statement,
Series B Notes, having an aggregate principal amount equal
<PAGE>
to the aggregate principal amount of Series A Notes
surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes
to be registered in the name of such Holder or in the name
of the purchaser(s) of such Notes, as the case may be; in
return, the Series A Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xiii) cooperate with the selling Holders of Transfer
Restricted Securities and the underwriter(s), if any, to
facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and enable
such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or
the underwriter(s), if any, may request at least two
business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s);
(xiv) use its best efforts to cause the Transfer
Restricted Securities or Broker-Dealer Transfer Restricted
Securities, as applicable, covered by the Registration
Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in
clause (xi) above;
(xv) if any fact or event contemplated by clause
(d)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, or Broker-Dealer Transfer Restricted
Securities, as applicable, the Prospectus will not contain
an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading;
(xvi) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of
the Registration Statement and provide the Trustee under the
Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for
deposit with the Depository Trust Company;
(xvii) cooperate and assist in any filings required
to be made with the NASD and in the performance of any 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;
(xviii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
<PAGE>
make generally available to its security holders, as soon as
practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) for the
twelve-month period (A) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering
or (B) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the
Registration Statement;
(xix) cause the Indenture to be qualified under the
TIA not later than the effective date of the first
Registration Statement required by this Agreement, and, in
connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use
all commercially reasonable efforts to cause the Trustee to
execute, all documents that may be required to effect such
changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so
qualified in a timely manner;
(xx) provide promptly to each Holder upon request
each document filed with the Commission pursuant to the
requirements of Section 13 and Section 15 of the Exchange
Act; and
(xxi) cause each Guarantor upon the creation or
acquisition by the Company of such Guarantor, to execute a
counterpart to this Agreement in the form attached hereto as
Annex A and to deliver such counterpart, together with an
opinion of counsel as to the enforceability thereof against
such entity, to the Initial Purchasers no later than five
business days following the execution thereof.
Each Holder agrees by acquisition of a Transfer
Restricted Security or Broker-Dealer Transfer Restricted Securities, as
applicable, that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 6(d)(iii)(D) hereof,
such Holder will forthwith discontinue disposition of Transfer Restricted
Securities or Broker-Dealer Transfer Restricted Security pursuant to the
applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(d)(xvi)
hereof, or until it is advised in writing (the "Advice") by the Company that
the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities or Broker-Dealer Transfer Restricted Security,
as applicable, that was current at the time of receipt of such notice. In
the event the Company shall give any such notice, the time period regarding
the effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
<PAGE>
Section 6(d)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies
of the supplemented or amended Prospectus contemplated by Section 6(d)(xv)
hereof or shall have received the Advice.
The Company may require each Holder of Transfer
Restricted Securities or Broker-Dealer Transfer Restricted Securities as to
which any registration is being effected to furnish to the Company such
information regarding such Holder and such Holder's intended method of
distribution of the applicable Transfer Restricted Securities or Broker-
Dealer Transfer Restricted Securities as the Company may from time to time
reasonably request in writing, but only to the extent that such information
is required in order to comply with the Act. Each such Holder agrees to
notify the Company as promptly as practicable of (i) any inaccuracy or change
in information previously furnished by such Holder to the Company or (ii) the
occurrence of any event, in either case, as a result of which any Prospectus
relating to such registration contains or would contain an untrue statement
of a material fact regarding such Holder or such Holder's intended method of
distribution of the applicable Transfer Restricted Securities or Broker-
Dealer Transfer Restricted Securities or omits to state any material fact
regarding such Holder or such Holder's intended method of distribution of the
applicable Transfer Restricted Securities or Broker-Dealer Transfer
Restricted Securities required to be stated therein or necessary to make the
statements therein not misleading and promptly to furnish to the Company any
additional information required to correct and update any previously furnish
to the Company any additional information required to correct and update any
previously furnished information or required so that such Prospectus shall
not contain, with respect to such Holder or the distribution of the
applicable Transfer Restricted Securities or Broker-Dealer Transfer
Restricted Securities 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.
SECTION 7. REGISTRATION EXPENSES
All expenses incident to the Company's performance of
or compliance with this Agreement will be borne by the Company regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including
filings made by any Initial Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter"
and its counsel that may be required by the rules and regulations of the
NASD)); (ii) all fees and expenses of compliance with federal securities and
state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Series B Notes to be issued in the Exchange
Offer and printing of Prospectuses), messenger and delivery services; (iv)
all fees and disbursements of counsel for the Company and the Holders of
Transfer Restricted Securities; and (v) all fees and disbursements of
independent certified public accountants of the Company (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses
<PAGE>
of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Company.
SECTION 8. INDEMNIFICATION
(a) The Company shall indemnify and hold harmless each
Holder of Transfer Restricted Securities or Broker Dealer Transfer Restricted
Securities, its officers and employees and each person, if any, who controls
any such Holders, within the meaning of the Securities Act, from and against
any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases, sales and registration of Notes),
to which that Holder, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Registration Statement or Prospectus or in any amendment or supplement
thereto or (B) in any blue sky application or other document prepared or
executed by the Company (or based upon any written information furnished by
the Company) specifically for the purpose of qualifying any or all of the
Notes under the securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called a "Blue Sky
Application"), (ii) the omission or alleged omission to state in any
Registration Statement or Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(iii) any act or failure to act or any alleged act or failure to act by any
Holder in connection with, or relating in any manner to, the Notes or the
offering contemplated hereby, and which is included as part of or referred to
in any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i) or (ii) above (provided that the Company shall
not be liable under this clause (iii) to the extent that it is determined in
a final judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such acts or failures
to act undertaken or omitted to be taken by such Holder through its gross
negligence or willful misconduct), and shall reimburse each Holder and each
such officer, employee or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that Holder, officer, employee
or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any
Registration Statement or Prospectus, or in any such amendment or supplement,
or in any Blue Sky Application, in reliance upon and in conformity with
written information concerning such Holder furnished to the Company by or on
behalf of any Holder specifically for inclusion therein. The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to any Holder or to any officer, employee or controlling
person of that Holder.
(b) Each Holder, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees, each of
its directors, and each person, if any, who controls the Company within the
meaning of the Securities Act, from and against any loss, claim, damage or
<PAGE>
liability, joint or several, or any action in respect thereof, to which the
Company or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Registration Statement or Prospectus, or in any amendment or supplement
thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged
omission to state in any Registration Statement or Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky Application any material
fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information concerning
such Holders furnished to the Company by or on behalf of that Holder
specifically for inclusion therein, and shall reimburse the Company and any
such director, officer or controlling person for any legal or other expenses
reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to
any liability which any Holder may otherwise have to the Company or any such
director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section
8 except to the extent it has been materially prejudiced by such failure and,
provided further, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 8. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, any
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party
in writing, (ii) such indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the indemnifying party
and in the reasonable judgement of such counsel it is advisable for such
indemnified party to employ separate counsel or (iii) the indemnifying party
has failed to assume the defense of such action and employ counsel reasonably
satisfactory to the indemnified party, in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party shall not, in
<PAGE>
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys (in addition to one local
counsel) at any time for all such indemnified parties, if the indemnified
parties under this Section 8 consist of any Initial Purchaser or any of their
respective officers, employees or controlling persons, or by the Company, if
the indemnified parties under this Section consist of the Company or any of
the Company's directors, officers, employees or controlling persons. Each
indemnified party, as a condition of the indemnity agreements contained in
Section 8, shall use all commercially reasonable efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent
of the indemnifying party or if there be a final judgment of the plaintiff in
any such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this
Section 8 shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party under Section 8(a) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company, on the one hand, and
the Holders on the other, from the offering of the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Holders on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Holders on the other with respect to such offering shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes purchased under the Purchase Agreement (before
deducting expenses) received by the Company, on the one hand, and the total
discounts and commissions received by the Holders with respect to the Series
A Notes purchased under this Agreement, on the other hand, bear to the total
gross proceeds from the offering of the Series A Notes under the Purchase
Agreement, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied
by the Company or the Holders, the intent of the parties and their relative
<PAGE>
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Holders agree that it would not
be just and equitable if contributions pursuant to this Section 8(d) were to
be determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above
in this Section shall be deemed to include, for purposes of this Section
8(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Holder shall be
required to contribute any amount in excess of the amount by which the net
proceeds received by it in connection with its sale of Notes exceeds the
amount of any damages which such Holder has otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute as provided in
this Section 8(d) are several and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder of Transfer
Restricted Securities, during any period in which the Company is not subject
to Section 13 or 15(d) of the Exchange Act within the two-year period
following the Closing Date, and each Holder of Broker-Dealer Transfer
Restricted Securities, for so long as any Broker-Dealer Transfer Restricted
Securities remain outstanding, to make available to any Holder or beneficial
owner of Transfer Restricted Securities or any Holder or Broker-Dealer
Transfer Restricted Securities, in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities from such Holder
or beneficial owner, the information required by Rule 144A(d)(4) under the
Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten
Registration hereunder unless such Holder (a) agrees to sell such Holder's
Transfer Restricted Securities or Broker-Dealer Transfer Restricted
Securities, as applicable, on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered
by the Shelf Registration Statement who desire to do so may sell such
Transfer Restricted Securities in an Underwritten Offering at such Holders'
expense. In any such Underwritten Offering, the investment banker or
<PAGE>
investment bankers and manager or managers that will administer the offering
will be selected by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities included in such offering; provided,
that such investment bankers and managers must be reasonably satisfactory to
the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company agrees that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not,
on or after the date of this Agreement, enter into any agreement with respect
to its securities that is inconsistent with the rights granted to the Holders
in this Agreement or otherwise conflicts with the provisions hereof. Except
as disclosed in the Final Offering Memorandum, the Company has not previously
entered into any agreement granting any registration rights with respect to
its securities to any Person. The rights granted to the Holders hereunder do
not in any way conflict with and are not inconsistent with the rights granted
to the holders of the Company's securities under any agreement in effect on
the date hereof.
(c) Adjustments Affecting the Notes. The Company will
not take any action, or permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or
consents to or departures from the provisions hereof may not be given unless
the Company has obtained the written consent of Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-
delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopier, or air courier guaranteeing overnight
delivery:
(i) if to a Holder, at the address set forth on
the records of the Registrar under the Indenture, with a
copy to the Registrar under the Indenture; and
<PAGE>
(ii) if to the Company:
L-3 Communications Corporation
600 Third Avenue, 34th Floor,
New York, New York 10016,
Attention: Chief Financial Officer
(Fax: 212-805-5470),
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY, 10017
Attention: Andrew R. Keller
(Fax: 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 telexed; when receipt
acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the same
to the Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of
each of the parties, including without limitation and without the need for an
express assignment, subsequent Holders or Restricted Broker Dealers;
provided, however, that this Agreement shall not inure to the benefit of or
be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities or Broker
Dealer Transfer Restricted Securities from such Holder.
(g) 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.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and
<PAGE>
of the remaining provisions contained herein shall not be affected or
impaired thereby.
(k) Entire Agreement. This Agreement together with
the other Operative Documents (as defined in the Purchase Agreement) is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding
of the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein with respect to the registration rights
granted by the Company with respect to the Transfer Restricted Securities.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
[Signature pages follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
L-3 Communications Corporation
By: ______________________________
Name:
Title:
Lehman Brothers Inc.
BancAmerica Securities, Inc.
By Lehman Brothers Inc.
By: __________________________________
Authorized Representative
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
L-3 Communications Corporation
By: ______________________________
Name:
Title:
Lehman Brothers Inc.
BancAmerica Securities, Inc.
By Lehman Brothers Inc.
By: __________________________________
Authorized Representative
<PAGE>
Annex A
------
Counterpart To Registration Rights Agreement
--------------------------------------------
The undersigned hereby absolutely, unconditionally and
irrevocably agrees (as a "Guarantor") to make all commercially reasonable
efforts to include its Subsidiary Guarantee in any Registration Statement
required to be filed by the Company pursuant to the Registration Rights
Agreement, dated as of April 30, 1997, (the "Registration Rights Agreement")
by and among L-3 Communications Corporation, a Delaware corporation, Lehman
Brothers Inc. and BancAmerica Securities, Inc.; to make all commercially
reasonable efforts to cause such Registration Statement to become effective
as specified in the Registration Rights Agreement; and to otherwise be bound
by the terms and provisions of the Registration Rights Agreement.
IN WITNESS WHEREOF, the undersigned has executed this
Counterpart as of _________, 1997.
[NAME]
By: _____________________________
Name:
Title:
EXHIBIT 10.3
L-3 COMMUNICATIONS CORPORATION
10 3/8% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
April 25, 1997
Lehman Brothers Inc.
BancAmerica Securities, Inc.
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
L-3 Communications Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell to you (the "Initial Purchasers")
$225.0 million in aggregate principal amount of its 10 3/8% Senior
Subordinated Notes due 2007 (the "Series A Notes") pursuant to the terms of
an Indenture (the "Indenture") between the Company and The Bank of New York,
as trustee (the "Trustee"), relating to the Series A Notes. Capitalized
terms used but not defined herein shall have the meanings given to such terms
in the Indenture.
The Series A Notes will be offered and sold to you pursuant
to an exemption from the registration requirements under the Securities Act
of 1933, as amended (the "Act"). The Company has prepared a preliminary
offering memorandum (the "Preliminary Offering Memorandum"), dated April 11,
1997, and a final offering memorandum (the "Offering Memorandum"), dated
April 25, 1997, relating to the Company and the Series A Notes. As described
in the Offering Memorandum, the Company will use all of the net proceeds from
the offering of the Series A Notes to pay, in part, the $480.0 million (prior
to adjustments and reductions) cash portion of the purchase price of certain
businesses and assets (the "Acquired Businesses") to be acquired by the
Company from Lockheed Martin Corporation pursuant to the Acquisition
Documents (as defined herein).
Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Act, the
Series A Notes (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:
"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
<PAGE>
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."
You have advised the Company that you will make offers (the
"Exempt Resales") of the Series A Notes purchased by you hereunder on the
terms set forth in the Offering Memorandum, as amended or supplemented,
solely to (i) persons whom you reasonably believe to be "qualified
institutional buyers" as defined in Rule 144A under the Act ("QIBs"), (ii) a
limited number of other institutional "accredited investors," as defined in
Rule 501(a) (1), (2), (3) and (7) under the Act, who execute a letter
containing certain representations and agreements in the form set forth as
Annex A to the Offering Memorandum (each, an "Accredited Institution") and
(iii) outside the United States to persons other than U.S. Persons in
offshore transactions meeting the requirements of Rule 904 of Regulation S
("Regulations S") under the Act (such persons specified in clauses (i)
through (iii) being referred to herein as the "Eligible Purchasers"). As
used herein, the terms "offshore transaction," "United States" and "U.S.
person" have the respective meanings given to them in Regulation S. You will
offer the Series A Notes to Eligible Purchasers initially at a price equal to
100% of the principal amount thereof. Such price may be changed at any time
without notice.
Holders (including subsequent transferees) of the Series A
Notes will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated April 30, 1997
(the "Closing Date"), in the form of Exhibit A hereto, for so long as such
Series A Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights
Agreement, the Company will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i)
a registration statement under the Act (the "Exchange Offer Registration
Statement") relating to the Company's 10 3/8% Senior Subordinated Notes due
2007 (the "Series B Notes" and, together with the Series A Notes, the
"Notes") to be offered in exchange for the Series A Notes, (such offer to
<PAGE>
exchange being referred to collectively as the "Registered Exchange Offer")
and (ii) a shelf registration statement pursuant to Rule 415 under the Act
(the "Shelf Registration Statement") relating to the resale by certain
holders of the Series A Notes, and to use its best efforts to cause such
Registration Statements to be declared effective. This Agreement, the
Indenture and the Registration Rights Agreement are hereinafter referred to
collectively as the "Operative Documents." This is to confirm the agreements
concerning the purchase of the Series A Notes from the Company by you.
1. Representations, Warranties and Agreements of the
Company. The Company represents, warrants and agrees as follows (all of such
representations and warranties shall be deemed to include the Acquired
Businesses, and all references to the Company in this section shall assume
that the Company has acquired the Acquired Businesses as of the date hereof):
(a) The Preliminary Offering Memorandum and Offering
Memorandum have been prepared by the Company for use by the Initial
Purchasers in connection with the Exempt Resales. No order or decree
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act has been
issued and no proceeding for that purpose has commenced or is pending or, to
the knowledge of the Company, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates and the Offering Memorandum as of the
Closing Date, did not and will not contain an untrue statement of a material
fact or omit to state a material fact necessary, in order to make the
statements, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the Preliminary Offering Memorandum and
Offering Memorandum made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing by or
on behalf of the Initial Purchasers expressly for use therein.
(c) The market-related and customer-related data and
estimates included in the Preliminary Offering Memorandum and the Offering
Memorandum are based on or derived from sources which the Company believes to
be reliable and accurate.
(d) The Company is a corporation duly incorporated and
validly existing and in good standing under the laws of Delaware with full
corporate power and authority to own, lease and operate its properties and to
conduct its business, and will be on or prior to the Closing Date duly
registered and qualified to conduct its business and will be on or prior to
the Closing Date in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or to be in good standing does not have a material adverse effect on
the condition (financial or other), business, prospects, properties,
shareholders' equity or results of operations of the Company (a "Material
Adverse Effect").
(e) The Company has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement, the
Indenture, the Notes and the Registration Rights Agreement.
<PAGE>
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Initial Purchasers, constitutes the valid and
binding agreement of the Company, enforceable against the Company 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 and except as rights to
indemnity and contribution hereunder may be limited by Federal or state
securities laws or principles of public policy.
(g) The Registration Rights Agreement has been duly and
validly authorized by the Company and, upon its execution and delivery by the
Company and, assuming due authorization, execution and delivery by the
Initial Purchasers, will constitute the valid and binding agreement of the
Company, enforceable against the Company 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 may be limited by Federal or state securities laws or
principles of public policy.
(h) The Indenture has been duly and validly authorized
by the Company, and upon its execution and delivery and, assuming due
authorization, execution and delivery by the Trustee, will constitute the
valid and binding agreement of the Company, enforceable against the Company
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; no qualification of
the Indenture under the 1939 Act is required in connection with the offer and
sale of the Series A Notes contemplated hereby or in connection with the
Exempt Resales.
(i) The Series A Notes have been duly and validly
authorized by the Company and when duly executed by the Company in accordance
with the terms of the Indenture and, assuming due authentication of the
Series A Notes by the Trustee, upon delivery to the Initial Purchasers
against payment therefor in accordance with the terms hereof, will have been
validly issued and delivered, and will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, 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.
(j) The Series B Notes have been duly and validly
authorized by the Company and if and when duly issued and authenticated in
accordance with the terms of the Indenture and delivered in accordance with
the Exchange Offer provided for in the Registration Rights Agreement, will
constitute valid and binding obligations of the Company entitled to the
benefits of the Indenture, enforceable against the Company in accordance with
their terms, subject to the effects of bankruptcy, insolvency, fraudulent
<PAGE>
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.
(k) Each of the credit agreement (the "Credit
Agreement"), dated April 30, 1997, by and among the Company, Lehman
Commercial Paper Inc. and Bank of America NT & SA and any and all other
agreements and instruments ancillary to or entered into in connection with
the transaction contemplated by the Credit Agreement (together with the
Credit Agreement, the "Credit Documents") has been duly and validly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the other parties thereto,
constitutes the valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles.
(l) The Company has all requisite corporate power and
authority to enter into or assume the rights and obligations under, as
applicable, (i) the transaction agreement (the "Transaction Agreement"),
dated as of March 28, 1997, by and among Lockheed Martin Corporation, Lehman
Brothers Capital Partners III, L.P., Frank C. Lanza, Robert V. LaPenta and L-
3 Communications Holdings, Inc. and (ii) any and all other agreements and
side letters (excluding the common stock subscription agreement to be entered
into by Lockheed Martin Corporation, Lehman Brothers Capital Partners III,
L.P. Frank C. Lanza, Robert V. LaPenta and L-3 Communications Holdings, Inc.)
ancillary to or entered into in connection with the transaction contemplated
by the Transaction Agreement (items (i) and (ii) are referred to collectively
as the "Acquisition Documents").
(m) Each of the Transaction Agreement, the other
Acquisition Documents and/or any assignment agreement pertaining thereto, as
applicable, between L-3 Communications Holdings, Inc. and the Company, has
been duly and validly authorized, and when executed and delivered by the
Company, and, assuming due authorization, execution and delivery by the other
parties thereto, will constitute the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
subject to the qualification that the enforceability of the Company's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or
affecting creditors' rights generally and by general equitable principles.
(n) All the shares of capital stock of the Company
outstanding prior to the issuance of the Series A Notes have been duly
authorized and validly issued and are fully paid and nonassessable and the
authorized capital stock of the Company conforms to the description thereof
under the caption "Capitalization" in the Offering Memorandum. The Company
does not have any subsidiaries.
(o) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, threatened, against the Company
or to which any of its properties, is subject, that are not disclosed in the
Offering Memorandum and which, if adversely decided, are reasonably likely to
cause a Material Adverse Effect. The Company is not involved in any strike,
<PAGE>
job action or labor dispute with any group of employees that would have a
Material Adverse Effect, and, to the Company's knowledge, no such action or
dispute is threatened.
(p) No material relationship, direct or indirect, exists
between or among the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand, except
as described in the Offering Memorandum.
(q) The Company (i) is not in violation of its
certificate of incorporation, by-laws or other organizational document, (ii)
is not in default in any material respect, and no event has occurred which,
with notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of
its properties or assets is subject that is material to the Company's
financial condition or prospects (collectively, the "Material Agreements") or
(iii) is not in violation in any material respect of any law, statute,
ordinance, governmental rule, regulation, filing or injunction or court
decree to which it or its property or assets is subject or has failed to
obtain any material license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of its
property or to the conduct of its business, except as would not,
individually, or in the aggregate, have a Material Adverse Effect.
(r) None of the issuance, offer or sale of the Series A
Notes, the execution, delivery or performance by the Company of this
Agreement or the other Operative Documents, compliance by the Company with
the provisions hereof or thereof nor consummation by the Company of the
transactions contemplated hereby or thereby; none of the execution, delivery
or performance by the Company of the Credit Agreement or the other Credit
Documents, compliance by the Company with the provisions thereof nor
consummation by the Company of the transactions contemplated thereby; and
none of the execution, delivery or performance by the Company of the
Transaction Agreement, the other Acquisition Documents and/or any assignment
agreement pertaining thereto between L-3 Communications Holdings, Inc. and
the Company, as the case may be, compliance by the Company with the
provisions thereof nor consummation by the Company of the transactions
contemplated thereby (i) requires any consent, approval, authorization or
other order of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required in connection with the registration under the Act of
the Series B Notes in accordance with the Registration Rights Agreement,
qualification of the Indenture under the 1939 Act and compliance with the
securities or Blue Sky laws of various jurisdictions and except as required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
except the consents specified by Exhibit B hereto), or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate of incorporation or bylaws, or other organizational
documents, of the Company or (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under any Material
Agreement or will violate any material law, statute, ordinance, governmental
rule, regulation, filing or injunction or court decree to which it or its
property or assets is subject or will result in the creation or imposition of
any lien, charge or encumbrance upon any material property or assets of the
<PAGE>
Company pursuant to the terms of any agreement or instrument to which it is a
party or to which any of its property or assets is subject.
(s) The accountants, Coopers & Lybrand L.L.P., who have
certified certain of the financial statements included as part of the
Offering Memorandum, are independent public accountants under Rule 101 of the
AICPA's Code of Professional Conduct, and its interpretation and rulings.
(t) The accountants, Ernst & Young LLP, who have
certified certain of the financial statements included as part of the
Offering Memorandum, are independent public accountants under Rule 101 of the
AICPA's Code of Professional Conduct, and its interpretation and rulings.
(u) The historical and pro forma financial statements,
together with related notes, set forth in the Offering Memorandum (excluding
Summary-Unaudited Pro Forma and Supplemental Adjusted Historical Financial
Data and Unaudited Supplemental Adjusted Historical Financial Data) comply as
to form in all material respects with the requirements of Regulation S-X
under the Act applicable to registration statements on Form S-1 under the
Act. Such historical financial statements fairly present the financial
position of the Company (or its predecessor) at the respective dates
indicated and the results of operations and cash flows for the respective
periods indicated, in accordance with GAAP consistently applied throughout
such periods. Such pro forma financial statements have been prepared on a
basis consistent with such historical statements, except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Offering Memorandum and this
Agreement. The other financial and statistical information and data included
in the Offering Memorandum (including Summary-Unaudited Pro Forma and
Supplemental Adjusted Historical Financial Data and Unaudited Supplemental
Adjusted Historical Financial Data), historical and pro forma, have been
derived from the financial records of the Lockheed Martin Predecessor
Businesses and the Loral Acquired Businesses (each as defined in the Offering
Memorandum) and, in all material respects, have been prepared on a basis
consistent with such books and records of the Company (or its predecessor),
except as disclosed therein.
(v) Except as disclosed in, or specifically contemplated
by, the Offering Memorandum, subsequent to the date as of which such
information is given in the Offering Memorandum, the Company has not incurred
any liability or obligation, direct or contingent, or entered into any
transaction, in each case not in the ordinary course of business, that is
material to the Company, and there has not been any material change in the
capital stock, or material increase in the short-term or long-term debt, of
the Company or any material adverse change, or any development involving or
which would reasonably be expected to involve a prospective material adverse
change, in the condition (financial or other), business, properties,
shareholders' equity, results of operations or prospects of the Company.
(w) The Company will, on or prior to the Closing Date,
have good and marketable title to all property (real and personal) described
in the Offering Memorandum as being owned by it, free and clear of all liens,
claims, security interests or other encumbrances except such as are described
in the Offering Memorandum or, to the extent that any such liens, claims,
security interests or other encumbrances would not have a Material Adverse
Effect (individually or in the aggregate) and all the material property
<PAGE>
described in the Offering Memorandum as being held under lease by the Company
is held by it under valid, subsisting and enforceable leases, with only such
exceptions as in the aggregate would not have a Material Adverse Effect.
(x) The Company will, on or prior to the Closing date,
own all material patents, trademarks, service marks, trade names, copyrights,
licenses, inventions, trade secrets and other rights, and all registrations
or applications relating thereto, described in the Offering Memorandum as
being owned by it or necessary for the conduct of its business, except as
such would not have a Material Adverse Effect, and the Company is not aware
of any pending or threatened claim to the contrary or any pending or
threatened challenge by any other person to the rights of the Company with
respect to the foregoing which, if determined adversely to the Company would
have a Material Adverse Effect.
(y) The Company will, on or prior to the Closing Date,
have all material permits, licenses, franchises, certificates of need and
other approvals or authorizations of governmental or regulatory authorities
("Permits") as are necessary under applicable law to own its properties and
to conduct its business in the manner described in the Offering Memorandum,
except to the extent that the failure to have such Permits would not have a
Material Adverse Effect; the Company has fulfilled and performed in all
material respects, all of its material obligations with respect to the
Permits, and no event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such Permit, subject
in each case to such qualification as may be set forth in the Offering
Memorandum and except to the extent that any such revocation or termination
would not have a Material Adverse Effect.
(z) To the best of the Company's knowledge, neither the
Company nor any director, officer, agent, employee or other person associated
with or acting on behalf of the Company, has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds or
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977 except such that would not have a Material Adverse Effect.
(aa) The Company is not and, upon sale of the Series A
Notes to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Company of such sale as described in
the Offering Memorandum under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(ab) Neither the Company nor any affiliate (as defined in
Rule 501(b) of Regulation D ("Regulation D") under the Act) of the Company
has directly, or through any agent (provided that no representation is made
as to the Initial Purchasers or any person acting on its behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Act) which is or could be integrated with
the offering and sale of the Notes in a manner that would require the
registration of the Series A Notes under the Act or (ii) engaged in any form
of general solicitation or general advertising (within the meaning of
Regulation D, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine, or
<PAGE>
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising) in connection with the offering of the Series A Notes.
No securities of the same class as the Series A Notes have been issued and
sold by the Company within the six-month period immediately prior to the date
hereof.
(ac) Except as permitted by the Act, the Company has not
distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Series A Notes, will not distribute any
offering material in connection with the offering and sale of the Series A
Notes other than the Preliminary Offering Memorandum and Offering Memorandum.
(ad) When the Series A Notes are issued and delivered
pursuant to this Agreement, such Series A Notes will not be of the same class
(within the meaning of Rule 144A under the Act) as securities of the Company
that are listed on a national securities exchange registered under Section 6
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
that are quoted in a U.S. automated inter-dealer quotation system.
(ae) Assuming (i) that your representations and
warranties in Section 2 are true, (ii) that the representations of the
Accredited Institutions set forth in the certificates of such Accredited
Institutions in the form set forth in Annex A to the Offering Memorandum are
true, (iii) compliance by you with your covenants set forth in Section 2 and
(iv) that each of the Eligible Purchasers is a QIB, an Accredited Institution
or a person who is not a "U.S. person" who acquires the Series A Notes
outside the United States in an "offshore transaction" (within the meaning of
Rule 904 of Regulation S), the purchase of the Series A Notes by you pursuant
hereto and the resale of the Series A Notes pursuant hereto pursuant to the
Exempt Resales is exempt from the registration requirements of the Act.
(af) The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA") other than in connection with
acquisition of the Acquired Businesses; no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA)
for which the Company would reasonably expect to incur any material
liability; the Company has not incurred and does not reasonably expect to
incur any material liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); (other
than contributions in the normal course which are not in default) and each
"pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is expected to be
so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would reasonably be expected to cause the
loss of such qualification.
(ag) Except as disclosed in the Offering Memorandum, there
are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities registered pursuant
<PAGE>
to the Exchange Offer Registration Statement, the Shelf Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(ah) The Company has filed all federal, state and local
income and franchise tax returns required to be filed through the date hereof
and has paid all taxes due thereon, and no tax deficiency has been determined
adversely to the Company nor does the Company have any knowledge of any tax
deficiency which, if determined adversely to the Company, might have a
Material Adverse Effect.
(ai) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of toxic
wastes, medical wastes, hazardous wastes or hazardous substances by the
Company (or, to the knowledge of the Company, any of their predecessors in
interest) at, upon or from any of the property now or previously owned or
leased by the Company in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require remedial
action under any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit, except for any violation or remedial action which
would not have, or would not be reasonably likely to have, singularly or in
the aggregate with all such violations and remedial actions, a Material
Adverse Effect; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into
the environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to or
caused by the Company or with respect to which the Company has knowledge,
except for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not have or would not be reasonably likely to
have, singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material Adverse
Effect; and the terms "hazardous wastes," "toxic wastes," "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect
to environmental protection.
(aj) None of the Company or any of its affiliates or any
person acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect to
the Notes, and the Company and its affiliates and all persons acting on its
of their behalf have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of
the Notes outside of the United States. The sales of the Series A Notes
pursuant to Regulation S are "offshore transactions" and are not part of a
plan or scheme to evade the registration provision of the Act. The Company
makes no representation in this paragraph (al) with respect to the Initial
Purchasers.
2. Representations, Warranties and Agreements of the
Initial Purchasers. Each Initial Purchaser represents and warrants with
respect to itself that:
(a) Such Initial Purchaser is either a QIB or an
Accredited Institution, in either case with such knowledge and experience in
financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the Series A Notes.
<PAGE>
(b) Such Initial Purchaser (i) is not acquiring the
Series A Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Series A Notes in a transaction
that would violate the Act or the securities laws of any State of the United
States or any other applicable jurisdiction; (ii) in connection with the
Exempt Resales, will solicit offers to buy the Notes only from, and will
offer to sell the Notes only to, the Eligible Purchasers in accordance with
this Agreement and on the terms contemplated by the Offering Memorandum; and
(iii) will not offer or sell the Notes, nor has it offered or sold the Notes
by, or otherwise engaged in, any form of general solicitation or general
advertising (within the meaning of Regulation D; including, but not limited
to, advertisements, articles, notices or other communications published in
any newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising) in connection with the offering
of the Series A Notes.
(c) The Notes have not been and will not be registered
under the Act and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Act or pursuant to an exemption from the registration
requirements of the Act. The Initial Purchasers represent that they have not
offered, sold or delivered the Notes, and will not offer, sell or deliver the
Notes (i) as part of its distribution at any time or (ii) otherwise until 40
days after the later of the commencement of the offering and the Closing Date
(such period, the "Restricted Period"), within the United States or to, or
for the account or benefit of U.S. persons, except in accordance with Rule
144A under the Act, or to Accredited Institutions in transactions that are
exempt from the registration requirements of the Act. Accordingly, each
Initial Purchaser represents and agrees that neither it, its affiliates nor
any persons acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Rule 901(b) of Regulation S
with respect to the Notes, and it, its affiliates and all persons acting on
its behalf have complied and will comply with the offering restrictions
requirements of Regulation S.
(d) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Notes (other than a sale pursuant to Rule 144A or
to Accredited Institutions in transactions that are exempt from the
registration requirements of the Act), it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration
that purchases Notes from it during the Restricted Period a confirmation or
notice substantially to the following effect:
"The Notes covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may
not be offered and sold within the United States or to, or
for the account or benefit of, U.S. persons (i) as part of
their distribution at any time or (ii) otherwise until 40
days after the later of the commencement of the offering or
the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above have the meanings assigned
to them in Regulation S."
Such Initial Purchaser further agrees that it has not
entered and will not enter into any contractual arrangement with respect to
<PAGE>
the distribution or delivery of the Notes, except with its affiliates or with
the prior written consent of the Company.
(e) Such Initial Purchaser further represents and agrees
that (i) it has not offered or sold and will not offer or sell any Notes to
persons in the United Kingdom prior to the expiry of the period of six months
from the issue date of the Notes, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes in, from or otherwise involving
the United Kingdom, and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document
may otherwise lawfully be issued or passed on.
(f) Such Initial Purchase agrees not to cause any
advertisement of the Notes to be published in any newspaper or periodical or
posted in any public place and not to issue any circular relating to the
Notes, except such advertisements as include the statements required by
Regulation S.
(g) The sales of the Series A Notes pursuant to
Regulation S are "offshore transactions" and are not part of a plan or scheme
to evade the registration provisions of the Act.
(h) Such Initial Purchaser understands that the Company
and, for purposes of the opinions to be delivered to you pursuant to Section
7 hereof, counsel to the Company, General Counsel to the Company and counsel
to the Initial Purchasers, will rely upon the accuracy and truth of the
foregoing representations and you hereby consent to such reliance.
The terms used in this Section 2 that have meanings assigned
to them in Regulation S are used herein as so defined.
Each Initial Purchaser further agrees that, in connection
with the Exempt Resales, it will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, the Eligible
Purchasers in Exempt Resales.
3. Purchase of the Notes by the Initial Purchasers. On the
basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to sell $200.0
million in aggregate principal amount of Series A Notes to the several
Initial Purchasers and each of the Initial Purchasers, severally and not
jointly, agrees to purchase the aggregate principal amount of Series A Notes
set opposite that Initial Purchaser's name in Schedule 1 hereto. Each
Initial Purchaser will purchase such aggregate principal amount of Series A
Notes at an aggregate purchase price equal to 97.0% of the principal amount
thereof (the "Purchase Price").
<PAGE>
The Company shall not be obligated to deliver any of the
Series A Notes to be delivered, except upon payment for all the Series A
Notes to be purchased on such Closing Date as provided herein.
4. Delivery of and Payment.
(a) Delivery to the Initial Purchasers of and payment
for the Series A Notes shall be made at 9:30 a.m., New York City time, on the
Closing Date at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York 10017, or such other time or place as you and the
Company shall designate.
(b) One or more Series A Notes in definitive form,
registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), or such other names as the Initial Purchasers may request
upon at least one business days' notice to the Company, having an aggregate
principal amount corresponding to the aggregate principal amount of Series A
Note sold pursuant to Eligible Resales to QIBs (collectively, the "Global
Note"), shall be delivered by the Company to the Initial Purchasers against
payment by the Initial Purchasers of the purchase price thereof by wire
transfer of immediately available funds as the Company may direct by written
notice delivered to you two business days prior to the Closing Date. The
Global Note in definitive form shall be made available to you for inspection
not later than 2:00 p.m. on the business day immediately preceding the
Closing Date.
(c) Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each Initial Purchaser hereunder.
5. Further Agreements of the Company. The Company agrees:
(a) To advise you promptly and, if requested by you, to
confirm such advice in writing, of (i) the issuance by any state securities
commission of any stop order suspending the qualification or exemption from
qualification of any Series A Notes for offering or sale in any jurisdiction,
or the initiation of any proceeding for such purpose by the Commission or any
state securities commission or other regulatory authority, and (ii) the
happening of any event that makes any statement of a material fact made in
the Preliminary Offering Memorandum or the Offering Memorandum untrue or
which requires the making of any additions to or changes in the Preliminary
Offering Memorandum or the Offering Memorandum in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company shall use all commercially reasonable efforts to
prevent the issuance of any stop order or order suspending the qualification
or exemption of the Series A Notes under any state securities or Blue Sky
laws and, if at any time any state securities commission shall issue any stop
order suspending the qualification or exemption of the Series A Notes under
any state securities or Blue Sky laws, the Company shall use every reasonable
effort to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish to you, as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as you may reasonably request. Such copies shall be
furnished without charge for the nine month period immediately following the
Closing Date. The Company consents to the use of the Preliminary Offering
<PAGE>
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant to this Agreement, by you in connection with the
Exempt Resales that are in compliance with this Agreement.
(c) Not to amend or supplement the Offering Memorandum
prior to the Closing Date or during the period referred to in (d) below
unless you shall previously have been advised of, and shall not have
reasonably objected to, such amendment or supplement within a reasonable
time, but in any event not longer than five days after being furnished a copy
of such amendment or supplement. The Company shall promptly prepare, upon
any reasonable request by you, any amendment or supplement to the Offering
Memorandum that may be necessary or advisable in connection with Exempt
Resales.
(d) If, in connection with any Exempt Resales or market
making transactions after the date of this Agreement and prior to the
consummation of the Exchange Offer, any event shall occur that, in the
judgment of the Company or in the judgment of counsel to you, makes any
statement of a material fact in the Offering Memorandum untrue or that
requires the making of any additions to or changes in the Offering Memorandum
in order to make the statements in the Offering Memorandum, in light of the
circumstances at the time that the Offering Memorandum is delivered to
prospective Eligible Purchasers, not misleading, or if it is necessary to
amend or supplement the Offering Memorandum to comply with all applicable
laws, the Company shall promptly notify you of such event and prepare an
appropriate amendment or supplement to the Offering Memorandum so that (i)
the statements in the Offering Memorandum as amended or supplemented will, in
light of the circumstances at the time that the Offering Memorandum is
delivered to prospective Eligible Purchasers, not be misleading and (ii) the
Offering Memorandum will comply with applicable law.
(e) To cooperate with you and your counsel in connection
with the qualification of the Series A Notes for offer and sale by you and by
dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request (provided, however, that the Company shall not be obligated
to qualify as a foreign corporation in any jurisdiction in which it is not
now so qualified or to take any action that would subject it to general
consent to service of process in any jurisdiction in which it is not now so
subject). The Company shall continue such qualification in effect so long as
required by law for distribution of the Series A Notes and shall file such
consents to service of process or other documents as may be necessary in
order to effect such qualification.
(f) Prior to the Closing Date, to furnish to you, as
soon as they have been prepared, a copy of any internal consolidated
financial statements of the Company for any period subsequent to the period
covered by the financial statements appearing in the Offering Memorandum.
(g) To use all commercially reasonable efforts to do and
perform all things required to be done and performed under this Agreement by
it prior to or after the Closing Date and to satisfy all conditions precedent
on its part to the delivery of the Series A Notes.
(h) Not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Notes in a manner that
<PAGE>
would require the registration under the Act of the sale to you or the
Eligible Purchasers of Series A Notes.
(i) During any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act within the two year period
following the Closing Date, to make available to any registered holder or
beneficial owner of Series A Notes in connection with any sale thereof and
any prospective purchaser of such Series A Notes from such registered holder
or beneficial owner, the information required by Rule 144A(d)(4) under the
Act.
(j) To use all commercially reasonable efforts to effect
the inclusion of the Notes in the National Association of Securities Dealers,
Inc. Automated Quotation System - PORTAL ("PORTAL").
(k) To apply the net proceeds from the sale of the Series A
Notes being sold by the Company as set forth in the Offering Memorandum under
the caption "Use of Proceeds."
(l) To take such steps as shall be necessary to ensure that
the Company shall not become an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
6. Expenses. The Company agrees that, whether or not the
transactions contemplated by this Agreement are consummated or this Agreement
becomes effective or is terminated, to pay all costs, expenses, fees and
taxes incident to and in connection with: (i) the preparation, printing and
distribution of the Preliminary Offering Memorandum and the Offering
Memorandum (including, without limitation, financial statements and exhibits)
and all amendments and supplements thereto (but not, however, legal fees and
expenses of your counsel incurred in connection therewith), (ii) the issuance
and delivery by the Company of the Notes, (iii) the qualification of the
Notes for offer and sale under the securities or Blue Sky laws of the several
states (including, without limitation, the reasonable fees and disbursements
of your counsel relating to such registration or qualification which will be
$10,000), (iv) furnishing such copies of the Preliminary Offering Memorandum
and the Offering Memorandum, and all amendments and supplements thereto, as
may be reasonably requested for use in connection with the Exempt Resales
during the nine month period following the Closing Date, (v) the preparation
of certificates for the Notes, (vi) the fees, disbursements and expenses of
the Company's counsel and accountants, (vii) all expenses and listing fees in
connection with the application for quotation of the Series A Notes in
PORTAL, (viii) all fees and expenses (including fees and expenses of counsel)
of the Company in connection with approval of the Notes by DTC for "book-
entry" transfer and (ix) the performance by the Company of their other
obligations under this Agreement.
7. Conditions of Initial Purchasers' Obligations. The
respective obligations of the Initial Purchasers hereunder are subject to the
accuracy, when made and again on the Closing Date (as if made again on and as
of such date), of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder, and
to each of the following additional terms and conditions:
(a) No Initial Purchaser shall have discovered and
disclosed to the Company on or prior to such Closing Date that the Offering
<PAGE>
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Latham & Watkins, counsel for
the Initial Purchasers, is material or omits to state a fact which, in the
opinion of such counsel, is material and is necessary to make the statements,
in the light of the circumstances under which they were made, not misleading.
(b) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the other
Operative Documents, the Acquisition Documents, the Credit Documents, the
Offering Memorandum, and all other legal matters relating to this Agreement
and the transactions contemplated hereby shall be reasonably satisfactory in
all material respects to counsel for the Initial Purchasers.
(c) Simpson Thacher & Bartlett shall have furnished to
the Initial Purchasers, its written opinion, as counsel to the Company,
addressed to the Initial Purchasers and dated as of the Closing Date, in the
form of Exhibit C hereto:
(d) Fried, Frank, Harris, Shriver & Jacobson shall have
furnished to the Initial Purchasers, its written opinion, as counsel to the
Company, addressed to the Initial Purchasers and dated as of the Closing
Date, in form and substance reasonably satisfactory to the Initial Purchasers
and their counsel, to the effect that:
(i) None of the issuance, offer or sale of the
Series A Notes, the execution, delivery or performance by
the Company of this Agreement or the other Operative
Documents, compliance by the Company with the provisions
hereof or thereof nor consummation by the Company of the
transactions contemplated hereby or thereby; none of the
execution, delivery or performance by the Company of the
Credit Agreement or the other Credit Documents, compliance
by the Company with the provisions thereof nor consummation
by the Company of the transactions contemplated thereby; and
none of the execution, delivery or performance by the
Company of the Transaction Agreement or the other
Acquisition Documents, compliance by the Company with the
provisions thereof nor consummation by the Company of the
transactions contemplated thereby (i) requires any consent,
approval, authorization or other order of, or registration
or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official having
authority over government procurement matters (except for
those governmental authorizations identified in the
Transaction Agreement) or (ii) conflicts or will conflict
with or constitutes or will constitute a material breach of,
or a material default under any material government
procurement contract (limited to our review of the contracts
set forth on Exhibit A) or will violate any law, statute,
ordinance, governmental rule or regulation regarding U.S.
government procurement matters to which it or its property
or assets may be subject or will result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to the terms of
any agreement or instrument (limited to our review of the
contracts set forth on Exhibit A) to which it is a party or
<PAGE>
by which it may be bound or to which any of its property or
assets is subject pursuant to any government procurement
contract.
(ii) The statements under the caption "Risk
Factors -- Risks Inherent in Government Contracts" in the
Offering Memorandum, insofar as they are statements of law
or legal conclusions with respect to government procurement
contracts (which statements are identified on Exhibit B),
are accurate in all material respects and present fairly the
information shown.
The opinion of such counsel may be limited to the laws of
the state of New York, and the federal laws of the United States.
(e) William J. LaSalle, Esq. shall have furnished to the
Initial Purchasers, his written opinion, as counsel to the Company, addressed
to the Initial Purchasers and dated as of the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers and their
counsel, to the effect that:
(i) To the knowledge of such counsel, there are
no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or
to which any of its properties, is subject, that are not
disclosed in the Offering Memorandum and which, if adversely
decided, are reasonably likely to cause a Material Adverse
Effect or to materially affect the issuance of the Notes or
the consummation of the other transactions contemplated by
the Operative Documents.
(f) The Initial Purchasers shall have received from Latham
& Watkins, counsel for the Initial Purchasers, such opinion or opinions,
dated such Closing Date, with respect to the issuance and sale of the Series
A Notes, the Offering Memorandum and other related matters as the Initial
Purchasers may reasonably require, and the Company shall have furnished to
such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(g) The Initial Purchasers shall have received letters
addressed to the Initial Purchasers, and dated the date hereof and the
Closing Date from Coopers & Lybrand L.L.P., independent certified public
accountants, substantially in the forms heretofore approved by the Initial
Purchasers.
(h) The Initial Purchasers shall have received letters
addressed to the Initial Purchasers, and dated the date hereof and the
Closing Date from Ernst & Young LLP, independent certified public
accountants, substantially in the forms heretofore approved by the Initial
Purchasers.
(i) The Company shall have furnished to the Initial
Purchasers a certificate, dated such Closing Date, of its Chairman of the
Board, its President or a Vice President and its chief financial officer
stating that:
<PAGE>
(i) The representations, warranties and
agreements of the Company in Section 1 are true and correct
as of such Closing Date and giving effect to the
consummation of the transactions contemplated by the
Acquisition Documents, the Credit documents and this
Agreement; the Company has complied with all its agreements
contained herein; and the condition set forth in
Section 7(j) has been fulfilled; and
(ii) They have carefully examined the
Preliminary Offering Memorandum and the Offering Memorandum
and, in their opinion (A) the Offering Memorandum and the
Preliminary Offering Memorandum as of their respective dates
and the Offering Memorandum as of the Closing Date, did not
include any untrue statement of a material fact and did not
omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading,
and (B) since the date of the Offering Memorandum, no event
has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum.
(j) (i) The Company shall not have sustained since the
date of the latest audited financial statements included in the Offering
Memorandum any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Offering Memorandum or
(ii) since such date there shall not have been any change in the capital
stock or long-term debt of the Company or any change, or any development
involving a prospective change, in or affecting the business, management,
financial position, shareholders' equity or results of operations of the
Company, otherwise than as set forth or contemplated in the Offering
Memorandum, the effect of which, in any such case described in clause (i) or
(ii), is, in the judgment of the Initial Purchasers, so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Notes being delivered on such Closing Date on
the terms and in the manner contemplated in the Offering Memorandum.
(k) Prior to or simultaneously with the closing of the
transactions contemplated by the Operative Documents, the Company shall have
closed the transactions contemplated by the Credit Documents and the
Acquisition Documents.
(l) Latham & Watkins shall have been furnished with
executed copies of the Acquisition Documents, the Credit Documents, the
stockholders agreements, dated the Closing Date, between and among the
Lockheed Martin Corporation, Lehman Brothers Capital Partners III, L.P.,
Frank C. Lanza, Robert V. LaPenta and L-3 Communications Holdings, Inc. and
the agreements and plans described in the Offering Memorandum under the
caption "Management -- Executive Compensation" and such other documents and
opinions, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Agreement and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
<PAGE>
(m) Subsequent to the execution and delivery of this
Agreement (i) no downgrading shall have occurred in the rating accorded the
Company's debt securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Act and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities.
(n) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market, or trading in any securities of
the Company on any exchange or in the over-the-counter market, shall have
been suspended or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state authorities, (iii)
the United States shall have become engaged in hostilities, there shall have
been an escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United States
or (iv) there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of international
conditions on the financial markets in the United States shall be such) as to
make it, in the judgment of the Initial Purchasers, impracticable or
inadvisable to proceed with the public offering or delivery of the Notes
being delivered on such Closing Date on the terms and in the manner
contemplated in the Offering Memorandum.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Initial Purchaser, its officers and employees and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Notes), to
which that Initial Purchaser, officer, employee or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained (A)
in any Preliminary Offering Memorandum or the Offering Memorandum or in any
amendment or supplement thereto or (B) in any blue sky application or other
document prepared or executed by the Company (or based upon any written
information furnished by the Company) specifically for the purpose of
qualifying any or all of the Series A Notes under the securities laws of any
state or other jurisdiction (any such application, document or information
being hereinafter called a "Blue Sky Application"), (ii) the omission or
alleged omission to state in any Preliminary Offering Memorandum or the
Offering Memorandum, or in any amendment or supplement thereto, or in any
Blue Sky Application any material fact required to be stated therein or
necessary to make the statements therein not misleading or (iii) any act or
failure to act or any alleged act or failure to act by any Initial Purchaser
<PAGE>
in connection with, or relating in any manner to, the Notes or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Initial Purchaser through its gross
negligence or willful misconduct), and shall reimburse each Initial Purchaser
and each such officer, employee or controlling person promptly upon demand
for any legal or other expenses reasonably incurred by that Initial
Purchaser, officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Memorandum or the Offering
Memorandum, or in any such amendment or supplement, or in any Blue Sky
Application, in reliance upon and in conformity with written information
concerning such Initial Purchaser furnished to the Company by or on behalf of
any Initial Purchaser specifically for inclusion therein; provided further,
that the indemnification contained in this paragraph (a) with respect to the
Preliminary Offering Memorandum shall not inure to the benefit of any Initial
Purchaser (or to the benefit of any officers or employees of any Initial
Purchase or of any person controlling such Initial Purchaser) on account of
any such loss, claim, damage, liability or action arising from the sale of
the Series A Notes by such Initial Purchaser to any person if the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in the Preliminary Offering Memorandum was corrected
in the Offering Memorandum and the Initial Purchaser sold Series A Notes to
that person without sending or giving at or prior to the written confirmation
of such sale, a copy of the Offering Memorandum (as then amended or
supplemented) if the Company has previously furnished sufficient copies
thereof to the Initial Purchaser on a timely basis to permit such sending or
giving. The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any Initial Purchaser or to any
officer, employee or controlling person of that Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly,
shall indemnify and hold harmless the Company, its officers and employees,
each of its directors, and each person, if any, who controls the Company
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained (A)
in any Preliminary Offering Memorandum or the Offering Memorandum or in any
amendment or supplement thereto, or (B) in any Blue Sky Application or (ii)
the omission or alleged omission to state in any Preliminary Offering
Memorandum or the Offering Memorandum, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be
stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information concerning such Initial Purchaser
<PAGE>
furnished to the Company by or on behalf of that Initial Purchaser
specifically for inclusion therein, and shall reimburse the Company and any
such director, officer or controlling person for any legal or other expenses
reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to
any liability which any Initial Purchaser may otherwise have to the Company
or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 8 except to the extent it
has been materially prejudiced by such failure and, provided further, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably satisfactory to
the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, any indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment
thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party and
in the reasonable judgement of such counsel it is advisable for such
indemnified party to employ separate counsel or (iii) the indemnifying party
has failed to assume the defense of such action and employ counsel reasonably
satisfactory to the indemnified party, in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys (in addition to one local
counsel) at any time for all such indemnified parties, which firm shall be
designated in writing by Lehman Brothers Inc., if the indemnified parties
under this Section 8 consist of any Initial Purchaser or any of their
respective officers, employees or controlling persons, or by the Company, if
the indemnified parties under this Section consist of the Company or any of
the Company's directors, officers, employees or controlling persons. Each
indemnified party, as a condition of the indemnity agreements contained in
Section 8, shall use all commercially reasonable efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
<PAGE>
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent
of the indemnifying party or if there be a final judgment of the plaintiff in
any such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section
8 shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other from the offering of the Series A Notes or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Initial Purchasers on the other with respect
to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Initial Purchasers on the other with respect to such
offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Series A Notes purchased under this
Agreement (before deducting expenses) received by the Company, on the one
hand, and the total discounts and commissions received by the Initial
Purchasers with respect to the Series A Notes purchased under this Agreement,
on the other hand, bear to the total gross proceeds from the offering of the
Series A Notes under this Agreement, in each case as set forth in the table
on the cover page of the Offering Memorandum. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Initial Purchasers, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
and the Initial Purchasers agree that it would not be just and equitable if
contributions pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section
shall be deemed to include, for purposes of this Section 8(d), any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding
<PAGE>
the provisions of this Section 8(d), no Initial Purchaser shall be required
to contribute any amount in excess of the amount by which the total price at
which the Series A Notes purchased by it was resold to Eligible Purchasers
exceeds the amount of any damages which such Initial Purchaser has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to
contribute as provided in this Section 8(d) are several in proportion to
their respective underwriting obligations and not joint.
(e) The Initial Purchasers severally confirm and the
Company acknowledges that the last paragraph on the cover page, the
stabilization legend on page iii and the last two paragraphs under the
caption "Plan of Distribution" constitute the only information concerning
such Initial Purchasers furnished in writing to the Company by or on behalf
of the Initial Purchasers specifically for inclusion in the Offering
Memorandum.
9. Termination. The obligations of the Initial
Purchasers hereunder may be terminated by Lehman Brothers Inc. by notice
given to the Company prior to delivery of and payment for the Series A Notes
if, prior to that time, any of the events described in Sections 7(j), 7(m) or
7(n), shall have occurred or if the Initial Purchasers shall decline to
purchase the Series A Notes for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchasers' Expenses. If
the Company shall fail to tender the Series A Notes for delivery to the
Initial Purchasers by reason of any failure, refusal or inability on the part
of the Company to perform any agreement on its part to be performed, or
because any other condition of the Initial Purchasers' obligations hereunder
required to be fulfilled by the Company is not fulfilled, the Company will
reimburse the Initial Purchasers for all reasonable out-of-pocket expenses
(including the fees and disbursements of its counsel) incurred by the Initial
Purchasers in connection with this Agreement and the proposed purchase of the
Series A Notes, and upon demand the Company shall pay the full amount thereof
to Lehman Brothers Inc.
11. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered
or sent by mail, telex or facsimile transmission to Lehman
Brothers Inc., Three World Financial Center, New York, New
York 10285, Attention: Syndicate Department (Fax: 212-526-
6588), with a copy to Latham & Watkins, 885 Third Avenue,
New York, New York 10022, Attention: Kirk A. Davenport (Fax:
212-751-4864) and, in the case of any notice pursuant to
Section 8, to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., Three World Financial
Center, 10th Floor, New York, NY 10285; and
(b) if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to L-3 Communications
Corporation, 600 Third Avenue, 34th Floor, New York, New
York 10016, Attention: Chief Financial Officer (Fax: 212-
<PAGE>
805-5470), with a copy to Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, Attention:
Andrew R. Keller (Fax: (212) 455-2502).
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Company shall be entitled to
act and rely upon any request, consent, notice or agreement given or made on
behalf of the Initial Purchasers by Lehman Brothers Inc.
12. Persons Entitled to Benefit of Agreement. This
Agreement shall inure to the benefit of and be binding upon the Initial
Purchasers, the Company, and their respective personal representatives and
successors. This Agreement and the terms and provisions hereof are for the
sole benefit of only those persons, except that (i) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control any Initial Purchaser within the meaning of
Section 15 of the Securities Act.
13. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Initial Purchasers contained
in this Agreement or made by or on behalf on them, respectively, pursuant to
this Agreement, shall survive the delivery of and payment for the Notes and
shall remain in full force and effect, regardless of any investigation made
by or on behalf of any of them or any person controlling any of them.
14. Definition of the Terms "Business Day" and
"Subsidiary." For purposes of this Agreement, (a) "business day" means any
day on which the New York Stock Exchange, Inc. is open for trading and (b)
"subsidiary" has the meaning set forth in Rule 405 of the Rules and
Regulations.
15. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of New York.
16. Counterparts. This Agreement may be executed in one
or more counterparts and, if executed in more than one counterpart, the
executed counterparts shall each be deemed to be an original but all such
counterparts shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to
affect the meaning or interpretation of, this Agreement.
[signature pages follow]
<PAGE>
If the foregoing correctly sets forth the agreement between
the Company and the Initial Purchasers, please indicate your acceptance in
the space provided for that purpose below.
Very truly yours,
L-3 Communications Corporation
By ________________________________
Name:
Title:
Accepted:
Lehman Brothers Inc.
BancAmerica Securities, Inc.
By Lehman Brothers Inc.
By ______________________________________
Authorized Representative
<PAGE>
If the foregoing correctly sets forth the agreement between
the Company and the Initial Purchasers, please indicate your acceptance in
the space provided for that purpose below.
Very truly yours,
L-3 Communications Corporation
By ________________________________
Name:
Title:
Accepted:
Lehman Brothers Inc.
BancAmerica Securities, Inc.
By Lehman Brothers Inc.
By ______________________________________
Authorized Representative
<PAGE>
SCHEDULE 1
Initial Purchaser Principal Amount of
Notes
Lehman Brothers Inc. . . . . . . . . . . . . . . $202,500,000
BancAmerica Securities, Inc . . . . . . . . . . . 22,500,000
Total $225,000,000
EXHIBIT 10.4
STOCKHOLDERS AGREEMENT
DATED AS OF APRIL 30, 1997
Among
L-3 COMMUNICATIONS HOLDINGS, INC.
LOCKHEED MARTIN CORPORATION,
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.,
LEHMAN BROTHERS HOLDINGS INC.,
FRANK C. LANZA,
and
ROBERT V. LAPENTA
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . 2
ARTICLE II
RESTRICTIONS ON TRANSFERS
Section 2.1. Transfers in Accordance with this Agreement . . 6
Section 2.2. Agreement to be Bound . . . . . . . . . . . . . 6
Section 2.3. Legend . . . . . . . . . . . . . . . . . . . . 6
Section 2.4. Transfers to Permitted Transferees and the
Company . . . . . . . . . . . . . . . . . . . 6
Section 2.5. No Transfer Period; Rights of First Offer . . . 7
Section 2.6. Tag Along Right . . . . . . . . . . . . . . . . 8
Section 2.7. Bring Along Right . . . . . . . . . . . . . . . 9
Section 2.8. Registration Rights . . . . . . . . . . . . . . 10
ARTICLE III
CLOSING
Section 3.1. Closing . . . . . . . . . . . . . . . . . . . . 10
Section 3.2. Deliveries at Closing; Method of Payment
of Purchase Price . . . . . . . . . . . . . . 10
ARTICLE IV
ADDITIONAL RIGHTS AND OBLIGATIONS
OF STOCKHOLDERS AND THE COMPANY
Section 4.1. Preemptive Rights . . . . . . . . . . . . . . . 11
Section 4.2. Future Services . . . . . . . . . . . . . . . . 11
Section 4.3. Regulatory Event . . . . . . . . . . . . . . . 12
Section 4.4. Regulatory Compliance . . . . . . . . . . . . . 12
Section 4.5. Standstill Agreement . . . . . . . . . . . . . 13
Section 4.6. Certain Other Agreements . . . . . . . . . . . 13
ARTICLE V
CERTAIN VOTING AGREEMENTS
Section 5.1. Board of Directors of the Company . . . . . . . 13
Section 5.2. Charter Documents . . . . . . . . . . . . . . . 15
Section 5.3. Consent to an Initial Public Offering;
Required IPO . . . . . . . . . . . . . . . . 15
ARTICLE VI
TERMINATION
Section 6.1. Termination . . . . . . . . . . . . . . . . . . 15
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 7.1. No Inconsistent Agreements . . . . . . . . . . 16
Section 7.2. Recapitalization, Exchanges, etc . . . . . . . 16
Section 7.3. Successors and Assigns . . . . . . . . . . . . 16
Section 7.4. No Waivers, Amendments . . . . . . . . . . . . 16
Section 7.5. Notices . . . . . . . . . . . . . . . . . . . . 16
Section 7.6. Inspection . . . . . . . . . . . . . . . . . . 17
SECTION 7.7. GOVERNING LAW . . . . . . . . . . . . . . . . . 17
Section 7.8. Section Headings . . . . . . . . . . . . . . . 17
Section 7.9. Entire Agreement . . . . . . . . . . . . . . . 17
Section 7.10. Severability . . . . . . . . . . . . . . . . . 17
Section 7.11. Counterparts . . . . . . . . . . . . . . . . . 17
Section 7.12. Option Plan . . . . . . . . . . . . . . . . . . 18
Exhibit A Bylaws
Exhibit B Certificate of Incorporation
Exhibit C Registration Rights
Exhibit D Form of Agreement to be Bound
Exhibit E 1997 Option Plan for Key Employees of L-3
Communications Holdings, Inc.
<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated as of April 30, 1997 among L-3
Communications Holdings, Inc., a Delaware corporation (the "Company"),
Lockheed Martin Corporation, a Maryland corporation ("Lockheed Martin"),
Lehman Brothers Capital Partners III, L.P., a Delaware limited partnership
("Lehman"), Lehman Brothers Holders Inc., a Delaware corporation and the
general partner of Lehman ("LBHI"), Frank C. Lanza ("Lanza") and Robert V.
LaPenta ("LaPenta" and, together with Lanza, the "Management Investors").
Each of the parties to this Agreement (other than the Company) and any other
Person (as hereinafter defined) who or which shall become a party to or agree
to be bound by the terms of this Agreement after the date hereof is sometimes
hereinafter referred to as a "Stockholder."
WITNESSETH
WHEREAS, this Agreement shall become effective (the "Effective
Date") on the date of, and simultaneously with, the Closing under the
Subscription Agreements (as hereinafter defined);
WHEREAS, as of the Effective Date, the Company will have an
authorized capital stock consisting of 25,000,000 shares of Class A common
stock, par value $0.01 per share (the "Class A Common Stock"), 3,000,000
shares of Class B common stock, par value $0.01 per share (the "Class B
Common Stock") and 3,000,000 shares of Class C common stock, par value $0.01
per share (the "Class C Common Stock") and, together with the Class A Common
Stock, the "Common Stock").
WHEREAS, the Company, Lockheed Martin, Lehman and the Management
Investors have entered into a Transaction Agreement dated as of March 28,
1997 (the "Transaction Agreement") pursuant to which, among other things, the
Company has agreed, subject to the terms and conditions thereof, to purchase
certain assets and assume certain related liabilities of Lockheed Martin;
WHEREAS, in connection with the consummation of the transactions
pursuant to the Transaction Agreement, each of Lockheed Martin, Lehman and
LBHI has entered into a Common Stock Subscription Agreement with the Company
dated as of the date of this Agreement pursuant to which each such
Stockholder has agreed, subject to the terms and conditions thereof, to
purchase shares of Class A Common Stock;
WHEREAS, in connection with the consummation of the transactions
pursuant to the Transaction Agreement, each of the Management Investors has
entered into a Common Stock Subscription Agreement with the Company dated as
of the date of this Agreement (such Common Stock Subscription Agreements,
together with the Common Stock Subscription Agreements referred to in the
preceding recital, the "Subscription Agreements") pursuant to which each such
Management Investor has agreed, subject to the terms and conditions thereof,
to purchase shares of Class B Common Stock; and
WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Shares (as
hereinafter defined) and to provide for certain rights and obligations and
other agreements in respect of the Shares, all as hereinafter provided.
<PAGE>
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the
following terms have the following meanings:
"Acquisition Transaction" shall have the meaning set forth in
Section 4.6.
"Adverse Clearance Status" shall have the meaning
set forth in Section 4.3.
"Affiliate", as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and
"under common control with"), as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities, by contract or otherwise. Notwithstanding the foregoing,
for purposes of this Agreement, Lockheed Martin shall not be considered an
Affiliate of Lehman or of either of the Management Investors and the employee
benefit plans of Lockheed Martin and its Subsidiaries shall not be considered
Affiliates of Lockheed Martin.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Business" shall have the meaning set forth in the Transaction
Agreement.
"Buyer's Notice" shall have the meaning set forth in Section
2.5(c).
"Buyout Notice" shall have the meaning set forth in Section 2.7.
"Bylaws" shall mean the Bylaws of the Company, in the form of
Exhibit A, as amended from time to time, consistent with the terms hereof.
"Certificate of Incorporation" shall mean the Amended and Restated
Certificate of Incorporation of the Company, in the form of Exhibit B, as
amended from time to time, consistent with the terms hereof.
"Charter Documents" shall have the meaning set forth in Section
5.2(a).
"Class A Common Stock" shall have the meaning set forth in the
recitals of this Agreement.
"Class B Common Stock" shall have the meaning set forth in the
recitals of this Agreement.
<PAGE>
"Class C Common Stock" shall have the meaning set forth in the
recitals of this Agreement.
"Common Stock" shall have the meaning set forth in the recitals of
this Agreement.
"Company" shall have the meaning set forth in the preamble of this
Agreement.
"Effective Date" shall have the meaning set forth in the recitals
of this Agreement.
"FOCI" shall have the meaning set forth in Section 4.3.
"Initial Public Offering" shall mean the initial Public Offering
(other than pursuant to a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of the
Company).
"Lanza" shall have the meaning set forth in the preamble of this
Agreement.
"LaPenta" shall have the meaning set forth in the preamble of this
Agreement.
"Lehman" shall have the meaning set forth in the preamble of this
Agreement.
"LBHI" shall have the meaning set forth in the preamble of this
Agreement.
"Lehman Nominees" shall have the meaning set forth in Section
5.1(a).
"Lockheed Martin" shall have the meaning set forth in the preamble
of this Agreement.
"Lockheed Martin Nominees" shall have the meaning set forth in
Section 5.1(a).
"Management Investors" shall have the meaning set forth in the
preamble of this Agreement.
"Offer Price" shall have the meaning set forth in Section 2.5(b).
"Offered Shares" shall have the meaning set forth in Section
2.5(b).
"Option Plan" shall mean the 1997 Option Plan for Key Employees of
L-3 Communications Holdings, Inc., in the form of Exhibit E hereto.
"Payment in Full of the Preference Amount" shall have the meaning
given such term in the Certificate of Incorporation.
"Permitted Transferee" shall mean:
<PAGE>
(i) in the case of Lehman or LBHI and Permitted Transferees of
Lehman and LBHI, (A) LBHI or Lehman, as the case may be, or any
controlled Affiliate (other than an individual) of LBHI, (B) any general
or limited partner, director, officer or employee of Lehman, LBHI or any
controlled Affiliate (other than an individual) of LBHI, (C) the heirs,
executors, administrators, testamentary trustees, legatees or
beneficiaries of any of the individuals referred to in clause (B), (D)
any trust, the beneficiaries of which include only (1) Lehman, (2)
Permitted Transferees referred to in clauses (A), (B) and (C) and (3)
spouses and lineal descendants of Permitted Transferees referred to in
clause (B) and (E) a corporation or partnership, a majority of the
equity of which is owned and controlled by Lehman and/or Permitted
Transferees referred to in clauses (A), (B), (C) and (D);
(ii) in the case of Lockheed Martin and Permitted Transferees of
Lockheed Martin, any controlled Affiliate of Lockheed Martin; and
(iii) in the case of each Management Investor and Permitted
Transferees of such Management Investor, his or her spouse or any of his
or her lineal descendants or legatees or a testamentary trust for such
legatees, or a trust or individual retirement account, the beneficiaries
of which or a corporation or partnership the stockholders or partners of
which include only such Stockholder, his or her spouse and his or her
lineal descendants or a corporation or partnership wholly owned by them;
provided, that any such Permitted Transferee referred to in clauses (i)-
(iii) agrees in writing to be bound by the terms of this Agreement in
accordance with Section 2.2.
"Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, limited liability company,
unincorporated association, joint venture or other entity of whatever nature.
"Proposed Transferee" shall have the meaning set forth in Section
2.6.
"Public Offering" shall mean any underwritten public offering of
equity securities of the Company pursuant to an effective registration
statement under the Securities Act.
"Put" shall have the meaning set forth in Section 4.3.
"Reduced Transfer Price" shall have the meaning set forth in
Section 2.5(d).
"Reduced Transfer Price Notice" shall have the meaning set forth in
Section 2.5(d).
"Regulatory Event Notice" shall have the meaning set forth in
Section 4.3.
"Regulatory Portion" shall have the meaning set forth in Section
4.3.
"Restriction Lapse" shall have the meaning given such term in the
Certificate of Incorporation.
<PAGE>
"Second Reduction Transfer Price" shall have the meaning set forth
in Section 2.5(e).
"Second Reduction Transfer Price Notice" shall have the meaning set
forth in Section 2.5(e).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in Section 2.5(b).
"Seller's Notice" shall have the meaning set forth in Section
2.5(b).
"Share Equivalents" shall mean securities of any kind issued by the
Company convertible into or exchangeable for Shares or options, warrants or
other rights to purchase or subscribe for Shares or securities convertible
into or exchangeable for Shares.
"Shares" shall mean, with respect to any Stockholder, shares of
Common Stock, whether now owned or hereafter acquired (including upon
exercise of options, preemptive rights or otherwise), held by such
Stockholder.
"Shares Subject to Forfeiture" shall have the meaning given such
term in the Certificate of Incorporation.
"Stockholder" shall have the meaning set forth in the preamble of
this Agreement.
"Subscription Agreements" shall have the meaning set forth in the
recitals of this Agreement.
"Subsidiary" shall mean, with respect to any Person, any
corporation or other entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar function at the time
directly or indirectly owned by such Person.
"Third Party" shall mean any prospective Transferee of Shares
(other than the Company) that is not a Permitted Transferee of the
Stockholder proposing the Transfer of such Shares to such prospective
Transferee.
"Transaction Agreement" shall have the meaning set forth in the
recitals of this Agreement.
"Transfer" shall have the meaning set forth in Section 2.1.
"Transfer Closing Date" shall have the meaning set forth in Section
3.1.
"Transferee" shall mean any Person who or which acquires Shares
from a Stockholder or a Transferee (including Permitted Transferees) of a
Stockholder subject to this Agreement.
<PAGE>
ARTICLE II
RESTRICTIONS ON TRANSFERS
Section 2.1. Transfers in Accordance with this Agreement. No
Stockholder shall, directly or indirectly, transfer, sell, assign, pledge,
hypothecate, encumber, or otherwise dispose of all or any portion of any
Shares or any economic interest therein (including without limitation by
means of any participation or swap transaction) (each, a "Transfer") to any
Person, except in compliance with the Securities Act, applicable state and
foreign securities laws and this Agreement. No Stockholder shall Transfer
any Shares if the consummation of such Transfer may result in the Company
becoming subject to FOCI or Adverse Clearance Status. Any attempt to
Transfer any Shares in violation of the terms of this Agreement shall be null
and void, and neither the Company, nor any transfer agent shall register upon
its books any Transfer of Shares by a Stockholder to any Person except a
Transfer in accordance with this Agreement.
Section 2.2. Agreement to be Bound. No Transfer of Shares (other
than Transfers (i) in the Initial Public Offering, if any, or (ii) to the
Company) shall be effective unless (i) the certificates representing such
Shares issued to the Transferee shall bear the legend provided in Section 2.3
and (ii) the Transferee, if not already a party hereto, shall have executed
and delivered to each other party hereto, as a condition precedent to such
Transfer, an instrument or instruments substantially in the form of Exhibit D
or otherwise reasonably satisfactory to such parties confirming that the
Transferee agrees to be bound by the terms of this Agreement with respect to
the Shares so Transferred to the same extent applicable to the Transferor
thereof.
Section 2.3. Legend. A copy of this Agreement shall be filed with
the Secretary of the Company and kept with the records of the Company. Each
Stockholder hereby agrees that each certificate representing Shares issued to
any Stockholder, or any certificate issued in exchange for any similarly
legended certificate, shall bear a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
THE SHARES REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
STOCKHOLDERS AGREEMENT, DATED AS OF APRIL 30, 1997, COPIES OF
WHICH MAY BE OBTAINED FROM L-3 COMMUNICATIONS HOLDINGS, INC.
(THE "COMPANY"). NO TRANSFER OF SUCH SHARES WILL BE MADE ON
THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT.
Section 2.4. Transfers to Permitted Transferees and the Company.
(a) None of the restrictions contained in this Agreement with respect to
Transfers of Shares (other than Sections 2.2, 2.3 and 2.4(b)) shall apply to
any Transfer of Shares by any Stockholder (i) to a Permitted Transferee of
such Stockholder or (ii) to the Company.
(b) Each Permitted Transferee of any Stockholder shall, and such
Stockholder shall cause such Permitted Transferee to, transfer back to such
<PAGE>
Stockholder any Shares it owns prior to such Permitted Transferee ceasing to
be a Permitted Transferee of such Stockholder.
Section 2.5. No Transfer Period; Rights of First Offer. (a) The
Stockholders may not Transfer Shares prior to the first anniversary of the
Effective Date, except for Transfers referred to in Section 2.4. Commencing
on the first anniversary of the Effective Date, with the exception of
Transfers in accordance with Section 2.4, each Stockholder may Transfer
Shares only following compliance and in accordance with the provisions of
this Section 2.5 and, as applicable, Sections 2.6 or 2.7.
(b) Any Stockholder desiring to Transfer Shares to any Third Party
(such Stockholder, in such capacity, a "Seller") shall give written notice (a
"Seller's Notice") to the other Stockholders and to the Company (i) stating
that such Seller desires to make such Transfer and (ii) setting forth the
number of Shares proposed to be Transferred (the "Offered Shares") and the
cash price per share that such Seller proposes to be paid for such Offered
Shares (the "Offer Price") and, to the extent then known, the other terms and
conditions of such Transfer, including the identity of any proposed
transferee. Each Seller's Notice shall constitute an irrevocable offer by
the Seller to the other Stockholders and to the Company of the Offered Shares
at the Offer Price in cash and in accordance with the terms of this
Agreement.
(c) Within 60 days after receipt of a Seller's Notice, each other
Stockholder may elect to purchase, on a pro rata basis based upon the total
number of outstanding Shares then held by such other Stockholders (provided
that any Offered Shares thereby offered to any other Stockholder that does
not elect to purchase such Offered Shares shall be reallocated (on a pro rata
basis based on the total number of Offered Shares each other Stockholder
elected to purchase) among the remaining other Stockholders who have elected
to exercise their option to purchase Offered Shares) all (but not less than
all) of the Offered Shares allocated to it at the Offer Price in cash. The
Company may elect, within 10 days following the expiration of such 60-day
period, to purchase at the Offer Price in cash all (but not less than all) of
the Offered Shares as to which no election to purchase is made by the other
Stockholders within such 60-day period. The election to purchase such
Offered Shares shall be exercisable by delivery of a notice (a "Buyer's
Notice") to the Seller, with a copy to the Company (where the Company is not
the electing party), stating (i) that such electing party elects to purchase
such Offered Shares at the Offer Price in cash, (ii) that such election is
irrevocable and (iii) the source of financing for such purchase, which
financing shall not be subject to any material contingencies. Delivery of a
Buyer's Notice shall constitute a contract among the Seller and the electing
party that has delivered such Buyer's Notice for the sale and purchase of the
Offered Shares at the Offer Price in cash and upon the other applicable terms
and conditions set forth in the Seller's Notice.
(d) If the other Stockholders and the Company fail to elect to
purchase all of the Offered Shares within the time periods specified in
Section 2.5(c), then the Seller may, within a period of 90 days following the
expiration of such time periods specified in Section 2.5(c), complete the
Transfer of all or any of the Offered Shares not purchased by the other
Stockholders or the Company to one or more Third Parties at a price per share
not less than 95% of the Offer Price; provided that if the purchase price per
share (the "Reduced Transfer Price") proposed to be paid by any such Third
Party for Offered Shares is less than 95% of the Offer Price, the Seller
<PAGE>
shall promptly provide written notice (the "Reduced Transfer Price Notice")
to the other Stockholders and the Company of such intended Transfer
(including the material terms and conditions thereof) and the other
Stockholders and the Company shall have the right, exercisable by delivery of
a written election notice to the Seller within 30 days of receipt of such
notice, to purchase such Offered Shares at the Reduced Transfer Price and
otherwise substantially in accordance with the terms and conditions of the
intended Transfer to such Third Party, following which 30-day period, if no
such election is made, Section 2.5(e) shall apply.
(e) If the other Stockholders and the Company fail to elect to
purchase all of the Offered Shares at the Reduced Transfer Price in cash
within the 30-day period specified in Section 2.5(d), then the Seller may,
within a period of 90 days following the expiration of such 30-day period,
complete the Transfer of all or any of the Offered Shares to one or more
Third Parties at a price per share not less than 95% of the Reduced Transfer
Price; provided that if the purchase price per share (the "Second Reduced
Transfer Price") proposed to be paid by any such Third Party for Offered
Shares is less than 95% of the Reduced Transfer Price, the Seller shall
promptly provide written notice (the "Second Transfer Price Notice") to the
other Stockholders and the Company of such intended Transfer (including the
material terms and conditions thereof) and the other Stockholders and the
Company shall have the right, exercisable by delivery of a written election
notice to the Seller within 30 days of receipt of such notice, to purchase
such Offered Shares at the Second Reduced Transfer Price and otherwise
substantially in accordance with the terms and conditions of the intended
Transfer to such Third Party.
(f) If the other Stockholders and the Company fail to elect to
purchase all of the Offered Shares at the Offer Price (or, if applicable, the
Reduced Transfer Price or Second Reduced Transfer Price) in cash and the
Seller shall not have Transferred the Offered Shares to any Transferee prior
to the expiration of the 90-day period specified in Section 2.5(e), the
rights of first offer under this Section 2.5 shall again apply in connection
with any subsequent Transfer or offer to Transfer shares of Common Stock by
such Sellers.
Section 2.6. Tag Along Right. (a) If at any time on or after the
first anniversary of the Effective Date and prior to the consummation of an
Initial Public Offering, Lehman and/or LBHI (and/or their Permitted
Transferees) proposes to Transfer Shares to any Person (other than a
Permitted Transferee) (each, a "Proposed Transferee") in any transaction or
series of related transactions and as a result of such Transfer, Lehman and
LBHI (with their Permitted Transferees) would no longer own at least 35% of
the issued and outstanding Common Stock, then Lehman shall send written
notice to each Management Investor and Lockheed Martin which shall state (i)
that Lehman and/or LBHI and/or their Permitted Transferees desires to make
such a Transfer, (ii) the identity of the Proposed Transferee and the number
of Shares proposed to be sold or otherwise transferred, (iii) the proposed
purchase price per Share to be paid and the other terms and conditions of
such Transfer and (iv) the projected closing date of such Transfer, which in
no event shall be prior to 30 days after the giving of such written notice to
each Management Investor and Lockheed Martin.
(b) For a period of 30 days after the giving of the notice
pursuant to clause (a) above, each Management Investor and Lockheed Martin
shall have the right to sell to the Proposed Transferees in such Transfer at
<PAGE>
the same price and upon the same terms and conditions as Lehman, LBHI (and/or
their Permitted Transferees) that percentage of the total number of Shares
held by such Management Investor or Lockheed Martin, as the case may be,
equal to the percentage of the total number of Shares then held by Lehman,
LBHI and their Permitted Transferees proposed to be Transferred to such
Proposed Transferee; provided that neither Management Investor shall have the
right to sell any of its Shares Subject to Forfeiture pursuant to this
Section 2.6(b) if the price per share to be obtained by Lehman in such
Transfer is less than $6.47.
(c) The rights of each Management Investor and Lockheed Martin
under Section 2.6(b) shall be exercisable by delivering written notice
thereof, prior to the expiration of the 30-day period referred to in clause
(b) above, to Lehman with a copy to the Company; provided that Lockheed
Martin shall not be entitled to exercise any rights under this Section 2.6 if
neither of the Management Investors exercises his rights under this Section
2.6. The failure of such Management Investor or Lockheed Martin to respond
within such period to Lehman shall be deemed to be a waiver of rights under
this Section 2.6.
(d) In the event that any Management Investor or Lockheed Martin
exercises rights under Section 2.6(b) and following such exercise there is a
change in the price or terms of the proposed transaction between Lehman and
the Proposed Transferee, then Lehman shall promptly notify such Management
Investor and Lockheed Martin of the revised price or terms and such
Management Investor or Lockheed Martin, as the case may be, shall have the
right to exercise its rights under Section 2.6(b) by notice to Lehman within
two business days of receipt of the notice from Lehman. The failure of such
Management Investor or Lockheed Martin to respond within such two-day period
to Lehman shall be deemed to be a waiver of his or its rights under this
Section 2.6.
(e) For purposes of determining the number of Shares a Management
Investor may Transfer pursuant to this Section 2.6, such Management Investor
shall be deemed to hold the shares of Common Stock issuable upon exercise of
any outstanding options to purchase Common Stock he holds so long as (i) such
options have vested and (ii) the exercise price of such options is below the
proposed price to be paid by the Proposed Transferee in the Transfer to which
such determination relates.
Section 2.7. Bring Along Right. (a) If at any time on or after
the first anniversary of the Effective Date and prior to the consummation of
an Initial Public Offering, Lehman and/or LBHI (and/or their Permitted
Transferees) proposes to sell Shares to a Third Party other than an Affiliate
in any bona fide arm's-length transaction or series of related transactions
and as a result of such sale Lehman and LBHI with their Permitted Transferees
would cease to own at least 35% of the issued and outstanding Common Stock,
then Lehman shall have the right to deliver a written notice (a "Buyout
Notice") to each Management Investor (with a copy to Lockheed Martin) which
shall state (i) that Lehman proposes to effect such transaction, (ii) the
identity of the Third Party, the number of Shares to be sold and the proposed
purchase price per Share to be paid and any other terms and conditions, and
(iii) the projected closing date of such sale. Each such Management Investor
agrees that, upon receipt of a Buyout Notice, each such Management Investor
(and his Permitted Transferees) shall be obligated to sell in such
transaction that percentage of the total number of Shares held by such
Management Investor (determined on the basis set forth in Section 2.6(e))
<PAGE>
equal to the percentage of the total number of Shares then held by Lehman and
LBHI and their Permitted Transferees to be sold in such transaction upon the
terms and conditions of such transaction (and otherwise take all necessary
action to cause consummation of the proposed transaction; provided, however,
that each such Management Investor shall only be obligated as provided above
in this Section 2.7 if each such Management Investor receives the same per
Share consideration as Lehman and LBHI (and/or their Permitted Transferees);
and provided further that in no event shall any Management Investor be
required to make any representations or provide any indemnities other than on
a proportionate basis and other than with respect to matters relating solely
to Lehman and LBHI (and/or its Permitted Transferees), such as
representations as to title to Shares to be transferred by Lehman and LBHI or
their Permitted Transferees.
(b) At any time that Lehman exercises its rights under this
Section 2.7, Lockheed Martin shall have the right, but not the obligation, to
sell in the transaction specified in the Buyout Notice at the same price and
upon the same terms and conditions as Lehman and/or LBHI (and/or their
Permitted Transferees) and the Management Investors that percentage of the
total number of Shares held by Lockheed Martin equal to the percentage of the
total number of Shares then held by Lehman and LBHI and their Permitted
Transferees to be sold in such transaction. The rights of Lockheed Martin
under this Section 2.7(b) shall be exercisable by delivering written notice
thereof at least 10 days prior to the proposed closing date of such
transaction.
Section 2.8. Registration Rights. The Company hereby grants to
each Stockholder the registration and other rights set forth in, and each
Stockholder agrees to comply with the terms and conditions contained in,
Exhibit C.
ARTICLE III
CLOSING
Section 3.1. Closing. Any Stockholders acquiring or Transferring
any Shares pursuant to Section 2.5 shall mutually determine a closing date
(the "Transfer Closing Date") which, subject to any applicable regulatory
waiting periods, shall not be more than 60 days after the last notice is
given with respect to such Transfer pursuant to Section 2.5 or after the
expiration of the last notice period pursuant to Section 2.5 applicable to
such Transfer. The closing shall be held at 10:00 a.m., local time, on the
Transfer Closing Date at the principal office of the Company, or at such
other time and/or place as the parties may mutually agree.
Section 3.2. Deliveries at Closing; Method of Payment of Purchase
Price. On the Transfer Closing Date, each selling Stockholder shall deliver
(i) certificates representing the Shares being sold, free and clear of any
lien, claim or encumbrance, and (ii) such other documents, including evidence
of ownership and authority, as the Transferees may reasonably request. The
purchase price shall be paid by wire transfer of immediately available funds
no later than 2:00 p.m. on the Transfer Closing Date.
<PAGE>
ARTICLE IV
ADDITIONAL RIGHTS AND OBLIGATIONS
OF STOCKHOLDERS AND THE COMPANY
Section 4.1. Preemptive Rights. If the Company shall (other than
in connection with the issuance of Shares or Share Equivalents (i) to
employees, officers and directors of or any of its direct or indirect
subsidiaries with respect to any employee benefit plan, incentive award
program or other compensation arrangement approved by the affirmative vote of
a majority of the outstanding shares and (ii) as all or a portion of the
consideration for the purchase of capital stock or assets of another Person)
(A) issue any Shares, (B) issue any Share Equivalents or (C) enter into any
contracts, commitments, agreements, understandings or arrangements of any
kind relating to the issuance of any Shares or Share Equivalents (in each
case other than in connection with the Initial Public Offering), each
Stockholder shall have the right to purchase that number of Shares (or Share
Equivalents, as the case may be) at the same purchase price as the price for
the additional Shares (or Share Equivalents) to be issued so that, after the
issuance all of such Shares (or Share Equivalents), together with all Shares
(or Share Equivalents) to be issued pursuant to this Section 4.1 in
connection therewith, the Stockholder would, in the aggregate, hold the same
proportional interest of the outstanding Shares (assuming, in the case of an
issuance of Share Equivalents, the conversion, exercise or exchange thereof)
as was held by such Stockholder prior to the issuance of such additional
Shares (or Share Equivalents).
Section 4.2. Future Services. The Company agrees that Lehman
Brothers Inc. ("Lehman Brothers") shall have the right, but not the
obligation, which right shall be exercisable in Lehman Brothers' sole
discretion, to provide investment banking services to the Company on an
exclusive basis for a period of five years from the Effective Date (the
"Exclusivity Period"); provided that as to acquisitions undertaken by the
Company for cash, the Exclusivity Period shall be the three year period after
the Effective Date. Such services may include arranging senior and
subordinated debt financing for the Company, underwriting on a sole managed
basis or acting as the sole initial purchaser or placement agent for the
Company's or its affiliates' debt and/or equity securities, acting as the
exclusive financial advisor to the Company with respect to any mergers,
acquisitions or divestitures for which the services of an investment banking
firm are utilized and providing other financial advisory services on an
exclusive basis. In the event that Lehman Brothers agrees to provide any
investment banking services to the Company, Lehman Brothers shall be paid
fees to be mutually agreed upon based on fees which are competitive based
upon similar transactions and practices in the investment banking industry.
The Company acknowledges that Lehman Brothers may determine in its sole
discretion for any reason (including, without limitation, the results of its
due diligence investigation, a material change in the Company's financial
condition, business, management, prospects or value, the lack of appropriate
internal Lehman Brothers' committee approvals or then current market
conditions) not to provide such investment banking services to the Company.
In the event that Lehman Brothers elects not to provide such services to the
Company with respect to any particular transaction, nothing contained herein
shall be deemed to prevent the Company from utilizing the services of another
investment banking firm for such transaction or to require the Company to pay
a fee to Lehman Brothers with respect to such transaction, but such retention
of another investment banking firm shall be without prejudice to Lehman
Brothers' rights hereunder with respect to subsequent transactions.
<PAGE>
Section 4.3. Regulatory Event. If (a) the Company receives
notification from a representative of the Department of Defense or any other
U.S. government department, agency or authority that the ownership of Shares
by Lehman and/or LBHI or the terms and provisions of this Agreement or the
Charter Documents (i) causes the Company to be under impermissible foreign
ownership, control or influence ("FOCI") within the meaning of Section 721 of
Title VII of the Defense Production Act of 1950, as amended by Section 5021
of the Omnibus Trade and Competitiveness Act of 1988, or (ii) materially
adversely affects the ability of the Company to maintain or obtain Department
of Defense or other U.S. government department, agency or authority security
clearance of the level held by the Business and their employees on the
Effective Date or which are necessary or desirable for the Company to perform
and to bid competitively on U.S. government contracts and to participate in
joint ventures formed to bid on or perform U.S. government contracts of the
type the Business is eligible to bid on or participate in, respectively, on
the Effective Date (any of the matters described in this clause (ii) being
referred to as "Adverse Clearance Status"), and such FOCI or Adverse
Clearance Status is not a result of a change in (A) the ownership of Lehman
or LBHI from the ownership thereof as it exists as of the Effective Date or
(B) applicable law, regulations and decrees as in effect as of the Effective
Date, Lehman and/or LBHI may, within 60 days of becoming aware of such
notification, upon delivery of a written notice (a "Regulatory Event Notice")
to the Company, require the Company (i) to repurchase (the "Put") such
portion of the Shares then held by Lehman and/or LBHI required to eliminate
such FOCI or Adverse Clearance Status (the "Regulatory Portion") for an
amount in cash equal to the fair market value of the shares subject to the
Put as determined by an investment bank of national reputation which is
mutually acceptable to the Company (as determined by the Board of Directors
of the Company without the participation by any directors designated by
Lehman pursuant to this Agreement) and Lehman or (ii) to commence a Public
Offering which shall include the registration and offering of the Regulatory
Portion in accordance with the registration procedures contained in Exhibit
C; provided, that prior to delivery of any Regulatory Event Notice Lehman
and/or LBHI shall have complied with Section 4.4; and provided further, that
the Company shall not be required to take any action under this Section 4.3
that it is prohibited from taking under the terms of any of its financing
agreements or under applicable law.
Section 4.4. Regulatory Compliance. (a) If any of the
circumstances described in Section 4.3 occur and would (x) cause the Company
to be under FOCI or (y) result in Adverse Clearance Status and such FOCI and
Adverse Clearance Status, if any, may be eliminated to the complete
satisfaction of all applicable U.S. government departments, agencies or
authorities solely by the adoption by Lehman or LBHI or the Board of
Directors of the Company of governance procedures or board resolutions
insulating the Company from impermissible control or influence of any foreign
entity in accordance with the National Industrial Security Program Operating
Manual (DOD 5220.22M), then Lehman or LBHI or the Board of Directors of the
Company, shall adopt such procedures or board resolutions, provided that such
procedures and/or board resolutions do not contravene and are consistent with
applicable law and do not materially and adversely affect the governance and
other rights (whether exercised directly or in accordance with such
procedures) of Lehman or LBHI contained in this Agreement and the Charter
Documents and any other agreements or documents relating thereto.
(b) If such FOCI and Adverse Clearance Status, if any, are not
eliminated following compliance with paragraph (a) above, and such FOCI and
<PAGE>
Adverse Clearance Status, if any, may be eliminated by a Transfer of Shares
held by Lehman or LBHI to an Affiliate, Lehman or LBHI, as the case may be,
shall use its reasonable efforts to effectuate such Transfer, provided that
any such Transfer shall not contravene, and is made in compliance with,
Lehman's and/or LBHI's customary business practices.
(c) If there is a change in the ownership of Lehman from the
ownership thereof as it exists as of the Effective Date and such change in
ownership causes the Company to be under impermissible FOCI or otherwise
results in an Adverse Clearance Status, and such FOCI or Adverse Clearance
Status, as the case may be, cannot be eliminated through the procedures
contemplated by Section 4.4(a) or Section 4.4(b), the Company shall have the
option, exercisable within 30 days after it concludes that the measures
contemplated by Section 4.4(a) and Section 4.4(b) are not sufficient to
eliminate the FOCI or Adverse Clearance Status, to purchase (the "Call") the
Regulatory Portion of the Shares then held by Lehman and/or LBHI for an
amount in cash equal to the fair market value of the Shares subject to the
Call as determined by an investment bank of national reputation which is
mutually acceptable to the Company (as determined by the Board of Directors
of the Company without the participation by any directors designated by
Lehman pursuant to this Agreement) and Lehman.
Section 4.5. Standstill Agreement. Lockheed Martin agrees that it
will not, and it will cause its Permitted Transferees not to, directly or
indirectly (through Affiliates or otherwise), acquire any shares of Common
Stock if immediately following such acquisition of shares of Common Stock,
Lockheed Martin and its Affiliates would own more than 34.9% of the
outstanding shares of Common Stock; provided that this Section 4.5 shall not
limit any of Lockheed Martin's rights under Section 2.5 or Section 4.1 of
this Agreement.
Section 4.6. Certain Other Agreements. If at any time prior
to Payment in Full of the Preference Amount a merger or other similar
transaction is consummated pursuant to which 90% or more of the outstanding
equity interests in the Company are acquired by a Person other than an
Affiliate of Lehman at a price per share which is less than $6.47 (an
"Acquisition Transaction"), then each of the Stockholders agrees to enter
into such other agreements or other arrangements as may be required in order
that the proceeds to the Stockholders from such Acquisition Transaction are
distributed as among the holders of each class of Common Stock in a manner
comparable to the manner in which such proceeds would be distributed in a
distribution of assets of the Company in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company in
accordance with the terms of the Certificate of Incorporation.
ARTICLE V
CERTAIN VOTING AGREEMENTS
Section 5.1. Board of Directors of the Company. (a) The
Company's Board of Directors shall be initially composed of eleven members.
Lehman shall be entitled, but not required, to designate six members (the
"Lehman Nominees") of the Board of Directors. Lockheed Martin shall be
entitled, but not required, to designate three members (the "Lockheed Martin
Nominees") of the Board of Directors. In addition, each of Lanza and LaPenta
shall be entitled, but not required, to designate themselves as members of
the Board of Directors for so long as they are employees of the Company or
<PAGE>
any of its Subsidiaries (the "Lanza Nominee" and "LaPenta Nominee",
respectively).
(b) (i) Each of the Stockholders agrees to vote all of the Shares
of Class A Common Stock owned or held of record by such Stockholder at any
regular or special meeting of the stockholders of the Company called for the
purpose of filling positions on the Board of Directors, or in any written
consent executed in lieu of such a meeting of stockholders, and agrees to
take all actions otherwise necessary, to ensure the election to the Board of
Directors of the Lehman Nominees, the Lockheed Martin Nominees, the Lanza
Nominee and the LaPenta Nominee in accordance with the terms hereof.
(ii) Each of the Company and each Stockholder hereby agrees to use
its or his best efforts to call, or cause the appropriate officers and
directors of the Company to call, a special meeting of stockholders of the
Company and to vote all of the Shares of Class A Common Stock owned or held
of record by such Stockholder for, or to take all actions by written consent
in lieu of any such meeting necessary to cause, the removal (with or without
cause) of (i) any Lehman Nominee if Lehman requests such director's removal
for any reason and (ii) any Lockheed Martin Nominee if Lockheed Martin
requests such director's removal for any reason. Lehman and Lockheed Martin
shall have the right to designate a new nominee in the event any Lehman
Nominee or Lockheed Martin Nominee, respectively, shall be so removed or
shall vacate his or her directorship for any reason.
(c) Except as provided in Section 5.1(b)(ii) hereof, each
Stockholder hereby agrees that, at any time that it or he is then entitled to
vote for the election or removal of directors, it will not vote in favor of
the removal of any Lehman Nominee, Lockheed Martin Nominee, Lanza Nominee or
LaPenta Nominee, unless such removal shall be for Cause. For the purposes of
this Section 5.1(c), "Cause" shall mean (i) as to any Lehman Nominee or
Lockheed Martin Nominee, the gross neglect of or willful and continuing
refusal to substantially perform his duties as a director, the willful
engaging by a director in conduct which is demonstrably and materially
injurious to the Company or the director's conviction of any crime
constituting a felony and (ii) as to any Management Investor, gross neglect
of or willful and continuing refusal to substantially perform his duties as a
director or employee, any breach of the restrictive covenants contained in
such Management Investor's employment agreement with the Company or any of
its Subsidiaries, willful engaging in conduct which is demonstrably injurious
to the Company or the Company's subsidiaries or affiliates or conviction or
plea of guilty or nolo contendere to a felony or a misdemeanor involving
moral turpitude.
(d) The number of directors which Lehman and Lockheed Martin have
the right to designate pursuant to Section 5.1(a) shall be reduced from time
to time to take into account any reduction in Lehman's and Lockheed Martin's
(in either case, together with its Permitted Transferees) ownership level in
the issued and outstanding shares of Common Stock so that the percentage of
the total number of directors designated by each such party corresponds as
nearly as practicable to the percentage ownership of such party (with its
Permitted Transferees) of the issued and outstanding shares of Common Stock;
provided that so long as Lehman (with its Permitted Transferees) continues to
own at least 35% of the issued and outstanding Common Stock, the directors
designated by Lehman pursuant to Section 5.1(a) shall constitute a majority
of the Board of Directors so long as Lehman (with its Permitted Transferees)
continues to represent the largest single stockholder of the Company. The
<PAGE>
Stockholders' obligations under Section 5.1(b) and (c) shall remain in effect
with respect to the Lehman Nominees and Lockheed Martin Nominees, as reduced
pursuant to the preceding sentence.
(e) The rights of Lehman, Lockheed Martin, Lanza and LaPenta to
designate Board members under Section 5.1(a) shall not be assignable
(including to any Transferee of Shares).
Section 5.2. Charter Documents. (a) Exhibits A and B set forth
copies of the Certificate of Incorporation and By-laws of the Company, each
in the form in which it is to be in effect on the Effective Date (the
"Charter Documents").
(b) The Company covenants and agrees that it will act in
accordance with the Charter Documents. Each Stockholder covenants and agrees
that it will vote all the Shares owned or held of record by such Stockholder
at any regular or special meeting of stockholders of the Company or in any
written consent executed in lieu of such a meeting of stockholders, and shall
take all action necessary, to ensure that the Charter Documents do not, at
any time, conflict with the provisions of this Agreement.
Section 5.3. Consent to an Initial Public Offering; Required IPO.
(a) Prior to the first anniversary of the Effective Date, the Company shall
not commence an Initial Public Offering without the affirmative vote of (i) a
majority of the Lehman Nominees, (ii) a majority of the Lockheed Martin
Nominees, (iii) the Lanza Nominee and (iv) the LaPenta Nominee.
(b) At any time on or after the fifth anniversary of the Effective
Date, if an Initial Public Offering shall not have been consummated prior to
such date, Lehman or Lockheed Martin (in each case, provided that it and its
Permitted Transferees then own at least 50% of the issued and outstanding
Common Stock owned by such party on the Effective Date) may require the
Company promptly to commence an Initial Public Offering and to complete such
Initial Public Offering as soon as reasonably practicable in accordance with
the registration procedures contained in Exhibit C. The rights of Lehman
and Lockheed Martin under this Section 5.3(b) shall not be assignable
(including to any Transferee of Shares).
ARTICLE VI
TERMINATION
Section 6.1. Termination. The provisions of this Agreement, other
than Sections 2.8, 4.2 and 4.5 shall terminate upon the consummation of an
Initial Public Offering. Section 2.8 and the registration rights contained
in Exhibit C shall continue to apply following such consummation with respect
to all Registrable Securities (as defined in Exhibit C) in accordance with
the terms thereof. Section 4.2 shall continue to apply following the
consummation of an Initial Public Offering until the earlier of the
expiration of the Exclusivity Period or the date on which Lehman (together
with its Permitted Transferees) ceases to own at least 10% of the outstanding
shares of Common Stock. Section 4.5 shall continue to apply following such
consummation until the fifth anniversary of the Effective Date.
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 7.1. No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Stockholders in this Agreement.
Section 7.2. Recapitalization, Exchanges, etc. In the event that
any capital stock or other securities are issued in respect of, in exchange
for, or in substitution of, any Shares by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial
or complete liquidation, stock dividend, split-up, sale of assets,
distribution to stockholders or combination of the Shares or any other change
in capital structure of the Company, appropriate adjustments shall be made
with respect to the relevant provisions of this Agreement so as to fairly and
equitably preserve, as far as practicable, the original rights and
obligations of the parties hereto under this Agreement and the term "Shares,"
as used herein, shall be deemed to include shares of such capital stock or
other securities, as appropriate.
Section 7.3. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective successors and permitted assigns.
Section 7.4. No Waivers, Amendments. (a) No failure or delay by
any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
(b) No amendment, modification or supplement to this Agreement
shall be enforced against any holder unless such amendment, modification or
supplement is signed by (i) where such holder is Lehman or LBHI or one of
their Permitted Transferees, a majority of the Shares held by Lehman and LBHI
and its Permitted Transferees, (ii) where such holder is Lockheed Martin or
one of their Permitted Transferees, a majority of the Shares held by Lockheed
Martin and its Permitted Transferees, (iii) where such holder is Lanza or one
of his Permitted Transferees, a majority of the Shares held by Lanza and his
Permitted Transferees and (iv) where such holder is LaPenta or one of his
Permitted Transferees, a majority of the Shares held by LaPenta and his
Permitted Transferees.
(c) Any provision of this Agreement may be waived if, but only if,
such waiver is in writing and is signed by the party against whom the
enforcement of such waiver is sought.
Section 7.5. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telex,
telecopier or similar writing) and shall be given to such party at its
address, telex or telecopier number set forth below, or such other address,
telex or telecopier number as such party may hereinafter specify for the
purpose to the party giving such notice. Each such notice, request or other
communication shall be effective (i) if given by telex or telecopy, when such
telex or telecopy is transmitted to the telex or telecopy number specified in
this Section and the appropriate answerback is received or, (ii) if given by
mail, 72 hours after such communication is deposited in the mails with first
<PAGE>
class postage prepaid, addressed as aforesaid or, (iii) if given by any other
means, when delivered at the address specified in this Section 7.5.
Notices to the Company shall be addressed to the Company at L-3
Communications Holdings, Inc., 600 Third Avenue, New York, New York 10016,
Attention: General Counsel (telecopier no. (212) 805-5494) with a copy
thereof to Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York 10017, Attention: David B. Chapnick (telecopier (212) 455-2502); notices
to Lehman or LBHI shall be addressed to Lehman Brothers Capital Partners III,
L.P. or Lehman Brothers Holdings Inc., as the case may be, 3 World Financial
Center, New York, New York 10285, Attention: Steven Berkenfeld (telecopier
(212) 526-3738) with a copy thereof to Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, Attention: David B. Chapnick
(telecopier (212) 455-2502); notices to Lockheed Martin shall be addressed to
Lockheed Martin at Lockheed Martin Corporation, 6801 Rockledge Drive,
Bethesda, Maryland 20817, Attention: Marcus C. Bennett (telecopier (301)
897-6083) with a copy thereof to Lockheed Martin Corporation, 6801 Rockledge
Drive, Bethesda, Maryland 20817, Attention: Frank H. Menaker, Jr. (telecopier
(301) 897-6791) and to Miles & Stockbridge, a Professional Corporation, 10
Light Street, Baltimore, Maryland 21202, Attention: Glenn C. Campbell
(telecopier (410) 385-3700); notices to Lanza and LaPenta shall be addressed
to Lanza and LaPenta, respectively, at L-3 Communications Holdings, Inc., 600
Third Avenue, New York, New York 10016 (telecopier (212) 949-9879, as to
Lanza and (212) 805-5470, as to LaPenta) with a copy thereof to Fried, Frank,
Harris, Shriver and Jacobson, 1 New York Plaza, New York, New York 10004
Attention: Robert C. Schwenkel (telecopier (212) 859-8879).
Section 7.6. Inspection. So long as this Agreement shall be in
effect, this Agreement and any amendments hereto shall be made available for
inspection by a Stockholder at the principal offices of the Company.
SECTION 7.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 7.8. Section Headings. The section headings contained in
this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
Section 7.9. Entire Agreement. This Agreement, together with the
Subscription Agreements, constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, written or oral, relating to the subject matter hereof.
Section 7.10. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdictions, it being intended that all rights and obligations of the
parties hereunder shall be enforceable to the fullest extent permitted by law.
Section 7.11. Counterparts. This Agreement may be signed in
counterparts, each of which shall constitute an original and which together
shall constitute one and the same agreement.
<PAGE>
Section 7.12. Option Plan. Each of the Stockholders agrees to
vote all of the Shares of Class A Common Stock owned or held of record by
such Stockholder at any regular or special meeting of the stockholders of the
Company called for the purpose of approving the Option Plan or in any written
consent executed in lieu of such a meeting of stockholders (and the Company
agrees to use reasonable efforts to cause such meeting to occur promptly),
and agrees to take all actions otherwise necessary, to ensure the approval of
the Option Plan in accordance with the terms hereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date set forth above.
L-3 COMMUNICATIONS
HOLDINGS, INC.
By:_________________________________
Title:
LOCKHEED MARTIN CORPORATION
By:_________________________________
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: Lehman Brothers Holdings Inc.,
its general partner
By:_________________________________
Title:
LEHMAN BROTHERS HOLDINGS INC.
By:_________________________________
Title:
____________________________________
Frank C. Lanza
____________________________________
Robert V. LaPenta
<PAGE>
EXHIBIT D
FORM OF AGREEMENT TO BE BOUND
[DATE]
To the Parties to the
Stockholders Agreement
dated as of April 30, 1997
Dear Sirs:
Reference is made to the Stockholders Agreement dated as of April 30,
1997 (the "Stockholders Agreement"), among L-3 Communications Holdings, Inc.,
Lockheed Martin Corporation, Lehman Brothers Capital Partners III, L.P.,
Lehman Brothers Holdings Inc., Frank C. Lanza and Robert V. LaPenta and each
other Stockholder who or which shall become parties to the Stockholders
Agreement as provided therein. Capitalized terms used herein and not defined
have the meanings ascribed to them in the Stockholders Agreement.
In consideration of the representations, covenants and agreements
contained in the Stockholders Agreement, the undersigned hereby confirms and
agrees that it shall be bound by all of the provisions thereof.
This letter shall be construed and enforced in accordance with the
laws of the State of New York.
Very truly yours,
[Permitted Transferee]
PERSONAL
AND
CONFIDENTIAL
<PAGE>
EXHIBIT 10.5
TRANSACTION AGREEMENT
Dated as of March 28, 1997
By and Among
LOCKHEED MARTIN CORPORATION
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.
FRANK C. LANZA
ROBERT V. LAPENTA
and
L-3 COMMUNICATIONS HOLDINGS, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRANSACTIONS AND CLOSING
Section 2.01 Closing Transactions . . . . . . . . . . . . . . . . 1
Section 2.02 Exchange Consideration . . . . . . . . . . . . . . . 4
Section 2.03 Adjustment of Exchange Consideration . . . . . . . . 4
Section 2.04 Closing . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.05 Cash True-Up . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LOCKHEED MARTIN
Section 3.01 Representations and Warranties of Lockheed Martin . 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LEHMAN
Section 4.01 Representations and Warranties of Lehman . . . . . . 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL PURCHASERS
Section 5.01 Representations and Warranties of the Individual
Purchasers . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO
Section 6.01 Representations and Warranties of Newco . . . . . . 8
ARTICLE VII
COVENANTS OF LOCKHEED MARTIN
Section 7.01 Conduct of Business . . . . . . . . . . . . . . . . 8
Section 7.02 Access to Information; Confidentiality . . . . . . . 10
Section 7.03 Non-Solicitation of Offers . . . . . . . . . . . . . 12
Section 7.04 Non-Solicitation of Employees . . . . . . . . . . . 12
Section 7.05 Change of Lockbox Accounts . . . . . . . . . . . . . 13
Section 7.06 Access to Information; Cooperation After Closing . . 13
Section 7.07 Maintenance of Insurance Policies . . . . . . . . . 13
<PAGE>
Section 7.08 Novation of Government Contracts . . . . . . . . . . 14
Section 7.09 Financial Statements . . . . . . . . . . . . . . . . 14
ARTICLE VIII
COVENANTS OF NEWCO AND THE PURCHASERS
Section 8.01 Confidentiality . . . . . . . . . . . . . . . . . . 15
Section 8.02 Provision and Preservation of and Access to Certain
Information; Cooperation . . . . . . . . . . . . . . 16
Section 8.03 Insurance; Financial Support Arrangements . . . . . 17
Section 8.04 Non-Solicitation of Employees . . . . . . . . . . . 20
Section 8.05 Financing . . . . . . . . . . . . . . . . . . . . . 21
Section 8.06 Use of Certain Trademarks, etc . . . . . . . . . . . 21
Section 8.07 Government Contract Novation; Cooperation . . . . . 21
Section 8.08 Reimbursement of Damages . . . . . . . . . . . . . . 22
ARTICLE IX
COVENANTS OF THE PARTIES
Section 9.01 Further Assurances . . . . . . . . . . . . . . . . . 22
Section 9.02 Certain Filings; Consents . . . . . . . . . . . . . 22
Section 9.03 Public Announcements . . . . . . . . . . . . . . . . 22
Section 9.04 Intellectual Property; License Agreements . . . . . 23
Section 9.05 HSR Act . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.06 Operation of Newco . . . . . . . . . . . . . . . . . 24
Section 9.07 Maintenance of Insurance Policies . . . . . . . . . 24
Section 9.08 Legal Privileges . . . . . . . . . . . . . . . . . . 25
Section 9.09 Non-Compete . . . . . . . . . . . . . . . . . . . . 25
ARTICLE X
TAX MATTERS
Section 10.01 Tax Matters . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XI
EMPLOYEE BENEFIT MATTERS
Section 11.01 Employee Benefit Matters . . . . . . . . . . . . . . 26
<PAGE>
ARTICLE XII
CONDITIONS TO CLOSING
Section 12.01 Conditions to the Obligations of Each Party . . . . 26
Section 12.02 Conditions to Obligation of Newco and the Purchasers 27
Section 12.03 Conditions to Obligation of Lockheed Martin . . . . 28
Section 12.04 Effect of Waiver . . . . . . . . . . . . . . . . . . 28
ARTICLE XIII
SURVIVAL; INDEMNIFICATION
Section 13.01 Survival . . . . . . . . . . . . . . . . . . . . . . 29
Section 13.02 Indemnification. . . . . . . . . . . . . . . . . . . 30
Section 13.03 Procedures . . . . . . . . . . . . . . . . . . . . . 31
Section 13.04 Limitations . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XIV
TERMINATION
Section 14.01 Termination . . . . . . . . . . . . . . . . . . . . 35
Section 14.02 Effect of Termination . . . . . . . . . . . . . . . 36
ARTICLE XV
MISCELLANEOUS
Section 15.01 Notices . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.02 Amendments; Waivers . . . . . . . . . . . . . . . . 39
Section 15.03 Expenses . . . . . . . . . . . . . . . . . . . . . . 39
Section 15.04 Successors and Assigns . . . . . . . . . . . . . . . 40
Section 15.05 Disclosure . . . . . . . . . . . . . . . . . . . . . 40
Section 15.06 Construction . . . . . . . . . . . . . . . . . . . . 40
Section 15.07 Entire Agreement . . . . . . . . . . . . . . . . . . 41
Section 15.08 Governing Law . . . . . . . . . . . . . . . . . . . 41
Section 15.09 Counterparts; Effectiveness . . . . . . . . . . . . 41
Section 15.10 Jurisdiction . . . . . . . . . . . . . . . . . . . . 41
Section 15.11 Captions . . . . . . . . . . . . . . . . . . . . . . 42
Section 15.12 Bulk Sales . . . . . . . . . . . . . . . . . . . . . 42
Section 15.13 Delivery of Disclosure Schedules; Certain
Attachments . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
EXHIBITS
EXHIBIT A Definitions
EXHIBIT B Representations and Warranties of Lockheed Martin
EXHIBIT C Representations and Warranties of Lehman
EXHIBIT D Representations and Warranties of the Individual Purchasers
EXHIBIT E Representations and Warranties of Newco
EXHIBIT F Tax Matters
EXHIBIT G Employee Benefit Matters
<PAGE>
ATTACHMENTS
Attachment I Audited Business Financial Statements
Attachment II December Statement
Attachment III Transfer Agreement
Attachment IV Forms of Common Stock Subscription Agreements
Attachment V Form of Stockholders Agreement
Attachment VI Additional Matters Relating to the Calculation of
Net Tangible Assets
Attachment VII Form of Exchange Consideration Schedule
Attachment VIII Certificate of Incorporation of Newco
Attachment IX Bylaws of Newco
Attachment X Consents and Approvals Required Prior to Closing
Attachment XI Exceptions to Non-Solicitation of Employees
Attachment XII Lockheed Martin Legal Opinions
Attachment XIII Newco Legal Opinions
Attachment XIV Certain Employee Benefit Matters
Attachment XV Patents and Patent Applications Constituting
Transferred Assets
<PAGE>
TRANSACTION AGREEMENT
This Transaction Agreement (together with the Exhibits, Schedules and
Attachments hereto, this "Agreement") is made as of the 28th day of March,
1997, by and among Lockheed Martin Corporation, a Maryland corporation
("Lockheed Martin"), Lehman Brothers Capital Partners III, L.P., a Delaware
limited partnership ("Lehman"), Frank C. Lanza ("Lanza"), Robert V. LaPenta
("LaPenta"; and together with Lanza, the "Individual Purchasers") and L-3
Communications Holdings, Inc., a Delaware corporation ("Newco"). For
purposes of this Agreement, Lehman, Lanza and LaPenta each are individually
referred to as a "Purchaser" and collectively referred to as the
"Purchasers."
W I T N E S S E T H:
WHEREAS, Lockheed Martin, in its own right and through certain of its
direct and indirect Subsidiaries is engaged in the Business;
WHEREAS, Lockheed Martin and the Purchasers, upon the terms and subject
to the conditions of this Agreement have agreed to the formation and
organization of Newco; and
WHEREAS, upon the terms and subject to the conditions of this Agreement,
Lockheed Martin desires to transfer, or to cause the Affiliated Transferors
to transfer, substantially all of the assets held or owned by, or used to
conduct, the Business and to assign certain liabilities associated with the
Business to Newco, and Newco desires to receive such assets and assume such
liabilities;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Defined terms used in this Agreement shall
have the meanings specified in this Agreement or in Exhibit A.
ARTICLE II
TRANSACTIONS AND CLOSING
Section 2.01 Closing Transactions. Upon the terms and subject to the
conditions set forth in the Transaction Documents, the parties agree that at
the Closing, among other things:
(i) Lockheed Martin will transfer or cause to be transferred to
Newco all Transferred Assets and Newco will assume all Assumed
Liabilities in accordance with this Agreement and the terms of the
Transfer Agreement attached as Attachment III;
(ii) Newco will issue to Lehman 10,020,000 shares of Newco Class A
Stock in exchange for $64,835,000 in cash;
(iii) Newco will issue to Lanza 1,500,000 shares of Newco Class B
Stock in exchange for $7,500,000 in cash;
<PAGE>
(iv) Newco will issue to LaPenta 1,500,000 shares of Newco Class B
Stock in exchange for $7,500,000 in cash; and
(v) Newco, Lockheed Martin and the Purchasers, as the case may be,
will enter into Common Stock Subscription Agreements and a Stockholders
Agreement in substantially the forms attached as Attachments IV and V,
will enter into License Agreements in the forms contemplated by
Section 9.04, and will enter into an Exchange Agreement in substantially
the form attached to the Transfer Agreement attached as Attachment III;
(vi) Lockheed Martin and Newco will enter into a services agreement
for a term expiring on December 31, 1997 (other than with respect to
certain services to the Communications Systems Business Unit the term
for which shall be mutually agreed upon up to one year with a six-month
option exercisable by Newco) (which may be terminated (in whole or in
part, provided that related services may not be terminated in part) by
the party receiving such services upon 60 days advance written notice to
the other party at any time, it being understood that each party will
use reasonable commercial efforts to transition away from the other
party as the source for such services as soon as practicable) relating
to the provision by the Lockheed Martin Companies to Newco (or by Newco
to the Lockheed Martin Companies, as the case may be) following the
Closing of certain services (which may include making limited space and
equipment available) of a type provided by the Lockheed Martin Companies
(other than services provided by the Business Units or personnel at the
location covered by the NY Leases) to the Business (or services provided
by the Business Units or the personnel at the location covered by the NY
Leases to the Lockheed Martin Companies) as of the date of this
Agreement, at costs consistent with past practices (the "Interim
Services Agreement"), which agreement is to be negotiated by the parties
in good faith prior to the Closing;
(vii) Lockheed Martin and Newco will enter into one or more supply
agreements to document intercompany work transfer agreements existing as
of the Closing or intercompany work transfer agreements or similar
support arrangements contemplated as of the Closing in connection with
Bids in existence as of the Closing between any of the Business Units
and any of the Lockheed Martin Companies, at prices and generally upon
other terms consistent with existing intercompany work transfer
agreements, but including such additional terms and conditions as are
appropriate (including indemnification and damage provisions consistent
with the underlying contract) to reflect the third-party nature of the
agreements (and in any event (1) including profit chargebacks (other
than with respect to the Eagle and Raptor programs) to Lockheed Martin
of up to $1.9 million in 1997, $1.1 million in 1998, $700,000 in 1999
and $500,000 in 2000 consistent with the Long Range Plan for the
Business prepared by Lockheed Martin and previously provided to the
Purchasers (the "Long Range Plan"), but only to the extent in backlog at
the Closing Date or contemplated as of the Closing in connection with
Bids in existence as of the Closing, and in the case of the "Eagle" and
"Raptor" (both long lead material award and production award) programs,
profit chargebacks to Lockheed Martin of up to an aggregate of
$1,000,000 and (2) providing that, notwithstanding the terms of the Long
Range Plan, after December 31, 2000 Newco shall not be entitled to any
profit chargeback to Lockheed Martin) (the "Supply Agreement"), which
agreement is to be negotiated by the parties in good faith prior to the
Closing; and
<PAGE>
(viii) Other than with respect to the matters referenced in clause
(ix) below, Lockheed Martin (and/or other Lockheed Martin Companies, as
appropriate) and Newco will enter into lease, sublease or assignment
agreements, as the case may be, in respect of those facilities used by
the Business Units on such terms and subject to such conditions as may
be negotiated by the parties in good faith prior to the Closing, it
being understood that such terms and conditions shall be consistent with
existing agreements; and
(ix) Lockheed Martin and Newco will enter into an agreement
pursuant to which (A)(1) Lockheed Martin will agree for a period
beginning on the Closing Date and ending on December 31, 1999, to lease
67,400 square feet of space in Building 1 at the Communications Systems
Business Unit at an "all in" annual cost of $36.25 per square foot,
(2) Newco will grant Lockheed Martin an option (exercisable on or prior
to December 31, 1998) to continue to lease all of the space contemplated
by the preceding clause (A)(1) for the period from January 1, 2000 until
March 14, 2003 at an "all in" annual cost of $18.12 per square foot, and
(3) Newco will agree to pay Lockheed Martin $2,000,000 on the first
Business Day of January 2000 in the event that Lockheed Martin exercises
the option contemplated by the preceding clause (A)(2), and (B) Lockheed
Martin will agree to lease on behalf of its existing MAC-MAR business
its current space in Building 1 at the Communications Systems Business
Unit at the current lease rates through December 31, 1998, and will
grant Newco the right, on a year-to-year basis, to match any competing
offer to provide space and related services to MAC-MAR thereafter until
the end of the current lease term, it being understood that Newco must
continue to use the services of the MAC-MAR business as long as the MAC-
MAR business is using Newco's receiving services at the Communications
Systems Business Unit.
Section 2.02 Exchange Consideration. The consideration to be paid to
Lockheed Martin and the Affiliated Transferors for the Transferred Assets
(the "Exchange Consideration") shall consist of the following:
(i) Subject to adjustment in accordance with Section 2.03 and
Section 2.04, $479,835,000 in cash;
(ii) 6,980,000 shares of Newco Class A Stock; and
(iii) Newco's assumption of the Assumed Liabilities in accordance
with this Agreement.
Section 2.03 Adjustment of Exchange Consideration.
(a) At least two Business Days prior to the Closing Date, Lockheed
Martin shall, in good faith and after consultation with the Individual
Purchasers, prepare an estimate of the Net Tangible Assets of the Business as
of March 30 (if the Closing shall occur in April 1997) or April 27 (if the
Closing shall occur in May 1997) (such date being the date on which Lockheed
Martin closes its accounting books and records for the respective month and
referred to as the "Effective Date"; and such estimate being the "Estimated
Final Net Tangible Asset Amount") and shall provide a copy of its calculation
of the Estimated Final Net Tangible Asset Amount to Newco and the Purchasers.
(b) Promptly following the Closing Date, but in no event later than 60
days after the Closing Date, Lockheed Martin shall, at its expense, with the
<PAGE>
assistance of Newco prepare and submit to Newco an audited combined statement
of net tangible assets setting forth, in reasonable detail, Lockheed Martin's
calculation of the Net Tangible Assets of the Business as of the close of
business on the Effective Date (the "Proposed Final Net Tangible Asset
Amount") together with an opinion of Ernst & Young LLP stating that such
audited combined statement of Net Tangible Assets presents fairly, in all
material respects, the Net Tangible Assets of the Business as of the close of
business on the Effective Date in accordance with the provisions of this
Agreement. In the event Newco disputes the correctness of the Proposed Final
Net Tangible Asset Amount, Newco shall notify Lockheed Martin of its
objections within 45 days after receipt of Lockheed Martin's calculation of
the Proposed Final Net Tangible Asset Amount and shall set forth, in writing
and reasonable detail, the reasons for Newco's objections. If Newco fails to
deliver such notice of objections within such time, Newco shall be deemed to
have accepted Lockheed Martin's calculation. Lockheed Martin and Newco shall
endeavor in good faith to resolve any disputed items within 20 days after
Lockheed Martin's receipt of Newco's notice of objections. If they are
unable to do so, Lockheed Martin and Newco shall select a nationally known
independent accounting firm (other than Ernst & Young LLP or Coopers &
Lybrand L.L.P.) to resolve the dispute (in a manner consistent with Section
2.03(c) and with any items not in dispute), and the determination of such
firm in respect of the correctness of each item remaining in dispute shall be
conclusive and binding on Lockheed Martin and Newco. The Net Tangible Assets
of the Business as of the close of business on the Effective Date as finally
determined pursuant to this Section 2.03(b) (whether by failure of Newco to
deliver notice of objection, by agreement of Lockheed Martin and Newco or by
determination of the accountants selected as set forth above) is referred to
herein as the "Final Net Tangible Asset Amount."
(c) The Estimated Final Net Tangible Asset Amount, the Proposed Final
Net Tangible Asset Amount and the Final Net Tangible Asset Amount shall be
determined in accordance with the accounting principles, policies, practices
and methods utilized in the preparation of the December Statement, as
disclosed in the notes to the December Statement, except as otherwise set
forth in Attachment VI.
(d) If the Final Net Tangible Asset Amount is greater than the
Estimated Final Net Tangible Asset Amount, the difference shall be paid to
Lockheed Martin by Newco with interest thereon from the Closing Date to the
date of payment at a rate per annum equal to the per annum interest rate
announced from time to time by Bank of America National Trust and Savings
Association as its reference rate in effect. If the Final Net Tangible Asset
Amount is less than the Estimated Final Net Tangible Asset Amount, the
difference shall be paid to Newco by Lockheed Martin with interest thereon
from the Closing Date to the date of payment at a rate per annum equal to the
per annum interest rate announced from time to time by Bank of America
National Trust and Savings Association as its reference rate in effect. Such
payment shall be made in immediately available funds not later than five
Business Days after the determination of the Final Net Tangible Asset Amount
by wire transfer to a bank account designated in writing by the party
entitled to receive the payment; provided, however, if Newco is prohibited
from making such payment by the financing arrangements of Newco in effect as
of the Closing Date, then, in lieu of making any payment in excess of the sum
of (i) the difference between $479,835,000 and the amount of the payment
actually made pursuant to Section 2.04(i) and (ii) $5,000,000 by wire
transfer in immediately available funds, Newco may deliver to Lockheed Martin
in satisfaction of its obligation in excess of such sum a subordinated note
<PAGE>
the principal amount of which shall equal such excess and providing for
repayment thereof in eight consecutive equal quarterly payments of principal
together with interest thereon, with an interest rate and such other terms
and conditions that reflect the financial condition of Newco and would be
available to Newco for similar subordinated debt on the date the subordinated
note is delivered to Lockheed Martin by Newco, which subordinated note is to
be negotiated by the parties in good faith in the event such subordinated
note is required to be issued pursuant to the terms hereof.
(e) Lockheed Martin shall make available and shall cause Ernst & Young
LLP to make available, in accordance with reasonable and customary practices
and professional standards and subject to such reasonable conditions as Ernst
& Young LLP shall impose, the books, records, documents and work papers
underlying the preparation and audit of the December Statement and the
calculation of the Proposed Final Net Tangible Asset Amount. Newco and the
Purchasers shall make available and shall cause Coopers & Lybrand L.L.P. to
make available, in accordance with reasonable and customary practices and
professional standards and subject to such reasonable conditions as Coopers &
Lybrand L.L.P. shall impose, the books, records, documents and work papers
created or prepared by or for Newco in connection with the review of the
Proposed Final Net Tangible Asset Amount and the other matters contemplated
by Section 2.03(b).
(f) The fees and expenses, if any, of the accounting firm selected to
resolve any disputes between Lockheed Martin and Newco in accordance with
Section 2.03(b) shall be paid one-half by Lockheed Martin and one-half by
Newco.
Section 2.04 Closing. The closing (the "Closing") of the Contemplated
Transactions shall take place at the offices of Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York on April 25, 1997, provided,
however, that if all of the conditions to Closing set forth in Article XII
have not been satisfied (or waived) as of that date and if closing on that
date therefore would be impractical, the Closing shall take place on the
fifth Business Day following the satisfaction or waiver (by the party
entitled to waive the condition) of all conditions to the Closing set forth
in Article XII, or at such other time and place as the parties to this
Agreement may agree. The Closing will occur at 9:00 a.m. on the Closing
Date. At the Closing, among other things:
(i) Newco shall pay and deliver to Lockheed Martin, for its own
account and as agent for the Affiliated Transferors, $479,835,000 (minus
the difference between the Estimated Final Net Tangible Asset Amount and
$269,118,000 in the event the Estimated Final Net Tangible Asset Amount
is less than $269,118,000) in immediately available funds by wire
transfer to an account designated by Lockheed Martin (which account
shall be designated by Lockheed Martin by written notice to Newco at
least two Business Days prior to the Closing Date, or such shorter
notice as Newco shall agree to accept);
(ii) Newco shall issue to Lockheed Martin, for its own account and
as agent for the Affiliated Transferors, 6,980,000 shares of Newco Class
A Stock;
(iii) Newco shall issue to Lehman 10,020,000 shares of Newco Class A
Stock in exchange for Lehman paying and delivering to Newco $64,835,000
in immediately available funds by wire transfer to an account designated
<PAGE>
by Newco (which account shall be designated by Newco by written notice
to Lehman at least two Business Days prior to the Closing Date, or such
shorter notice as Lehman shall agree to accept);
(iv) Newco shall issue to Lanza 1,500,000 shares of Newco Class B
Stock in exchange for Lanza paying and delivering to Newco $7,500,000 in
immediately available funds by wire transfer to an account designated by
Newco (which account shall be designated by Newco by written notice to
Lanza at least two Business Days prior to the Closing Date, or such
shorter notice as Lanza shall agree to accept); and
(v) Newco shall issue to LaPenta 1,500,000 shares of Newco Class B
Stock in exchange for LaPenta paying and delivering to Newco $7,500,000
in immediately available funds by wire transfer to an account designated
by Newco (which account shall be designated by Newco by written notice
to LaPenta at least two Business Days prior to the Closing Date, or such
shorter notice as LaPenta shall agree to accept).
Section 2.05 Cash True-Up. Within fifteen Business Days after the
Closing Date, Lockheed Martin shall prepare and deliver to Newco a schedule
setting forth, on a daily basis, the cash generated by the Business from
12:01 a.m. on the first day following the Effective Date (after subtracting
any cash investments made by any of the Lockheed Martin Companies in or for
the benefit of the Business after the Effective Date and the amount of any
checks drawn on the accounts of any of the Lockheed Martin Companies prior to
Closing Date but not yet debited from such accounts as of the close of
business on the day prior to the Closing Date). Within five Business Days of
receipt of the foregoing schedule, Newco shall make payment to Lockheed
Martin if the schedule shows a net cash usage by the Business during the
period referenced in the preceding sentence and Lockheed Martin shall make
payment to Newco if the schedule shows net cash generation during such period
in an amount equal to such net cash usage or net cash generation, as the case
may be. Lockheed Martin shall give Newco reasonable access to its books and
records for the purpose of confirming the calculations of Lockheed Martin
pursuant to this Section 2.05. Any payment made hereunder shall be made in
immediately available funds by wire transfer to a bank account designated in
writing by the party entitled to receive the payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LOCKHEED MARTIN
Section 3.01 Representations and Warranties of Lockheed Martin.
Lockheed Martin represents and warrants prior to but not after the Closing to
the Purchasers, and as of and after the Closing to Newco, as set forth in
Exhibit B.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LEHMAN
Section 4.01 Representations and Warranties of Lehman. Lehman
represents and warrants to Lockheed Martin, Newco and the Individual
Purchasers as set forth in Exhibit C.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL PURCHASERS
Section 5.01 Representations and Warranties of the Individual
Purchasers. Each of the Individual Purchasers represents and warrants to
Lockheed Martin, Newco and Lehman as set forth in Exhibit D.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO
Section 6.01 Representations and Warranties of Newco. Newco
represents and warrants to Lockheed Martin and the Purchasers as set forth in
Exhibit E.
ARTICLE VII
COVENANTS OF LOCKHEED MARTIN
Section 7.01 Conduct of Business. From the date of this Agreement
until the Closing Date, except with the written consent of either of the
Individual Purchasers (which consent may not be unreasonably withheld or
delayed) the Lockheed Martin Companies shall conduct the Business in all
material respects in accordance with the historical and customary operating
practices relating to the conduct of the Business (except that Lockheed
Martin and the Affiliated Transferors may sell or otherwise dispose
of obsolete Inventory whether or not in accordance with such practices and
shall cause its Subsidiaries to use reasonable commercial efforts to preserve
intact the Business and its relationships with third parties. Without
limiting the generality of the foregoing, from the date of this Agreement
through the Closing Date, subject to any exceptions required to comply with
Applicable Laws, the Lockheed Martin Companies shall not, without the written
consent of either of the Individual Purchasers (which consent may not be
unreasonably withheld or delayed):
(i) make any capital expenditure, or group of related capital
expenditures (other than as contemplated by the Long Range Plan)
relating to the Business in excess of $250,000;
(ii) sell or dispose of more than an aggregate of $250,000 of
assets (other than the sale of Inventory, any sale made in the ordinary
course of business, and other than pursuant to Bids or Contracts in
existence on the date of this Agreement) that would constitute
Transferred Assets if owned, held or used by any of the Lockheed Martin
Companies on the Closing Date;
(iii) amend, modify, or terminate any Contract where the effect of
such amendment, modification or termination would be a decrease in the
backlog value of the relevant Contract or a decrease in the payments to
be received or made by Newco, in any such case by $250,000 or more;
(iv) submit any Bid which, if accepted, would result in a fixed
price Contract that would constitute a Transferred Asset with a backlog
value in excess of (1) $5,000,000 in the case of a fixed price
<PAGE>
production Contract, or (2) $1,000,000 in the case of a fixed price
development Contract;
(v) except as required by Contracts in existence as of the date of
this Agreement or in the ordinary course of business, sell, transfer,
license or otherwise dispose of, any Intellectual Property relating to
the Business;
(vi) enter into any (1) fixed price production Contracts (other
than pursuant to a Bid in existence as of the date of this Agreement)
that would constitute a Transferred Asset if held by any of the Lockheed
Martin Companies on the Closing Date with a backlog value in excess of
$5,000,000, or (2) fixed price development Contracts (other than
pursuant to a Bid in existence as of the date of this Agreement) that
would constitute a Transferred Asset if held by any of the Lockheed
Martin Companies on the Closing Date with a backlog value in excess of
$1,000,000;
(vii) terminate the coverage of any policies of title, liability,
fire, workers' compensation, property and any other form of insurance
covering the Transferred Assets or operations of the Business, except
where the termination could not reasonably be expected to have a
Material Adverse Effect on the Business;
(viii) settle any lawsuit or claim if such settlement imposes a
material continuing non-monetary obligation on the Business or any of
the Transferred Assets;
(ix) except in respect of the Individual Purchasers, grant any new
or modified severance or termination arrangement or increase or
accelerate in any material respect any benefits payable under its
severance or termination pay policies in effect on the date of this
Agreement with respect to any Transferred Employee;
(x) other than with respect to the Individual Purchasers, except
as may be otherwise permitted or required by this Agreement, and except
as contemplated by Attachment XIV, adopt or amend in any material
respect any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any Transferred Employee or, other than compensation
increases for individuals below the level of vice president in the
ordinary course of business or compensation increases for individuals at
the level of vice president and above in accordance with
nondiscretionary provisions of the Employee Plans or Benefit
Arrangements disclosed in Section B.21 of the Disclosure Schedules or
referenced in Exhibit G, increase the compensation or fringe benefits of
any Transferred Employee or pay any benefit not required by any Employee
Plan, Benefit Arrangement or any agreement with respect to any
Transferred Employee; and
(xi) effectuate a "plant closing" or "mass layoff," as those terms
are defined in WARN, affecting in whole or in part any site of
employment, facility, operating unit or employee of the Business,
without complying with the notice requirements and other provisions of
WARN.
<PAGE>
Section 7.02 Access to Information; Confidentiality.
(a) Except as may be necessary to comply with any Applicable Laws
(including, without limitation, any requirements with respect to security
clearances) and subject to any applicable privileges (including, without
limitation, the attorney-client privilege), from the date of this Agreement
until the Closing Date, Lockheed Martin will (a) give the Purchasers and
their Representatives reasonable access to the records of the Lockheed Martin
Companies relating to the Business during normal business hours and upon
reasonable prior notice, (b) give the Purchasers and their Representatives
reasonable access to any facilities the possession of which will be
transferred to Newco at Closing during normal business hours and upon
reasonable prior notice for the purpose of Purchasers' conduct of a Phase I
Environmental Audit of such facilities or documentary diligence, (c) furnish
to the Purchasers and their Representatives such financial and operating data
and other information relating to the Business as the Purchasers may
reasonably request and (d) instruct the employees and Representatives of the
Lockheed Martin Companies to cooperate with the Purchasers in their
investigation of the Business. Without limiting the generality of the
foregoing, subject to the limitations set forth in the first sentence of this
Section 7.02(a), (i) Lockheed Martin shall use reasonable commercial efforts
to enable the Purchasers and the Purchasers' Representatives to conduct, at
the Purchasers' own expense, business and financial reviews, investigations
and studies as to the operation of the various Business Units, including any
tax, operating or other efficiencies that may be achieved and (ii) from the
date of this Agreement to the Closing Date, Lockheed Martin shall give the
Purchasers and their Representatives access to information relating to the
Business of the type, and with the same level of detail, as in the ordinary
course of business is made available to the presidents or chief financial
officers of the Business Units. Notwithstanding the foregoing, the
Purchasers shall not have access to personnel records of any of the Lockheed
Martin Companies relating to individual performance or evaluation records,
medical histories or other information which in Lockheed Martin's good faith
opinion is sensitive or the disclosure of which could subject any of the
Lockheed Martin Companies to risk of liability.
(b) For a period of three years after the Closing Date, the Lockheed
Martin Companies will treat and hold as such, any confidential information
concerning the operations or affairs of the Business. In the event any of
the Lockheed Martin Companies is requested or required (by oral or written
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process or by Applicable Law)
to disclose any such confidential information, then Lockheed Martin will
notify Newco promptly of the request or requirement so that Newco, at its
expense, may seek an appropriate protective order or waive compliance with
this Section 7.02(b). If, in the absence of a protective order or receipt of
a waiver hereunder, any of the Lockheed Martin Companies is, on the advice of
counsel, compelled to disclose such confidential information the Lockheed
Martin Company may so disclose the confidential information, provided that
the Lockheed Martin Company will use its reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded to such
confidential information. The provisions of this Section 7.02(b) will not be
deemed to prohibit the disclosure of confidential information concerning the
operations or affairs of the Business by any of the Lockheed Martin Companies
to the extent reasonably required (i) to prepare or complete any required tax
returns or financial statements, (ii) in connection with audits or other
proceedings by or on behalf of a Governmental Authority, (iii) in connection
<PAGE>
with any insurance or benefits claims, (iv) to the extent necessary to comply
with any Applicable Laws, (v) to provide services to Newco in accordance with
the Interim Services Agreement, or (vi) in connection with any other similar
administrative functions in the ordinary course of business. Notwithstanding
the foregoing, the provisions of this Section 7.02(b) shall not apply to
information that (i) is or becomes publicly available other than as a result
of a disclosure by any of the Lockheed Martin Companies, (ii) is or becomes
available to a Lockheed Martin Company on a non-confidential basis from a
source that, to Lockheed Martin's knowledge, is not prohibited from
disclosing such information by a legal, contractual or fiduciary obligation,
or (iii) is or has been independently developed by a Lockheed Martin Company
(other than solely for the Business or by one of the Business Units). This
Section 7.02(b) shall not apply to the disclosure of confidential information
concerning the Instrumentation Recorder Product Line of Advanced Recorders in
connection with or after the sale thereof to a purchaser or potential
purchaser (other than Newco); provided, however, that such disclosure may
only be made pursuant to a confidentiality agreement containing reasonable
terms and conditions.
Section 7.03 Non-Solicitation of Offers. From the date of this
Agreement to the earlier of the Closing Date or the termination of this
Agreement, Lockheed Martin shall not, and Lockheed Martin shall not authorize
or permit any of its Representatives to, directly or indirectly (through
Affiliates or otherwise), (i) solicit, initiate or take any action knowingly
to facilitate the submission of inquiries, proposals or offers from any
Person (other than Newco) relating to any acquisition or purchase of all or a
substantial part of the Business, in one transaction or a series of related
transactions (whether by asset or stock sale, business combination
transaction or otherwise), (collectively, the "Alternative Transaction
Proposals"), or (ii) enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any other Person
any information with respect to the Business (other than in the ordinary
course of operating the Business and in connection with the possible sale of
the Instrumentation Recorder Product Line of Advanced Recorders) or otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing. Except to the extent that it is prohibited from doing so by
contractual agreements that were in existence as of January 31, 1997 (of
which there are two), if Lockheed Martin, directly or indirectly, receives an
Alternative Transaction Proposal, Lockheed Martin shall promptly inform the
Purchasers of the terms and conditions of the Alternative Transaction
Proposal and the identity of the Person making it.
Section 7.04 Non-Solicitation of Employees. From and after the date
of this Agreement until the second anniversary of the Closing Date, Lockheed
Martin shall not, without prior written approval of Newco, directly or
indirectly (through Affiliates or otherwise), knowingly solicit any
individual (other than individuals identified in Attachment XI) who at that
time is an employee of the Business to terminate his or her relationship with
the Business and will not knowingly hire any individual inadvertently
solicited; provided, however, that the foregoing shall not apply to (i)
individuals solicited or hired as a result of the use of an independent
employment agency (so long as the agency was not directed to solicit such
individual and Lockheed Martin, promptly following execution of this
Agreement, advises the Vice President for Human Resources of each Operating
Sector of Lockheed Martin of the provisions of this Section 7.04), and (ii)
individuals solicited or hired as a result of the use of a general
<PAGE>
solicitation (such as an advertisement) not specifically directed to
employees of the Business.
Section 7.05 Change of Lockbox Accounts. Immediately after the
Closing, Lockheed Martin shall take such steps as Newco may reasonably
request to cause Newco to be substituted as the sole party having control
over any lockbox or similar bank account maintained exclusively by the
Business Units to which customers of the Business directly make payments in
respect of the Business or to direct the bank at which any such lockbox or
similar account is maintained to transfer any payments made thereto to an
account established by Newco.
Section 7.06 Access to Information; Cooperation After Closing. On and
after the Closing Date and subject to any applicable privileges (including,
without limitation, the attorney-client privilege), Lockheed Martin shall,
and shall cause each of the other Lockheed Martin Companies to, at their
expense (i) afford Newco and its Representatives reasonable access upon
reasonable prior notice during normal business hours, to all employees,
offices, properties, agreements, records, books and affairs of the Lockheed
Martin Companies to the extent relating to the Business, (ii) provide copies
of such information concerning the Business as Newco may reasonably request
for any proper purpose, including, without limitation, in connection with any
public or private offering of securities by Newco or the preparation of any
financial statements or in connection with any judicial, quasi judicial,
administrative, or arbitration proceeding or audit (provided, however, that
except as otherwise provided in writing signed by an officer of Lockheed
Martin specifically approving the use of such information, the specific
purpose for which such information is to be used therein and the specific
representations and warranties at issue, Lockheed Martin makes no
representations or warranties to the Purchasers, Newco or any other Person in
respect of any such information) and (iii) cooperate fully with Newco for
any proper purpose, including, without limitation, in the defense or pursuit
of any Transferred Asset, Assumed Liability or any claim or action that
relates to occurrences involving the Business prior to the Closing Date.
Section 7.07 Maintenance of Insurance Policies. Except as otherwise
provided in Exhibit G, on and after the date of this Agreement and until the
Closing Date, Lockheed Martin shall not take or fail to take any action if
such action or inaction, as the case may be, would adversely affect the
applicability of any insurance (including reinsurance) in effect on the date
of this Agreement that covers all or any part of the assets that would
constitute Transferred Assets if owned, held or used by any of the Lockheed
Martin Companies on the Closing Date, the Business or the Transferred
Employees. Except as otherwise provided in Exhibit G or as may otherwise be
agreed in writing by the parties, Lockheed Martin shall not have any
obligation to maintain the effectiveness of any such insurance policy after
the Closing Date or to make any monetary payment in connection with any such
policy.
Section 7.08 Novation of Government Contracts. As soon as is
reasonably practicable following the Closing, Lockheed Martin shall, in
accordance with Federal Acquisition Regulations Part 42, Section 42.12,
submit in writing to each Responsible Contracting Officer (as such term is
defined in Federal Acquisition Regulations Part 42, Section 42.102(a)), a
request for the U.S. Government to (i) recognize Newco as the successor in
interest to all of the Government Contracts being sold, assigned, transferred
and conveyed to Newco in accordance with this Agreement and (ii) enter into a
<PAGE>
novation agreement (the "Novation Agreement") substantially in the form
contemplated by such regulations. Lockheed Martin shall use commercially
reasonable efforts to obtain all consents, approvals and waivers required for
the purpose of processing, entering into and completing the Novation
Agreement with regard to any of the Government Contracts, including
responding to any reasonable requests for information by the U.S. Government
with regard to such Novation Agreement.
Section 7.09 Financial Statements. Lockheed Martin shall, at Lockheed
Martin's expense, furnish and shall cause its independent accountants for the
Communications Systems Business Unit to audit and furnish their opinion
thereon not later than March 28, 1997, financial statements for such Business
Unit for the years ended December 31, 1996, December 31, 1995 and December
31, 1994 prepared in accordance with GAAP applied consistently throughout the
periods covered thereby in a form meeting the requirements of Regulation S-X
of the Securities Act, and, consistent with appropriate terms and conditions
and upon receipt of appropriate management representation letters, to furnish
the consent of such independent accountants to the inclusion of their report
on such financial statements to the extent the financial statements are
required to be included in any registration statement of Newco under the
Securities Act and any amendments thereto or in any offering memoranda in
connection with an offering of securities exempt from registration under the
Securities Act, and to provide comfort letters in customary form in
connection therewith; and for the purposes of assisting Newco with any such
registration statement and subsequent reporting requirements under the
Securities Act of 1934, as amended, Lockheed Martin will deliver to Newco
unaudited income statements and balance sheets of the Communications Systems
Business Unit for each 1996 calendar quarter and each 1997 calendar quarter
completed prior to or on the Closing Date. The financial statements and
schedules described in the preceding sentence for the first quarter of 1997
and 1996, respectively, will be provided by May 10, 1997. To the extent
required, each subsequent 1997 quarter's financial statements and schedules
(together with the corresponding 1996 quarter's financial statements) shall
be delivered to Newco by Lockheed Martin within 40 days after the last day of
such quarter. The parties acknowledge and agree that time is of the essence
in the performance of this Section 7.09 and Lockheed Martin shall provide
Newco unaudited financial information with respect to the Communications
Systems Business Unit for the years 1993 and 1992 meeting the requirements of
Item 301 of Regulation S-K (Selected Financial Data) of the Securities Act by
April 4, 1997. Lockheed Martin acknowledges that Newco's independent
accountants will be performing the audit of the combined financial statements
of the Business for the year ended December 31, 1996 (and, if required by
applicable SEC regulations, for the period from January 1, 1997 to the
Closing Date), and the combined financial statements of the Wideband Systems
Business Unit and the Products Group of the Business for the three months
ended March 31, 1996 and the years ended December 31, 1995 and December 31,
1994. Lockheed Martin agrees to cooperate and cause its independent
accountants to cooperate with Newco's independent accountants, and provide
such reasonable representation letters of Lockheed Martin's management to
Newco's independent accountants in a form appropriate to enable such
accountants to issue an opinion on the financial statements they are auditing
in accordance with professional standards.
<PAGE>
ARTICLE VIII
COVENANTS OF NEWCO AND THE PURCHASERS
Section 8.01 Confidentiality.
(a) Newco and the Purchasers agree that all information provided or
otherwise made available in connection with the Contemplated Transactions, to
any of the Purchasers, Newco or their Representatives will be treated as if
provided, in the case of Newco and Lehman, under the Lehman Confidentiality
Agreement (whether or not the Lehman Confidentiality Agreement is in effect
or has been terminated) or, in the case of the Individual Purchasers, under
paragraph 7 of the Memorandum (whether or not the Memorandum is in effect or
has been terminated). In addition, until consummation of the Closing, Newco
agrees to be bound by the terms of the Lehman Confidentiality Agreement as if
Newco were Lehman thereunder (whether or not the Lehman Confidentiality
Agreement is in effect or has been terminated). Upon consummation of the
Closing, the Lehman Confidentiality Agreement and paragraph 7 of the
Memorandum shall cease to apply.
(b) For a period of three years after the Closing Date, the Purchasers,
Newco and each of their Affiliates will treat and hold as such, any
confidential information concerning the operations or affairs of businesses
of the Lockheed Martin Companies (other than the Business). In the event
that any of the Purchasers, Newco or any of their Affiliates is requested or
required (by oral or written request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand or
similar process or by Applicable Law) to disclose any such confidential
information, then they will notify Lockheed Martin promptly of the request or
requirement so that Lockheed Martin, at its expense, may seek an appropriate
protective order or waive compliance with this Section 8.01(b). If, in the
absence of a protective order or receipt of a waiver hereunder, any of the
Purchasers, Newco or any of their Affiliates is, on the advice of counsel,
compelled to disclose such confidential information, they may so disclose the
confidential information, provided that they use reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded to such
confidential information. Notwithstanding the foregoing, the provisions of
this Section 8.01(b) shall not apply to information that (i) is or becomes
publicly available other than as a result of a disclosure by any of the
Purchasers, Newco or any of their Affiliates, (ii) is or becomes available to
any of the Purchasers, Newco or any of their Affiliates on a non-confidential
basis from a source that, to the Purchasers', Newco's or any of their
Affiliates' knowledge, is not prohibited from disclosing such information by
a legal, contractual or fiduciary obligation, or (iii) is or has been
independently developed by any of the Purchasers, Newco or any of their
Affiliates.
(c) Nothing in this Section 8.01 shall abrogate or otherwise limit the
fiduciary duties of, and any other duties or restrictions imposed by
Applicable Law on, the Individual Purchasers by virtue of their service as a
director, officer or employee of any of the Lockheed Martin Companies or
their predecessors.
<PAGE>
Section 8.02 Provision and Preservation of and Access to Certain
Information; Cooperation.
(a) Prior to the Closing Date, each Purchaser shall provide to Lockheed
Martin promptly upon its receipt thereof copies of all environmental audit
and similar reports with respect to facilities the possession of which will
be transferred to Newco at the Closing.
(b) The Individual Purchasers acknowledge that effective as of February
3, 1997, Lockheed Martin turned over day-to-day management of the Business
Units to the Individual Purchasers. From the date of this Agreement until
the Closing Date, the Individual Purchasers agree to take reasonable steps to
ensure that the Business Units conduct their business and operations in
accordance with the provisions of Section 7.01. Notwithstanding the
foregoing, the Individual Purchasers shall not have liability to any Person
for the breach of this Section 8.02(b), it being understood that the effects
of a breach of this Section 8.02(b) shall be limited to the effects set forth
in Section 13.04(d) and Section 14.02.
(c) On and after the Closing Date, Newco shall preserve all books and
records of the Business for a period of five years commencing on the Closing
Date (or in the case of books and records relating to tax, employment and
employee benefits matters, until such time as Lockheed Martin notifies Newco
in writing that all statutes of limitations to which such records relate have
expired), and thereafter, not to destroy or dispose of such records without
giving notice to Lockheed Martin of such pending disposal and offering
Lockheed Martin the right to copy such records at its expense. In the event
Lockheed Martin has not copied such materials within 90 days following the
receipt of notice from Newco, Newco may proceed to destroy or dispose of such
materials without any liability. From and after the Closing Date and subject
to any applicable privileges (including, without limitation, the attorney-
client privilege), Newco shall at its expense (i) afford Lockheed Martin and
its Representatives reasonable access upon reasonable prior notice during
normal business hours, to all employees, offices, properties, agreements,
records, books and affairs of Newco, and provide copies of such information
concerning the Business as Lockheed Martin may reasonably request for any
proper purpose, including, without limitation, in connection with the
preparation of any tax returns or financial statements or in connection with
any judicial, quasi judicial, administrative, tax, audit or arbitration
proceeding and in connection with the preparation of any financial statements
or reports in accordance with past practices and procedures and (ii)
cooperate fully with Lockheed Martin for any proper purpose, including,
without limitation, the defense of or pursuit of any Excluded Liability,
Excluded Asset or any claim or action that relates to an Excluded Liability
or Excluded Asset.
Section 8.03 Insurance; Financial Support Arrangements.
(a) Newco and the Purchasers acknowledge and agree that as of the
Closing Date, neither Newco, the Business or any of the Business Units, any
property owned or leased by any of the foregoing nor any of the directors,
officers, employees (including, without limitation, the Transferred
Employees) or agents of any of the foregoing will be insured under any
insurance policies maintained by Lockheed Martin or any of its Affiliates,
except (i) in the case of certain policies, to the extent that a claim has
been reported as of the Closing Date, (ii) in the case of a policy that is an
occurrence policy, to the extent the accident, event or occurrence that
<PAGE>
results in an insurable loss occurs prior to the Closing Date and has been,
is or will be reported or noticed to the respective carrier by Newco or any
of the Lockheed Martin Companies in accordance with the requirements of such
policies (which claims Lockheed Martin shall, at Newco's cost and expense,
pursue diligently on Newco's behalf and the net proceeds of which claims
shall be remitted promptly to Newco upon receipt thereof), and (iii) as
otherwise provided in Exhibit G or agreed to in writing by the parties.
Except as otherwise provided in Exhibit G or as otherwise may be agreed to in
writing by the parties, from and after the Closing Date, Lockheed Martin
shall have no obligation of any kind to maintain any form of insurance
covering all or any part of the Transferred Assets, the Business or the
Transferred Employees.
(b) Newco agrees to reimburse Lockheed Martin within 30 days of receipt
of an invoice for the items set forth below.
(i) The allocated cost to the Business of premiums, costs and
expenses (excluding Lockheed Martin risk management department costs and
expenses), including general and administrative charges, for all periods
prior to the Closing Date in respect of any and all insurance policies
that cover or covered the Business, whether or not a claim has been made
or ever will be made by the Business or Newco under such policies. The
"allocated cost" to the Business shall be determined by Lockheed Martin
in a manner consistent with prior practices and in conjunction with the
Cost Disclosure Statement filed by Lockheed Martin or any of its
Affiliates and their predecessors with the U.S. Government on the
portion of the period covered by the respective policies that ends prior
to the Closing Date, except that with respect to policies for which no
premium rebate or refund is available as a result of the consummation of
the Contemplated Transactions, the "allocated cost" to the Business
shall be based on the entire policy period. Newco and the Purchasers
understand that Lockheed Martin is in the process of reviewing with the
U.S. Government the methodology used by Lockheed Martin and its
Affiliates to allocate premiums, costs, expenses and reserves to various
businesses and divisions, including the Business Units, and acknowledge
that any changes to such allocation methodology may result in
retroactive adjustments to the allocated cost to the Business of
premiums, costs and expenses. In the event of any such change to the
allocation methodology, Lockheed Martin and Newco agree to adjust the
allocated costs to the Business (either through a special charge or
credit to Newco under this Section 8.03(b)(i)) as appropriate.
(ii) Any self insurance, retention, deductible, retrospective
premium, cash payment for reserves calculated or charged on an incurred
loss basis and similar items, including but not limited to associated
administrative expenses and allocated loss adjustment or similar
expenses (collectively, "Insurance Liabilities") allocated to the
Business by Lockheed Martin on a basis consistent with past practices
resulting from or arising under any and all current or former insurance
policies maintained by Lockheed Martin or any of its Affiliates to the
extent that such Insurance Liabilities relate to or arise out of the
Business or any activities of Newco.
Newco agrees that, to the extent any of the insurers under the insurance
policies, in accordance with the terms of the insurance policies, requests or
requires collateral, deposits or other security to be provided with respect
to claims made against such insurance policies relating to or arising from
<PAGE>
the Business, Newco will provide the collateral, deposits or other security
or, upon request of Lockheed Martin, will replace any collateral, deposits or
other security provided by Lockheed Martin or any of its Affiliates.
(c) Newco agrees that, for a period of at least six years commencing on
the Closing Date, to the extent it maintains insurance coverage, Newco will
(at Lockheed Martin's cost to the extent of any additional cost therefor,
provided that, in the event there will be such a cost, Newco will give
Lockheed Martin a reasonable period of time to determine whether it desires
to incur such cost before Newco commits to such coverage with respect to
Lockheed Martin) include Lockheed Martin and its Affiliates as an additional
insured/loss payee on any policies in respect of which Lockheed Martin or its
Affiliates has or may have an insurable interest with respect to the
Business, the Transferred Assets, any of the Assumed Liabilities or any
facilities the possession of which will be transferred to Newco at the
Closing.
(d) Newco and the Purchasers agree that, not later than September 30,
1997, and in a manner reasonably satisfactory to Lockheed Martin, Newco will
in good faith seek to release Lockheed Martin and its Affiliates from all
obligations under all Financial Support Arrangements maintained by Lockheed
Martin or any of its Affiliates in connection with the Business.
(e) Lockheed Martin will use reasonable commercial efforts to cause
each Financial Support Arrangement to remain in full force and effect in
accordance with its terms until the earliest of (i) the date (the "Release
Date") on which Newco ensures that Lockheed and its Affiliates are released
from all obligations of Lockheed Martin and its Affiliates under such
Financial Support Arrangement in accordance with Section 8.03(d), (ii)
September 30, 1997 and (iii) the date such Financial Support Arrangement
terminates in accordance with its terms. After the Closing Date and prior to
the Release Date for any such Financial Support Arrangement, Lockheed Martin
will not waive any requirements of or agree to amend such Financial Support
Arrangement without the prior written consent of Newco.
(f) If, after the Closing Date, (i) any amounts are drawn on or paid
under any Financial Support Arrangement where Lockheed Martin or any of its
Affiliates is obligated to reimburse the Person making such payment or (ii)
Lockheed Martin or any of its Affiliates pays any amounts under, or any fees,
costs or expenses relating to, any Financial Support Arrangement, Newco shall
pay Lockheed Martin such amounts promptly after receipt from Lockheed Martin
of notice thereof accompanied by written evidence of the underlying payment
obligation.
(g) In the event that Newco fails to ensure that Lockheed Martin and
its Affiliates are released from all obligations under the Financial Support
Arrangements not later than September 30, 1997, Newco shall either (i)
promptly deposit with Lockheed Martin cash in an amount equal to the
aggregate principal or stated amount, as may be applicable, of the Financial
Support Arrangements not so released or (ii) provide back-up letters of
credit in form and substance reasonably satisfactory to Lockheed Martin with
respect to such Financial Support Arrangements; provided that if Newco has
used reasonable commercial efforts to structure its financing arrangements to
permit it to comply with the foregoing obligations, Newco shall not be
required to take any action under this Section 8.03(g) that it is prohibited
from taking under the terms of any financing agreements of Newco in effect on
the Closing Date. Any cash deposited with Lockheed Martin in accordance with
<PAGE>
clause (i) shall be held by Lockheed Martin in a segregated interest-bearing
account and shall be used by Lockheed Martin solely to satisfy its payment
obligations in respect of such Financial Support Arrangements, and the unused
portion of any cash (including interest) relating to a Financial Support
Arrangement shall be returned to Newco promptly after the occurrence of the
Release Date with respect to, or any other termination of, the Financial
Support Arrangement.
(h) In the event that Newco fails to ensure that Lockheed Martin and
its Affiliates are released from all obligations of Lockheed Martin and its
Affiliates under the Disclosed Financial Support Arrangements not later than
September 30, 1997, whether as a result of the proviso to the first sentence
of Section 8.03(g) or otherwise, and to the extent that Newco has not
provided the deposits or letters of credit contemplated by the first sentence
of Section 8.03(g), on October 1, 1997 and on the first day of each calendar
quarter thereafter Newco agrees to pay to Lockheed Martin an amount equal to
(i) .3125% of the maximum aggregate potential liability of Lockheed Martin
and its Affiliates under such Disclosed Financial Support Arrangements in
the case of performance-related Disclosed Financial Support Arrangements or
(ii) .625% of the maximum aggregate potential liability of Lockheed Martin
and its Affiliates under such Disclosed Financial Support Arrangements in the
case of all other Disclosed Financial Support Arrangements (other than
Disclosed Financial Support Arrangements that constitute non-monetary
performance guarantees or similar non-monetary obligations) that have not
been released or otherwise secured by the deposits or letters of credit
contemplated by the first sentence of Section 8.03(g) (determined as of the
last day of the preceding calendar quarter). Any such payment by Newco shall
be due and payable on October 1, 1997 or on the first day of the applicable
calendar month thereafter, and shall be nonrefundable regardless of any
subsequent reduction of the liability of Lockheed Martin or any of its
Affiliates thereunder.
Section 8.04 Non-Solicitation of Employees. From and after the date
of this Agreement until the second anniversary of the Closing Date, Newco
shall not, without prior written approval of Lockheed Martin, directly or
indirectly (through Affiliates or otherwise), knowingly solicit any
individual (other than individuals identified in Attachment XI) who at that
time is an employee of any of the Lockheed Martin Companies (other than a
Transferred Employee) to terminate his or her relationship with the Lockheed
Martin Companies and will not knowingly hire any individual inadvertently
solicited; provided, however, that the foregoing shall not apply to
individuals solicited or hired as a result of the use of an independent
employment agency (so long as the agency was not directed to solicit such
individual and Newco advises its Manager of Human Resources of the provisions
of this Section 8.04) or solicited or hired as a result of the use of a
general solicitation (such as an advertisement) not specifically directed to
employees of the Lockheed Martin Companies.
Section 8.05 Financing. Newco shall use reasonable commercial efforts
to obtain (on or prior to the Closing Date) sufficient funds on commercially
available terms acceptable to Newco in its sole discretion (i) to pay the
cash portion of the Exchange Consideration and (ii) to obtain adequate
working capital for the Business, provided that Newco shall not be considered
to be in breach of this Agreement if, notwithstanding its use of reasonable
commercial efforts as aforesaid, Newco does not have sufficient funds
available for such purposes on the Closing Date.
<PAGE>
Section 8.06 Use of Certain Trademarks, etc. Newco acknowledges and
agrees that it is not obtaining any rights or licenses with respect to the
names "Lockheed Martin," "Lockheed," "Loral," "Martin Marietta" or any
derivative thereof, or to their logos or trade dress, or to any other
Intellectual Property not constituting a Transferred Asset or not licensed to
it under the License Agreements. As soon as practicable following the
Closing, but no later than 180 days after the Closing Date, Newco shall
remove and change signage, change and substitute promotional and advertising
material in whatever medium, change stationery and packaging and take all
such other steps as may be required or appropriate to cease use of all such
Intellectual Property not constituting a Transferred Asset or not licensed to
it under the License Agreements; provided, however, that nothing in this
Agreement shall obligate Newco to change or copy over any engineering
drawings, prints or copies of correspondence, invoices and other documents
prepared prior to the Closing Date or to replace or alter any tools or dies
included in the Transferred Assets.
Section 8.07 Government Contract Novation; Cooperation. Newco shall
provide to Lockheed Martin and each Responsible Contracting Officer all
information necessary to obtain the consent of the U.S. Government to
recognize Newco as the successor in interest to all of the Government
Contracts being sold, assigned, transferred and conveyed to Newco in
accordance with this Agreement. Newco shall use commercially reasonable
efforts to obtain all consents, approvals and waivers required for the
purpose of processing, entering into and completing the Novation Agreement
with regard to any of the Government Contracts, including responding to any
requests for information by the U.S. Government with regard to such Novation
Agreement.
Section 8.08 Reimbursement of Damages. Newco shall use reasonable
commercial efforts to obtain reimbursement of any Damages suffered by it that
are subject to indemnification by Lockheed Martin hereunder as a reimbursable
cost under Government Contracts, provided the reimbursement of such Damages
is permitted by Applicable Law.
ARTICLE IX
COVENANTS OF THE PARTIES
Section 9.01 Further Assurances. Subject to the terms and conditions
of this Agreement, each party shall use all reasonable commercial efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under Applicable Laws to consummate the
Contemplated Transactions. Lockheed Martin, Newco and the Purchasers shall
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the Contemplated Transactions.
Except as otherwise expressly set forth in the Transaction Documents, nothing
in this Section 9.01 shall require Lockheed Martin, Newco or any of the
Purchasers to make any payments in order to obtain any consents or approvals
necessary or desirable in connection with the consummation of the
Contemplated Transactions.
Section 9.02 Certain Filings; Consents. Lockheed Martin, Newco and
the Purchasers shall cooperate with one another (i) in determining whether
any action by or in respect of, or filing with, any Governmental Authority is
<PAGE>
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material Contracts, in connection with the
consummation of the Contemplated Transactions and (ii) subject to the terms
and conditions of this Agreement, in taking such actions or making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers.
Section 9.03 Public Announcements. Prior to the Closing, Lockheed
Martin, Newco and the Purchasers shall consult with each other before issuing
any press release or making any public statement or communicating with the
U.S. Government as a customer with respect to this Agreement or the
Contemplated Transactions and, except as may be required by Applicable Law or
any listing agreement with any national or international securities exchange,
will not issue any such press release or make any such public statement prior
to such consultation. Notwithstanding the foregoing, no provision of this
Agreement (except as set forth in Section 8.01) shall relieve Lehman from any
of its obligations under the Lehman Confidentiality Agreement, or relieve the
Individual Purchasers from any of their respective obligations under
paragraph 7 of the Memorandum, or terminate any of the restrictions imposed
upon any party by Section 8.01.
Section 9.04 Intellectual Property; License Agreements.
(a) In consideration of the grant described in Section 9.04(b),
Lockheed Martin shall grant to Newco, effective as of the Closing Date and
pursuant to a License Agreement, a fully paid-up, worldwide, perpetual, non-
exclusive license in respect of all Intellectual Property owned by Lockheed
Martin that is used or currently planned for use by the Business (but not
constituting Transferred Assets) on the Closing Date, for such uses and
currently planned uses by Newco and its Affiliates. Such license shall not
be transferable by Newco other than in connection with the sale or transfer
of all or a substantial portion (it being understood that the sale of a
Business Unit shall be deemed a substantial portion) of the Business by
Newco.
(b) In consideration of the grant described in Section 9.04(a), Newco
shall grant to the Lockheed Martin Companies, effective as of the Closing
Date and pursuant to a License Agreement, a fully paid-up, world-wide,
perpetual, non-exclusive license in respect of all Intellectual Property
constituting Transferred Assets (i) that is used or currently planned for use
by the Lockheed Martin Companies (other than the Business Units) on the
Closing Date, for such uses and currently planned uses by Lockheed Martin and
its Affiliates or (ii) used by Newco after the Closing Date in connection
with the manufacture of any products for sale to, or the provision of any
services to, any of the Lockheed Martin Companies pursuant to any agreement
between Newco and any of the Lockheed Martin Companies that is breached by
Newco, for use by Lockheed Martin and its Affiliates in making or using such
products or providing such services (other than in the case of clause (ii),
the duration for which shall be an appropriate length of time to permit
completion of manufacture or services). The license granted pursuant to
clause (i) of the preceding sentence shall be effective as of the Closing
Date and the license granted pursuant to clause (ii) of the preceding
sentence shall be effective as of the date that the agreement described
therein is breached by Newco. Such license shall not be transferable by
Lockheed Martin other than in connection with the sale or transfer of all or
a substantial portion of a business by Lockheed Martin.
<PAGE>
(c) Newco acknowledges and agrees that it shall hold all Intellectual
Property constituting part of the Transferred Assets subject to any licenses
thereof granted by Lockheed Martin and its Affiliates prior to the Closing
Date.
(d) The transfer of Intellectual Property constituting Transferred
Assets to Newco shall not affect Lockheed Martin's right to use, disclose or
otherwise freely deal with any know-how, trade secrets and other technical
information not constituting Transferred Assets that is resident on the
Closing Date at businesses of the Lockheed Martin Companies other than the
Business.
Section 9.05 HSR Act. The parties shall take all actions necessary or
appropriate to cause the prompt expiration or termination of any applicable
waiting period under the HSR Act in respect of the Contemplated Transactions,
including, without limitation, complying as promptly as practicable with any
requests for additional information; provided that Newco shall not be
required to provide any undertakings or comply with any condition that, in
its good faith judgment, would materially and adversely diminish Newco's
rights under this Agreement or materially and adversely affect its business,
results or operations.
Section 9.06 Operation of Newco. From and after the date of this
Agreement through the Closing, Newco will not engage in or conduct any
activities other than activities that are necessary or appropriate in
connection with the consummation of the Contemplated Transactions.
Section 9.07 Maintenance of Insurance Policies. Notwith-standing any
provision to the contrary in this Agreement, this Section 9.07 shall
constitute the parties' agreement regarding the allocation of insurance
proceeds with respect to claims for liabilities that arise under or relate to
Environmental Laws that are comprised, in whole or in part, of Environmental
Liabilities that constitute Assumed Liabilities (the "Environmental Insurance
Claims"). Newco and the Purchasers acknowledge that Lockheed Martin shall
control the Environmental Insurance Claims and shall have the right to
compromise or settle any Environmental Insurance Claims. Lockheed Martin
will act in good faith and with reasonable prudence to maximize recovery with
respect to the Environmental Insurance Claims and will allocate any recovery
received with respect to such Environmental Insurance Claims, first, to the
costs it incurred to collect such recovery and all net tax costs related to
such recovery, and second, to reimburse any Governmental Authority, prime
contractor or subcontractor pursuant to a Government Contract.
With respect to any recovery remaining (the "Remaining Recovery"):
(i) if the recovery applies to liabilities that are Assumed
Liabilities and to liabilities that are not Assumed Liabilities, and the
recovery was not designated as arising from specific liabilities (e.g.,
a global settlement with an insurance carrier), Lockheed Martin will pay
Newco an amount equal to the Remaining Recovery multiplied by X
multiplied by (one minus Y); where X equals the total of the
Environmental Insurance Claims (estimated as of the date of recovery)
under said insurance policies divided by the total environmental and
other claims by Lockheed Martin under said insurance policies; and Y
equals Lockheed Martin's past expenditures on said liabilities divided
by the total estimated expenditures made or to be made by Lockheed
<PAGE>
Martin or Newco in respect of said liabilities (estimated as of the date
of recovery), or
(ii) if the recovery was designated as arising from a specific
liability that is an Assumed Liability, Lockheed Martin will pay Newco
the Remaining Recovery multiplied by (one minus Y).
Any obligations assumed in any such compromise or settlement of the
Environmental Insurance Claims will be apportioned between Lockheed Martin
and Newco in the same proportion as a recovery would be allocated pursuant to
this Section 9.07.
Section 9.08 Legal Privileges. Lockheed Martin and Newco acknowledge
and agree that all attorney-client, work product and other legal privileges
that may exist with respect to the Transferred Assets or the Assumed
Liabilities, shall, from and after the Closing Date, be deemed joint
privileges of Lockheed Martin and Newco. Both Lockheed Martin and Newco
shall use all commercially reasonable efforts after the Closing Date to
preserve all such privileges and neither Lockheed Martin nor Newco shall
knowingly waive any such privilege without the prior written consent of the
other party (which consent will not be unreasonably withheld or delayed).
Section 9.09 Non-Compete. Lockheed Martin, Newco and the Purchasers
covenant and agree that prior to the Closing Date they will discuss in good
faith the scope and nature of an appropriate non-competition agreement to
provide reasonable commercial protection to Newco for periods to be mutually
agreed upon of up to three years with respect to the material core businesses
of the Business while providing the Lockheed Martin Companies the ability to
continue, without impediment, all of its existing businesses and currently
planned businesses (other than those conducted only through the Business
Units), to enter into businesses reasonably related to its exiting businesses
and currently planned businesses, to make acquisitions and to otherwise
provide third-party sourced products similar to those manufactured or sold by
the Business as part of larger systems manufactured or sold by the Lockheed
Martin Companies. The non-competition agreement also will provide reasonable
commercial protection to the Lockheed Martin Companies on programs where
Newco performs substantial subcontract work for the Lockheed Martin
Companies, it being understood that this provision shall not prohibit Newco
from entering into subcontract agreements with other Persons on programs that
compete against the Lockheed Martin Companies, provided that appropriate
safeguards (including, for example, "firewalls" and confidentiality
agreements) are implemented and in place to protect the proprietary and
confidential information of the Lockheed Martin Companies. For the purposes
of any such non-competition agreement, (i) the businesses operated and
managed by Lockheed Martin on behalf of the U.S. Government, including the
Department of Energy, shall not be included within the prohibitions, and (ii)
"currently planned" businesses of the Lockheed Martin Companies shall mean
those businesses that Lockheed Martin can demonstrate are affirmatively under
consideration as of the Closing Date.
ARTICLE X
TAX MATTERS
Section 10.01 Tax Matters. The parties agree as to tax matters as set
forth in Exhibit F.
<PAGE>
ARTICLE XI
EMPLOYEE BENEFIT MATTERS
Section 11.01 Employee Benefit Matters. The parties agree as to
employee benefit matters as set forth in Exhibit G.
ARTICLE XII
CONDITIONS TO CLOSING
Section 12.01 Conditions to the Obligations of Each Party. The
obligations of Lockheed Martin, Newco and the Purchasers to consummate the
Closing are subject to the satisfaction (or waiver) of the following
conditions:
(a) Any applicable waiting period under the HSR Act relating to the
Contemplated Transactions shall have expired or been terminated;
(b) No provision of any Applicable Law or regulation and no judgment,
injunction, order or decree shall prohibit the Closing, and no action or
proceeding shall be pending before any court, arbitrator or governmental
body, agency or official with respect to which counsel reasonably
satisfactory to Lockheed Martin, Newco and the Purchasers shall have rendered
a written opinion that there is a substantial likelihood of a determination
that would prohibit the Closing;
(c) All actions by or in respect of or filings with any Governmental
Authority required to permit the consummation of the Closing shall have been
obtained;
(d) Lockheed Martin, Newco and the Purchasers shall have executed and
delivered the Common Stock Subscription Agreements and the Stockholders
Agreement in substantially the forms attached as Attachments IV and V, and
shall have executed and delivered the Exchange Agreement in substantially the
form attached to the Transfer Agreement attached as Attachment III, the
Interim Services Agreement, the License Agreements, the Supply Agreement and
the leases, subleases and assignment agreements referred to in Section
2.01(viii) and the agreement referred to in Section 2.01(ix);
(e) Lockheed Martin and Newco shall have executed and delivered the
noncompetition agreement contemplated by Section 9.09;
(f) Lockheed Martin or the applicable Affiliated Transferor, as the
case may be, shall have obtained the consents, approvals or permits
contemplated by Attachment X; and
(g) There shall be (i) no conditions requested of Lockheed Martin by
the PBGC or of Newco by Lockheed Martin, in connection with the transfer of
all of the assets and liabilities of the Spinoff Plans or the Assumed Plans,
that are in either party's reasonable good faith judgment unacceptable to
either Lockheed Martin (as to conditions requested of Lockheed Martin by the
PBGC) or Newco (as to conditions requested of Newco by Lockheed Martin); or
(ii) no commencement of proceedings by the PBGC to terminate any Lockheed
Martin Pension Plan (or a reasonable good faith determination of Newco or
<PAGE>
Lockheed Martin that the commencement of such proceedings is reasonably
likely).
Section 12.02 Conditions to Obligation of Newco and the Purchasers.
The obligations of Newco and the Purchasers to consummate the Closing are
subject to the satisfaction (or waiver by Newco and the Purchasers) of the
following further conditions:
(a) (i) Lockheed Martin shall have performed in all material respects
all of its obligations under the Transaction Documents required to be
performed by it on or prior to the Closing Date, (ii) the representations and
warranties of Lockheed Martin contained in the Transaction Documents shall be
complete and correct (in all material respects, in the case of those
representations and warranties which are not by their express terms qualified
by reference to materiality) at and as of the date of this Agreement and as
of the Closing Date, as if made at and as of each such date, except that
those representations and warranties which are by their express terms made as
of a specific date shall be complete and correct (in all material respects,
in the case of those representations and warranties which are not by their
express terms qualified by reference to materiality) only as of such date,
and (iii) Newco shall have received a certificate signed by an executive
officer of Lockheed Martin to the foregoing effect;
(b) Newco has sufficient funds available to pay the cash portion of the
Exchange Consideration for the Transferred Assets, provided that this Section
12.02(b) shall not be a condition to Newco and the Purchasers' obligation to
consummate the Closing unless the representations and warranties set forth in
Section C.08 of Exhibit C and Section D.06 of Exhibit D shall be, and
continue to be, accurate and Newco shall have complied in all material
respects with its obligations under Section 8.05;
(c) The Purchasers shall have completed their review of the litigation
titled Universal Navigation v. Loral Corporation and the results of such
review shall be satisfactory to the Purchasers;
(d) Since December 31, 1996, there shall not have been any material
adverse change in the assets, properties, business, financial condition or
results of operations of the Business taken as a whole or any developments
that reasonably could be expected to result in such a change;
(e) Lockheed Martin, the applicable Affiliated Transferor or Newco, as
the case may be, shall have obtained the consents, approvals or permits
contemplated by Attachment X;
(f) Newco shall have obtained such surveys and title insurance in
respect of the Owned Real Property as are sufficient to satisfy Newco's
lenders and to enable Newco to obtain financing; and
(g) Lockheed Martin shall have furnished Newco with an opinion dated
the Closing Date concerning the matters set forth in Attachment XII.
Section 12.03 Conditions to Obligation of Lockheed Martin. The
obligation of Lockheed Martin to consummate the Closing is subject to the
satisfaction (or waiver by Lockheed Martin) of the following further
conditions:
<PAGE>
(a) (i) Newco and the Purchasers shall have performed in all material
respects all of their respective obligations under the Transaction Documents
required to be performed by them at or prior to the Closing Date, (ii) the
representations and warranties of Newco and the Purchasers contained in the
Transaction Documents shall be complete and correct (in all material
respects, in the case of those representations and warranties which are not
by their express terms qualified by reference to materiality) at and as of
the date of this Agreement and as of the Closing Date, as if made at and as
of each such date, except that those representations and warranties which are
by their express terms made as of a specific date shall be complete and
correct (in all material respects, in the case of those representations and
warranties which are not by their express terms qualified by reference to
materiality) only as of such date, and (iii) Lockheed Martin shall have
received certificates signed by executive officers of Newco (as to Newco) and
Lehman (as to Lehman), and certificates signed by each of the Individual
Purchasers, to the foregoing effect; and
(b) Newco shall have furnished Lockheed Martin with an opinion dated
the Closing Date covering the matters set forth in Attachment XIII.
Section 12.04 Effect of Waiver. Any waiver by Newco and the Purchasers
of the conditions specified in clause (ii) of Section 12.02(a) and any waiver
by Lockheed Martin of the conditions specified in clause (ii) of Section
12.03, if made knowingly, shall also be deemed a waiver by such Person of any
claim for Damages as the result of the matters waived.
ARTICLE XIII
SURVIVAL; INDEMNIFICATION
Section 13.01 Survival. None of the representations and warranties of
the parties contained in any Transaction Document or in any certificate or
other writing delivered pursuant to any Transaction Document or in connection
with any Transaction Document shall survive the Closing, except for:
(i) the representations and warranties in Sections B.01, B.02,
B.07(b) and B.12 shall survive indefinitely;
(ii) the representations and warranties in Section B.13 shall not
survive the Closing Date;
(iii) the representations and warranties in Section B.15 shall
survive for a period of three years from the Closing Date;
(iv) the representations and warranties in Section B.21 shall
survive until 30 days after the expiration of the applicable statute of
limitations (or extensions or waivers thereof);
(v) the representations and warranties in Exhibit B (other than
those Sections of Exhibit B referenced in the preceding clauses (i),
(ii), (iii) and (iv)), shall survive for a period of two years from the
Closing Date;
(vi) the representations and warranties included in Exhibit F shall
survive until 30 days after the expiration of the applicable statute of
limitations (or extensions or waivers thereof);
<PAGE>
(vii) the representations and warranties in Sections C.01, C.02 and
C.05 shall survive indefinitely;
(viii) the representations and warranties in Exhibit C (other than
those Sections of Exhibit C referenced in the preceding clause (vii))
shall survive for a period of two years from the Closing Date;
(ix) the representations and warranties in Sections D.03 shall
survive indefinitely;
(x) the representations and warranties in Exhibit D (other than
the representations and warranties in Section D.03), shall survive for a
period of two years from the Closing Date;
(xi) the representations and warranties in Sections E.01, E.02 and
E.05 shall survive indefinitely; and
(xii) the representations and warranties in Exhibit E (other than
those Sections of Exhibit E referenced in the preceding clause (xi))
shall survive for a period of two years from the Closing Date.
The covenants and agreements of the parties in the Transaction Documents and
the representations and warranties referenced in the preceding clauses (i)
and (iii) through (xii) are referred to herein as the "Surviving
Representations or Covenants." It is understood and agreed that, (1) before
the Closing the remedies expressly set forth in Article XIV are the sole and
exclusive remedies for any breach of any representation, warranty or covenant
and (2) following the Closing the sole and exclusive remedy with respect to
any breach of any representation, warranty or covenant (other than (i) with
respect to a breach of the terms of a covenant, as to which Newco or Lockheed
Martin, as the case may be, shall be entitled to seek specific performance or
other equitable relief and (ii) with respect to claims for fraud or for
willful breach of a covenant) shall be a claim for Damages made pursuant to
this Article XIII.
Section 13.02 Indemnification.
(a) Effective as of the Closing and subject to the limitations set
forth in Section 13.04(a), Newco hereby indemnifies Lockheed Martin and its
Affiliates and their respective directors, officers, employees and agents,
against and agrees to hold them harmless from any and all Damages incurred or
suffered by any of them arising out of or related in any way to (i) any
misrepresentation or breach of any Surviving Representation or Covenant made
or to be performed by Newco pursuant to any of the Transaction Documents,
(ii) the Assumed Liabilities (including, without limitation, Newco's failure
to perform or in due course pay and discharge any Assumed Liability) or (iii)
any Financial Support Arrangement referred to in Section 8.03(b).
(b) Effective as of the Closing and subject to the limitations set
forth in Section 13.04(b), Lockheed Martin hereby indemnifies Newco and its
Affiliates and their respective directors, officers, employees and agents
against and agrees to hold them harmless from any and all Damages incurred or
suffered by any of them arising out of or related in any way to (i) any
misrepresentation or breach of any Surviving Representation or Covenant made
or to be performed by the Lockheed Martin Companies pursuant to any
Transaction Document, (ii) the Excluded Liabilities (including, without
limitation, Lockheed Martin's (or any other Lockheed Martin Company's)
<PAGE>
failure to perform or in due course pay and discharge any Excluded
Liability), (iii) the assumption by Newco of Environmental Liabilities
arising out of, relating to, based on or resulting from actions taken (or
failures to take action), conditions existing or events occurring prior to
the Closing, (iv) the Camden CAS 410 Issue, or (v) the Sarasota Asset Step-Up
Issue; provided, however, that Newco shall not have suffered or be deemed to
have suffered any Damages in the case of the foregoing clauses (iii), (iv),
and (v) to the extent that such Damages are recoverable as an allowable cost
under Applicable Law or under the terms of any applicable Government
Contracts.
(c) Effective as of the Closing and subject to the limitations set
forth in Section 13.04(c), each of the Purchasers hereby, severally and not
jointly with the other Purchasers, indemnifies each of the other parties to
this Agreement and their respective Affiliates and their respective
directors, officers, employees and agents, against and agrees to hold them
harmless from any and all Damages incurred or suffered by any of them arising
out of or related in any way to any breach of any Surviving Representation or
Covenant made or to be performed by the Purchasers pursuant to any of the
Transaction Documents.
Section 13.03 Procedures.
(a) If Lockheed Martin or any of its Affiliates or any of their
directors, officers, employees and agents, shall seek indemnification
pursuant to Section 13.02(a) or Section 13.02(c), or if Newco or any of its
Affiliates or any of their directors, officers, employees and agents, shall
seek indemnification pursuant to Section 13.02(b), such Person seeking
indemnification (the "Indemnified Party") shall give written notice to the
party from whom such indemnification is sought (the "Indemnifying Party")
promptly (and in any event within 30 days) after the Indemnified Party (or,
if the Indemnified Party is a corporation, any officer of the Indemnified
Party) becomes aware of the facts giving rise to such claim for
indemnification (an "Indemnified Claim") specifying in reasonable detail the
factual basis of the Indemnified Claim, stating the amount of the Damages, if
known, the method of computation thereof, and containing a reference to the
provision of the Transaction Documents in respect of which such Indemnified
Claim arises. The failure of an Indemnified Party to provide notice pursuant
to this Section 13.03 shall not constitute a waiver of that party's claims to
indemnification pursuant to Section 13.02 in the absence of, and then only to
the extent of, material prejudice to the Indemnifying Party. If the
Indemnified Claim arises from the assertion of any claim, or the commencement
of any suit, action, proceeding or Remedial Action brought by a Person that
is not a party hereto (a "Third Party Claim")any such notice to the
Indemnifying Party shall be accompanied by a copy of any papers theretofore
served on the Indemnified Party in connection with such Third Party Claim.
With respect to any Third Party Claim asserted or brought prior to the
Closing Date, notice of such Third Party Claim shall be deemed to have been
delivered on the Closing Date.
(b) (i) Upon receipt of notice of a Third Party Claim from an
Indemnified Party pursuant to Section 13.03(a), the Indemnifying Party
will, subject to the other provisions of this Section 13.03(b), assume
the defense and control of such Third Party Claim but shall allow the
Indemnified Party a reasonable opportunity to participate in the defense
thereof with its own counsel and at its own expense. The Indemnifying
Party shall select counsel, contractors and consultants of recognized
<PAGE>
standing and competence after consultation with the Indemnified Party;
shall take all steps necessary in the defense or settlement thereof; and
shall at all times diligently and promptly pursue the resolution
thereof. In conducting the defense thereof, the Indemnifying Party
shall at all times act as if all Damages relating to such Third Party
Claim were for its own account and shall act in good faith and with
reasonable prudence to minimize Damages therefrom. The Indemnified
Party shall, and shall cause each of its Affiliates, directors,
officers, employees, and agents to, cooperate fully with the
Indemnifying Party in the defense of any Third Party Claim defended by
the Indemnifying Party.
(ii) The Indemnifying Party shall give prompt and continuing notice
to the other Indemnified Party of any Third Party Claims that the
Indemnifying Party reasonably believes may: (1) result in the assertion
of criminal liability on the part of the Indemnified Party or any of its
Affiliates, directors, officers, employees or agents; (2) adversely
affect the ability of the Indemnified Party to do business in any
jurisdiction or in any manner or with any customer; or (3) materially
affect the reputation of the Indemnified Party or any of its Affiliates,
directors, officers, employees or agents.
(iii) Subject to the provisions of Section 13.03(b)(iv) and Section
13.03(b)(v), the Indemnifying Party shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any Third
Party Claims, without the consent of any Indemnified Party; provided,
that the Indemnifying Party shall (1) pay or cause to be paid all
amounts arising out of such settlement or judgment concurrently with the
effectiveness thereof; (2) shall not encumber any of the assets of any
Indemnified Party or agree to any restriction or condition that would
apply to such Indemnified Party or to the conduct of that party's
business; and (3) shall obtain, as a condition of any settlement or
other resolution, a complete release of each Indemnified Party. Except
for the foregoing, no settlement or entry of judgment in respect of any
Third Party Claim shall be consented to by any Indemnifying Party
without the consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
(iv) An Indemnified Party may elect to share the defense of a Third
Party Claim the defense of which has been assumed by the Indemnifying
Party pursuant to Section 13.03(b)(ii). In that event, the Indemnified
Party will so notify the Indemnifying Party in writing. Thereafter, the
Indemnifying Party and the Indemnified Party shall participate on an
equal basis in the defense, management and control of any such claim.
The Indemnifying Party and the Indemnified Party shall select mutually
satisfactory counsel, contractors and consultants to conduct the defense
or settlement thereof (the costs and expenses of which shall be shared
equally by the Indemnifying Party and the Indemnified Party), and shall
at all times diligently and promptly pursue the resolution thereof.
Notwithstanding the foregoing, Newco shall manage all Remedial Actions
conducted with respect to facilities which constitute Transferred Assets
or at which Newco will undertake operations pursuant to this Agreement,
provided that Lockheed Martin and its Representatives shall have the
right, consistent with Newco's right to manage such Remedial Actions as
aforesaid, to participate fully in all decisions regarding any Remedial
Action, including reasonable access to sites where any Remedial Action
is being conducted, reasonable access to all documents, correspondence,
<PAGE>
data, reports or information regarding the Remedial Action, reasonable
access to employees and consultants of Newco with knowledge of relevant
facts about the Remedial Action and the right to attend all meetings and
participate in any telephone or other conferences with any government
agency or third party regarding the Remedial Action.
(v) In the case of the indemnification contemplated by clauses
(iii), (iv) and (v) of Section 13.02(b), in the event that either the
Indemnified Party or the Indemnifying Party desires to settle the
matters referenced therein or consent to the entry of any judgment
arising thereunder and the other party does not wish to consent to such
settlement, the other party shall have no obligation to consent to the
settlement provided that it agrees in writing to pay and be responsible
for 100% of any Damages thereafter incurred; provided that no
Indemnified Party shall be required to consent to any settlement or
agree to be responsible for the payment of Damages thereafter incurred
with respect to any matter the settlement of which would require the
consent of such Indemnified Party pursuant to Section 13.03(b)(iii).
The obligation of the party that rejects any proposed settlement offer
or entry of any such judgment to pay and be responsible for 100% of any
Damages thereafter incurred in accordance with this Section 13.03(b)(v)
shall be conditioned upon and subject to the payment, within five
Business Days of the date such party provides the written agreement
contemplated by the preceding sentence, of an amount, in immediately
available funds, equal to the portion of the total settlement that would
have been payable by the party desiring to settle the matter or consent
to the entry of any such judgment according to the percentage sharing
arrangement contemplated by Section 13.04(b)(ii) or Section
13.04(b)(iii), as the case may be. Thereafter, the party that rejects
the proposed settlement shall be solely responsible for the defense of
the matter that is the subject of the proposed settlement.
(c) If the Indemnifying Party and the Indemnified Party are unable to
agree with respect to a procedural matter arising under Section 13.03(b)(iv),
the Indemnifying Party and the Indemnified Party shall, within 10 days after
notice of disagreement given by either party, agree upon a third-party
referee ("Referee"), who shall be an attorney and who shall have the
authority to review and resolve the disputed matter. The parties shall
present their differences in writing (each party simultaneously providing to
the other a copy of all documents submitted) to the Referee and shall cause
the Referee promptly to review any facts, law or arguments either the
Indemnifying Party or the Indemnified Party may present. The Referee shall
be retained to resolve specific differences between the parties within the
range of such differences. Either party may request that all oral arguments
presented to the Referee by either party be in each other's presence. The
decision of the Referee shall be final and binding unless both the
Indemnifying Party and the Indemnified Party agree. The parties shall share
equally all costs and fees of the Referee.
Section 13.04 Limitations. Notwithstanding anything to the contrary in
this Agreement or in any of the Transaction Documents:
(a) Newco shall only have liability to Lockheed Martin and its
Affiliates with respect to the representations and warranties described in
clause (i) of Section 13.02(a) if such matters were the subject of a written
notice given by the Indemnified Party pursuant to Section 13.03(a) within the
<PAGE>
period following the Closing Date specified for each respective matter in
Section 13.01.
(b) Lockheed Martin shall only have liability to Newco or any other
Person hereunder:
(i) with respect to the representations and warranties described
in clause (i) of Section 13.02(b), (y) to the extent that the aggregate
Damages of all Indemnified Parties as the result thereof exceed
$5,000,000 but are not greater than $55,000,000 (it being understood
that Lockheed Martin's maximum liability under Section 13.02(b)(i) with
respect to representations and warranties and this Section 13.04(b)(i)
shall be $50,000,000), and (z) if such matters were the subject of a
written notice given by the Indemnified Party pursuant to Section
13.03(a) within the period following the Closing Date specified for each
respective matter in Section 13.01;
(ii) with respect to the matters described in clause (iii) of
Section 13.02(b) (after giving effect to the proviso thereto), (y) to
the extent of 50% of the aggregate Damages incurred within eight years
following the Closing Date by all Indemnified Parties as the result
thereof, and (z) to the extent of 40% of the aggregate Operation and
Maintenance Costs incurred by all Indemnified Parties after the eighth
anniversary of the Closing Date and within 15 years following the
Closing Date; provided, however, that Lockheed Martin shall only have
liability under Section 13.02(b)(iii) or this Section 13.04(b)(ii) for
Damages and Operation and Maintenance Costs incurred after the Closing
Date in excess of $6,000,000;
(iii) with respect to the matters described in clause (iv) of
Section 13.02(b) (after giving effect to the proviso thereto), (y) to
the extent of 75% of the aggregate Damages incurred by an Indemnified
Party as the result thereof, and (z) to the extent such Damages were
incurred within three years following the Closing Date; and
(iv) with respect to the matters described in clause (v) of Section
13.02(b) (after giving effect to the proviso thereto), (y) to the extent
of 75% of the aggregate Damages incurred by an Indemnified Party as the
result thereof, and (z) to the extent such Damages were incurred within
three years following the Closing Date.
(c) The Purchasers shall only have liability to Lockheed Martin and its
Affiliates with respect to the representations and warranties described in
Section 13.02(c) if such matters were the subject of a written notice given
by the Indemnified Party pursuant to Section 13.03(a) within the period
following the Closing Date specified for each respective matter in Section
13.01.
(d) Lockheed Martin shall not be liable to Newco or any other Person
hereunder for any Damages that result from a breach of the provisions of
Section 7.01 if such breach results from a breach by either of the Individual
Purchasers of Section 8.02(b).
(e) Lockheed Martin shall not be liable to Newco or any other Person
under this Article XIII for any Damages that result from any breach of any
representation or warranty made by Lockheed Martin hereunder to the extent
such representation or warranty is expressly qualified by reference to the
<PAGE>
knowledge of the Individual Purchasers or a substantially similar clause
relating to their knowledge if either of the Individual Purchasers had such
knowledge as of the Closing.
ARTICLE XIV
TERMINATION
Section 14.01 Termination. The Transaction Documents may be terminated
at any time prior to the Closing:
(i) by mutual written agreement of Lockheed Martin and the
Purchasers;
(ii) by Lockheed Martin or the Purchasers (as a group) if the
Closing shall not have been consummated by May 30, 1997; provided,
however, that neither Lockheed Martin nor a Purchaser may terminate the
Transaction Documents pursuant to this clause (ii) if the Closing shall
not have been consummated by May 30, 1997, by reason of the failure of
such party or any of its Affiliates to perform in all material respects
any of its or their respective covenants or agreements contained in the
Transaction Documents; provided further, that either Lockheed Martin or
Newco and the Purchasers (as a group) shall be entitled to terminate the
Transaction Documents prior to May 30, 1997, if such party or parties,
as the case may be, shall reasonably conclude that any condition to such
party's or parties' obligations hereunder (as set forth in Section 12.01
with respect to Lockheed Martin, Newco and the Purchasers, Section 12.02
with respect to Newco and the Purchasers, and Section 12.03 with respect
to Lockheed Martin) cannot reasonably be expected to be satisfied prior
to May 30, 1997; and provided, further, that as a condition to the right
of a party to elect to terminate the Transaction Documents pursuant to
the immediately preceding proviso, the party shall first provide ten
Business Days prior notice to the other party specifying in reasonable
detail the nature of the condition that such party has concluded will
not be satisfied, and the other party shall be entitled during such ten
Business Day period to take any actions it may elect consistent with the
terms of this Agreement such that the condition reasonably could be
expected to be satisfied prior to the expiration of such time period;
(iii) by either Lockheed Martin or Newco and the Purchasers (as a
group) if there shall be any law or regulation that makes consummation
of the Contemplated Transactions illegal or otherwise prohibited or if
consummation of the Contemplated Transactions would violate any
nonappealable final order, decree or judgment of any court or
Governmental Authority having competent jurisdiction; and
(iv) in accordance with the provisions of Section 15.13.
Any party desiring to terminate this Agreement pursuant to this Section 14.01
shall give written notice of such termination to the other parties to this
Agreement.
<PAGE>
Section 14.02 Effect of Termination. If this Agreement is terminated
as permitted by Section 14.01, such termination shall be without liability of
any party (or any Affiliate, shareholder, director, officer, employee, agent,
consultant or representative of such party) to any other party to this
Agreement; provided, however, that if the Contemplated Transactions fail to
close as a result of a breach of any Transaction Document by Lockheed Martin,
Newco or any of the Purchasers, such party shall be fully liable for any and
all Damages incurred or suffered by any other party as a result of all such
breaches in an amount not to exceed $2,500,000, except that Lockheed Martin
(i) shall be fully liable for any and all Damages incurred or suffered by the
Purchasers as a result of any breach by Lockheed Martin of its obligations
under Section 7.03, (ii) shall be fully liable for any and all Damages
incurred or suffered by the Purchasers as a result of Lockheed Martin's
willful failure to consummate the Closing (other than resulting from an
unintentional failure of any of the conditions set forth in Section 12.01 or
Section 12.03) if Newco and the Purchasers have sufficient funds available,
and are ready and willing, to pay the cash portion of the Exchange
Consideration for the Transferred Assets, and (iii) shall not be liable to
the Purchasers or any other Person hereunder for any Damages that result from
a breach of the provisions of Section 7.01 if such breach results from a
breach by either of the Individual Purchasers of Section 8.02(b). The
provisions of Sections 8.01 and 15.03 and this Section 14.02 shall survive
any termination hereof pursuant to Section 14.01.
ARTICLE XV
MISCELLANEOUS
Section 15.01 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Lockheed Martin:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Marcus C. Bennett
Telecopy: (301) 897-6083
with a copy to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Frank H. Menaker, Jr.
Telecopy: (301) 897-6791
and
Miles & Stockbridge, a
Professional Corporation
10 Light Street
Baltimore, Maryland 21202
Attention: Glenn C. Campbell
Telecopy: (410) 385-3700
<PAGE>
if to Lehman:
Lehman Brothers Capital Partners III, L.P.
3 World Financial Center
New York, New York 10285
Attention: Steven Berkenfeld
Telecopy: (212) 526-2198
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David B. Chapnick
Telecopy: (212) 455-2502
if to Lanza:
Frank C. Lanza
600 Third Avenue
New York, New York 10016
Telecopy: (212) 949-9879
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel
Telecopy: (212) 859-8879
if to LaPenta:
Robert V. LaPenta
600 Third Avenue
New York, New York 10016
Telecopy: (212) 805-5470
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel
Telecopy: (212) 859-8879
If to Newco:
L-3 Communications Holdings, Inc.
600 Third Avenue
New York, New York 10016
Attention: William J. LaSalle
Telecopy: (212) 805-5494
<PAGE>
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David B. Chapnick
Telecopy: (212) 455-2502
and
Lehman Brothers Capital Partners III, L.P.
3 World Financial Center
New York, New York 10285
Attention: Steven Berkenfeld
Telecopy: (212) 526-2198
and
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Frank H. Menaker, Jr.
Telecopy: (301) 897-6791
or to such other address or telecopy number and with such other copies, as
such party may hereafter specify for the purpose by notice to the other
parties. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the telecopy
number specified in this Section 15.01 and evidence of receipt is received or
(ii) if given by any other means, upon delivery or refusal of delivery at the
address specified in this Section 15.01.
Section 15.02 Amendments; Waivers.
(a) Any provision of the Transaction Documents may be amended or waived
prior to the Closing Date if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by Lockheed Martin, Newco
and the Purchasers, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege under any Transaction Document shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
Section 15.03 Expenses. Except as otherwise provided in the
Transaction Documents and except that if the Closing shall occur the costs
and expenses of the Purchasers will be paid by Newco, all costs and expenses
incurred in connection with the Transaction Documents shall be paid by the
party incurring such cost or expense. Notwithstanding the foregoing, all
transfer, sales, use and similar fees and taxes resulting from or relating to
the formation and organization of Newco, including but not limited to the
transfer of the Transferred Assets to Newco by Lockheed Martin or any of the
Affiliated Transferors, shall be borne one-half by Lockheed Martin and one-
half by Newco. Each of Newco and Lockheed Martin shall reimburse the other
<PAGE>
for one-half of such fees and taxes paid by the other promptly upon
presentation of a demand therefor.
Section 15.04 Successors and Assigns. The provisions of the
Transaction Documents shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns; provided that no party
may assign, delegate or otherwise transfer any of its right or obligations
under this Agreement without the consent of Lockheed Martin, in the case of
Newco or any of the Purchasers, and Newco and the Purchasers in the case of
Lockheed Martin. Notwithstanding the foregoing proviso (i) Lehman may assign
all or part of its rights to Lehman Brothers Holdings Inc. and (ii) Newco may
assign all or part of its rights and obligations (other than the obligation
to issue shares of its capital stock) to a wholly owned Subsidiary of Newco,
provided that Newco also shall remain liable hereunder as if it had not
assigned its rights and obligations.
Section 15.05 Disclosure. Certain information set forth in the
Disclosure Schedules has been included and disclosed solely for informational
purposes and may not be required to be disclosed pursuant to the terms and
conditions of the Transaction Documents. The disclosure of any such
information shall not be deemed to constitute an acknowledgement or agreement
that the information is required to be disclosed in connection with the
representations and warranties made in the Transaction Documents or that the
information is material, nor shall any information so included and disclosed
be deemed to establish a standard of materiality or otherwise used to
determine whether any other information is material.
Section 15.06 Construction. As used in the Transaction Documents, any
reference to the masculine, feminine or neuter gender shall include all
genders, the plural shall include the singular, and the singular shall
include the plural. With regard to each and every term and condition of the
Transaction Documents, the parties understand and agree that the same have or
has been mutually negotiated, prepared and drafted, and that if at any time
the parties desire or are required to interpret or construe any such term or
condition or any agreement or instrument subject hereto, no consideration
shall be given to the issue of which party actually prepared, drafted or
requested any term or condition of the Transaction Documents.
Section 15.07 Entire Agreement.
(a) The Transaction Documents and any other agreements
contemplated thereby (including, to the extent contemplated herein, the
Lehman Confidentiality Agreement and paragraph 7 of the Memorandum) and
certain other letter agreements entered into contemporaneously herewith
constitute the entire agreement among the parties with respect to the subject
matter of such documents and supersede all prior agreements, understandings
and negotiations, both written and oral, between the parties with respect to
the subject matter thereof.
(b) The parties hereto acknowledge and agree that no
representation, warranty, promise, inducement, understanding, covenant or
agreement has been made or relied upon by any party hereto other than those
expressly set forth in the Transaction Documents. Without limiting the
generality of the disclaimer set forth in the preceding sentence, neither
Lockheed Martin nor any of its Affiliates has made or shall be deemed to have
made any representations or warranties, in any presentation or written
information relating to the Business given or to be given in connection with
<PAGE>
the Contemplated Transactions, in any filing made or to be made by or on
behalf of Lockheed Martin or any of its Affiliates with any governmental
agency, and no statement, made in any such presentation or written materials,
made in any such filing or contained in any such other information shall be
deemed a representation or warranty hereunder or otherwise. The Purchasers
acknowledge that Lockheed Martin has informed them that no Person has been
authorized by Lockheed Martin or any of its Affiliates to make any
representation or warranty in respect of the Business or in connection with
the Contemplated Transactions, unless in writing and contained in this
Agreement or in any of the Transaction Documents to which they are a party.
(c) Except as expressly provided herein or in any other
Transaction Document, no Transaction Document or any provision thereof is
intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder.
Section 15.08 Governing Law. Except as otherwise provided in any of
the Transaction Documents, this Agreement shall be construed in accordance
with and governed by the law of the State of New York.
Section 15.09 Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other parties
hereto.
Section 15.10 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, any of the Transaction Documents or the Contemplated
Transactions may be brought against any of the parties in the United States
District Court for the Southern District of New York, and each of the parties
hereby consents to the exclusive jurisdiction of such court (and of the
appropriate appellate court) in any such suit, action or proceeding and
waives any objection to venue laid therein. Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether
within or without the State of New York. Without limiting the foregoing,
Lockheed Martin, Newco and the Purchasers agree that service of process upon
such party at the address referred to in Section 15.01, together with written
notice of such service to such party, shall be deemed effective service of
process upon such party.
Section 15.11 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 15.12 Bulk Sales. Newco hereby waives compliance by Lockheed
Martin and each Affiliated Transferor, in connection with the Contemplated
Transactions, with the provisions of Article 6 of the Uniform Commercial Code
as adopted in the States of Georgia, Florida, California, Pennsylvania, New
York, Massachusetts, Utah and New Jersey, and as adopted in any other states
where any of the Transferred Assets are located, and any other applicable
bulk sales laws with respect to or requiring notice to Lockheed Martin's (or
any Affiliated Transferor's) creditors, as the same may be in effect on the
Closing Date. Lockheed Martin shall indemnify and hold harmless Newco
against any and all liabilities (other than liabilities in respect of Assumed
<PAGE>
Liabilities) which may be asserted by third parties against Newco as a result
of noncompliance with any such bulk sales law.
Section 15.13 Delivery of Disclosure Schedules; Certain Attachments.
(a) The parties acknowledge and agree that the Disclosure
Schedules contemplated by this Agreement are not being delivered at the time
of signing of this Agreement. Not later than the close of business on April
14, 1997, Lockheed Martin shall deliver to Newco the Disclosure Schedules
contemplated by this Agreement, which Disclosure Schedules, once delivered,
shall be effective and speak as of the date of this Agreement as if delivered
on the date of this Agreement. In the event Newco or the Purchasers object
to the Disclosure Schedules, Newco or the Purchasers may, by written notice
delivered to Lockheed Martin prior to the close of business on the fifth
Business Day following the day on which the Disclosure Schedules are
delivered to Newco, terminate this Agreement. In the event Lockheed Martin
does not receive such written notice within the time period specified in the
preceding sentence, Newco and the Purchasers shall be deemed to have accepted
the Disclosure Schedules. In the event that Newco or any of the Purchasers
elects to terminate this Agreement in accordance with the provisions of this
Section 15.13(a), no party to this Agreement shall have any liability to any
of the other parties to this Agreement.
(b) The parties acknowledge and agree that Attachment X
contemplated by this Agreement is not being delivered at the time of signing
of this Agreement. Not later than the close of business on the third
Business Day after delivery of the Disclosure Schedules, Newco shall deliver
to Lockheed Martin a draft of the portions of Attachment X contemplated by
Section 12.01 and Section 12.02. Not later than the close of business on the
third Business Day after delivery of the Disclosure Schedules, Lockheed
Martin shall deliver to Newco a draft of the portion of Attachment X
contemplated by Section 12.01. In the event either Newco or Lockheed Martin
objects to any of the matters proposed to be included by the other party in
Attachment X, Newco and Lockheed Martin shall in good faith discuss the
matters to be included in Attachment X. In the event Newco and Lockheed
Martin are unable to reach agreement on the matters to be included in
Attachment X prior to the close of business on the sixth Business Day after
the delivery of the Disclosure Schedules, Attachment X shall include all
matters proposed to be included by each of Newco and Lockheed Martin.
(c) The parties acknowledge and agree that Attachments IV, V,
VIII, IX, XI and XV as attached to this Agreement at the time of signing of
this Agreement are subject to modification by any of the Purchasers or
Lockheed Martin at any time not later than the close of business on April 4,
1997. In the event that any of the Purchasers or Lockheed Martin desires to
amend either Attachment IV, Attachment V, Attachment VIII, Attachment IX,
Attachment XI or Attachment XV, it shall notify the other parties in writing
of the proposed amendment and the Purchasers and Lockheed Martin shall, in
good faith, discuss the proposed amendment. In the event that,
notwithstanding those discussions, the Purchasers and Lockheed Martin are
unable to resolve the differences as to the provisions of either Attachment
IV, Attachment V, Attachment VIII, Attachment IX, Attachment XI or Attachment
XV, any of the parties may terminate this Agreement prior to the close of
business on April 11, 1997 by written notice to the other parties to this
Agreement and upon any such termination no party to this Agreement shall have
any liability to any other parties to this Agreement. If this Agreement
shall not have been terminated in accordance with the provisions of this
<PAGE>
Section 15.13(c) by the close of business on April 11, 1997, the amended
versions of Attachments IV, V, VIII, IX, XI and XV shall replace Attachments
IV, V, VIII, IX, XI and XV as attached to this Agreement at the time of
signing of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly
executed by their respective authorized officers on the day and year first
above written.
WITNESS: LOCKHEED MARTIN CORPORATION
____________________________ By:________________________________
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: LEHMAN BROTHERS HOLDINGS INC.,
its General Partner
____________________________ By:___________________________
Name:
Title:
FRANK C. LANZA
____________________________ ___________________________________
ROBERT V. LAPENTA
____________________________ ___________________________________
L-3 COMMUNICATIONS HOLDINGS, INC.
____________________________ By:________________________________
Name:
Title:
<PAGE>
EXHIBIT A
DEFINITIONS
(a) The following terms have the following meanings:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such
other Person. For purposes of determining whether a Person is an Affiliate,
the term "control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of securities, contract or otherwise.
Notwith-standing the foregoing, for purposes of the Agreement neither
Lockheed Martin nor any of the Lockheed Martin Companies shall be considered
an Affiliate of Newco or any of the Purchasers.
"Affiliated Transferors" means Lockheed Martin Tactical Systems, Inc.,
Randtron Systems, Inc., Lockheed Martin Fairchild Corporation, Conic
Corporation, Lockheed Martin Microcom Corporation, Lockheed Martin Hycor,
Inc., The NARDA Microwave Corporation and any other Affiliate of Lockheed
Martin that owns any of the assets that would constitute Transferred Assets
if owned, held or used by Lockheed Martin or any of the Affiliated
Transferors specified above on the Closing Date or is liable for any of the
Assumed Liabilities.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction,
directive, judgment, decree or other requirement of any Governmental
Authority (including any Environmental Law) applicable to such Person or any
of their respective properties, assets, officers, directors, employees,
consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person).
"Assumed Liabilities" means all of the following liabilities and
obligations of any of the Lockheed Martin Companies relating to or arising
out of the operation and affairs of the Business, the Transferred Assets or
the NY Leases:
(i) Balance Sheet and Scheduled Liabilities. All liabilities and
obligations relating to the Business, the Transferred Assets or the NY Leases
whether accrued, liquidated, contingent, matured or unmatured, at or prior to
the Closing, which (a) are disclosed in any of the Disclosure Schedules
delivered hereunder, (b) would be subject to disclosure in any of the
Disclosure Schedules delivered in connection with any of Lockheed Martin's
representations and warranties but for the materiality standards contained in
such representation and warranty, (c) are reflected in the Final Net Tangible
Asset Amount as determined in accordance with Section 2.03 herein (including
without limitation accounts payable and reserves reflected as contra-asset
accounts, and those reflected in the estimates at completion), (d) are
incurred in the ordinary course of business subsequent to the Effective Date,
other than with respect to the matters covered by Exhibits F and G, or (e)
are otherwise a liability or obligation that Newco is expressly assuming
pursuant to this Agreement;
<PAGE>
(ii) Contracts. All liabilities and obligations arising under the
Contracts, whether or not such Contracts have been completed or terminated
prior to the Closing Date, including, without limitation, any such
liabilities and obligations arising from or relating to the performance or
non-performance of the Contracts by the Business Units, Newco or any other
party, whether arising prior to, on or after the Closing Date, except to the
extent they constitute Excluded Liabilities;
(iii) Employment. All liabilities and obligations in respect of
employees and former employees of the Business provided in Exhibit G to be
assumed by Newco;
(iv) Benefit Plans; Workers' Compensation. The liabilities and
obligations under the Employee Plans and Benefit Arrangements provided in
Exhibit G to be assumed by Newco;
(v) Product Warranty and Liability Claims. All liabilities and
obligations relating to warranty obligations or services, or claims of
manufacturing or design defects, with respect to any product or service sold
or provided by the Business whether prior to, on or after the Closing Date;
(vi) Taxes. All liabilities and obligations in respect of Taxes
provided in Exhibit F to be assumed by Newco;
(vii) Environmental Liabilities. All Environmental Liabilities,
whether arising prior to, on or after the Closing Date and whether such
Environmental Liabilities are "onsite" or "offsite," but only to the extent
relating to or arising out of conditions at, or the current or former
operations of the Business Units at, the facilities owned or leased by the
Business as of the Closing Date and included in the Transferred Assets
(whether by fee ownership or leasehold interest), it being understood that
the term "Assumed Liabilities" shall not include any Environmental
Liabilities included in clause (viii) of the definition of Excluded
Liabilities;
(viii) NY Leases. All liabilities and obligations relating to the NY
Leases, whether arising prior to, on or after the Closing Date;
(ix) OSHA Liabilities. All liabilities and obligations relating to
the Occupational Safety and Health Act of 1970, as amended, and any
regulations, decisions or orders promulgated thereunder, together with any
state or local law, regulation or ordinance pertaining to worker, employee or
occupational safety or health in effect as of the Closing Date or as
thereinafter may be amended or superseded, whether arising prior to, on or
after the Closing Date;
(x) Litigation. All matters of governmental, judicial or
adversarial proceedings (public or private), litigation, arbitration,
disputes, claims, causes of action or investigations (collectively,
"Proceedings") of a civil nature arising from or directly or indirectly
relating to any of the enumerated "Assumed Liabilities" in clauses (i)
through (ix), whether or not such matters were accrued, liquidated,
contingent, matured, unmatured, or known or unknown to Lockheed Martin at or
prior to the Closing; and
(xi) Post-Closing Liabilities. All liabilities and obligations
relating to Newco's ownership of the Transferred Assets, directly or
<PAGE>
indirectly relating to or arising under the Employee Plans and Benefit
Arrangements or relating to the Transferred Employees, the lease of
properties under the NY Leases or otherwise or its conduct of the Business
and any related operations, in each case, from and after the Closing Date
including, without limitation, any and all Proceedings in respect thereof.
"Audited Business Financial Statements" means the audited combined
financial statements of the Lockheed Martin Predecessor Businesses, together
with the notes thereto, as attached in Attachment I to the Agreement.
"Bid" means any quotation, bid or proposal made by Lockheed Martin or
any of its Affiliates primarily in connection with the Business that if
accepted or awarded would lead to a Contract with the U.S. Government or any
other Person for the design, manufacture and sale of products or the
provision of services by the Business.
"Business" means the businesses conducted by the Business Units
(together with their predecessors), which in the aggregate comprise the
Products Group (excluding the business of Frequency Sources Inc. (other than
its semiconductor products business) and the assembly plant in Goodyear,
Arizona), the Wideband Systems business and the Communications Systems
business of the Lockheed Martin Companies.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by
law to close.
"Business Units" means (i) Display Systems headquartered in Atlanta,
Georgia, (ii) Advanced Recorders headquartered in Sarasota, Florida,
(iii) Conic headquartered in San Diego, California, (iv) Microcom
headquartered in Warminster, Pennsylvania, (v) Telemetry & Instrumentation
headquartered in San Diego, California, (vi) Randtron headquartered in Menlo
Park, California, (vii) Microwave--Narda East headquartered in Hauppauge, New
York (including the NARDA Semiconductor Products business in Lowell,
Massachusetts), (viii) Microwave--Narda West headquartered in Rancho Cordova,
California, (ix) Hycor headquartered in Woburn, Massachusetts, (x) Wideband
Systems headquartered in Salt Lake City, Utah, (xi) Communications Systems
headquartered in Camden, New Jersey, and (xii) the Airport Explosive
Detection Business represented by the Grant from the Federal Aviation
Administration held by Lockheed Martin Specialty Components, Inc.
"Camden CAS 410 Issue" means the assertions raised by the United States
Defense Contract Audit Agency that the Communications Systems Business Unit
overallocated general and administrative expenses during its transition from
a "cost of sales" to a "total cost input" allocation methodology for such
expenses in a manner inconsistent with CAS 410.
"Closing Date" means the date of the Closing.
"Common Stock Subscription Agreements" means the Common Stock
Subscription Agreements dated the Closing Date and entered into by each of
Lockheed Martin and the Purchasers with Newco (in substantially the forms of
Attachment IV to the Agreement), as the same may be amended from time to
time.
"Contemplated Transactions" means the transactions contemplated by the
Transaction Documents.
<PAGE>
"Contracts" means all contracts, agreements, leases (including leases of
real property), licenses, commitments, sales and purchase orders,
intercompany work transfer agreements (with respect to work by or for other
Lockheed Martin businesses) and other instruments of any kind, whether
written or oral, that relate primarily to the Business.
"Damages" means (subject in the case of Damages suffered by Newco to
Newco's fulfillment of its obligations under Section 8.08 of the Agreement)
all demands, claims, actions or causes of action, assessments, losses,
damages, costs, expenses, liabilities, judgments, awards, fines, sanctions,
penalties, charges and amounts paid in settlement, including, without
limitation, reasonable costs, fees and expenses of attorneys, experts,
accountants, appraisers, consultants, witnesses, investigators and any other
agents or representatives of such Person (with such amounts to be determined
net of any resulting tax benefit actually received or realized and net of any
refund or reimbursement of any portion of such amounts actually received or
realized, including, without limitation, reimbursement by way of insurance,
third party indemnification or the inclusion of any portion of such amounts
as a cost under Government Contracts), but specifically excluding (i) any
costs incurred by or allocated to an Indemnified Party with respect to time
spent by employees of the Indemnified Party or any of its Affiliates, (ii)
any lost profits or opportunity costs (except to the extent assessed in
connection with a third-party claim with respect to which the party against
which such damages are assessed is entitled to indemnification hereunder),
exemplary or punitive damages and (iii) the decrease in the value of any
Transferred Asset to the extent that such valuation is based on any use of
such Transferred Asset other than its use as of the Closing Date.
Notwithstanding the foregoing, in respect of any breach of the
representations and warranties set forth in Section B.05 with respect to the
Audited Business Financial Statements, "Damages" shall be limited to (i) the
reasonable costs of defense by Newco of any demands, claims, actions or
causes of action to the extent related to or arising out of allegations that
the Audited Business Financial Statements as included in the offering
document used by Newco in the sale of high yield debt securities to finance
the Contemplated Transactions (and the related exchange offer registration
statement) and (ii) liability of Newco to third parties for violations of the
Securities Act or related blue sky or state securities laws in connection
with the offerings of securities referenced in the foregoing clause (i) (with
such amounts in each case to be determined net of any resulting tax benefit
actually received or realized and net of any refund or reimbursement of any
portion of such amounts actually received or realized, including, without
limitation, reimbursement by way of insurance, third party indemnification or
the inclusion of any portion of such amounts as a cost under Government
Contracts).
"December Statement" means the audited combined statement of net
tangible assets of the Business at December 31, 1996, together with the notes
thereto, as attached in Attachment II to the Agreement.
"Disclosed Financial Support Arrangements" means the Financial Support
Arrangements listed or referred to in Section B.10 of the Disclosure
Schedules.
"Disclosure Schedule" means the Disclosure Schedule dated the date of
this Agreement and acknowledged by the parties hereto relating to the
Agreement.
<PAGE>
"Environmental Claim" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any third
Person alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property
damage, personal injury, fines or penalties) arising out of, relating to,
based on or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Substances at any location, (ii) circum-
stances forming the basis of any violation or alleged violation of any
Environmental Laws, or (iii) otherwise relating to obligations or liabilities
under any Environmental Laws.
"Environmental Laws" means any and all past, present or future federal,
state, local and foreign statutes, laws, regulations, ordinances, judgments,
orders, codes, or injunctions, which (i) imposes liability for or standards
of conduct concerning the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of
Hazardous Substances including, The Resource Conservation and Recovery Act of
1976, as amended, The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, The Superfund Amendment and
Reauthorization Act of 1984, as amended, The Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, to the
extent it relates to the handling of and exposure to hazardous or toxic
materials or similar substances, and any other so-called "Superfund" or
"Superlien" law or (ii) otherwise relates to the protection of human health
or the environment.
"Environmental Liabilities" means all liabilities to the extent arising
in connection with or in any way relating to the Business or Lockheed
Martin's or its Affiliates' use or ownership thereof, whether vested or
unvested, contingent or fixed, actual or potential, which arise under or
relate to Environmental Laws including, without limitation, (i) Remedial
Actions, (ii) personal injury, wrongful death, economic loss or property
damage claims, (iii) claims for natural resource damages, (iv) violations of
law or (v) any other cost, loss or damage with respect thereto.
"Exchange Agreement" means the Exchange Agreement referred to in the
Transfer Agreement.
"Excluded Assets" means:
(i) cash and cash equivalents of Lockheed Martin or any of its
Affiliates, including, without limitation, cash and cash equivalents used as
collateral for letters of credit, deposits with utilities, insurance
companies and other Persons;
(ii) all original books and records that Lockheed Martin or any of
its Affiliates shall be required to retain pursuant to any Applicable Law (in
which case copies of such books and records shall be provided to Newco upon
request), or that contain information relating primarily to any business or
activity of Lockheed Martin or any of its Affiliates not forming a part of
the Business, or any employee of Lockheed Martin or any of its Affiliates
that is not a Transferred Employee;
(iii) tax assets specified as Excluded Assets in Exhibit F;
<PAGE>
(iv) all assets of Lockheed Martin or any of its Affiliates not
held or owned by or used primarily in connection with the Business (including
the Chelmsford, Massachusetts location of Frequency Sources, Inc.), other
than the NY Leases;
(v) all assets of Lockheed Martin or any of its Affiliates (other
than the Business Units) held or used in connection with the provision of
services, or the sale of goods, to the Business;
(vi) all rights of Lockheed Martin under any of the Transaction
Documents and the agreements and instruments delivered to Lockheed Martin by
Newco pursuant to any of the Transaction Documents;
(vii) "Legacy Intellectual Property" identified as such in Section
B.16 of the Disclosure Schedules, including but not limited to income, losses
and rights relating thereto;
(viii) any accounts receivable, notes receivable or similar claims or
rights (whether billed or accrued) of the Business from Lockheed Martin or
any Affiliate of Lockheed Martin other than a Business Unit except for
accounts receivable, notes receivable or similar claims or rights (whether
billed or accrued) relating to materials sold or services rendered by the
Business Units to or for Lockheed Martin or any such Affiliates;
(ix) capital stock or any other securities of any Subsidiaries of
Lockheed Martin;
(x) Intellectual Property not used primarily in the Business, it
being understood and agreed that the only Intellectual Property consisting of
patents and patent applications used primarily in the Business are those
listed on Attachment XV;
(xi) the leasehold interest of the Lockheed Martin Companies in
respect of the Horsham, Pennsylvania property of the Microcom Business Unit;
and
(xii) any Intellectual Property developed by a Business Unit at the
expense of a Lockheed Martin Company (other than a Business Unit) unless such
Intellectual Property may fairly be characterized as an immaterial
improvement, modification or derivative work to or of Intellectual Property
developed by a Business Unit at its own expense, including but not limited to
income, losses and rights relating thereto.
"Excluded Liabilities" means the following obligations and liabilities:
(i) any obligations or liabilities in respect of events occurring
prior to the Closing Date and arising out of (1) any criminal investigations,
grand jury proceedings, or counts in any causes of action specifically
alleging criminal conduct; provided, however, that if such investigations,
grand jury proceedings or counts become civil in nature, at such time they
will no longer constitute Excluded Liabilities pursuant to this provision
or (2) counts or actions alleging civil fraud or intentional misconduct by
the Communications Systems Business Unit (or its predecessors) headquartered
in Camden, New Jersey;
<PAGE>
(ii) all obligations and liabilities of Lockheed Martin or any of
its Affiliates not arising out of the conduct of the Business, except as
otherwise specifically provided in the Transaction Documents;
(iii) to the extent set forth in Exhibit F to the Agreement, any
obligation or liability for any Tax arising from or with respect to the
Transferred Assets or the operations of the Business for the Pre-Closing Tax
Period;
(iv) any liability whether presently in existence or arising after
the date of the Agreement in respect of accounts payable, notes payable
(including intercompany promissory notes and similar financing arrangements)
or similar obligations (whether billed or unbilled) to or allocated to
Lockheed Martin or any Affiliate of Lockheed Martin, except for accounts
payable, notes payable or similar obligations (whether billed or unbilled)
relating to materials sold or services rendered to, or any insurance procured
for, the Business Units by Lockheed Martin or any Affiliate of Lockheed
Martin other than a Business Unit;
(v) any liability whether presently in existence or arising after
the date of the Agreement relating to fees, commissions or expenses owed to
any broker, finder, investment banker, accountant, attorney or other
intermediary or advisor employed by Lockheed Martin or any of its Affiliates
in connection with the Contemplated Transactions;
(vi) any obligation or liability retained by Lockheed Martin
pursuant to Exhibit G;
(vii) all obligations and liabilities related to Excluded Assets;
(viii) all Environmental Liabilities whether arising prior to, on or
after the Closing Date and whether such Environmental Liabilities are
"onsite" or "offsite," (1) relating to or arising out of conditions at or the
operations of the Camden Truck Depot located at 1257 2nd Street, Camden, New
Jersey, or (2) relating to or arising out of conditions at, or the current or
former operations at, any facilities not included in the Transferred Assets
(whether by fee ownership or leasehold interest) (including any predecessors
to such facilities); and
(vi) all obligations and liabilities related to the closing of the
assembly plant formerly operated by the Conic Business Unit in Goodyear,
Arizona.
"Financial Support Arrangements" means any obligations, contingent or
otherwise, of a Person in respect of any indebtedness, obligation or
liability (including assumed indebtedness, obligations or liabilities) of
another Person, including but not limited to remaining obligations or
liabilities associated with indebtedness, obligations or liabilities that are
assigned, transferred or otherwise delegated to another Person, if any,
letters of credit and standby letters of credit (including any related
reimbursement or indemnity agreements), direct or indirect guarantees,
endorsements (except for collection or deposit in the ordinary course of
business), notes co-made or discounted, recourse agreements, take-or-pay
agreements, keep-well agreements, agreements to purchase or repurchase such
indebtedness, obligation or liability or any security therefor or to provide
funds for the payment or discharge thereof, agreements to maintain solvency,
<PAGE>
assets, level of income or other financial condition, agreements to make
payment other than for value received and any other financial accommodations.
"GAAP" means Generally Accepted Accounting Principles as in effect on
the date of the Agreement.
"Government Contract" means any prime contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement, pricing
agreement, letter contract, purchase order, delivery order, change order, Bid
or other arrangement of any kind relating exclusively to the Business between
Lockheed Martin or any of the Affiliated Transferors and (i) the U.S.
Government (acting on its own behalf or on behalf of another country or
international organization), (ii) any prime contractor of the U.S. Government
or (iii) any subcontractor with respect to any contract of a type described
in clauses (i) or (ii) above.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department or branch of any of the foregoing.
"Hazardous Substances" means substances defined as "hazardous
substances," "hazardous materials" or "hazardous waste" in The Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
or The Resource Conservation and Recovery Act of 1976, as amended, those
substances defined as "hazardous wastes" in the regulations adopted and
publications promulgated pursuant to any of said laws, those substances
defined as "toxic substances" in The Toxic Substances Control Act, as
amended, petroleum, its derivatives and petroleum products, and asbestos and
asbestos containing materials.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" means all patents, copyrights, technology, know-
how, processes, trade secrets, inventions, proprietary data, formulae,
research and development data and computer software programs; all trademarks,
trade names, service marks and service names; all registrations,
applications, recordings, licenses and common-law rights relating thereto,
all rights to sue at law or in equity for any infringement or other
impairment thereto, including the right to receive all proceeds and damages
therefrom, and all rights to obtain renewals, continuations, divisions or
other extensions of legal protections pertaining thereto; and all other
United States, state and foreign intellectual property owned by Lockheed
Martin or the Affiliated Transferors on the Closing Date.
"Interim Services Agreement" means the Interim Services Agreement dated
the Closing Date by and among Newco and Lockheed Martin as contemplated by
Section 2.01, as the same may be amended from time to time.
"Inventory" means all items of inventory notwithstanding how classified
in Lockheed Martin's financial records, including all raw materials, work-in-
process and finished goods, together with costs accumulated under all
Contracts in progress.
<PAGE>
"Lehman Confidentiality Agreement" means the letter agreement dated
November 13, 1996, by and between Lockheed Martin and Lehman, as the same has
been or may be amended from time to time.
"License Agreements" means the license agreements dated the Closing Date
by and among Newco and Lockheed Martin as contemplated by Section 9.04, as
the same may be amended from time to time.
"Lien" means, with respect to any asset, any mortgage, lien, claim,
pledge, charge, security interest or other encumbrance of any kind in respect
of such asset.
"Lockheed Martin Companies" means Lockheed Martin and its Subsidiaries.
"Material Adverse Effect" means (i) with respect to the Business, a
material adverse effect on the assets, properties, business, financial
condition or results of operations of the Business taken as a whole, or (ii)
with respect to any other Person, a material adverse effect on the assets,
properties, business, financial condition or results of operations of such
Person and its Subsidiaries taken as a whole.
"Memorandum" means the Memorandum of Understanding dated January 31,
1997, by and among Lockheed Martin and the Purchasers, as the same may be
amended from time to time.
"Net Tangible Assets" means (i) all Transferred Assets of the Business,
(ii) minus all (1) Assumed Liabilities of the Business, (2) goodwill, (3)
intangible assets related to contracts and programs acquired, and (4) any
reserve, liability or asset resulting from or relating to pension benefits,
retirement benefits or other post-employment benefits, (iii) in accordance
with the practices and policies of Lockheed Martin on December 31, 1996 and
employed in the preparation of the December Statement, determined, in each
case, in accordance with the December Statement and Attachment VI.
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"Newco Bylaws" means the Bylaws of Newco as attached in Attachment IX.
"Newco Certificate of Incorporation" means the Certificate of
Incorporation of Newco as attached in Attachment VIII.
"Newco Class A Stock" means the Class A Common Stock, par value $.01 per
share, of Newco.
"Newco Class B Stock" means the Class B Common Stock, par value $.01 per
share, of Newco.
"NY Leases" means the lease by and between Loral Corporation (now known
as Lockheed Martin Tactical Systems, Inc.) and 600 Third Avenue Associates in
respect of the property located at 600 Third Avenue, New York, New York, as
the same may be amended and supplemented from time to time, including the
interests of the Lockheed Martin Companies in any related fixtures,
improvements and personal property located therein.
"Operation and Maintenance Costs" means the reasonable costs (including
routine monitoring and sampling) required to operate and maintain the
<PAGE>
effectiveness of an environmental response action that, on or prior to the
eighth anniversary of the Closing Date, has been constructed or effectuated
and, if required, have been approved (or subsequently are approved as
constructed or effectuated as of the eighth anniversary of the Closing Date)
by the applicable environmental regulatory authority, it being understood
that Operation and Maintenance Costs does not include (i) any capital costs
(other than replacement in kind) relating to any such action, (ii) any claim
for property damage, damages to natural resources or personal injury or
similar claims or damages, whether or not arising out of the operation or
maintenance of such action or otherwise or (iii) any fines or penalties,
whether or not arising out of the operation or maintenance of such action or
otherwise.
"Permitted Liens" means any of the following:
(i) Liens for taxes that (x) are not yet due or delinquent or (y)
are being contested in good faith by appropriate proceedings;
(ii) statutory Liens or landlords' carriers' warehousemen's
mechanic's, suppliers' materialmen's or other like Liens arising in the
ordinary course of business with respect to amounts not yet overdue for a
period of 45 days or amounts being contested in good faith by appropriate
proceedings;
(iii) easements, rights of way, restrictions and other similar
charges or encumbrances on real property interests, that, individually or in
the aggregate, do not materially interfere with the ordinary course of
operation of the Business or the use of any such real property for its
current uses;
(iv) leases or subleases granted to others that do not materially
interfere with the ordinary conduct of the Business;
(v) with respect to real property, title defects or irregularities
that do not in the aggregate materially impair the use of such real property
for its current use;
(vi) Liens in favor of the U.S. Government or any other customer of
the Business arising in the ordinary course of business;
(vii) rights and licenses granted to others in Intellectual
Property;
(viii) with respect to any Real Property Lease where any of the
Lockheed Martin Companies is a lessee, any Lien affecting the interest of the
landlord thereunder;
(ix) Liens, title defects, encumbrances, easements and
restrictions, invalidities of leasehold interests (collectively,
"Encumbrances") that have not had, and could not reasonably be expected to
have, a Material Adverse Effect on the Business; and
(x) Encumbrances disclosed in the Disclosure Schedule or taken
into account in the December Statement.
"Person" means an individual, a corporation, a general partnership, a
limited partnership, a limited liability company, an association, a trust or
<PAGE>
any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Prime Government Contract" means any Government Contract relating
primarily to the Business in connection with which Lockheed Martin or an
Affiliated Transferor is the prime contractor.
"Remedial Action(s)" means the investigation, clean-up or remediation of
contamination or environmental degradation or damage caused by, related to or
arising from the generation, use, handling, treatment, storage,
transportation, disposal, discharge, release, or emission of Hazardous
Substances, including, without limitation, investigations, response, removal
and remedial actions under The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, corrective action under
The Resource Conservation and Recovery Act of 1976, as amended, and clean-up
requirements under similar state Environmental Laws.
"Representatives" means (i) with respect to Lehman, any of the
"Representatives" as defined in the Lehman Confidentiality Agreement, (ii)
with respect to the Individual Purchasers, any of the "Representatives" as
defined in the Memorandum and (iii) with respect to Lockheed Martin or Newco,
each of their respective directors, officers, advisors, attorneys,
accountants, employees or agents.
"Responsible Contracting Officer" means, with respect to any Prime
Government Contract, the Person identified as such with respect thereto in
Section 42.1202(a) of the Federal Acquisition Regulation, Part 42 of the Code
of Federal Regulations.
"Sarasota Asset Step-Up Issue" means the position of the U.S. Government
that the amendment of the provisions of the Federal Acquisition Regulations
relating to the ability of a contractor to include in its overhead the
"stepped up" value of acquired assets shall have retroactive effect and the
related impact on the Advanced Recorders Business Unit of its agreements in
June 1994, April 1995 and January 1997 with the cognizant Administrative
Contracting Officer to authorize the Advanced Recorders Business Unit to
include in its overhead the "stepped up" assets relating to the acquisition
of Advanced Recorders by Loral Corporation in 1989.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholders Agreement" means the Stockholders Agreement dated the
Closing Date by and among Newco, Lockheed Martin and the Purchasers (in
substantially the form of Attachment V to the Agreement), as the same may be
amended from time to time.
"Subsidiary" as it relates to any Person, shall mean with respect to any
Person, any corporation, partnership, joint venture or other legal entity of
which such Person, either directly or through or together with any other
Subsidiary of such Person, owns more than 50% of the voting power in the
election of directors or their equivalents, other than as affected by events
of default.
<PAGE>
"Supply Agreement" means the Supply Agreement dated the Closing Date by
and among Newco and Lockheed Martin as contemplated by Section 2.01, as the
same may be amended from time to time.
"Transaction Documents" means the Agreement, the Transfer Agreement, the
Exchange Agreement, the Common Stock Subscription Agreements, the
Stockholders Agreement, the Interim Services Agreement, the Supply Agreement,
the License Agreements, the Newco Certificate of Incorporation, the Newco
Bylaws and any exhibits or attachments to any of the foregoing, as the same
may be amended from time to time.
"Transfer Agreement" means the Transfer Agreement dated March 28, 1997,
by and between Lockheed Martin and Newco (a copy of which is attached as
Attachment III to the Agreement), as the same may be amended from time to
time.
"Transferred Assets" means all of the assets, properties, rights,
licenses, permits, contracts, causes of action and business of every kind and
description as the same shall exist on the Closing Date, other than the
Excluded Assets, wherever located, real, personal or mixed, tangible or
intangible, owned by, leased by or in the possession of Lockheed Martin or
any Affiliated Transferor, whether or not reflected in the books and records
thereof, and held or used primarily in the conduct of the Business as the
same shall exist on the Closing Date, including but not limited to all assets
reflected in the December Statement and not disposed of in the ordinary
course of business or as permitted or contemplated by the Agreement, and all
assets of the Business acquired by Lockheed Martin or any Affiliated
Transferor, on or prior to the Closing Date and not disposed of in the
ordinary course of business or as permitted or contemplated by the Agreement
and including, without limitation, except as otherwise specified herein, all
direct or indirect right, title and interest of Lockheed Martin or any
Affiliated Transferor in, to and under:
(i) all real property and leases (including, without limitation,
the NY Leases), whether capitalized or operating, of, and other interests in,
real property, owned by Lockheed Martin or any of its Affiliates that are
used primarily in the Business, in each case together with all buildings,
fixtures, easements, rights of way, and improvements thereon and
appurtenances thereto;
(ii) all personal property and interests therein, including
machinery, equipment, furniture, office equipment, communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and other tangible
property (and interests in any of the foregoing) owned by Lockheed Martin or
any of its Affiliates that are used primarily in connection with the
Business:
(iii) all costs accumulated for all Contracts in progress, raw
materials, work-in-process, finished goods, supplies and other inventories
that are owned by Lockheed Martin or any of its Affiliates and held for sale,
use or consumption primarily in the Business;
(iv) all Contracts;
(v) all Bids (with any Contracts (including, without limitation,
Government Contracts) awarded to Lockheed Martin or any of its Affiliates on
or before the Closing Date in respect of such Bids to be deemed Contracts);
<PAGE>
(vi) all accounts, accounts receivable and notes receivable whether
or not billed, accrued or otherwise recognized in the December Statement or
taken into account in the determination of the Final Net Tangible Asset
Amount, together with any unpaid interest or fees accrued thereon or other
amounts due with respect thereto, of Lockheed Martin or any of its Affiliates
that relate primarily to the Business, and any security or collateral for any
of the foregoing;
(vii) all expenses that have been prepaid by Lockheed Martin or any
of its Affiliates to the extent relating to the operation of the Business,
including but not limited to ad valorem taxes, lease and rental payments;
(viii) all of Lockheed Martin's or any of its Affiliates' rights,
claims, credits, causes of action or rights of set-off against third parties
relating primarily to the Business or the Transferred Assets, including,
without limitation, unliquidated rights under manufacturers' and vendors'
warranties;
(ix) all Intellectual Property (other than Intellectual Property
constituting an Excluded Asset) used primarily in the Business, including the
goodwill of the Business symbolized thereby (including, without limitation,
the rights to the name "Fairchild" when used by or in connection with the
Advanced Recorders Business Unit and the names "Narda," "Conic," and
"Randtron," but excluding "Lockheed Martin," "Loral," "Lockheed" and "Martin
Marietta" and any derivatives thereof together with any logos, trade dress or
other intellectual property rights relating thereto);
(x) all transferable franchises, licenses, permits or other
governmental authorizations owned by, or granted to, or held or used by,
Lockheed Martin or any of its Affiliates and primarily related to the
Business;
(xi) except to the extent Lockheed Martin or any of its Affiliates
is required to retain the originals pursuant to any Applicable Law (in which
case copies will be provided to Newco upon request), all business books,
records, files and papers, whether in hard copy or computer format, of
Lockheed Martin or any of its Affiliates used primarily in the Business,
including, without limitation, bank account records, books of account,
invoices, engineering information, sales and promotional literature, manuals
and data, sales and purchase correspondence, lists of present and former
suppliers, lists of present and former customers, personnel and employment
records of present or former employees, documentation developed or used for
accounting, marketing, engineering, manufacturing, or any other purpose
relating to the conduct of the Business at any time prior to the closing;
(xii) the right to represent to third parties that Newco is the
successor to the Business;
(xiii) all insurance proceeds, net of any retrospective premiums,
deductibles, retention or similar amounts, arising out of or related to
damage, destruction or loss of any property or asset of or used primarily in
connection with the Business to the extent of any damage or destruction that
remains unrepaired, or to the extent any property or asset remains unreplaced
at the Closing Date;
(xiv) any tax assets specified to be Transferred Assets in Exhibit
F; and
<PAGE>
(xv) all of the Lockheed Martin Companies' right, title and
interest in the real property located at 1355 Bluegrass Lakes Parkway,
Alpharetta, Georgia.
"U.S. Government" means the United States Government and any agencies,
instrumentalities and departments thereof.
(b) "To the knowledge," "known by" or "known" (and any similar phrase) means
(i) with respect to Lockheed Martin, to the actual knowledge of any of the
Senior Vice Presidents or higher ranking officers of Lockheed Martin, or the
Vice President, Financial Strategies of Lockheed Martin, or the President,
Chief Financial Officer and General Counsel of the Lockheed Martin Operating
Sector to which each of the Business Units reports, and shall be deemed to
include a representation that a reasonable investigation or inquiry of the
subject matter thereof has been conducted by or on behalf of the foregoing
specified Persons, which investigation shall include inquiries of the
President and the Chief Financial Officer of each of the Business Units, and
(ii) with respect to the Individual Purchasers, to the actual knowledge of
either of the Individual Purchasers as of the date the applicable
representation or warranty is made (by Lockheed Martin, in the case of
representations in Exhibit B limited by reference to the knowledge of the
Individual Purchasers, or by the Individual Purchasers, in the case of
representations in Exhibit D), it being understood that if there is any
dispute as to whether an Individual Purchaser had actual knowledge of any
fact, event or circumstance and Lockheed Martin seeks to assert such
knowledge as a defense to any claim under any of the Transaction Documents,
Lockheed Martin shall have the burden of proof in connection with any such
determination. Notwithstanding the foregoing, the knowledge of Lockheed
Martin at any particular time shall not include knowledge of any matters
actually known by either of the Individual Purchasers at such time if such
matters are not also actually known by one or more of the other individuals
specified in clause (i) above (whether by disclosure to them by the
Individual Purchasers or otherwise).
(c) Each of the following terms is defined in the Section set forth opposite
such term:
Term Section
Accrued Liability . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Allocation Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . F.01
Alternative Transaction Proposals . . . . . . . . . . . . . . . . . 7.04
Assumed Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Basis Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . F.01
Benefit Arrangement . . . . . . . . . . . . . . . . . . . . . . . . G.01
Camden SERPs . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Camden Transferee . . . . . . . . . . . . . . . . . . . . . . . . . G.01
Camden Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Cash Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F.01
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F.01
Controlled Group . . . . . . . . . . . . . . . . . . . . . . . . . B.21
Defending Party . . . . . . . . . . . . . . . . . . . . . . . . . 13.03
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
Employee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . G.01
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . A
<PAGE>
Environmental Insurance Claims . . . . . . . . . . . . . . . . . . 9.07
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.01
Estimated Final Net Tangible Asset Amount . . . . . . . . . . . . . 2.03
Exchange Consideration . . . . . . . . . . . . . . . . . . . . . . 2.02
Exchange Consideration Schedule . . . . . . . . . . . . . . . . . . F.05
Federal Systems Plan . . . . . . . . . . . . . . . . . . . . . . . G.05
Final Determination . . . . . . . . . . . . . . . . . . . . . . . . F.01
Final Net Tangible Asset Amount . . . . . . . . . . . . . . . . . . 2.03
Former GE Employees . . . . . . . . . . . . . . . . . . . . . . . . G.07
GE Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . G.07
GE Reimbursement Obligations . . . . . . . . . . . . . . . . . . . G.07
Government Bid . . . . . . . . . . . . . . . . . . . . . . . . . . B.15
Government Conditions . . . . . . . . . . . . . . . . . . . . . . . G.05
Hycor Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . F.01
Indemnified Claim . . . . . . . . . . . . . . . . . . . . . . . . 13.03
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . 13.03
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . 13.03
Individual Purchaser . . . . . . . . . . . . . . . . . . . . . Preamble
Initial Transfer Amount . . . . . . . . . . . . . . . . . . . . . . G.05
Initial Transfer Date . . . . . . . . . . . . . . . . . . . . . . . G.05
Insurance Liabilities . . . . . . . . . . . . . . . . . . . . . . . 8.03
Lanza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
LaPenta . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Leased Real Property . . . . . . . . . . . . . . . . . . . . . . . B.07
Lehman . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
LMC SERPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
LMTS SERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
LMTS Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Lockheed Martin . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Lockheed Martin Conditions . . . . . . . . . . . . . . . . . . . . G.05
Lockheed Martin Defined Contribution Plans . . . . . . . . . . . . G.06
Lockheed Martin Pension Plans . . . . . . . . . . . . . . . . . . . G.05
Lockheed Martin Savings Plans . . . . . . . . . . . . . . . . . . . G.06
Lockheed Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Long Range Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
Narda Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Newco Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Newco's Savings Plans . . . . . . . . . . . . . . . . . . . . . . . G.06
Newco SERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Newco Spinoff Plans . . . . . . . . . . . . . . . . . . . . . . . . G.05
Novation Agreement . . . . . . . . . . . . . . . . . . . . . . . . 7.08
Owned Real Property . . . . . . . . . . . . . . . . . . . . . . . . B.07
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B.21
Post-Closing Tax Period . . . . . . . . . . . . . . . . . . . . . . F.01
Pre-Closing Tax Period . . . . . . . . . . . . . . . . . . . . . . F.01
Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . A
Program Agreements . . . . . . . . . . . . . . . . . . . . . . . . G.08
Proposed Final Net Tangible Asset Amount . . . . . . . . . . . . . 2.03
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . B.07
Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . B.07
Referee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.03
Release Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.03
Remaining Recovery . . . . . . . . . . . . . . . . . . . . . . . . 9.07
Section 351 Transfer . . . . . . . . . . . . . . . . . . . . . . . F.01
<PAGE>
Section 4044 Amount . . . . . . . . . . . . . . . . . . . . . . . . G.05
SERP Liability . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Spinoff Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . G.08
Supplementary Plan . . . . . . . . . . . . . . . . . . . . . . . . G.05
Surviving Representation and Covenant . . . . . . . . . . . . . . 13.01
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F.01
Tax Basis Shortfall . . . . . . . . . . . . . . . . . . . . . . . . F.01
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . 13.03
Transferred Beneficiary . . . . . . . . . . . . . . . . . . . . . . G.01
Transferred Benefit Plans . . . . . . . . . . . . . . . . . . . . . G.10
Transferred Employee . . . . . . . . . . . . . . . . . . . . . . . G.01
Transferred Savings Plans . . . . . . . . . . . . . . . . . . . . . G.06
True-Up Amount . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
True-Up Date . . . . . . . . . . . . . . . . . . . . . . . . . . . G.05
WARN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G.02
<PAGE>
EXHIBIT B
REPRESENTATIONS AND WARRANTIES OF LOCKHEED MARTIN
Lockheed Martin hereby represents and warrants prior to but not after
the Closing to the Purchasers, and as of and after the Closing to Newco,
that:
B.01. Corporate Existence and Power. Each of Lockheed Martin and
each Affiliated Transferor is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its
incorporation and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on the Business as
now conducted, except where the failure to have such licenses,
authorizations, consents and approvals has not had, and could not reasonably
be expected to have, a Material Adverse Effect on the Business. Each of
Lockheed Martin and each Affiliated Transferor, as the case may be, is duly
qualified to do business as a foreign corporation in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities make such qualification necessary to carry on the Business as now
conducted, except where the failure to be so qualified has not had, and could
not reasonably be expected to have, a Material Adverse Effect on the
Business.
B.02. Corporate Authorization. The execution, delivery and
performance by each of Lockheed Martin and each Affiliated Transferor of each
of the Transaction Documents to which it is a party and the consummation by
Lockheed Martin and each Affiliated Transferor of the Contemplated
Transactions are within its corporate powers and have been duly authorized by
all necessary corporate action on its part. Each of the Transaction
Documents to which it is a party constitutes a legal, valid and binding
agreement of Lockheed Martin and each Affiliated Transferor enforceable
against it in accordance with its terms (i) except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers and (ii) subject
to the limitations imposed by general equitable principles (regardless of
whether such enforceability is considered in a proceeding at law or in
equity).
B.03. Governmental Authorization.
(a) The execution, delivery and performance by Lockheed Martin and
each Affiliated Transferor of the Transaction Documents to which it is a
party require no action by or in respect of, or consent or approval of, or
filing with, any Governmental Authority other than:
(i) compliance with any applicable requirements of the HSR
Act;
(ii) compliance with any applicable requirements of the New
Jersey Industrial Site Recovery Act;
<PAGE>
(iii) the facilities clearance requirements of the Defense
Investigative Service of the United States Department of Defense
("DIS"), as set forth in the DIS Industrial Security Regulation and the
DIS Industrial Security Manual, as each may be amended from time to
time;
(iv) the novation of the Government Contracts as contemplated
by Section 7.08 herein;
(v) any actions, consents, approvals or filings set forth in
Section B.03 of the Disclosure Schedules or otherwise expressly referred
to in this Agreement; and
(vi) such other consents, approvals, authorizations, permits
and filings the failure to obtain or make would not have, in the
aggregate, a Material Adverse Effect on the Business.
(b) To the knowledge of Lockheed Martin, there are no facts
relating to the identity or circumstances of Lockheed Martin or any of its
Affiliates that would prevent or materially delay obtaining any of the
consents referred to in Section B.03(a).
B.04. Non-Contravention. Except as set forth in Section B.04 of the
Disclosure Schedules or known to the Individual Purchasers (in the case of
clauses (i)(B) and (i)(C) below), the execution, delivery and performance by
Lockheed Martin of the Transaction Documents do not and will not (i)(A)
contravene or conflict with the charter or bylaws of Lockheed Martin or any
Affiliated Transferor, (B) assuming compliance with the matters referred to
in Section B.03, contravene or conflict with or constitute a violation of any
provisions of any Applicable Law, regulation, judgment, injunction, order,
writ or decree binding upon Lockheed Martin or any Affiliated Transferor that
is applicable to the Business; (C) assuming compliance with the matters
referred to in Section B.03, constitute a default under or give rise to any
right of termination, cancellation or acceleration of, or to a loss of any
benefit relating primarily to the Business to which Lockheed Martin or any
Affiliated Transferor is entitled under, any agreement, Contract or other
instrument binding upon Lockheed Martin or any Affiliated Transferor and
relating primarily to the Business or by which any of the Transferred Assets
is or may be bound or any license, franchise, permit or similar authorization
held by Lockheed Martin or any Affiliated Transferor relating primarily to
the Business except, in the case of clauses (B) and (C), for any such
contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that could not reasonably be expected to have a Material
Adverse Effect on the Business or (ii) result in the creation or imposition
of any Lien on any transferred Asset, other than Permitted Liens and other
than such Liens the creation or imposition of which could not reasonably be
expected to have a Material Adverse Effect on the Business.
B.05. Financial Statements.
(a) The December Statement presents fairly, in all material
respects, the Net Tangible Assets of the Business (other than the Airport
Explosive Detection Business) as of December 31, 1996, in conformity with
GAAP (except as set forth in the notes thereto or in Attachment VI applied on
a basis consistent in all material respects with the manner in which the
Business reported as of December 31, 1996 its financial position for
inclusion in the financial statements of Lockheed Martin.
<PAGE>
(b) The Audited Business Financial Statements have been prepared
based upon the books and records of Lockheed Martin and the Affiliated
Transferors relating to the Business and present fairly the financial
condition, results of operations and cash flows of the Business in conformity
with GAAP (except as set forth in the notes thereto) for the periods and as
of the dates included therein.
B.06. Absence of Certain Changes. Except for matters that would be
permitted (without consent of either of the Individual Purchasers) in
accordance with Section 7.01 if they occurred after the date of this
Agreement, as set forth in Section B.06 of the Disclosure Schedules and
except as known to the Individual Purchasers, from December 31, 1996 to the
date of this Agreement, there has not been any material adverse change in the
business, financial condition or results of operations of the Business and
there has not been:
(a) any event, occurrence, development or state of circumstances
or facts that has had a Material Adverse Effect on the Business, other than
those resulting from changes, whether actual or prospective, in general
conditions applicable to the industries in which the Business is involved or
general economic conditions;
(b) any damage, destruction or other casualty loss affecting the
Business or any assets that would constitute Transferred Assets if owned,
held or used by Lockheed Martin or any of the Affiliated Transferors on the
Closing Date that has had a Material Adverse Effect on the Business;
(c) any transaction or commitment made, or any contract or
agreement entered into, by Lockheed Martin or any Affiliated Transferor
relating primarily to the Business or any assets that would constitute
Transferred Assets if owned, held or used by Lockheed Martin or any of the
Affiliated Transferors on the Closing Date (including the acquisition or
disposition of any assets) or any termination or amendment by Lockheed Martin
or any Affiliated Transferor of any contract or other right relating
primarily to the Business, in either case, material to the Business taken as
a whole, other than transactions and commitments in the ordinary course of
business and those contemplated by this Agreement;
(d) any sale or other disposition of more than an aggregate of
$250,000 of assets (other than Inventory or any sale made in the ordinary
course of business) that would constitute Transferred Assets if owned, held
or used by any of the Lockheed Martin companies on the Closing Date;
(e) any increase in the compensation of any current employee of
any of the Business Units at a level of vice president or above, other than
nondiscretionary increases pursuant to Employee Plans or Benefit Arrangements
disclosed in Section B.21 of the Disclosure Schedules or referenced in
Exhibit G; and
(f) any cancellation, compromise, waiver or release by Lockheed
Martin of any claim or right (or a series of related rights and claims)
related to the Business, other than cancellations, compromises, waivers or
releases in the ordinary course of business.
<PAGE>
B.07. Sufficiency of and Title to the Transferred Assets.
(a) The Transferred Assets, together with the services to be
provided to Newco pursuant to the Interim Services Agreement and the
Intellectual Property to be licensed to Newco pursuant to the License
Agreements, constitute, and on the Closing Date will constitute, all of the
assets and services that are necessary to permit the operation of the
Business in substantially the same manner as such operations have heretofore
been conducted.
(b) Upon consummation of the Contemplated Transactions, Newco will
have acquired good and marketable title in and to, or a valid leasehold
interest in, each of the Transferred Assets that are necessary to permit the
operation of the Business in substantially the same manner as operations have
heretofore been conducted, free and clear of all Liens, except for Permitted
Liens.
(c) Section B.07 of the Disclosure Schedules includes a true and
complete list of all real property owned by the Lockheed Martin Companies (or
property which the Lockheed Martin Companies have a right to acquire in
connection with the operation of the Business) which is included in the
Transferred Assets (collectively, the "Owned Real Property"; the Owned Real
Property and the Leased Real Property, collectively the "Real Property").
Section B.07(c) of the Disclosure Schedules specifies (i) the address of each
parcel of Owned Real Property and (ii) the owner of such Owned Real Property.
(d) Section B.07 of the Disclosure Schedules includes a true and
complete list of all agreements (together with any amendments thereof
collectively, the "Real Property Leases") pursuant to which the Lockheed
Martin Companies lease, sublease or otherwise occupy (whether as landlord,
tenant, subtenant or other occupancy arrangement) any real property used in
the Business (collectively, the "Leased Real Property"). Section B.07 of the
Disclosure Schedules specifies (i) the address of each parcel of Leased Real
Property and (ii) the owner of the leasehold, subleasehold or occupancy
interest for each Leased Real Property.
B.08. No Undisclosed Liabilities. To the knowledge of Lockheed
Martin, there are no liabilities of Lockheed Martin (or any Affiliated
Transferor) relating to the Business that constitute Assumed Liabilities of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than:
(a) liabilities disclosed or provided for in the December
Statement and liabilities for matters taken into account in the determination
of the Final Net Tangible Asset Amount;
(b) liabilities (i) disclosed in Section B.08 of the Disclosure
Schedules, (ii) known to the Individual Purchasers, (iii) related to any
Contract disclosed in the Disclosure Schedules or (iv) related to any
Employee Plan or Benefit Arrangements identified in Exhibit G or disclosed in
Section B.08 of the Disclosure Schedules;
(c) liabilities incurred in the ordinary course of business since
December 31, 1996;
(d) liabilities not required to be accrued for or reserved against
in accordance with GAAP as of December 31, 1996; and
<PAGE>
(e) with respect to the bring down of this representation and
warranty as of the Closing Date, liabilities not required to be accrued for
or reserved against in accordance with GAAP as of the Closing Date.
B.09. Litigation; Contract-Related Matters.
(a) Except as set forth in Section B.09 of the Disclosure
Schedules or reserved against or referred to in the December Statement, there
is no action, suit, investigation or proceeding (except for actions, suits or
proceedings referred to in Section B.09(b)) pending against, or to the
knowledge of Lockheed Martin, threatened against or affecting, the Business
or any Transferred Asset before any court or arbitrator or any governmental
body, agency, official or authority which could reasonably be expected to
have a Material Adverse Effect on the Business.
(b) Except as set forth in Section B.09 of the Disclosure
Schedules or reserved against or referred to in the December Statement or
known to the Individual Purchasers, there is no action, suit, investigation
or proceeding relating to any Government Contract or Bid, or relating to any
proposed suspension or debarment of the Business or any of its employees,
pending against, or to the knowledge of Lockheed Martin, threatened against
or affecting the Business or any Transferred Asset before any court or
arbitrator or any governmental body, agency, official or authority which
could reasonably be expected to have a Material Adverse Effect on the
Business.
(c) None of the Lockheed Martin Companies is, in connection with
the Business, subject to any unsatisfied monetary judgment, order or decree
that would materially affect Newco's ability to conduct the business and
operations of the Business immediately after Closing as the Lockheed Martin
Companies currently conduct them.
B.10. Material Contracts and Bids; Backlog.
(a) Except as set forth in Section B.10 of the Disclosure
Schedules, to the knowledge of Lockheed Martin, as of the date of this
Agreement, the Lockheed Martin Companies, with respect to the Business, are
not parties to or otherwise bound by or subject to:
(i) any written employment, severance, consulting or sales
representative Contract which contains an obligation to pay more than
$100,000 per year and constitutes an Assumed Liability;
(ii) any Contract containing any covenant limiting the freedom
of the Lockheed Martin Companies, with respect of the Business or the
operations of any of the Business Units, to engage in any line of
business or compete with any Person in any geographic area in any
material respect if such Contract will be binding on Newco after the
Closing;
(iii) any Contract in effect on the date of this Agreement
relating to the disposition or acquisition of the assets of, or any
interest in, any business enterprise which relates to the Business other
than in the ordinary course of business;
(iv) any Financial Support Arrangements;
<PAGE>
(v) any indebtedness for borrowed money of the Business that
would constitute an Assumed Liability if in existence on the Closing
Date, other than indebtedness or borrowed money totaling not more than
$100,000 in the aggregate; or
(vi) any offset agreement entered into in connection with an
international sales transaction and relating to any Contract that
imposes on the Business an obligation to perform that will continue in
effect on or after the Closing Date.
Notwithstanding the foregoing or any other provisions of this Agreement, the
failure of Lockheed Martin to include any Financial Support Arrangements in
Section B.10 of the Disclosure Schedules shall not constitute a breach of a
representation or warranty hereunder and shall have no effect on the rights,
duties and obligations of the parties under this Agreement, except that the
obligations of Newco under Section 8.03 in respect of Financial Support
Arrangements shall not include an obligation to seek the release of or comply
with Section 8.03(g) with respect to any Financial Support Arrangements in
existence on the date of this Agreement that are not disclosed in Section
B.10 of the Disclosure Schedules.
(b) Except as disclosed in Section B.10 of the Disclosure
Schedules, or known to the Individual Purchasers, to the knowledge of
Lockheed Martin all cost or pricing data submitted or certified in connection
with Bids and Government Contracts were when filed current, accurate and
complete in accordance with the Truth in Negotiation Act, as amended, and the
rules and regulations thereunder, except any failures to be current, accurate
and complete which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Business.
(c) Except as disclosed in Section B.10 of the Disclosure
Schedules, or known to the Individual Purchasers, each Government Contract
and each other material Contract relating to the Business or any of the
Transferred Assets is a legal, valid and binding obligation of Lockheed
Martin (or the applicable Affiliated Transferor) enforceable against Lockheed
Martin (or the applicable Affiliated Transferor) in accordance with its terms
(except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, including the effect of statutory and
other laws regarding fraudulent conveyances and preferential transfers, and
subject to the limitations imposed by general equitable principles regardless
of whether such enforceability is considered in a proceeding at law or in
equity), and Lockheed Martin (or the applicable Affiliated Transferor) is not
in default and has not failed to perform any obligation thereunder, and, to
the knowledge of Lockheed Martin, there does not exist any event, condition
or omission which would constitute a breach or default (whether by lapse of
time or notice or both) by any other Person, except for any such default,
failure or breach as has not had, and could not reasonably be expected to
have, a Material Adverse Effect on the Business.
B.11. Licenses and Permits. To the knowledge of Lockheed Martin,
Lockheed Martin (or the appropriate Affiliated Transferor) has all licenses,
franchises, permits and other similar authorizations affecting, or relating
in any way to, the Business required by law to be obtained by Lockheed Martin
(or the appropriate Affiliated Transferor) to permit Lockheed Martin to
conduct the Business in substantially the same manner as the Business has
heretofore been conducted.
<PAGE>
B.12. Finders' Fees. Except for Bear, Stearns & Co. Inc., whose
fees will be paid by Lockheed Martin, there is no investment banker, broker,
finder or other intermediary that has been retained by or is authorized to
act on behalf of Lockheed Martin who might be entitled to any fee or
commission from Lockheed Martin, Newco or the Purchasers or any of their
Affiliates upon consummation of the contemplated Transactions.
B.13. Environmental Compliance. Except as disclosed in Section B.13
of the Disclosure Schedules or known to the Individual Purchasers, and except
as reserved against or referred to in the December Statement, to the
knowledge of Lockheed Martin the Business is and has been in substantial
compliance with all applicable Environmental Laws, and has obtained all
material permits, licenses and other authorizations that are required under
applicable Environmental Laws. Except as set forth in Section B.13 of the
Disclosure Schedules or known to the Individual Purchasers, and except as
reserved against or referred to in the December Statement, to the knowledge
of Lockheed Martin (i) the Business is and has been in material compliance
with the terms and conditions under which the permits, licenses and other
authorizations referenced in the preceding sentence were issued or granted,
(ii) the Lockheed Martin Companies hold all permits required by Environmental
Laws that are appropriate to conduct the Business as presently conducted in
all material respects and to operate the Transferred Assets in all material
respects as they are presently operated; (iii) no suspension, cancellation or
termination of any of permit referred to in clause (ii) is pending or to
Lockheed Martin's knowledge threatened; (iv) Lockheed Martin has not received
written notice of any material Environmental Claim relating to or affecting
the Business or the Transferred Assets, and to the knowledge of Lockheed
Martin, there is no such threatened Environmental Claim; (v) Lockheed Martin,
in connection with the Business or the Transferred Assets, has not entered
into, agreed in writing to, or is subject to any judgment, decree, order or
other similar requirement of any Governmental Authority under any
Environmental Laws.
B.14. Compliance with Laws. Except as set forth in Section B.14 of
the Disclosure Schedules and, except for violations or infringements of
Environmental Laws or orders, writs, injunctions or decrees relating to
Contracts or Bids and except for violations or infringements that have not
had, and may not reasonably be expected to have, a Material Adverse Effect on
the Business, to the knowledge of Lockheed Martin the operation of the
Business and condition of the Transferred Assets have not violated or
infringed, and do not violate or infringe, in any respect any Applicable Law
or any order, writ, injunction or decree of any Governmental Authority.
B.15. Government Contracts.
(a) Except as set forth in Section B.15 of the Disclosure
Schedules or known to the Individual Purchasers, and except for inaccuracies
in the following as have not had, and may not reasonably be expected to have
a Material Adverse Effect on the Business, with respect to each fixed price
Government Contract with a backlog value in excess of $5,000,000, each "cost
plus" Government Contract with a backlog value in excess of $7,500,000 and
each Bid that, if accepted, would result in such a Government Contract (a
"Government Bid") to which Lockheed Martin or any Affiliated Transferor is a
party with respect to the Business, (i) to the knowledge of Lockheed Martin,
Lockheed Martin (or the applicable Affiliated Transferor) has complied with
all terms and conditions of such Government Contract or Government Bid,
including all clauses, provisions and requirements incorporated expressly, by
<PAGE>
reference or by operation of law therein; (ii) to the knowledge of Lockheed
Martin, Lockheed Martin (or the applicable Affiliated Transferor) has
complied with all requirements of all Applicable Laws or agreements
pertaining to such Government Contract or Government Bid; (iii) to the
knowledge of Lockheed Martin, all representations and certifications
executed, acknowledged or set forth in or pertaining to such Government
Contract or Government Bid were complete and correct as of their effective
date, and Lockheed Martin (or the applicable Affiliated Transferor) has
complied in all respects with all such representations and certifications;
(iv) neither the U.S. Government nor any prime contractor, subcontractor or
other Person has notified Lockheed Martin (or the applicable Affiliated
Transferor) that Lockheed Martin (or the applicable Affiliated Transferor)
has breached or violated any Applicable Law, certification, representation,
clause provision or requirement pertaining to such Government Contract or
Government Bid; (v) no termination for convenience, termination for default,
cure notice or show cause notice is currently in effect pertaining to such
Government Contract or Government Bid; (vi) to the knowledge of Lockheed
Martin, no cost incurred by Lockheed Martin (or the applicable Affiliated
Transferor) pertaining to such Government Contract or Government Bid has been
questioned or challenged, is the subject of any investigation or has been (or
could reasonably be expected to be) disallowed by the U.S. Government; (vii)
to the knowledge of Lockheed Martin, no money due to Lockheed Martin (or the
applicable Affiliated Transferor) pertaining to such Government Contract or
Government Bid has been (or has attempted to be) withheld or set off and
Lockheed Martin (or the applicable Affiliated Transferor) is entitled to all
progress payments with respect thereto and (viii) each Government Contract is
valid and subsisting.
(b) Except as set forth in Section B.15 of the Disclosure
Schedules or known to the Individual Purchasers, and except as has not had,
and may not reasonably be expected to have, a Material Adverse Effect on the
Business, with respect to the Business; (i) to the knowledge of Lockheed
Martin, none of its respective employees, consultants or agents is (or during
the last five years has been) under administrative, civil or criminal
investigation, indictment or information by any Governmental Authority, or
any audit or investigation by Lockheed Martin with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract or Government Bid; and (ii) during the last five years,
Lockheed Martin has not conducted or initiated any internal investigation or,
to Lockheed Martin's knowledge, had reason to conduct, initiate or report any
internal investigation, or made a voluntary disclosure to the U.S.
Government, with respect to any alleged irregularity, misstatement or
omission arising under or relating to a Government Contract or Government
Bid. Except as set forth in Section B.15 of the Disclosure Schedules or
known to the Individual Purchasers, Lockheed Martin has no knowledge of any
irregularity, misstatement or omission arising under or relating to any
Government Contract or Government Bid that has led or could reasonably be
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.
(c) Except as set forth in Section B.15 of the Disclosure
Schedules or known to the Individual Purchasers, and except as has not had,
and may not reasonably be expected to have, a Material Adverse Effect on the
Business, with respect to the Business, to the knowledge of Lockheed Martin,
there exist (i) no outstanding claims against Lockheed Martin or any
<PAGE>
Affiliated Transferor, either by the U.S. Government or by any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract or Bid referred to in Section B.15(a) and
(ii) no disputes between Lockheed Martin or any Affiliated Transferor and the
U.S. Government under the Contract Disputes Act or any other Federal statute
or between Lockheed Martin or any Affiliated Transferor and any prime
contractor, subcontractor or vendor arising under or relating to any such
Government Contract or Government Bid. Except as set forth in Section B.15
of the Disclosure Schedules or known to the Individual Purchasers, Lockheed
Martin has no knowledge of any fact that could reasonably be expected to
result in a claim or a dispute under clause (i) or (ii) of the immediately
preceding sentence.
(d) Except as set forth in Section B.15 of the Disclosure
Schedules or known to the Individual Purchasers, neither Lockheed Martin (or
any Affiliated Transferor) (with respect to the Business), nor to Lockheed
Martin's knowledge, any of its employees, consultants or agents is (or during
the last five years has been) suspended or debarred from doing business with
the U.S. Government or is (or during such period was) the subject of a
finding of nonresponsibility or ineligibility for U.S. Government
contracting. Except as set forth in Section B.15 of the Disclosure Schedules
or known to the Individual Purchasers, Lockheed Martin does not know of any
facts or circumstances that would warrant the suspension or debarment, or the
finding of nonresponsibility or ineligibility, on the part of Lockheed Martin
(or any Affiliated Transferor) or any of Lockheed Martin's (or any Affiliated
Transferor's) employees, consultants or agents. Except as set forth in
Section B.15 of the Disclosure Schedules or known to the Individual
Purchasers, and except as has not had, and may not reasonably be expected to
have, a Material Adverse Effect on the Business, to Lockheed Martin's
knowledge, the Lockheed Martin Companies have complied with all requirements
of all material laws pertaining to all Government Contracts and Bids.
(e) Except as set forth in Section B.15 of the Disclosure
Schedules or known to the Individual Purchasers, and except for any of the
following as has not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Business, to the knowledge of Lockheed Martin,
all test and inspection results Lockheed Martin (or any Affiliated
Transferor) has provided to the U.S. Government pursuant to any Government
Contract referred to in Section B.15(a) or to any other Person pursuant to
any such Government Contract or as a part of the delivery to the U.S.
Government pursuant to any such Government Contract of any article designed,
engineered or manufactured in the Business were complete and correct as of
the date so provided. Except as set forth in Section B.15 of the Disclosure
Schedules or known to the Individual Purchasers, and except for any of the
following as has not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Business, to the knowledge of Lockheed Martin,
Lockheed Martin (or an Affiliated Transferor) has provided all test and
inspection results to the U.S. Government pursuant to any such Government
Contract as required by Applicable Law and the terms of the applicable
Government Contracts.
(f) Except as set forth in Section B.15 of the Disclosure
Schedules or known to the Individual Purchasers, and except for any of the
following as has not had, and may not reasonably be expected to have, a
Material Adverse Effect on the Business, to the knowledge of Lockheed Martin,
no statement, representation or warranty made by Lockheed Martin (or an
Affiliated Transferor) in any Government Contract, any exhibit thereto or in
<PAGE>
any certificate, statement, list, schedule or other document submitted or
furnished to the U.S. Government in connection with any Government Contract
or Government Bid (i) contained on the date so furnished or submitted any
untrue statement of a material fact, or failed to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading or (ii) contains on the
date hereof any untrue statement of a material fact, or fails to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading, except in the case
of both clauses (i) and (ii) any untrue statement or failure to state a
material fact that would not result in any material liability to the Business
as a result of such untrue statement or failure to state a material fact.
B.16. Intellectual Property. With respect to Intellectual Property
that constitute Transferred Assets, except as set forth in Section B.16 of
the Disclosure Schedules, to the knowledge of Lockheed Martin:
(a) Lockheed Martin (or an Affiliated Transferor) owns, free and
clear of all Liens other than Permitted Liens, and subject to any licenses
granted by Lockheed Martin and its Affiliates prior to the Closing Date, all
right, title and interest in such Intellectual Property. To the knowledge of
Lockheed Martin, the use of such Intellectual Property in connection with the
operation of the Business as heretofore conducted does not conflict with,
infringe upon or violate the intellectual property rights of any other
Persons;
(b) Lockheed Martin (or an Affiliated Transferor) has the right to
use all Intellectual Property used by the Business and necessary for the
continued operation of the Business in substantially the same manner as its
operations have heretofore been conducted except where the failure to have
any such Intellectual Property has not had, and could not reasonably be
expected to have, a Material Adverse Effect on the Business; and
(c) Upon the consummation of the Closing hereunder, (i) Newco will
be vested with all of Lockheed Martin's (or the Affiliated Transferors')
rights, title and interest in, and Lockheed Martin's (or the Affiliated
Transferors') rights and authority to use in connection with the Business,
all of the Intellectual Property that constitute Transferred Assets and
(ii) such Intellectual Property, together with the Intellectual Property
licensed to Newco in accordance with Section 9.04 of the Agreement and any
other interests in Intellectual Property transferred hereunder will
collectively constitute such rights and interests in Intellectual Property
which are necessary for the continued operation of the Business as a whole in
substantially the same manner as its operations have heretofore been
conducted, except where any inaccuracy of clause (ii) has not had, and could
not reasonably be expected to have, a Material Adverse Effect on the
Business.
B.17. Government Furnished Equipment. Section B.17 of the
Disclosure Schedules incorporates the most recent schedule delivered to the
U.S. Government which identifies by description or inventory number certain
equipment and fixtures loaned, bailed or otherwise furnished to or held by
each Business Unit by or on behalf of the United States. To Lockheed
Martin's knowledge, such schedule was accurate and complete on its date and,
if dated as of the Closing Date, would contain only those additions and omit
only those deletions of equipment and fixtures that have occurred in the
<PAGE>
ordinary course of business, except for such inaccuracies that could not
reasonably be expected to have a Material Adverse Effect on the Business.
B.18. Powers of Attorney. Section B.18 of the Disclosure Schedules
lists the names of each person holding powers of attorney from any of the
Lockheed Martin Companies in connection with the Business.
B.19. Insurance. Section B.19 of the Disclosure Schedules contains
a correct and complete list of all material policies of insurance held by any
of the Lockheed Martin Companies that have been procured specifically with
respect to the operation of the Business, other than workers' compensation
policies.
B.20. Affiliate Transactions. Except as set forth in Section B.20
of the Disclosure Schedule, (a) there is no ongoing agreement or arrangement
between Lockheed Martin or any Affiliated Transferor, on the one hand, and
any of the Business Units, on the other hand, having an annual cost to a
Business Unit or any of the Lockheed Martin Companies, individually, in
excess of $120,000; (b) there is no debt owed by any Business Unit to any of
the Lockheed Martin Companies (other than another Business Unit), other than
debt which will be eliminated prior to the Closing or otherwise will not be
an Assumed Liability; and (c) there is no indemnification or similar
obligation owed by any Business Unit to Lockheed Martin or any of its
Affiliates (other than another Business Unit), other than in connection with
or resulting from the failure of a Business Unit to perform its obligations
under any Contracts involving Lockheed Martin or any of its Affiliates.
B.21. Employee Benefit Matters.
(a) To the knowledge of Lockheed Martin, Section B.21 of the
Disclosure Schedule lists each Employee Plan or Benefit Arrangement which
covers Transferred Employees or Transferred Beneficiaries and each collective
bargaining agreement covering Transferred Employees.
(b) Except as set forth in Section B.21 of the Disclosure Schedule
and with respect to the Business:
(i) Neither Lockheed Martin nor any member of its "Controlled
Group" (defined as any organization which is a member of a controlled
group of organizations within the meaning of Code Sections 414(b), (c),
(m) or (o)) has ever contributed to or had any liability to a multi-
employer plan, as defined in Section 3(37) of ERISA, which could
reasonably be expected to have a Material Adverse Effect on the
Business;
(ii) To the knowledge of Lockheed Martin, except to the extent
known by the Individual Purchasers with respect to the Business Units
other than the Communications Systems Business Unit, no fiduciary of any
funded Employee Plan has engaged in a "prohibited transaction" (as that
term is defined in Section 4975 of the Code and Section 406 of ERISA)
which could subject Newco to a penalty tax imposed by Section 4975 of
the Code;
(iii) No Employee Plan that is subject to Section 412 of the
Code has incurred an "accumulated funding deficiency" within the meaning
of Section 412 of the Code, whether or not waived;
<PAGE>
(iv) To the knowledge of Lockheed Martin, except to the extent
known by the Individual Purchasers with respect to the Business Units
other than the Communications Systems Business Unit, each Employee Plan
and Benefit Arrangement has been established and administered in
accordance with its terms and in compliance with Applicable Law;
(v) To the knowledge of Lockheed Martin, except to the extent
known by the Individual Purchasers with respect to the Business Units
other than the Communications Systems Business Unit, no Employee Plan
subject to Title IV of ERISA has incurred any material liability under
such title other than for the payment of premiums to the Pension Benefit
Guaranty Corporation ("PBGC"), all of which to the knowledge of Lockheed
Martin and the Individual Purchasers have been paid when due;
(vi) No defined benefit Employee Plan has been terminated; nor
have there been any "reportable events" (as that term is defined in
Section 4043 of ERISA and the regulations thereunder), other than
reportable events arising directly from the Contemplated Transactions,
which would present a risk that an Employee Plan would be terminated by
the PBGC in a distress termination;
(vii) Each Employee Plan intended to qualify under Section 401
of the Code has received a determination letter that it is so qualified
and to the knowledge of Lockheed Martin, except to the extent known by
the Individual Purchasers with respect to the Business Units other than
the Communications Systems Business Unit, no event has occurred with
respect to any such Employee Plan which could cause the loss of such
qualification or exemption;
(viii) With respect to each Employee Plan listed on Section B.21
of the Disclosure Schedule, Lockheed Martin has made available to Newco
the most recent copy (where applicable) of (A) the plan document; (B)
the most recent determination letter; (C) any summary plan description;
(D) Form 5500; and (E) actuarial valuation report; and with respect to
each Benefit Arrangement that covers any Transferred Employee or
Transferred Beneficiary, Lockheed Martin has made available to Newco a
current, accurate and complete copy (or, to the extent that no such copy
exists, an accurate description) thereof; and
(ix) To the knowledge of Lockheed Martin, except to the extent
known by the Individual Purchasers with respect to the Business Units
other than the Communications Systems Business Unit, no Employee Plan or
Benefit Arrangement exists which could result in the payment to any
Transferred Employee or Transferred Beneficiary of any money or other
property or rights or accelerate or provide any other rights or benefits
to any Transferred Employee or Transferred Beneficiary as a result of
the transaction contemplated by this Agreement, whether or not such
payment would constitute a parachute payment (within the meaning of
Section 280G of the Code).
<PAGE>
EXHIBIT C
REPRESENTATION AND WARRANTIES OF LEHMAN
Lehman hereby represents and warrants to Lockheed Martin and the
individual Purchasers and, upon the Closing, to Newco that:
C.01. Organization and Existence. Lehman is a limited partnership
duly formed, validly existing and in good standing under the laws of the
State of Delaware and has all partnership powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except where the failure to have such licenses,
authorizations, consents and approvals has not had and may not reasonably be
expected to have, a Material Adverse Effect on Lehman. Lehman is duly
qualified to do business as a foreign limited partnership in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities make such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where failure to be
so qualified has not had, and may not reasonably be expected to have, a
Material Adverse Effect on Lehman.
C.02. Authorizations. The execution, delivery and performance by
Lehman of the Transaction Documents and the consummation by Lehman of the
Contemplated Transactions are within the partnership powers of Lehman and
have been duly authorized by all necessary partnership action on the part of
Lehman. Each of the Transaction Documents constitutes a legal, valid and
binding agreement of Lehman, enforceable against Lehman in accordance with
its terms (i) except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally,
including the effect of statutory and other laws regarding fraudulent
conveyances and preferential transfers and (ii) subject to the limitations
imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
C.03. Governmental Authorization.
(a) The execution, delivery and performance by Lehman of the
Transaction Documents require no action by or in respect of, consents or
approvals of, or filing with, any governmental body, agency, official or
authority other than:
(i) compliance with any applicable requirements of the HSR
Act; and
(ii) compliance with any applicable requirements of the 1933
Act.
(b) To the actual knowledge of Lehman, there are no facts relating
to the identity or circumstances of Lehman or any of its Affiliates that
would prevent or materially delay obtaining the consents or approvals
referred to in Section C.03(a).
C.04. Non-Contravention. The execution, delivery and performance by
Lehman of the Transaction Documents do not and will not (i) contravene or
<PAGE>
conflict with the certificate of limited partnership or Amended and Restated
Agreement of Limited Partnership of Lehman, (ii) assuming compliance with the
matter referred to in Section C.03, contravene or conflict with or constitute
a violation of any provision of any law, regulation, judgment, injunction,
order or decree binding upon or applicable to Lehman, or (iii) constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Lehman or to a loss of any benefit
to which Lehman is entitled under any provision of any agreement, contract or
other instrument binding upon Lehman or any license, franchise, permit or
other similar authorization held by Lehman, except, in the case of clauses
(ii) and (iii), for any such contravention, conflict, violation, default,
termination, cancellation, acceleration or loss that would not have a
Material Adverse Effect on Lehman.
C.05. Finders' Fees. Except for Lehman Brothers Inc., there is no
investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of Lehman who might be entitled
to any fee or commission from Newco, Lockheed Martin or any of its
Affiliates, or either of the Individual Purchasers, upon consummation of the
Contemplated Transactions by the Transaction Documents.
C.06. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the actual knowledge of Lehman, threatened
against or affecting, Lehman before any court or arbitrator or any
governmental body, agency or official which in any matter challenges or seeks
to prevent, enjoin, alter or materially delay the Contemplated Transactions.
C.07. Inspections. Lehman is an informed and sophisticated
participant in the Contemplated Transactions, and has engaged expert
advisors, experienced in the evaluation and purchase of enterprises such as
the Business. Lehman has undertaken an investigation and has been provided
with, has evaluated and has relied upon certain documents and information to
assist Lehman in making an informed and intelligent decision with respect to
the execution of the Transaction Documents. Lehman will undertake prior to
Closing such further investigation and request such additional documents and
information as it deems necessary. Lehman acknowledges that Lockheed Martin
has made no representation or warranty as to the prospects, financial or
otherwise of the Business. Lehman agrees that Newco shall accept the
Transferred Assets and the Assumed Liabilities as they exist on the Closing
Date based upon Lehman's and the Individual Purchasers' inspection,
examination and determination with respect thereto as to all matters, and
without reliance upon any express or implied representations or warranties of
any nature, whether in writing, orally or otherwise, made by or on behalf of
or imputed to Lockheed Martin except as expressly set forth in the
Transaction Documents.
C.08. Financing. Lehman has available to it cash, marketable
securities or other investments, or presently available sources of credit, to
enable it to purchase the shares of Newco Class A Stock contemplated by this
Agreement.
<PAGE>
EXHIBIT D
REPRESENTATIONS AND WARRANTIES OF THE INDIVIDUAL PURCHASERS
Each of the Individual Purchasers hereby represents and warrants, with
respect to himself, to Lockheed Martin and Lehman and, upon the Closing, to
Newco that:
D.01. Governmental Authorization.
(a) The execution, delivery and performance by each Individual
Purchaser of the Transaction Documents require no action by or in respect of,
consents or approvals of, or filing with, any governmental body, agency,
official or authority other than:
(i) compliance with any applicable requirements of the HSR
Act; and
(ii) compliance with any applicable requirements of the 1933
Act.
(b) To the knowledge of each of the Individual Purchasers, there
are no facts relating to the identity or circumstances of the Individual
Purchasers that would prevent or materially delay obtaining any of the
consents or approvals referred to in Section D.01(a).
D.02. Non-Contravention. The execution, delivery and performance by
each of the Individual Purchasers of the Transaction Documents do not and
will not (i) assuming compliance with the matters referred to in Section
D.01, contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Individual Purchasers or (ii) constitute a default under or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of either of the Individual Purchasers or to a loss of
any benefit to which either of the Individual Purchasers is entitled under
any provision of any agreement, contract or other instrument binding upon
either of the Individual Purchasers or any license, franchise, permit or
other similar authorization held by either of the Individual Purchasers,
except for any such contravention, conflict, violation, default, termination,
cancellation, acceleration or loss that is immaterial to the Contemplated
Transactions and the operation of the Business after Closing.
D.03. Finders' Fees. There is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of either of the Individual Purchasers who might be entitled to any
fee or commission from Newco, Lockheed Martin or Lehman, or any of their
Affiliates, upon consummation of the Contemplated Transactions.
D.04. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of either of the Individual
Purchasers, threatened against or effecting, either of the Individual
Purchasers before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Contemplated Transactions.
<PAGE>
D.05. Inspections. Each of the Individual Purchasers is an informed
and sophisticated participant in the Contemplated Transactions, and has
engaged such expert's advisors as he deems appropriate. Each of the
Individual Purchasers has undertaken an investigation and has been provided
with, has evaluated and has relied upon certain documents and information to
assist him in making an informed and intelligent decision with respect to the
execution of the Transaction Documents. Each of the Individual Purchasers
will undertake prior to Closing such further investigation and request such
additional documents and information as he deems necessary. Each of the
Individual Purchasers acknowledges that Lockheed Martin has made no
representation or warranty as to the prospects, financial or otherwise of the
Business. Each of the Individual Purchasers agrees that Newco shall accept
the Transferred Assets and the Assumed Liabilities as they exist on the
Closing Date based upon Lehman's and the Individual Purchasers' inspection,
examination and determination with respect thereto as to all matters, and
without reliance upon any express or implied representations or warranties of
any nature, whether in writing, orally or otherwise, made by or on behalf of
or imputed to Lockheed Martin, except as expressly set forth in the
Transaction Documents.
D.06. Financing. Each of the Individual Purchasers has available
sufficient cash, marketable securities or other investments, or presently
available sources of credit, to enable him to purchase the shares of Newco
Class B Stock contemplated by this Agreement.
<PAGE>
EXHIBIT E
REPRESENTATION AND WARRANTIES OF NEWCO
Newco hereby represents and warrants to Lockheed Martin, Lehman and the
Individual Purchasers that:
E.01. Organization and Existence. Newco is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has (or, prior to the Closing Date, will have) all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where
the failure to have such licenses, authorizations, consents and approvals has
not had and may not reasonably be expected to have, a Material Adverse Effect
on Newco (after giving effect to the Contemplated Transactions). As of the
Closing Date, Newco will be duly qualified to do business as a foreign
corporation in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities (after giving effect to the
Contemplated Transactions) make such qualification necessary to carry on its
business as now conducted, except for those jurisdictions where failure to be
so qualified has not had, and may not reasonably be expected to have, a
Material Adverse Effect on Newco (after giving effect to the Contemplated
Transactions).
E.02. Corporate Authorizations. The execution, delivery and
performance by Newco of the Transaction Documents and the consummation by
Newco of the Contemplated Transactions are within the corporate powers of
Newco and have been (or, prior to the Closing, will have been) duly
authorized by all necessary corporate action on the part of Newco. Each of
the Transaction Documents constitutes a legal, valid and binding agreement of
Newco, enforceable against Newco in accordance with its terms (i) except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and preferential
transfers and (ii) subject to the limitations imposed by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
E.03. Governmental Authorization.
(a) Except as set forth on Attachment X, the execution, delivery
and performance by Newco of the Transaction Documents require no action by or
in respect of, consents or approvals of, or filing with, any governmental
body, agency, official or authority other than:
(i) compliance with any applicable requirements of the HSR
Act; and
(ii) compliance with any applicable requirements of the 1933
Act.
(b) There are no facts relating to the identity or circumstances
of Newco known to Newco that would prevent or materially delay obtaining any
of the consents or approvals referred to in Section E.03(a).
<PAGE>
E.04. Non-Contravention. The execution, delivery and performance by
Newco of the Transaction Documents do not and will not (i) contravene or
conflict with the charter or bylaws of Newco, (ii) assuming compliance with
the matters referred to in Section E.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Newco, or
(iii) constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Newco or to a loss
of any benefit to which Newco is entitled under any provision of any
agreement, contract or other instrument binding upon Newco or any license,
franchise, permit or other similar authorization held by Newco, except, in
the case of clauses (ii) and (iii), for any such contravention, conflict,
violation, default, termination, cancellation, acceleration or loss that
could not reasonably be expected to have a Material Adverse Effect on Newco.
E.05. Finders' Fees. Except for Lehman Brothers Inc., there is no
investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of Newco who might be entitled
to any fee or commission from Lockheed Martin or Lehman (or any of their
Affiliates), or from either of the Individual Purchasers, upon consummation
of the Contemplated Transactions.
<PAGE>
EXHIBIT F
TAX MATTERS
F.01. Tax Definitions. The following terms shall have the following
meanings:
"Allocation Tax Loss" means an amount equal to 20% of the first
$5,000,000 of the Tax Basis Shortfall and 25% of the next $20,000,000 of
the Tax Basis Shortfall.
"Basis Liabilities" means Assumed Liabilities which upon the Tax Closing
Date give rise to the creation of, or increase in, basis to Newco of one
or more Transferred Assets for Income Tax purposes.
"Cash Sale" means a transfer of assets to Newco pursuant to the
Transaction Agreement whereby Lockheed Martin or any of its Affiliated
Transferors, as the case may be, does not receive any Newco Class A
Stock as Exchange Consideration for Transferred Assets.
"Code" means the Internal Revenue Code of 1986, as amended.
"Final Determination" means a determination as defined in Section
1313(a) of the Code or any other event which finally and conclusively
establishes the amount of any liability for Taxes.
"Income Taxes" means any Taxes determined by reference to net income.
"Post-Closing Tax Period" means that portion of any Tax period ending
after the Tax Closing Date, which is after the Tax Closing Date.
"Pre-Closing Tax Period" means that portion of any Tax period ending on
or before the Tax Closing Date, which is on or before the Tax Closing
Date.
"Section 351 Transfer" means a transfer of assets to Newco pursuant to
the Transaction Agreement whereby Lockheed Martin or any of its
Affiliated Transferors, as the case may be, receives Newco Class A Stock
as part or all of the Exchange Consideration for Transferred Assets.
"Tax" means any tax imposed of any nature including federal, state,
local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted
gross income or gross receipts tax, employment related tax (including
employee withholding or employer payroll tax, FICA, or FUTA), real or
personal property tax or ad valorem tax, sales or use tax, excise tax,
stamp tax or duty, any withholding or backup withholding tax, value
added tax, severance tax, prohibited transaction tax, premiums tax,
occupation tax, together with any interest or any penalty, addition to
tax or additional amount imposed by any Governmental Authority
responsible for the imposition of any such tax.
"Tax Basis Shortfall" means the amount by which Newco's adjusted tax
basis in the Transferred Assets (after the recognition of gains pursuant
to Section F.07.(a)(i)(C)) is less than $525,000,000 plus or minus any
<PAGE>
adjustment to the Exchange Consideration in accordance with Sections
2.03 and 2.04 and plus the Basis Liabilities.
"Tax Closing Date" means the Effective Date.
F.02. Tax Return Packages. Newco will use its reasonable efforts to
cause appropriate employees of the Business to prepare usual and customary
Tax return packages (in the form provided to the Business Units for the 1996
calendar year) with respect to (1) the taxable period ended December 31,
1996, in the event that such packages have not been prepared prior to Closing
and (2) the tax period beginning January 1, 1997 and ending as of the Tax
Closing Date. In the event that Tax return packages for the taxable period
ended December 31, 1996 have not been prepared prior to Closing, then Newco
will use reasonable efforts to cause the Tax return packages for such taxable
period to be delivered to Lockheed Martin no later than 30 days subsequent to
Closing. Newco will use reasonable efforts to cause the Tax return packages
for the period beginning on January 1, 1997 and ending as of the Tax Closing
Date to be delivered to Lockheed Martin no later than the last day of the
third calendar month succeeding the month in which the Closing occurs.
F.03.A. Assumed Liabilities. The term Assumed Liabilities as defined
in Exhibit A shall include any and all liabilities and obligations of
Lockheed Martin and the Affiliated Transferors for Taxes arising from or with
respect to the Transferred Assets or the operation of the Business with
respect to any period ending prior to on or after the Tax Closing Date other
than (i) income or franchise taxes arising from or with respect to the
Transferred Assets or the operations of the Business for the Pre-Closing Tax
Period (other than state or local income or franchise taxes attributable to
the Business with respect to a Pre-Closing Tax Period to the extent
reimbursable (but not actually reimbursed as of the Tax Closing Date) by the
U.S. Government pursuant to the principles of Federal Acquisition Regulation
Part 31, Contract Cost Principles and Procedures), and (ii) income or
franchise taxes imposed on Lockheed Martin or any of the Affiliated
Transferors with respect to gain or loss on the disposition of the
Transferred Assets pursuant to the Transaction Agreement (other than Taxes
borne by Newco pursuant to Section 15.03). Notwithstanding the foregoing,
the parties agree that, with respect to Tax liabilities attributable to the
Communications Systems Business Unit relating to the Pre-Closing Tax Period,
Newco shall not assume any liability or obligation other than and only to the
extent (i) disclosed or provided for in the December Statement or taken into
account in the determination of the Final Net Tangible Asset Amount or (ii)
relating to Tax periods for which Tax returns (including any applicable
extensions) are not required to have been filed prior to the Tax Closing
Date.
F.03.B. Excluded Liabilities. The term Excluded Liabilities as
defined in Exhibit A shall include any and all liabilities or obligations for
any and all Taxes arising from or with respect to the Transferred Assets or
operations of the Business that are not Assumed Liabilities as defined in
Section F.03.A.
F.04.A. Transferred Assets. The term Transferred Assets as defined in
Exhibit A shall include any and all refunds, credits or rights of recovery in
respect of any Taxes that are Assumed Liabilities as defined in Section
F.03.A.
<PAGE>
F.04.B. Excluded Assets. The term Excluded Assets as defined in
Exhibit A shall include any refund, credit or right of recovery in respect of
any Taxes that are not Assumed Liabilities as defined in Section F.03.A.
F.05. Allocation of Exchange Consideration.
(a) Within 30 days after the appraisal of the Transferred Assets
by Coopers & Lybrand L.L.P. as referred to in Section F.07 has been
completed, Lockheed Martin shall prepare a schedule (the "Exchange
Consideration Schedule") setting forth the allocation of the cash amount of
the Exchange Consideration among Lockheed Martin and each of the Affiliated
Transferors. The allocation shall be determined based on such appraisal by
Coopers & Lybrand L.L.P., and shall take into account the allocation of Newco
Class A Stock among Lockheed Martin and the Affiliated Transferors, as
determined by Lockheed Martin in its sole discretion. In connection with the
preparation of the Exchange Consideration Schedule, Lockheed Martin shall
give Newco reasonable access to the books and records of Lockheed Martin in
respect of the Transferred Assets and the Basis Liabilities. Lockheed Martin
agrees to make reasonable efforts to allocate the Exchange Consideration in
the Exchange Consideration Schedule in a manner calculated to allow Newco to
obtain a tax basis in the Transferred Assets equal to, but not greater than,
$525,000,000 plus or minus any adjustment to the Exchange Consideration in
accordance with Sections 2.03 and 2.04 and plus the Basis Liabilities.
Lockheed Martin covenants and agrees that the Exchange Consideration will be
allocated so that the adjusted tax basis of Newco in the Transferred Assets,
based on the allocation in the Exchange Consideration Schedule, will be not
less than $500,000,000 plus or minus any adjustment to the Exchange
Consideration in accordance with Sections 2.03 and 2.04 and plus the Basis
Liabilities.
(b) The Allocation Tax Loss shall be determined jointly by
Lockheed Martin and Newco within 90 days after the Exchange Consideration
Schedule is delivered to Newco. Any dispute with respect to the
determination of the Allocation Tax Loss shall be resolved in the manner
specified in Section 2.03 (b) (regarding determination of the Final Net
Tangible Asset Amount). Within 10 days after the Allocation Tax Loss is
determined, Lockheed Martin shall pay to Newco the amount of the Allocation
Tax Loss with interest thereon from the Closing Date to the date of payment
at a rate per annum equal to the per annum interest rate announced from time
to time by Bank of America National Trust and Savings Association as its
reference rate in effect. Such payment shall be made in immediately
available funds by wire transfer to a bank account designated in writing by
Newco. Newco agrees that the aforementioned payment by Lockheed Martin shall
satisfy all obligations assumed by Lockheed Martin pursuant to this Section
F.05. Lockheed Martin shall have no further obligation to indemnify Newco
with regard to any adjustment to the tax basis of the Transferred Assets in
the hands of Newco as a result of an audit by the Internal Revenue Service or
any other Tax authority, or as a result of any other adjustment which is
treated for Tax purposes as an adjustment to the Exchange Consideration.
F.06. Representations and Warranties of Lockheed Martin. Lockheed
Martin hereby represents prior to but not after the Closing to the
Purchasers, and as of and after the Closing to Newco that:
(a) there are no liens on any of the Transferred Assets that arose
in connection with any failure (or alleged failure) to pay any Tax;
<PAGE>
(b) neither Lockheed Martin nor any of the Affiliated Transferors
will take part in both a Section 351 Transfer and a Cash Sale in the context
of the Contemplated Transactions;
(c) neither Lockheed Martin nor any of the Affiliated Transferors
has transferred or otherwise altered the ownership of any of the Transferred
Assets in anticipation of the Contemplated Transactions.
F.07. Consistent Reporting.
(a) Section 351 Transfers
(i) Unless there has been a Final Determination to the
contrary, Lockheed Martin, the Affiliated Transferors and Newco covenant
and agree, for all Tax purposes including all Tax returns and Tax
controversies, to (and to cause any Affiliate or successor to their
assets or business to) take each of the positions set forth in
subparagraph (A) through (E) below with respect to Section 351
Transfers.
(A) The transfer of assets by each transferor will
qualify under Section 351(b) of the Internal Revenue Code of 1986.
(B) The amount of cash received in exchange for any
Transferred Asset will be determined by (A) allocating Basis Liabilities
to the Transferred Assets in proportion to the adjusted tax basis of
such Transferred Assets, and then (B) allocating the total amount of
cash received by the transferor among the Transferred Assets in
proportion to the net fair market value of such Transferred Assets (the
net fair market value being the fair market value of a Transferred Asset
reduced by the amount of any Basis Liabilities allocated to the asset).
(C) The tax basis of each Transferred Asset to be
received by Newco will be the same as the tax basis of such asset in the
hands of the transferor increased by the amount of any gain recognized
by the transferor on the transfer of such asset.
(D) The fair market value of each category of
Transferred Assets will be determined based on an independent appraisal
by Coopers & Lybrand L.L.P.
(E) Neither Newco, nor any successor to its assets or
businesses will be entitled to claim any deduction in respect of any
Basis Liability to the extent previously deducted by the transferor,
unless such previous deduction is later denied.
(ii) Lockheed Martin and the Affiliated Transferors will file
with their consolidated federal income tax return for the tax period
which includes the Tax Closing Date the information required by Treas.
Reg. 1.351-3(a) and will deliver copies of such statements, including
attachments, to Newco at least 10 days prior to the date on which such
return is filed, and Newco will file with its federal income tax return
for the taxable period within which the Tax Closing Date falls the
information required by Treas. Reg. 1.351-(b) and will deliver a copy of
that statement to Lockheed Martin within ten days thereafter. Within
180 days after the Closing Date, Lockheed Martin will deliver to Newco
all of the cost and other basis information relating to the Transferred
<PAGE>
Assets and Basis Liabilities reasonably required for Newco to prepare
the Statement required by Treas. Reg. 1.351-3(b)(2).
(iii) Lockheed Martin and Newco will jointly prepare schedules
showing (A) the amount of any gain recognized on the transfer of each
category of Transferred Assets, (B) the tax basis of each category of
Transferred Assets in the hands of the transferor, and (C) the amount
previously deducted in respect of each category of Basis Liabilities.
Such schedules will be prepared in a manner consistent with each of the
positions described in Section F.07.(a)(i). In the event of any
adjustment to the tax basis of the Transferred Assets or Basis
Liabilities, as the result of an audit or otherwise, Lockheed Martin,
the Affiliated Transferors and Newco will jointly prepare any necessary
revisions to such schedules. Unless there has been a Final
Determination to the contrary, Lockheed Martin, the Affiliated
Transferors and Newco covenant and agree, for all Income Tax purposes,
including all Income Tax returns and any Income Tax controversies, not
to take (and to cause any Affiliate or successors to their assets or
businesses not to take) any position inconsistent with the basis in
assets shown on such schedules (including any revised schedules from and
after the date of revision) prepared pursuant to this Section
F.07.(a)(iii).
(iv) Lockheed Martin and the Affiliated Transferors covenant
and agree to make the election necessary under Section 197(f)(9)(B) of
the Code and pay the Tax that is required to be paid thereunder, so that
intangible assets will be amortizable to the extent allowable under
Section 197 of the Code. Lockheed Martin will deliver a copy of the
election to Newco within 10 days of filing or making such election.
(b) Cash Sales
With respect to Cash Sales, the Exchange Consideration shall
be allocated among the Transferred Assets in accordance with Section 1060 of
the Code and Treasury Regulations thereunder. Such allocation shall be based
on an independent appraisal by Coopers & Lybrand L.L.P. Lockheed Martin, the
Affiliated Transferors and Newco shall not take any position on their
respective Tax returns that is inconsistent with such allocation of the
Exchange Consideration for purposes of determining the amount of gain or loss
recognized by Lockheed Martin and/or any of the Affiliated Transferors
pursuant to Cash Sales, and Lockheed Martin and Newco shall duly prepare and
timely file such reports and information returns as may be required to report
the allocation, including Internal Revenue Service Form 8594. Lockheed
Martin and Newco will each deliver a copy of Form 8594, including
attachments, to the other at least 10 days prior to filing it with its tax
return.
F.08. Allocation of Income, Deductions and Other Items. For
purposes of the Transaction Agreement, income, deductions, and other items
will be allocated between the Pre-Closing Tax Period and the Post-Closing Tax
Period based on an actual closing of the books of the Business on the Tax
Closing Date. Income, deductions and other items attributable to the Pre-
Closing Tax Period will be included in the federal and state income and/or
franchise tax returns of Lockheed Martin. Income, deductions and other items
attributable to the Post-Closing Tax Period will be included in the federal
and state income and/or franchise tax returns of Newco.
<PAGE>
F.09. Allocation of Taxes. Any pre-paid asset or accrued liability
for real property tax, personal property tax or any similar ad valorem
obligation levied with respect to any Transferred Asset for a Post-Closing
Tax Period which includes the Tax Closing Date will be apportioned as of the
Tax Closing Date and included in the determination of the Estimated Final Net
Tangible Asset Amount, the Proposed Final Net Tangible Asset Amount and the
Final Net Tangible Asset Amount based on the number of days of such taxable
period included in the Pre-Closing Tax Period and the number of days of such
taxable period included in the Post-Closing Tax Period.
F.10. Credit for Increasing Research Activities. Lockheed Martin,
the Affiliated Transferors and Newco agree that the transfers of assets
pursuant to the Transaction Agreement constitute dispositions of trades or
businesses within the meaning of Section 41(f)(3) of the Code. Lockheed
Martin and the Affiliated Transferors agree to provide Newco within 150 days
after the Closing Date with all information necessary to permit Newco to
timely apply the provisions of Section 41(f)(3)(A) of the Code with respect
to the Businesses.
F.11. Costs and Expenses of Appraisal. The costs and expenses of
the appraisal by Coopers & Lybrand L.L.P. which is referred to in Sections
F.05., F.07.(a)(i)(D) and F.07.(b) shall be shared equally by Lockheed Martin
and Newco.
F.12. Resale Certificates. Within 45 days after the Closing Date,
where applicable, Newco shall remit to Lockheed Martin such properly
completed resale exemption certificates or similar certificates or
instruments as are necessary to claim exemptions from the payment of sales,
transfer, use or other similar taxes under Applicable Law.
<PAGE>
EXHIBIT G
EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS
G.01. Employee Benefits Definitions. The following terms shall have
the following meanings:
"Benefit Arrangement" means each employment, severance, continuation
pay, termination pay, layoff, or other similar written contract, arrangement
or policy and each written plan or arrangement providing for health, medical,
life or other welfare or fringe benefit coverage (including any insurance,
self-insurance or other arrangements), workers' compensation, severance pay,
retention agreements, disability benefits, supplemental unemployment
benefits, holiday, education or vacation benefits, retirement benefits or
deferred compensation, profit-sharing, benefits in the event of a sale of the
Business or other change in the control, management or the ownership of the
Business, bonuses, stock options, stock appreciation rights and other forms
of incentive compensation or post-retirement insurance, compensation or
benefits which (i) is not an Employee Plan, (ii) is or has been entered into,
maintained, administered or contributed to, as the case may be, by Lockheed
Martin or any of its Affiliates and (iii) covers any Transferred Employee,
Transferred Beneficiary and/or his or her dependent, spouse or beneficiary or
for which a Transferred Employee would be eligible upon retirement or other
termination of service.
"Camden Transferee" means each Transferred Employee who worked in the
Communications Systems Business Unit immediately prior to Closing and any
Transferred Beneficiary related to such Transferred Employee.
"Employee Plan" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, which (i) is subject to any provision of
ERISA, (ii) is or has been entered into, maintained, administered or
contributed to by Lockheed Martin or any of its Affiliates and (iii) covers
any Transferred Employee and/or Transferred Beneficiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Transferred Employee" means any Person who, (i) on the Closing Date, is
actively employed in the Business, or who, with respect to the Business, is
on vacation, approved illness absence, long-term disability, authorized leave
of absence (including leave under the Family and Medical Leave Act) or
military service leave of absence as of the Closing Date, (ii) was laid off
from the Business and has recall rights with respect to the Business, or
(iii) is identified on Attachment XI, to be delivered to Newco at the same
time as the Disclosure Schedules are delivered.
"Transferred Beneficiary" means any Person who, at Closing, is not a
Transferred Employee but (i) who was formerly employed in the Business (other
than at the Communications Systems Business Unit)(whether by Lockheed Martin
and/or its Affiliates or by their predecessors with respect to the Business)
and to whom or with respect to whom Lockheed Martin or any of its Affiliates
now has or may have in the future any obligation or liability (whether or not
contingent) arising from that Person's employment in the Business or who is
now or may become entitled to any coverage or benefit (whether or not
<PAGE>
contingent) provided under any Employee Plan or Benefit Arrangement as a
result of his or her employment in the Business; (ii) who is the spouse,
dependent or beneficiary of a Person who qualifies as a Transferred Employee
or a Person described in clause (i), if that spouse, dependent or beneficiary
is or may become entitled to any coverage or benefit (whether or not
contingent) provided under any Employee Plan or Benefit Arrangement as a
result of that Person's employment in the Business.
G.02. Employees and Offers of Employment.
(a) Newco shall offer employment to commence on the Closing Date
to all Transferred Employees; provided that, for any Transferred Employee who
is on vacation, approved illness absence, authorized leave of absence
(including leave under the Family and Medical Leave Act), long-term
disability or military service leave of absence as of the Closing, the offer
shall remain open until the date he or she is able to return to active
employment to the extent consistent with any applicable collective bargaining
agreement and/or existing company policy; provided, further, that any Camden
Transferee entitled to recall rights shall be offered employment by Newco in
accordance with the terms of the applicable bargaining agreement. Each
Transferred Employee shall be offered a position by Newco similar to his or
her position immediately prior to the Closing Date, at the same job and
salary or wage levels, with non-equity based bonus and incentive plans and
other non-equity based employee benefit plans substantially similar to those
provided by Lockheed Martin and its Affiliates immediately prior to the
Closing Date. Such offers of employment shall be at the same respective
locations as those at which such Transferred Employees are employed
immediately prior to the Closing. Subject to Applicable Law and this
Agreement, Newco shall have the right to dismiss any Transferred Employee at
any time, with or without cause, and to change the terms of employment of any
Transferred Employee.
(b) Lockheed Martin shall provide any notices to Transferred
Employees which may be required under the Worker Adjustment Retraining and
Notification Act, 29 USC Section 2101 et seq., ("WARN") with respect to
events which occur prior to the Closing Date and Newco shall provide any
notices to Transferred Employees which may be required under WARN with
respect to events which occur on or after the Closing Date.
(c) Commencing on the Closing Date, Newco shall assume all
responsibility and liability for all matters arising out of or relating to
Transferred Employees and Transferred Beneficiaries regardless of whether
such matter arises from or relates to events prior to, on or after the
Closing Date, including but not limited to (i) accrued but unpaid wages,
bonuses and salary; (ii) all liabilities for workers compensation claims made
at any time by Transferred Employees or Transferred Beneficiaries whether or
not reported as of the Closing Date and all expenses of administration of
such claims; (iii) all incurred but not reported claims for life insurance,
medical, disability or similar benefits; (iv) all claims relating to the
terms and conditions of employment, hiring, firing, supervision, occupational
safety and health, workplace, wages and hours promotion, employment practices
or treatment of Transferred Employees or Transferred Beneficiaries; provided,
however, that with respect to any responsibility and liability relating to a
Camden Transferee for a matter described in clause (iv), Newco shall only
assume such responsibility and liability if it arises from or relates to (A)
a matter described in Section B.09 of the Disclosure Schedule, or (B) events
occurring on or after the Closing Date.
<PAGE>
G.03. Plans Following the Closing.
(a) Except to the extent changes are (i) required by Applicable
Law; (ii) necessary to maintain the tax favored status of any employee plan
or benefit arrangement; (iii) permitted or required under any applicable
collective bargaining agreement; or (iv) necessary to eliminate the use of
any equity securities as the basis for any equity-based incentive
compensation, during the one-year period following the Closing, Newco will
maintain employee compensation and employee plans and benefit arrangements
for the benefit of the Transferred Employees and Transferred Beneficiaries,
in either case, who are not covered by collective bargaining agreements, that
are substantially similar to the Employee Plans and Benefit Arrangements
(excluding any stock options, stock appreciation or other equity based
incentive compensation) in effect on the Closing Date; provided, however,
that layoff, severance and retention benefits (including the Special
Severance Program) shall be identical during this period; provided, further,
that post-retirement benefits for Camden Transferees shall also be provided
in accordance with Sections G.03(b) and G.05(f). During such period, for
Transferred Employees and Transferred Beneficiaries who are covered by
collective bargaining agreements, Newco shall provide such benefits as are
required by any and such collective bargaining agreements as are assumed
pursuant to Section G.04. Newco will give Transferred Employees full credit
for purposes of eligibility, vesting and benefit accrual under any such plans
or arrangements maintained by Newco pursuant to this Section G.03 for such
Transferred Employees' service recognized for such purposes under the
Employee Plans and Benefit Arrangements at Closing; provided, however, that
any Newco pension plan may offset pension benefits provided under Newco's
pension plan to a Transferred Employee and attributable to service before the
Closing Date by any pension benefits provided to that Transferred Employee
under any Lockheed Martin pension plan and attributable to that same pre-
Closing service.
(b) Effective as of the Closing Date, Lockheed Martin and its
Affiliates shall cease to have any liability or obligation to provide post-
retirement medical and life insurance benefits to Transferred Employees and
Transferred Beneficiaries and Newco shall assume all such liabilities and
obligations to provide post- retirement life and medical benefits and shall
provide post-retirement medical and life insurance benefits in accordance
with Section G.03(a). In addition, Newco will provide (i) substantially
equivalent post-retirement medical benefits for Camden Transferees who meet
the age and service requirements for those benefits (as such requirements are
in effect under the applicable Lockheed Martin plan immediately prior to the
Closing Date) by the five-year anniversary of the Closing Date and who retire
before that 5th year anniversary; (ii) substantially equivalent post
retirement life insurance benefits for those Camden Transferees who were at
least age 50 as of December 31, 1994 and have ten years of continuous service
at retirement; and (iii) post-retirement medical benefits and life insurance
for Transferred Employees and Transferred Beneficiaries covered by a
collective bargaining agreement in accordance with the terms of that
agreement. Notwithstanding the foregoing, nothing herein shall prevent Newco
from increasing the cost to Transferred Employees or Transferred
Beneficiaries who became participants in such plans to the extent permitted
by law, but only if the proportion of any required payments by such
participants does not change in relation to the payments made prior to the
Closing Date by such participant's employer; provided, however, nothing
herein permits the level of benefits provided under the plans to be
decreased.
<PAGE>
(c) Newco's plans that are welfare plans (as defined in Section
3(1) of ERISA) shall not contain a clause excluding coverage for preexisting
conditions of Transferred Employees or Transferred Beneficiaries (unless and
only to the extent and for the period that such pre-existing condition as of
the Closing Date would be excluded from coverage under the welfare plans of
the Business) and shall provide that any expenses incurred by a Transferred
Employee or Transferred Beneficiary during 1997 on or before the Closing
shall be taken into account from the Closing until December 31, 1997 under
such welfare plans for the purposes of deductible and coinsurance
requirements and satisfaction of maximum out-of-pocket provisions to the same
extent as if such expenses had been incurred after the Closing.
(d) Effective as of the Closing Date, Newco and Lockheed Martin
shall enter into a benefit administration agreement or agreements, whereby
Newco shall provide to Lockheed Martin and Lockheed Martin shall provide to
Newco, upon reasonable request, assistance in the administration of benefit
plans and arrangements after the Closing Date. Newco and Lockheed Martin
agree to negotiate in good faith the cost of such services and actual terms
of such benefit administration agreement(s).
G.04. Collective Bargaining Agreements. Newco shall (i) expressly
recognize any collective bargaining representative recognized by Lockheed
Martin or any of its Affiliates as of the Closing for bargaining units
consisting of Transferred Employees; (ii) expressly assume any and all of
Lockheed Martin's and its Affiliates' obligations under the collective
bargaining agreements set forth on Section B.21 of the Disclosure Schedules
with respect to the Transferred Employees; and (iii) be a successor employer
for purposes of such collective bargaining agreements.
G.05. Pension Plan Obligations
(a) Transferred Employees currently participate in the following
defined benefit pension plans: (i) Lockheed Martin Tactical Defense Systems
Retirement Plan; (ii) Lockheed Martin Corporation Retirement Income Plan II;
(iii) Lockheed Martin Corporation Pension Plan for Employees in Participating
Bargaining Units; (iv) The Narda Microwave Corporation Pension Plan; (v)
Lockheed Martin Tactical Systems, Inc. Pension Plan; (vi) Lockheed Martin
Fairchild Corporation Retirement Plan; (vii) Lockheed Martin Hycor Pension
Plan; (viii) Lockheed Martin Retirement Income Plan; (ix) Lockheed Martin
Supplemental Retirement Income Plan; (x) Lockheed Martin Retirement Plan for
Certain Salaried Employees; (xi) Lockheed Martin Tactical Systems, Inc.
Supplemental Executive Retirement Plan; (xii) Lockheed Martin Corporation
Supplementary Pension Plan for Employees of Transferred GE Operations; (xiii)
Supplemental Executive Retirement Plan for Certain Management Employees of
the Narda Microwave Corporation; (xiv) Lockheed Martin Fairchild Corporation
Supplemental Benefit Plan; (xv) Lockheed Martin Supplemental Executive
Retirement Plan ("Lockheed Martin Pension Plans"). As of the Closing Date,
Transferred Employees shall cease to accrue service credit or benefits under
Lockheed Martin Pension Plans, other than the Assumed Plans described in
Section G.05(b).
(b) With respect to The Narda Microwave Corporation Pension Plan
("Narda Plan") and the Lockheed Martin Hycor Pension Plan ("Hycor Plan")
(collectively, the "Assumed Plans"), as of the Closing Date, Lockheed Martin
and its Affiliates shall cease to sponsor, administer, pay benefits or
contribute to the Assumed Plans (other than for contributions due prior to
the Effective Date) and thereby cease to be responsible for any acts,
<PAGE>
omissions and transactions under or in connection with any such Assumed Plan,
whether occurring before or after Closing. Effective as of the Closing Date,
Newco shall become the sponsor of the Assumed Plans. Contingent upon receipt
of the Initial Transfer Amount in the case of the Narda Plan or the transfer
of sponsorship of the trust in the case of the Hycor Plan, Newco shall assume
all liabilities with respect to such Assumed Plan (including liabilities with
respect to Transferred Beneficiaries), shall assume responsibility for paying
pension benefits in respect of Transferred Employees and Transferred
Beneficiaries, and shall become responsible for all acts, omissions and
transactions under or in connection with that Assumed Plan, whether arising
before or after the Closing. As soon as practicable after the Closing Date,
the parties shall cause the sponsorship of the trust agreement maintained to
fund the Hycor Plan to be transferred to Newco and Newco, as of the Closing
Date, shall assume all of Lockheed Martin's and its Affiliates rights,
obligations and duties under that trust agreement. Lockheed Martin shall
cause the trusts holding the assets of the Narda Plan to transfer the assets
attributable to the Narda Plan (determined as of the end of the month in
which the Closing Date occurs) to be transferred to a trust (or trusts)
designated by Newco for the purpose of holding the assets of the Narda Plan.
(c) With respect to the (i) Lockheed Martin Tactical Defense
Systems Retirement Plan; (ii) Lockheed Martin Corporation Retirement Income
Plan II; (iii) Lockheed Martin Corporation Pension Plan for Employees in
Participating Bargaining Units; (iv) Lockheed Martin Tactical Systems, Inc.
Pension Plan; (v) Lockheed Martin Fairchild Corporation Retirement Plan; and
(vi) Lockheed Martin Retirement Income Plan (the "Spinoff Plans"), Newco
shall establish a defined benefit plan or plans which provide substantially
similar benefits in accordance with Section G.03(a), where applicable,(the
"Newco Spinoff Plans") for the benefit of the Transferred Employees and
Transferred Beneficiaries participating in the Spinoff Plans. As soon as
practicable following the Closing, Lockheed Martin shall cause its actuary to
calculate the Accrued Liability of all participants in each of the Spinoff
Plans and then to compare, on a plan by plan basis, the Accrued Liability of
all the participants in each of the Spinoff Plans to the fair market value of
the assets in the respective Spinoff Plan as of the end of the month in which
the Closing Date occurs. If the Accrued Liability of all participants in the
respective Spinoff Plan is less than the fair market value of the assets in
that Spinoff Plan, then Lockheed Martin shall cause assets (determined as of
the end of the month in which the Closing Date occurs) to be transferred to a
trust established to hold assets of the respective Newco Spinoff Plan equal
to such fair market value of the assets multiplied by a fraction the
numerator of which is the Accrued Liability of Transferred Employees and
Transferred Beneficiaries under such Spinoff Plan and the denominator of
which is the Accrued Liability of all participants in such plan. If the
Accrued Liability of all participants in the respective Spinoff Plan is equal
to or more than the fair market value of the assets in that Spinoff Plan,
then Lockheed Martin shall cause its actuary to determine the amount of
assets allocable to the liabilities of Transferred Employees and Transferred
Beneficiaries participating in that plan based on Section 4044 of ERISA
("Section 4044 Amount"). Lockheed Martin shall cause assets in cash equal to
the Section 4044 Amount applicable to Transferred Employees and Transferred
Beneficiaries under such Spinoff Plan to be transferred to a trust
established by Newco to hold assets of the respective Newco Spinoff Plans.
Contingent upon the transfer of the Initial Transfer Amount (as described in
Section G.05(b)) to each Newco Spinoff Plan, Newco shall assume all
liabilities of Lockheed Martin and its affiliates with respect to Transferred
Employees and Transferred Beneficiaries under the Spinoff Plan from which
<PAGE>
that transfer was made and shall become with respect to such Transferred
Employees and Transferred Beneficiaries responsible for all acts, omissions
and transactions under or in connection with such Spinoff Plan, whether
arising before or after the Closing; provided, however, that in the case of
liabilities with respect to Camden Transferees, Newco shall only assume
liabilities and shall only become responsible for all acts, omissions and
transactions under or in connection with that Spinoff Plan arising on or
after the Closing or disclosed in Section B.21 of the Disclosure Schedules.
(d) All transfers to the Narda Plan and the Newco Spinoff Plans
shall be made in accordance with the provisions of this Section G.05(d).
Within 30 days of the Closing Date, or if later, 20 days following the date
on which Lockheed Martin has been provided evidence reasonably satisfactory
to it that Newco has established a trust (or trusts) to hold the assets of
the Narda Plan and the Newco Spinoff Plans and that the Newco Spinoff Plans
are qualified under Section 401(a) of the Code and the trusts holding assets
of the Newco Spinoff Plans or Narda Plan are tax exempt under Section 501(a)
of the Code ("Initial Transfer Date"), Lockheed Martin shall cause its trusts
to make an initial transfer of assets in cash equal to 85% of the amount
estimated by Lockheed Martin in good faith to be equal to X (as defined
below) with respect to each plan (using the same assumptions and
methodologies consistent with estimates previously provided to Newco and as
set forth in a schedule to be presented at Closing by Lockheed Martin)
("Initial Transfer Amount"). In addition, prior to the Initial Transfer Date
Lockheed Martin shall provide Newco with evidence reasonably satisfactory to
Newco that the appropriate Lockheed Martin Pension Plans remain qualified
under Section 401(a) of the Code. As soon as practicable after the final
determination of the amounts to be transferred ("True-Up Date"), Lockheed
Martin shall cause a second transfer to be made in cash of the "True-Up
Amount." The True-Up Amount shall be equal to the sum of the following
amount with respect to the Narda Plan and each Spinoff Plan:
(X minus Initial Transfer Amount), minus benefit payments,
adjusted for Earnings,
where X equals in the case of the Spinoff Plans, the Accrued Liability or the
Section 4044 Amount, whichever is applicable, and in the case of the Narda
Plan, the fair market value of the assets attributable to the Narda Plan at
the end of the month in which the Closing Date occurs. Earnings shall be
calculated (i) from the last day of the month following the Closing until the
Initial Transfer Date on the amount equal to the Initial Transfer Amount
using the rate paid on a 90-day Treasury Bill on the auction date coincident
with or immediately preceding the Closing, (ii) from the Initial Transfer
Date until the True-Up Date on an amount equal to X minus the sum of the
Initial Transfer Amount and the benefit payments using (A) with respect to
the period from the Closing Date to the last day of the month preceding the
True-Up Date, the cumulative rate of return (considering both gain and loss)
earned or lost on the assets of the trust from which the True-Up Amount is
being transferred and (B) with respect to the period from the first day of
the month in which the True-Up Date occurs and the True-Up Date the rate paid
on a 90-Day Treasury Bill on the auction date coincident with or immediately
preceding the first day of the month in which the True-Up Date occurs. If
the Initial Transfer Amount exceeds X with respect to any plan, as soon as
practicable following such determination Newco shall cause a transfer to be
made to the respective Lockheed Martin Pension Plan equal to the difference
between the Initial Transfer Amount and X, adjusted to reflect Earnings (i)
from the last day of the month in which the Closing occurs until the Initial
<PAGE>
Transfer Date using the rate paid on a 90-day Treasury Bill on the auction
date coincident with or immediately preceding the Closing; (ii) from the
Initial Transfer Date until the date of transfer, such Earnings shall be
calculated using (A) with respect to the period from that Initial Transfer
Date to the last day of the month preceding such transfer, the cumulative
rate of return (considering both gain and loss) on the assets of the plan
from which the transfer is being transferred and (B) with respect to the
period from the first day of the month in which the transfer occurs and the
date of such transfer, the rate paid on a 90-Day Treasury Bill on the auction
date coincident with or immediately preceding the first day of the month in
which the transfer occurs. The True-Up Amount shall be transferred in cash
except benefits of Transferred Employees and Transferred Beneficiaries
attributable to John Hancock Group Annuity Contract 8474 shall be transferred
in kind. Unless the parties agree otherwise, all transfers will occur on the
last business day of a month. Notwithstanding anything contained herein to
the contrary, the transfers contemplated by this section G.05(d) shall be
determined in accordance with Section 414(l) of the Code and Treasury
Regulation 1.414(l)-1. The amounts to be transferred pursuant to this
section G.05(d) shall be reduced to the extent necessary to satisfy Section
414(l) of the Code, and any regulations promulgated thereunder, ERISA Section
4044, and any regulations promulgated thereunder.
(e) For the purposes of this Section, the term "Accrued Liability"
shall mean the present value of the accrued benefit of the Transferred
Employee or Transferred Beneficiary, determined on a termination basis using
the interest factors specified by the PBGC for an immediate or deferred
annuity as appropriate for such Transferred Employee or Transferred
Beneficiary and the other methods and factors specified in the regulations of
the PBGC for the valuation of accrued benefits upon plan termination,
including, but not limited to, expected retirement ages and expense load
assumptions published by the PBGC, and the 1983 Group Annuity Mortality
Table. The interest factors shall be those in effect on the Closing Date.
The Accrued Liability and Section 4044 Amount shall be determined by an
enrolled actuary designated by Lockheed Martin. Lockheed Martin shall
provide any actuary designated by Newco with all information reasonably
necessary to review the calculation of the Accrued Liability and the Section
4044 Amount in all material respects and to verify that such calculations
have been performed in a manner consistent with the terms of this Agreement.
If there is a good faith dispute between Lockheed Martin's actuary and
Newco's actuary as to the amount to be transferred to any plan, and such
dispute remains unresolved for 30 days, the chief financial officers of the
respective companies shall endeavor to resolve the issue. Should such
dispute remain unresolved for 60 days, Lockheed Martin and Newco shall select
and appoint a third actuary who is mutually satisfactory to both of the
parties hereto. The decision of such third party actuary shall be rendered
within 30 days and shall be conclusive as to any dispute for which it was
appointed. The cost of such third party actuary shall be divided equally
between Lockheed Martin and Newco. Each party shall be responsible for the
cost of its own actuary.
(f) Newco shall take all action necessary to qualify each Newco
Spinoff Plan under the applicable provisions of the Code and Newco and
Lockheed Martin shall cooperate to make any and all filings and submissions
to the appropriate governmental agencies required to be made by Newco as are
appropriate in effectuating the provisions hereof. The Newco Spinoff Plans
and Assumed Plans and any successor plans thereto shall contain appropriate
provisions providing that through the first year anniversary of the Closing
<PAGE>
(fifth anniversary in the case of Lockheed Martin Retirement Income Plan II
and Lockheed Martin Retirement Income Plan), each Newco Spinoff Plan shall
provide for a benefit formula that is no less favorable than the formula
provided in the corresponding Spinoff Plan at Closing. The Newco Spinoff
Plans or Assumed Plans receiving a transfer from the Lockheed Martin
Corporation Retirement Income Plan II and the Lockheed Martin Corporation
Pension Plan for Employees in Participating Bargaining Units and any
successor plans thereto shall contain appropriate provisions providing that
(i) to the extent assets transferred are attributable to assets transferred
from the GE Pension Plan or are governed by collective bargaining agreements,
any such assets shall be held by trusts forming a part of such Newco Spinoff
Plans (or successor plans) and shall be held for the exclusive benefit of the
participants in such Newco Spinoff Plans (or successor plans) and such assets
shall not upon termination of those Newco Spinoff Plans (or successor plans)
revert to the employer or sponsor of such Newco Spinoff Plans (or successor
plans); (ii) the accrued benefits as of the Closing of Transferred Employees
under such plans may not be decreased by amendment or otherwise; and (iii)
each Transferred Employee retiring under Newco Spinoff Plans (or successor
plans) will be entitled to receive pension benefits no less than what would
have been received under the GE Pension Plan as in effect as of April 5,
1993, taking into account the Transferred Employee's combined service with
Newco, Lockheed Martin, GE, and RCA and each of their Affiliates.
(g) With respect to the (i) Lockheed Martin Tactical Systems, Inc.
Supplemental Executive Retirement Plan ("LMTS SERP"); (ii) the Lockheed
Martin Corporation Supplementary Pension Plan for Employees of Transferred GE
Operations ("Supplementary Plan"), the Lockheed Martin Supplemental Executive
Retirement Plan, the Lockheed Martin Supplemental Retirement Income Plan (the
"Camden SERPs"); and (iii) the Supplemental Executive Retirement Plan for
Certain Management Employees of Narda Microwave Corporation, and Lockheed
Martin Fairchild Corporation Supplemental Benefit Plan, (the plans in (i),
(ii), and (iii) collectively referred to as the "LMC SERPs"), Newco shall
establish a nonqualified plan or plans (the "Newco SERP") for the benefit of
Transferred Employees and Transferred Beneficiaries participating in the LMC
SERPs as of the Closing Date and Newco shall assume all obligations and
liabilities under the LMC SERPs, with respect to the Transferred Employees
and the Transferred Beneficiaries. Effective as of the Closing Date, all
Transferred Employees will cease to accrue benefits under the LMC SERPs.
With respect to the Supplementary Plan, Newco will provide an equivalent plan
for Transferred Employees and Transferred Beneficiaries eligible to
participate in that plan as of the Closing Date that provides equivalent
benefits during the entire term of their employment with Newco, its
Affiliates and their successors. With respect to the LMC SERPs (other than
the Supplementary Plan), Newco shall provide a substantially similar plan in
accordance with the provisions of Section G.03(a). As soon as practicable
(but not more than 180 days) after the Closing Date, Lockheed Martin shall
cause its actuary to calculate the SERP Liability of all participants in the
LMTS SERP and the Camden SERPS, respectively, and the SERP Liability for
Transferred Employees and Transferred Beneficiaries in the LMTS and Camden
SERPS respectively and shall cause the following transfers. As soon as
practicable thereafter, but in no event later than the later of (i) the
acceptance of the calculation of the SERP Liability by Newco or (ii) 20 days
following submission to Lockheed Martin of evidence reasonably satisfactory
to it that Newco has established a corresponding rabbi trust or trusts,
Lockheed Martin shall cause a transfer of assets from the rabbi trust
established in connection with the LMTS SERP ("LMTS Trust") to a rabbi trust
established by Newco in an amount equal to the product of the (i) fair market
<PAGE>
value of the assets of the LMTS Trust as of the last day of the month in
which the Closing Date occurs; and (ii) a fraction, the numerator of which is
the "SERP Liability" for Transferred Employees and Transferred Beneficiaries
participating in the LMTS SERP and the denominator of which is the SERP
Liability for all participants in the LMTS SERP. Lockheed Martin shall also
cause a transfer of assets from the rabbi trust established in connection
with the Camden SERPs ("Camden Trust") to a rabbi trust established by Newco
in an amount equal to the product of the (i) fair market value of the assets
of the Camden Trust as of the last day of the month in which the Closing Date
occurs; and (ii) a fraction, the numerator of which is the "SERP Liability"
for Transferred Employees and Transferred Beneficiaries participating in the
Camden SERPs and the denominator of which is the SERP Liability for all
participants in the Camden SERPs. The amount of the transfer shall be
reduced by benefits paid by Lockheed Martin prior to the transfer. If the
amount of the benefits paid exceeds the amount of the transfer, Newco shall
promptly pay Lockheed Martin such excess. For the purpose of this section,
the "SERP Liability" with respect to a participant shall be the lump sum
present value (determined as of the end of the month in which the Closing
Date occurs) of the accrued benefit of the participant under the applicable
SERP calculated utilizing the assumptions used by Lockheed Martin for
reporting accrued benefit obligations relative to Seller Pension Plans under
FAS No. 87 in its 1996 Annual Report. The calculation of the amount to be
transferred shall be subject to the review and dispute resolution procedures
contained in subsection (e).
(h) No later than the True-Up Date, Lockheed Martin shall also
cause the Lockheed Martin Federal Systems, Inc. Retirement Plan ("Federal
Systems Plan") to make a transfer to a qualified defined benefit plan
designated by Newco in an amount equal to the accrued benefit of the
Transferred Employees who participated in the Federal Systems Plan
immediately prior to the Closing. For the purposes of this section, the
accrued benefit of the Transferred Employees shall mean the present value of
the accrued benefit determined on a termination basis using the interest
factors for an immediate or deferred annuity as appropriate for each such
Transferred Employee. The assumptions used in determining the accrued
benefit of each such Transferred Employee shall be the same as the
assumptions used to determine Accrued Liability under Section G.05(e). The
transfer shall be contingent upon Newco providing evidence reasonably
satisfactory to Lockheed Martin that such designated plan is qualified under
Section 401(a) of the Code and the trust of which it is a part is exempt from
taxation under Section 501(a) of the Code. Lockheed Martin shall also
provide to Newco evidence reasonably satisfactory to Newco that the Federal
Systems Plan is qualified under Section 401(a) of the Code and the trust of
which it is a part is exempt from taxation under Section 501(a) of the Code.
Upon receipt of such transfer of assets, Newco shall assume all liabilities
of Lockheed Martin and its Affiliates with respect to such Transferred
Employees under the Federal Systems Plan and shall become with respect to
such Transferred Employees responsible for all acts, obligations, omissions
and transactions under or in connection with the Federal Systems Plan,
whether arising before or after the Closing. Lockheed Martin shall cause the
benefits accrued as of the Closing Date by any Transferred Employee or
Transferred Beneficiary under the Lockheed Martin Retirement Plan for Certain
Salaried Employees (the "Lockheed Plan") or any other defined benefit pension
plan that is not listed in Schedule G.05(a) or this G.05(h) to be fully
vested at the Closing Date and any such Transferred Employee or Transferred
Beneficiary shall be eligible on the Closing Date to participate in the Newco
defined benefit plans (the "Newco Plans") established for other Transferred
<PAGE>
Employees or Transferred Beneficiaries who were formerly employed in the
Communications Systems Business Unit (or such other plan as Newco designates
in the case of Transferred Employees covered under any plan other than the
Lockheed Plan). Newco shall credit such Transferred Employees and
Transferred Beneficiaries with all service recognized under the Lockheed Plan
or such other plans as the case may be. If the Transferred Employee
participated in the plan for more than one year, Lockheed Martin shall credit
such Transferred Employees and Transferred Beneficiaries with all service
recognized under the Newco Plans for all purposes, other than benefit accrual
and will recognize Newco compensation for calculating pensionable earnings
under the Lockheed Plan or any other such plan which is a final average pay
plan.
G.06. Savings Plan Obligations.
(a) Transferred Employees currently participate in the following
defined contribution plans: (i) Lockheed Martin Defense Systems Savings and
Investment Plan; (ii) Lockheed Martin Salaried Savings Plan; (iii) Lockheed
Martin Salaried Savings Plan II; (iv) Lockheed Martin Performance Sharing
Plan; (v) Lockheed Martin Supplemental Savings Plan; (vi) Conic Corporation
Deferred Income Retirement Plan; (vii) Narda Microwave Supplemental
Retirement Savings Plan; (viii) Narda Western Operations 401(k) Deferred
Income Retirement Plan; (ix) Lockheed Martin Tactical Systems, Inc. Deferred
Income Savings Plan; (x) Lockheed Martin Fairchild Corporation Savings Plan;
(xi) Randtron Employees Retirement Savings Plan; (xii) Microcom Corporation
401(k) Plan; (xiii) Profit Sharing Plan and Trust of Lockheed Martin Hycor,
Inc., (xiv) Lockheed Martin Tactical Systems Inc. Frequency Sources, Inc.
401(k) Retirement Plan and (xv) Lockheed Martin Federal Systems Deferred
Income Retirement Plan (collectively, "Lockheed Martin Defined Contribution
Plans"). The plans listed in (i), (vi), (vii), (viii), (ix), (xiv) and (xv)
are all sub-plans in the Lockheed Martin Tactical Systems Master Savings
Plan.
(b) Effective as of the Closing Date, Lockheed Martin and Newco
shall cause (i) Randtron Employees Retirement Plan; (ii) Microcom Corporation
401K Plan; (iii) Profit Sharing Plan and Trust of Lockheed Martin Hycor, Inc.
("Transferred Savings Plans") to be amended to provide that sponsorship and
maintenance thereof shall be transferred to Newco and Newco shall assume all
of the obligations and liabilities of Lockheed Martin and its Affiliates with
respect to each such Transferred Plan (including liabilities with respect to
Transferred Beneficiaries) and contingent upon receipt of the transferred
assets described in Section G.06(c), shall become responsible for all acts,
omissions and transactions under or in connection with the Transferred
Savings Plan, whether arising before or after Closing. Effective as of the
Closing Date, Lockheed Martin and/or its Affiliates shall cease to sponsor,
administer or contribute (other than contributions in respect of benefits
accrued prior to the Effective Date) to the Transferred Savings Plans and
thereby cease to be responsible for any acts, omissions and transactions
under or in connection with any such Transferred Savings Plan.
(c) With respect to all Lockheed Martin Defined Contribution Plans
except the Transferred Savings Plans described in Section G.06(b) (the
"Lockheed Martin Savings Plans"), the Transferred Employees shall cease to
accrue benefits and service credits under such plans as of the Closing Date
and, effective as of the Closing Date, Newco shall establish new savings
plans ("Newco's Savings Plans") and associated trusts to hold the assets of
those plans for the Transferred Employees, to be effective as of the Closing
<PAGE>
Date, and shall provide to Lockheed Martin evidence reasonably satisfactory
to Lockheed Martin that Newco's Savings Plans and the associated trusts have
been established and that the Newco's Savings Plans qualify under the
requirements of Section 401(a) of the Code, and that the trusts are exempt
from tax under Section 501(a) of the Code. Lockheed Martin shall provide to
Newco evidence reasonably satisfactory to Newco that the Lockheed Martin
Savings Plans remain qualified under the requirements of Section 401(a) of
the Code. Provided Lockheed Martin and Newco have received evidence
reasonably satisfactory to them in accordance with the preceding sentences,
as soon as is reasonably practicable following the Closing Date, in no event
later than 60 days following receipt of such mutually satisfactory evidence,
Lockheed Martin shall take or cause to be taken all action required or
appropriate to transfer the account balances of all Transferred Employees and
Transferred Beneficiaries to the respective trusts associated with Newco's
Savings Plans. Such transfers shall be made in cash in an amount equal to
the value of the account balances to be transferred, determined as of the
close of business on the last business day immediately preceding the
transfer, except that (i) to the extent a participant's or beneficiary's
account balance in the transferor plan includes one or more promissory notes
evidencing a participant loan or loans, such promissory notes shall be
transferred in kind for the participant's or beneficiary's credit under the
transferee plan and (ii) any assets in the transferor trust consisting of
securities issued by Lockheed Martin, Martin Marietta Materials, Inc. or
Loral Space & Communications, Ltd. that are allocable to the respective
transferee plan shall be transferred in kind. For the period from the
Closing Date until the transfer, Newco shall collect by payroll deduction and
promptly pay over to the respective Lockheed Martin Defined Contribution Plan
all loan payments required on participant loans made by the respective plan
to any Transferred Employee and Lockheed Martin shall cause the respective
Lockheed Martin Defined Contribution Plan to administer and pay all
distributions, withdrawals and loans payable under the terms of the
respective plan to any Transferred Employee or Transferred Beneficiary until
the transfer. Contingent upon the transfer of the account balances to each
of Newco's Savings Plans, Newco shall assume all liabilities of Lockheed
Martin and its affiliates with respect to Transferred Employees and
Transferred Beneficiaries under the Lockheed Martin Defined Contribution Plan
from which that transfer was made and shall become with respect to such
Transferred Employees and Transferred Beneficiaries responsible for all acts,
omissions and transactions under or in connection with such Lockheed Martin
Defined Contribution Plan, whether arising before or after the Closing;
provided, however, that in the case of liabilities with respect to Camden
Transferees, Newco shall only assume liabilities and shall only become
responsible for all acts, omissions and transactions under or in connection
with that Lockheed Martin Defined Contribution Plan arising after the Closing
or disclosed in Section B.21 of the Disclosure Schedules.
G.07. GE Special Benefits Protections. Pursuant to Section V.II of
Exhibit V to a Transaction Agreement (the "GE Agreement") dated November 22,
1992, as amended, among GE, Martin Marietta Corporation, a Maryland
corporation and Lockheed Martin, Lockheed Martin has agreed to reimburse GE
(the "GE Reimbursement Obligations") for certain specified expenses relating
to benefits for certain individuals who were formerly employed by GE and who
became employees of Lockheed Martin or its Affiliates as a result of the
transaction contemplated by the GE Agreement (the "Former GE Employees").
Newco shall assume, effective on the Closing Date, all of the GE
Reimbursement Obligations in respect of Transferred Employees and Transferred
Beneficiaries for such specified expenses, and shall indemnify and hold
<PAGE>
harmless Lockheed Martin and its Affiliates from any and all such GE
Reimbursement Obligations. Lockheed Martin shall provide Newco with copies
of any documentation it receives from GE documenting the basis for such
expenses.
G.08. Severance and Retention Agreements. In accordance with
Section 6.9 of the Agreement and Plan of Merger dated as of January 7, 1996,
by and among Loral Corporation, Lockheed Martin Corporation and LAC
Acquisition Corporation, Lockheed Martin Tactical Systems, Inc. has adopted
the Supplemental Severance Program. Lockheed Martin has entered into Key
Employee Supplemental Severance Program and Key Executive Supplemental
Severance Program agreements (the "Program Agreements"). In addition,
Lockheed Martin has entered into Retention Agreements (collectively with the
Supplemental Severance Program and the Program Agreements, the "Supplemental
Agreements") with certain Transferred Employees who participate in the
Supplemental Severance Program. Other than with respect to the Transferred
Employees set forth on Section B.21 of the Disclosure Schedules, Newco
assumes all obligations and liabilities of Lockheed Martin and its Affiliates
under the Supplemental Agreements for all claims made after the Closing Date
by Transferred Employees, including claims based on the Contemplated
Transactions, which shall be Assumed Liabilities for purposes of this
Agreement. All obligations and liabilities of Lockheed Martin with respect
to the Transferred Employees on Section B.21 of the Disclosure Schedules and
any other individual covered by a Supplemental Agreement who is not a
Transferred Employee shall constitute Excluded Liabilities.
G.09. Vacation and Holidays. As of the Closing, Newco shall adopt
at its expense, vacation and holiday plans for Transferred Employees to
succeed Lockheed Martin's and its Affiliates' vacation and holiday plans.
For the 12-month period beginning with the Closing Date, such plans shall
provide for accrued vacation and holidays no less favorable than, and in
substitution for, those Lockheed Martin and its Affiliates would have
provided to such Transferred Employees had they remained employees of
Lockheed Martin and its Affiliates, and Lockheed Martin and its Affiliates
shall have no liability or obligation to pay or provide any vacation or
holiday payments claimed on or after the Closing Date. Thereafter, such
plans shall provide vacation, accrued vacation and holidays to each eligible
Transferred Employee on the basis of his or her continuous service with
Lockheed Martin, Newco and their Affiliates.
G.10. Other Employee Plans.
(a) Newco shall, as of the Closing Date, assume all obligations
and liabilities of Lockheed Martin and its Affiliates in respect of
Transferred Employees and Transferred Beneficiaries under the Deferred
Management Incentive Compensation Plan.
(b) Newco shall, as of the Closing Date, assume all obligations
and liabilities (including, without limitation, all obligations and
liabilities attributable to the period prior to the Closing Date) of Lockheed
Martin and its Affiliates in respect of Transferred Employees and Transferred
Beneficiaries under each Employee Plan and Benefit Arrangement not covered
under Sections G.05, G.06, G.07, G.08, G.09, G.10(a) and G.10(c) and shall be
a successor employer with respect to such plans; provided, however, that with
respect to obligations and liabilities to Camden Transferees arising from
events occurring prior to the Closing Date, Newco shall assume such
obligations and liabilities only to the extent that they (i) arise under a
<PAGE>
Benefit Arrangement or Employee Plan disclosed in Section B.21 of the
Disclosure Schedules; (ii) are reflected in the Final Net Tangible Asset
Amount; or (iii) are incurred after the Effective Date.
(c) With respect to each Employee Plan and Benefit Arrangement
(other than those referred to in Sections G.05, G.06, G.07, G.08, G.09 and
G.10(a)), including any employment agreement, that covers only Transferred
Employees and/or Transferred Beneficiaries ("Transferred Benefit Plans"),
Lockheed Martin and Newco shall cause each Transferred Benefit Plan to be
amended to provide that sponsorship and maintenance thereof shall be trans-
ferred as of the Closing Date to Newco and Newco shall assume all obligations
and liabilities of Lockheed Martin and its Affiliates with respect to each
such plan (including liabilities with respect to Transferred Beneficiaries),
and shall become responsible for all acts, omissions and transactions under
or in connection with the Transferred Benefit Plans, whether arising before
or after Closing; provided, however, that with respect to obligations and
liabilities to Camden Transferees under or otherwise arising in connection
with an Employee Plan or Benefit Arrangement arising from events occurring
prior to the Closing Date, Newco shall assume such obligations and
liabilities only to the extent that they (i) arise under an Employee Plan or
Benefit Arrangement disclosed in Section B.21 of the Disclosure Schedules;
(ii) are reflected in the Final Net Tangible Asset Amount; or (iii) are
incurred after the Closing Date. Effective as of the Closing Date, Lockheed
Martin and/or its Affiliates shall cease to sponsor, administer or contribute
to the Transferred Benefit Plans and thereby cease to be responsible for any
acts, omissions and transactions under or in connection with any such
Transferred Benefit Plan, whether occurring before or after Closing. Except
as otherwise agreed to by the parties or as it relates solely to an
Individual Purchaser, Lockheed Martin agrees to transfer any assets which are
separately identifiable or attributable to the Employee Plans and Benefit
Arrangements described in this Section G.10(c).
(d) As of the Closing Date, Transferred Employees and Transferred
Beneficiaries shall cease to accrue or enjoy benefits under any Employee
Plans and Benefit Arrangements (excluding those referred to in Sections
G.05(b), G.06(b), G.07, G.08, G.09 and G.10(c)) and shall commence accrual of
benefits and participation in those employee compensation and benefit plan
and arrangements maintained by Newco pursuant to Section G.03.
(e) For any full or partial contract year or plan year prior to
the Closing Date of any Employee Plan or Benefit Arrangement covering
Transferred Employees or Transferred Beneficiaries (other than Camden
Transferees): (i) Lockheed Martin agrees to carve out and transfer to the
corresponding Newco plan, any surpluses, refunds or rebates received by or
attributable to Lockheed Martin for any Employee Plan or Benefit Arrangement
and (ii) Newco agrees to transfer to the corresponding Lockheed Martin Plan
an amount equal to any deficit charged to or attributable to Lockheed Martin
for any Employee Plan or Benefit Arrangement, in either case that is
attributable to Transferred Employees and/or Transferred Beneficiaries.
(f) The flexible spending accounts established on behalf of the
Transferred Employees and Transferred Beneficiaries in accordance with
Section G.03(a) will be maintained through the end of the applicable plan
year in which the Closing occurs in a manner that ensures that each
Transferred Employee and Transferred Beneficiary receives no more and no less
than he or she would have received had the Contemplated Transactions not
occurred. Lockheed Martin and Newco shall coordinate management of their
<PAGE>
respective flexible spending accounts to achieve this result. As soon as
practicable following the close of the 1997 plan year, Lockheed Martin and
Newco shall reconcile flexible spending account balances so as to achieve an
equitable result as between Lockheed Martin and Newco.
G.11. Necessary Action. Newco and Lockheed Martin agree to take all
action which may be necessary in order to effectuate the transactions
contemplated by this Exhibit G, including, without limitation, adopting any
necessary amendments to the Employee Plans and Benefit Arrangements and
making all filings and submissions to the appropriate governmental agencies
required to be made in connection with the segregation and/or transfer of
assets contemplated by Sections G.05 and G.06.
G.12. Third Party Beneficiaries. No provision of this Exhibit G
shall create any third party beneficiary rights in any employee or former
employee of the Business (including any beneficiary or dependent thereof)
including, without limitation, any right to continued employment or
employment in any particular position by Newco for any specified period of
time after the Closing Date.
G.13. Plan Administration. Newco shall prepare and file all Forms
5500 and other government reports or returns that are required to be filed
after the Closing Date with respect to each of the Assumed Plans described in
Section G.05(b), the Transferred Savings Plans described in Section G.06(b)
and the Transferred Benefit Plans described in Section G.10(c).
G.14. Mutual Assistance. At all times after the Closing Date, Newco
and Lockheed Martin agree to make reasonably available to each other and each
other's agents, employees, accountants and other representatives such
actuarial, financial, personnel and related information as may be requested
with respect to any Employee Plan or Benefit Arrangement, Transferred
Employee or Transferred Beneficiary, including but not limited to benefit
records, compensation and employment histories, policies, interpretations and
other records relating to the Employee Plans and Benefit Arrangements.
G.15. Flanigan v. G.E. Newco shall not by reason of the
transactions contemplated by this Agreement or otherwise be deemed to have
assumed any liability or obligation with respect to any claim or cause of
action asserted against GE or Lockheed Martin in the lawsuit Flanigan v. G.E.
filed in the federal district court in Connecticut in March, 1993. All such
claims and causes of action shall constitute Excluded Liabilities for
purposes of this Agreement. Nothing in this Section G.15. or elsewhere,
however, shall be deemed to require Lockheed Martin to indemnify or otherwise
to relieve Newco of any liability or obligation it may incur as a result of a
purported claim or purported cause of action asserted against Newco which is
based on this Agreement, the Contemplated Transactions, or any actions or
transactions that occur on or after the date of this Agreement.
<PAGE>
- ---------------------------------------------------------------------------
AMENDMENT NO. 1
Dated as of April 11, 1997
to
TRANSACTION AGREEMENT
Dated as of March 28, 1997
By and Among
LOCKHEED MARTIN CORPORATION
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.
FRANK C. LANZA
ROBERT V. LAPENTA
and
L-3 COMMUNICATIONS HOLDINGS, INC.
- ---------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 1 TO TRANSACTION AGREEMENT
This Amendment No. 1 to Transaction Agreement (the "Amendment") is made
as of the 11th day of April, 1997, by and among Lockheed Martin Corporation,
a Maryland corporation ("Lockheed Martin"), Lehman Brothers Capital Partners
III, L.P., a Delaware limited partnership ("Lehman"), Frank C. Lanza
("Lanza"), Robert V. LaPenta ("LaPenta"; and together with Lanza, the
"Individual Purchasers") and L-3 Communications Holdings, Inc., a Delaware
corporation ("Newco"). For purposes of this Amendment, Lehman, Lanza and
LaPenta each are individually referred to as a "Purchaser" and collectively
referred to as the "Purchasers."
W I T N E S S E T H:
WHEREAS, Lockheed Martin, in its own right and through certain of its
direct and indirect Subsidiaries is engaged in the Business;
WHEREAS, Lockheed Martin and the Purchasers, upon the terms and subject
to the conditions of the Agreement have agreed to the formation and
organization of Newco;
WHEREAS, upon the terms and subject to the conditions of the Agreement,
Lockheed Martin has agreed to transfer, or to cause the Affiliated
Transferors to transfer, substantially all of the assets held or owned by, or
used to conduct, the Business and to assign certain liabilities associated
with the Business to Newco, and Newco has agreed to receive such assets and
assume such liabilities; and
WHEREAS, Lockheed Martin, Newco and the Purchasers desire to amend the
Agreement in accordance with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
Section 1. Capitalized terms used but not defined herein have the
meanings given to them in the Transaction Agreement dated as of March 28,
1997, by and among Lockheed Martin, Newco and the Purchasers.
Section 2. Section 15.13(a) of the Agreement is amended by deleting
the reference to "April 14, 1997" in the second sentence of Section 15.13(a)
and inserting in its place and stead "April 17, 1997."
Section 3. Section 15.13(c) of the Agreement is amended by deleting
the references to "April 11, 1997" in each of the last two sentences of
Section 15.13(c) and inserting in its place and stead "April 18, 1997."
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly
executed by their respective authorized officers on the day and year first
above written.
WITNESS: LOCKHEED MARTIN CORPORATION
____________________________ By:________________________________
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: LEHMAN BROTHERS HOLDINGS INC.,
its General Partner
____________________________ By:___________________________
Name:
Title:
FRANK C. LANZA
____________________________ ___________________________________
ROBERT V. LAPENTA
____________________________ ___________________________________
L-3 COMMUNICATIONS HOLDINGS, INC.
____________________________ By:________________________________
Name:
Title:
<PAGE>
- ---------------------------------------------------------------------------
AMENDMENT NO. 2
Dated as of April 30, 1997
to
TRANSACTION AGREEMENT
Dated as of March 28, 1997
By and Among
LOCKHEED MARTIN CORPORATION
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.
FRANK C. LANZA
ROBERT V. LAPENTA
and
L-3 COMMUNICATIONS HOLDINGS, INC.
- ---------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 2 TO TRANSACTION AGREEMENT
This Amendment No. 2 to Transaction Agreement (the "Amendment") is made
as of the 30th day of April, 1997, by and among Lockheed Martin Corporation,
a Maryland corporation ("Lockheed Martin"), Lehman Brothers Capital Partners
III, L.P., a Delaware limited partnership ("Lehman"), Frank C. Lanza
("Lanza"), Robert V. LaPenta ("LaPenta"; and together with Lanza, the
"Individual Purchasers") and L-3 Communications Holdings, Inc., a Delaware
corporation ("Newco"). For purposes of this Amendment, Lehman, Lanza and
LaPenta each are individually referred to as a "Purchaser" and collectively
referred to as the "Purchasers."
W I T N E S S E T H:
WHEREAS, Lockheed Martin, in its own right and through certain of its
direct and indirect Subsidiaries is engaged in the Business;
WHEREAS, Lockheed Martin and the Purchasers, upon the terms and subject
to the conditions of the Agreement have agreed to the formation and
organization of Newco;
WHEREAS, upon the terms and subject to the conditions of the Agreement,
Lockheed Martin has agreed to transfer, or to cause the Affiliated
Transferors to transfer, substantially all of the assets held or owned by, or
used to conduct, the Business and to assign certain liabilities associated
with the Business to Newco, and Newco has agreed to receive such assets and
assume such liabilities; and
WHEREAS, Lockheed Martin, Newco and the Purchasers desire to amend the
Agreement in accordance with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
Section 1. Capitalized terms used but not defined herein have the
meanings given to them in the Transaction Agreement dated as of March 28,
1997, by and among Lockheed Martin, Newco and the Purchasers, as amended by
Amendment No. 1 to Transaction Agreement dated as of April 11, 1997 (as
amended, the "Agreement").
Section 2. The list of Attachments set forth in the index to the
Agreement is revised by amending the description of Attachment XI to read as
follows: "Other Transferred Employees".
Section 3. Section 2.04(i) of the Agreement is amended by deleting
the references to "$269,118,000" in the first parenthetical of that Section
and inserting in their place and stead "$272,618,000".
Section 4. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment IV shall be as set forth
in Exhibit A to this Amendment.
Section 5. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment V shall be as set forth
in Exhibit B to this Amendment.
<PAGE>
Section 6. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment VIII shall be as set
forth in Exhibit C to this Amendment.
Section 7. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment IX shall be as set forth
in Exhibit D to this Amendment.
Section 8. Notwithstanding the provisions of Section 15.13(b) of the
Agreement, for purposes of the Agreement, Attachment X shall as set forth in
Exhibit E to this Amendment.
Section 9. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment XI shall be as set forth
in Exhibit F to the Amendment.
Section 10. For purposes of the Agreement, Attachment XIV shall be as
set forth in Exhibit G to this Amendment.
Section 11. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment XV shall be as set forth
in Exhibit H to this Amendment.
Section 12. The Disclosure Schedules attached to this Amendment as
Exhibit I are, and for all purposes shall be, the Disclosure Schedules
referenced in the Agreement.
Section 13. Section 7.04 of the Agreement is amended by deleting the
reference to "Attachment XI" in the second parenthetical of the first
sentence and inserting in its place and stead the phrase "writing by Lockheed
Martin and Newco on or prior to the Closing Date".
Section 14. Section 8.04 of the Agreement is amended by deleting the
reference to "Attachment XI" in the second parenthetical of the first
sentence and inserting in its place and stead the phrase "writing by Lockheed
Martin and Newco on or prior to the Closing Date".
Section 15. Section 13.02(b) of the Agreement is amended by deleting
the word "or" before the beginning of clause (v); inserting the phrase ", or
(vi) the Universal Litigation" after clause (v) and before the semicolon;
deleting the word "and" before "(v)" in the proviso; and inserting the phrase
"and (vi)" after "(v)" in the proviso.
Section 16. Section 13.04(b)(iii) of the Agreement is amended by
deleting the word "and" after the semicolon.
Section 17. Section 13.04(b)(iv) of the Agreement is amended by
deleting the period at the end and inserting in its place and stead the
phrase "; and".
Section 18. Section 13.04(b) of the Agreement is amended by adding a
new clause (v) as follows:
"(v) with respect to the matter described in clause (vi)
of Section 13.02(b) (after giving effect to the proviso
thereto), to the extent of 50% of the aggregate Damages
incurred by all Indemnified Parties as the result thereof in
<PAGE>
excess of the Reserve Amount but not in excess of the Reserve
Amount plus $1,000,000 (it being understood that Lockheed
Martin's maximum liability under Section 13.02(b)(vi) and this
Section 13.04(b)(v) shall be $500,000)."
Section 19. Section 15.01 of the Agreement is amended to change the
notice address for notices to Newco to the following:
"L-3 Communications Holdings, Inc.
600 Third Avenue
New York, New York 10016
Attention: Robert V. LaPenta
Telecopy: (212) 805-5470"
Section 20. Section (a) of Exhibit A to the Agreement is amended by
adding the following after the definition of "Prime Government Contract" and
before the definition of "Remedial Action(s)":
""Reserve Amount" means the amount referenced in the
letter from Lockheed Martin to Newco dated as of the Closing
Date making specific reference to the Agreement and this
definition.
Section 21. Section (a) of Exhibit A to the Agreement is amended by
adding the following after the definition of "Transferred Assets" and before
the definition of "U.S. Government":
""Universal Litigation" means the matter titled Universal
---------
Navigation Corporation, a California corporation; and
-----------------------------------------------------
Microcomputer Electronics Corporation, a Washington
---------------------------------------------------
corporation v. Loral Corporation, a New York corporation; and
-------------------------------------------------------------
Loral Fairchild Corp., a Delaware corporation (CIV93-743TUC
---------------------------------------------
WDB) pending in the United States District Court for the
District of Arizona."
Section 22. Clause (ii) of the definition of "Transferred Employee"
in Section G.01 of Exhibit G to the Agreement is amended by deleting the
existing provision in its entirety and inserting in its place and stead the
following:
"(ii) was laid off from the Business and has recall rights
with respect to the Business other than any Person with such
rights who is either employed by Lockheed Martin on the
Closing Date (other than in the Business) or who has recall
rights at another Lockheed Martin facility, or"
Section 23. Section G.08 of Exhibit G to the Agreement is amended by
deleting the existing provision in its entirety and inserting in its place
and stead the following:
<PAGE>
"G.08. Severance and Retention Agreements. In accordance with
----------------------------------
Section 6.9 of the Agreement and Plan of Merger dated as of January 7,
1996, by and among Loral Corporation, Lockheed Martin Corporation and
LAC Acquisition Corporation, Lockheed Martin Tactical Systems, Inc. has
adopted the Supplemental Severance Program. Lockheed Martin has entered
into Key Employee Supplemental Severance Program and Key Executive
Supplemental Severance Program agreements (the "Program Agreements").
In addition, Lockheed Martin has entered into Retention Agreements
(collectively with the Supplemental Severance Program and the Program
Agreements, the "Supplemental Agreements") with certain Transferred
Employees who participate in the Supplemental Severance Program.
Lockheed Martin also sponsors the Lockheed Martin Tactical Systems
Severance Plan (the "Tactical Severance Plan"), the Severance Benefit
Plan for Employees of Lockheed Martin Corporation (the "LMC Severance
Plan") and the Special Supplemental Severance Program relating to the
retention (as set forth in a memorandum from Steve Jackson dated October
28, 1996 of C3I and Systems Integration Sector administrative personnel
(collectively with the Supplemental Agreements, the Tactical Severance
Plan and the LMC Severance Plan, the "Severance Arrangements"). Other
than with respect to the Transferred Employees set forth on Section B.21
of the Disclosure Schedules, Newco assumes all obligations and
liabilities of Lockheed Martin and its Affiliates under the Severance
Arrangements and any other severance benefit obligation (collectively
with the Severance Arrangements, the "Severance Obligations") whether
oral or written, for all claims made after the Closing Date by
Transferred Employees, including claims based on the Contemplated
Transactions, which shall be Assumed Liabilities for purposes of this
Agreement. All obligations and Liabilities of Lockheed Martin with
respect to any Severance Obligation for the Transferred Employees on
Section B.21 of the Disclosure Schedules and any other individual
covered by a Supplemental Agreement under any Severance Obligation who
is not a Transferred Employee shall constitute Excluded Liabilities."
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly
executed by their respective authorized officers on the day and year first
above written.
LOCKHEED MARTIN CORPORATION
By:________________________________
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: LEHMAN BROTHERS HOLDINGS INC.,
its General Partner
By:___________________________
Name:
Title:
FRANK C. LANZA
___________________________________
ROBERT V. LAPENTA
___________________________________
L-3 COMMUNICATIONS HOLDINGS, INC.
By:________________________________
Name:
Title:
<PAGE>
AMENDMENT NO. 3
Dated as of May 21, 1997
to
TRANSACTION AGREEMENT
Dated as of March 28, 1997
By and Among
LOCKHEED MARTIN CORPORATION
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.
LEHMAN BROTHERS HOLDINGS INC.
FRANK C. LANZA
ROBERT V. LAPENTA
L-3 COMMUNICATIONS HOLDINGS, INC.
and
L-3 COMMUNICATIONS CORPORATION
<PAGE>
AMENDMENT NO. 3 TO TRANSACTION AGREEMENT
This Amendment No. 3 to Transaction Agreement (the "Amendment") is
made as of the 15th day of May, 1997, by and among Lockheed Martin
Corporation, a Maryland corporation ("Lockheed Martin"), Lehman Brothers
Capital Partners III, L.P., a Delaware limited partnership, Lehman Brothers
Holdings Inc., a Delaware corporation (together with Lehman Brothers Capital
Partners III, L.P., "Lehman"), Frank C. Lanza ("Lanza"), Robert V. LaPenta
("LaPenta"; and together with Lanza, the "Individual Purchasers"), L-3
Communications Holdings, Inc., a Delaware corporation ("Newco"), and L-3
Communications Corporation, a Delaware corporation. For purposes of this
Amendment, Lehman, Lanza and LaPenta each are individually referred to as a
"Purchaser" and collectively referred to as the "Purchasers."
W I T N E S S E T H
WHEREAS, Lockheed Martin, in its own right and through certain of
its direct and indirect Subsidiaries previously was engaged in the Business;
WHEREAS, Lockheed Martin and the Purchasers, upon the terms and
subject to the conditions of the Agreement have formed and organized Newco;
WHEREAS, upon the terms and subject to the conditions of the
Agreement, Lockheed Martin has transferred or caused the Affiliated
Transferors to transfer, substantially all of the assets held or owned by, or
used to conduct, the Business and to assign certain liabilities associated
with the Business to Newco, and Newco has received such assets and assumed
such liabilities;
WHEREAS, Lehman Brothers Capital Partners III L.P. has assigned
certain of its rights and obligations under the Agreement to Lehman Brothers
Holdings Inc., and Newco has assigned certain of its rights and obligations
under the Agreement to L-3 Communications Corporation, a Delaware corporation
and wholly owned subsidiary of Newco; and
WHEREAS, Lockheed Martin, Newco and the Purchasers desire to amend
the Agreement in accordance with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties contained herein, the parties agree as follows:
Section 1. Capitalized terms used but not defined herein have the
meanings given to them in the Transaction Agreement dated as of March 28,
1997, by and among Lockheed Martin, Newco and the Purchasers, as amended by
Amendment No. 1 to Transaction Agreement dated as of April 11, 1997, and by
Amendment No. 2 to the Transaction Agreement dated as of April 30, 1997 (as
amended, the "Agreement").
Section 2. Section G.06(c) of the Transaction Agreement shall be
amended to read as follows:
With respect to all Lockheed Martin Defined Contribution Plans
except the Transferred Savings Plans described in Section
G.06(b) (the "Lockheed Martin Savings Plans"), the Transferred
Employees shall cease to accrue benefits and service credits
under such plans as of the Closing Date and, effective as of
<PAGE>
the Closing Date, Newco shall establish new savings plans
("Newco's Savings Plans") and associated trusts to hold the
assets of those plans for the Transferred Employees, to be
effective as of the Closing Date, and shall provide to
Lockheed Martin evidence reasonably satisfactory to Lockheed
Martin that Newco's Savings Plans and the associated trusts
have been established and that Newco's Savings Plans qualify
under the requirements of Section 401(a) of the Code, and that
the trusts are exempt from tax under Section 501(a) of the
Code. Lockheed Martin shall provide to Newco evidence
reasonably satisfactory to Newco that the Lockheed Martin
Savings Plans remain qualified under the requirements of
Section 401(a) of the Code. Provided Lockheed Martin and Newco
have received evidence reasonably satisfactory to them in
accordance with the preceding sentences, as soon as is
reasonably practicable following the Closing Date, but in no
event later than 60 days following receipt of such mutually
satisfactory evidence, (i) Lockheed Martin shall take all
action required or appropriate to transfer the account
balances of all Transferred Employees and Transferred
Beneficiaries (other than account balances in the Lockheed
Martin Savings Plan, Lockheed Martin Savings Plan II and
Lockheed Martin Performance Sharing Plan, collectively the
"Camden Plans") to the respective trust associated with
Newco's Savings Plans; and (ii) with respect to account
balances in the Camden Plans, Lockheed Martin shall amend the
Camden Plans, to the extent permitted by Section 401(k)(10) of
the Code, to permit each Transferred Employee or Transferred
Beneficiary with an account balance in the Camden Plans during
the period between the Closing and the end of the second
calendar year following the Closing, to (x) receive a
distribution from the Camden Plans; (y) make a direct rollover
in accordance with Section 401(a)(31) of the Code; or (z)
leave his or her account balances in the Camden Plans.
Transfers shall be made in the form of cash in an amount equal
to the value of the account balances to be transferred,
determined as of the close of business on the last business
day immediately preceding the transfer, except that (i) to the
extent a participant's or beneficiary's account balance in the
transferor plan includes one or more promissory notes
evidencing a participant loan or loans, such promissory note
shall be transferred in kind for the participant's or
beneficiary's credit under the transferee plan and (ii) any
assets in the transferor trust consisting of securities issued
by Lockheed Martin, Martin Marietta Materials, Inc. and Loral
Space & Communications, Ltd. that are allocable to the
respective transferee plan shall be transferred in kind.
Amounts distributed or rolled over from the Camden Plans shall
be payable in cash only. For the period from the Closing Date
until such time as the Transferred Employee or Transferred
Beneficiary no longer has an account balance in any Lockheed
Martin Defined Contribution Plan, Newco shall collect by
payroll deduction and promptly pay over to the respective
Lockheed Martin Defined Contribution Plan all loan payments
required on participant loans made by the respective plan to
any Transferred Employee and Lockheed Martin shall cause the
respective Lockheed Martin Defined Contribution Plan to
<PAGE>
administer and pay all distributions, withdrawals and loans
payable under the terms of the respective plan. Contingent
upon the transfer of an account balance to each of Newco's
Savings Plans, Newco shall assume all liabilities of Lockheed
Martin and its affiliates with respect to that Transferred
Employee or Transferred Beneficiary under the Lockheed Martin
Defined Contribution Plan from which that transfer was made
and shall become with respect to such Transferred Employee and
Transferred Beneficiary responsible for all acts, omissions
and transactions under or in connection with such Lockheed
Martin Defined Contribution Plan, whether arising before or
after the Closing; provided, however, that in the case of any
liabilities with respect to Camden Transferees (other than
Camden Transferrees for whom no such transfer was made), Newco
shall only assume liabilities and shall only become
responsible for all acts, omissions and transactions under or
in connection with that Lockheed Martin Defined Contribution
Plan arising after the Closing or disclosed in Section B.21 of
the Disclosure Schedules."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their respective authorized officers on the day and
year first above written.
WITNESS: LOCKHEED MARTIN CORPORATION
_______________________________ By: ____________________________
Name: Marian S. Block
Title: Associate General
Counsel
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: LEHMAN BROTHERS HOLDINGS
INC., its General Partner
_______________________________ By: ____________________________
Name: Robert B. Millard
Title: Managing Director
LEHMAN BROTHERS HOLDINGS INC.
_______________________________ By: ____________________________
Name: Steven J. Berger
Title: Managing Director
L-3 COMMUNICATIONS HOLDINGS,
INC.
_______________________________ By: ____________________________
Name: Michael T. Strianese
Title: VP Finance and
Controller
FRANK C. LANZA
_______________________________ ____________________________
ROBERT V. LAPENTA
_______________________________ ____________________________
<PAGE>
L-3 COMMUNICATIONS CORPORATION
_______________________________ By: ____________________________
Name: Michael T. Strianese
Title: VP Finance and
Controller
- ---------------------------------------------------------------------------
AMENDMENT NO. 1
Dated as of April 11, 1997
to
TRANSACTION AGREEMENT
Dated as of March 28, 1997
By and Among
LOCKHEED MARTIN CORPORATION
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.
FRANK C. LANZA
ROBERT V. LAPENTA
and
L-3 COMMUNICATIONS HOLDINGS, INC.
- ---------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 1 TO TRANSACTION AGREEMENT
This Amendment No. 1 to Transaction Agreement (the "Amendment") is made
as of the 11th day of April, 1997, by and among Lockheed Martin Corporation,
a Maryland corporation ("Lockheed Martin"), Lehman Brothers Capital Partners
III, L.P., a Delaware limited partnership ("Lehman"), Frank C. Lanza
("Lanza"), Robert V. LaPenta ("LaPenta"; and together with Lanza, the
"Individual Purchasers") and L-3 Communications Holdings, Inc., a Delaware
corporation ("Newco"). For purposes of this Amendment, Lehman, Lanza and
LaPenta each are individually referred to as a "Purchaser" and collectively
referred to as the "Purchasers."
W I T N E S S E T H:
WHEREAS, Lockheed Martin, in its own right and through certain of its
direct and indirect Subsidiaries is engaged in the Business;
WHEREAS, Lockheed Martin and the Purchasers, upon the terms and subject
to the conditions of the Agreement have agreed to the formation and
organization of Newco;
WHEREAS, upon the terms and subject to the conditions of the Agreement,
Lockheed Martin has agreed to transfer, or to cause the Affiliated
Transferors to transfer, substantially all of the assets held or owned by, or
used to conduct, the Business and to assign certain liabilities associated
with the Business to Newco, and Newco has agreed to receive such assets and
assume such liabilities; and
WHEREAS, Lockheed Martin, Newco and the Purchasers desire to amend the
Agreement in accordance with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
Section 1. Capitalized terms used but not defined herein have the
meanings given to them in the Transaction Agreement dated as of March 28,
1997, by and among Lockheed Martin, Newco and the Purchasers.
Section 2. Section 15.13(a) of the Agreement is amended by deleting
the reference to "April 14, 1997" in the second sentence of Section 15.13(a)
and inserting in its place and stead "April 17, 1997."
Section 3. Section 15.13(c) of the Agreement is amended by deleting
the references to "April 11, 1997" in each of the last two sentences of
Section 15.13(c) and inserting in its place and stead "April 18, 1997."
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly
executed by their respective authorized officers on the day and year first
above written.
WITNESS: LOCKHEED MARTIN CORPORATION
____________________________ By:________________________________
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: LEHMAN BROTHERS HOLDINGS INC.,
its General Partner
____________________________ By:___________________________
Name:
Title:
FRANK C. LANZA
____________________________ ___________________________________
ROBERT V. LAPENTA
____________________________ ___________________________________
L-3 COMMUNICATIONS HOLDINGS, INC.
____________________________ By:________________________________
Name:
Title:
AMENDMENT NO. 2 TO TRANSACTION AGREEMENT
This Amendment No. 2 to Transaction Agreement (the "Amendment") is made
as of the 30th day of April, 1997, by and among Lockheed Martin Corporation,
a Maryland corporation ("Lockheed Martin"), Lehman Brothers Capital Partners
III, L.P., a Delaware limited partnership ("Lehman"), Frank C. Lanza
("Lanza"), Robert V. LaPenta ("LaPenta"; and together with Lanza, the
"Individual Purchasers") and L-3 Communications Holdings, Inc., a Delaware
corporation ("Newco"). For purposes of this Amendment, Lehman, Lanza and
LaPenta each are individually referred to as a "Purchaser" and collectively
referred to as the "Purchasers."
W I T N E S S E T H:
WHEREAS, Lockheed Martin, in its own right and through certain of its
direct and indirect Subsidiaries is engaged in the Business;
WHEREAS, Lockheed Martin and the Purchasers, upon the terms and subject
to the conditions of the Agreement have agreed to the formation and
organization of Newco;
WHEREAS, upon the terms and subject to the conditions of the Agreement,
Lockheed Martin has agreed to transfer, or to cause the Affiliated
Transferors to transfer, substantially all of the assets held or owned by, or
used to conduct, the Business and to assign certain liabilities associated
with the Business to Newco, and Newco has agreed to receive such assets and
assume such liabilities; and
WHEREAS, Lockheed Martin, Newco and the Purchasers desire to amend the
Agreement in accordance with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
Section 1. Capitalized terms used but not defined herein have the
meanings given to them in the Transaction Agreement dated as of March 28,
1997, by and among Lockheed Martin, Newco and the Purchasers, as amended by
Amendment No. 1 to Transaction Agreement dated as of April 11, 1997 (as
amended, the "Agreement").
Section 2. The list of Attachments set forth in the index to the
Agreement is revised by amending the description of Attachment XI to read as
follows: "Other Transferred Employees".
Section 3. Section 2.04(i) of the Agreement is amended by deleting
the references to "$269,118,000" in the first parenthetical of that Section
and inserting in their place and stead "$272,618,000".
Section 4. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment IV shall be as set forth
in Exhibit A to this Amendment.
Section 5. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment V shall be as set forth
in Exhibit B to this Amendment.
<PAGE>
Section 6. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment VIII shall be as set
forth in Exhibit C to this Amendment.
Section 7. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment IX shall be as set forth
in Exhibit D to this Amendment.
Section 8. Notwithstanding the provisions of Section 15.13(b) of the
Agreement, for purposes of the Agreement, Attachment X shall as set forth in
Exhibit E to this Amendment.
Section 9. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment XI shall be as set forth
in Exhibit F to the Amendment.
Section 10. For purposes of the Agreement, Attachment XIV shall be as
set forth in Exhibit G to this Amendment.
Section 11. Notwithstanding the provisions of Section 15.13(c) of the
Agreement, for purposes of the Agreement, Attachment XV shall be as set forth
in Exhibit H to this Amendment.
Section 12. The Disclosure Schedules attached to this Amendment as
Exhibit I are, and for all purposes shall be, the Disclosure Schedules
referenced in the Agreement.
Section 13. Section 7.04 of the Agreement is amended by deleting the
reference to "Attachment XI" in the second parenthetical of the first
sentence and inserting in its place and stead the phrase "writing by Lockheed
Martin and Newco on or prior to the Closing Date".
Section 14. Section 8.04 of the Agreement is amended by deleting the
reference to "Attachment XI" in the second parenthetical of the first
sentence and inserting in its place and stead the phrase "writing by Lockheed
Martin and Newco on or prior to the Closing Date".
Section 15. Section 13.02(b) of the Agreement is amended by deleting
the word "or" before the beginning of clause (v); inserting the phrase ", or
(vi) the Universal Litigation" after clause (v) and before the semicolon;
deleting the word "and" before "(v)" in the proviso; and inserting the phrase
"and (vi)" after "(v)" in the proviso.
Section 16. Section 13.04(b)(iii) of the Agreement is amended by
deleting the word "and" after the semicolon.
Section 17. Section 13.04(b)(iv) of the Agreement is amended by
deleting the period at the end and inserting in its place and stead the
phrase "; and".
Section 18. Section 13.04(b) of the Agreement is amended by adding a
new clause (v) as follows:
"(v) with respect to the matter described in clause (vi)
of Section 13.02(b) (after giving effect to the proviso
thereto), to the extent of 50% of the aggregate Damages
incurred by all Indemnified Parties as the result thereof in
<PAGE>
excess of the Reserve Amount but not in excess of the Reserve
Amount plus $1,000,000 (it being understood that Lockheed
Martin's maximum liability under Section 13.02(b)(vi) and this
Section 13.04(b)(v) shall be $500,000)."
Section 19. Section 15.01 of the Agreement is amended to change the
notice address for notices to Newco to the following:
"L-3 Communications Holdings, Inc.
600 Third Avenue
New York, New York 10016
Attention: Robert V. LaPenta
Telecopy: (212) 805-5470"
Section 20. Section (a) of Exhibit A to the Agreement is amended by
adding the following after the definition of "Prime Government Contract" and
before the definition of "Remedial Action(s)":
""Reserve Amount" means the amount referenced in the
letter from Lockheed Martin to Newco dated as of the Closing
Date making specific reference to the Agreement and this
definition.
Section 21. Section (a) of Exhibit A to the Agreement is amended by
adding the following after the definition of "Transferred Assets" and before
the definition of "U.S. Government":
""Universal Litigation" means the matter titled Universal
---------
Navigation Corporation, a California corporation; and
-----------------------------------------------------
Microcomputer Electronics Corporation, a Washington
---------------------------------------------------
corporation v. Loral Corporation, a New York corporation; and
-------------------------------------------------------------
Loral Fairchild Corp., a Delaware corporation (CIV93-743TUC
---------------------------------------------
WDB) pending in the United States District Court for the
District of Arizona."
Section 22. Clause (ii) of the definition of "Transferred Employee"
in Section G.01 of Exhibit G to the Agreement is amended by deleting the
existing provision in its entirety and inserting in its place and stead the
following:
"(ii) was laid off from the Business and has recall rights
with respect to the Business other than any Person with such
rights who is either employed by Lockheed Martin on the
Closing Date (other than in the Business) or who has recall
rights at another Lockheed Martin facility, or"
Section 23. Section G.08 of Exhibit G to the Agreement is amended by
deleting the existing provision in its entirety and inserting in its place
and stead the following:
<PAGE>
"G.08. Severance and Retention Agreements. In accordance with
----------------------------------
Section 6.9 of the Agreement and Plan of Merger dated as of January 7,
1996, by and among Loral Corporation, Lockheed Martin Corporation and
LAC Acquisition Corporation, Lockheed Martin Tactical Systems, Inc. has
adopted the Supplemental Severance Program. Lockheed Martin has entered
into Key Employee Supplemental Severance Program and Key Executive
Supplemental Severance Program agreements (the "Program Agreements").
In addition, Lockheed Martin has entered into Retention Agreements
(collectively with the Supplemental Severance Program and the Program
Agreements, the "Supplemental Agreements") with certain Transferred
Employees who participate in the Supplemental Severance Program.
Lockheed Martin also sponsors the Lockheed Martin Tactical Systems
Severance Plan (the "Tactical Severance Plan"), the Severance Benefit
Plan for Employees of Lockheed Martin Corporation (the "LMC Severance
Plan") and the Special Supplemental Severance Program relating to the
retention (as set forth in a memorandum from Steve Jackson dated October
28, 1996 of C3I and Systems Integration Sector administrative personnel
(collectively with the Supplemental Agreements, the Tactical Severance
Plan and the LMC Severance Plan, the "Severance Arrangements"). Other
than with respect to the Transferred Employees set forth on Section B.21
of the Disclosure Schedules, Newco assumes all obligations and
liabilities of Lockheed Martin and its Affiliates under the Severance
Arrangements and any other severance benefit obligation (collectively
with the Severance Arrangements, the "Severance Obligations") whether
oral or written, for all claims made after the Closing Date by
Transferred Employees, including claims based on the Contemplated
Transactions, which shall be Assumed Liabilities for purposes of this
Agreement. All obligations and Liabilities of Lockheed Martin with
respect to any Severance Obligation for the Transferred Employees on
Section B.21 of the Disclosure Schedules and any other individual
covered by a Supplemental Agreement under any Severance Obligation who
is not a Transferred Employee shall constitute Excluded Liabilities."
<PAGE>
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly
executed by their respective authorized officers on the day and year first
above written.
LOCKHEED MARTIN CORPORATION
By:________________________________
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: LEHMAN BROTHERS HOLDINGS INC.,
its General Partner
By:___________________________
Name:
Title:
FRANK C. LANZA
___________________________________
ROBERT V. LAPENTA
___________________________________
L-3 COMMUNICATIONS HOLDINGS, INC.
By:________________________________
Name:
Title:
<PAGE>
- ---------------------------------------------------------------------------
AMENDMENT NO. 2
Dated as of April 30, 1997
to
TRANSACTION AGREEMENT
Dated as of March 28, 1997
By and Among
LOCKHEED MARTIN CORPORATION
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.
FRANK C. LANZA
ROBERT V. LAPENTA
and
L-3 COMMUNICATIONS HOLDINGS, INC.
- ---------------------------------------------------------------------------
AMENDMENT NO. 3 TO TRANSACTION AGREEMENT
This Amendment No. 3 to Transaction Agreement (the "Amendment") is
made as of the 15th day of May, 1997, by and among Lockheed Martin
Corporation, a Maryland corporation ("Lockheed Martin"), Lehman Brothers
Capital Partners III, L.P., a Delaware limited partnership, Lehman Brothers
Holdings Inc., a Delaware corporation (together with Lehman Brothers Capital
Partners III, L.P., "Lehman"), Frank C. Lanza ("Lanza"), Robert V. LaPenta
("LaPenta"; and together with Lanza, the "Individual Purchasers"), L-3
Communications Holdings, Inc., a Delaware corporation ("Newco"), and L-3
Communications Corporation, a Delaware corporation. For purposes of this
Amendment, Lehman, Lanza and LaPenta each are individually referred to as a
"Purchaser" and collectively referred to as the "Purchasers."
W I T N E S S E T H
WHEREAS, Lockheed Martin, in its own right and through certain of
its direct and indirect Subsidiaries previously was engaged in the Business;
WHEREAS, Lockheed Martin and the Purchasers, upon the terms and
subject to the conditions of the Agreement have formed and organized Newco;
WHEREAS, upon the terms and subject to the conditions of the
Agreement, Lockheed Martin has transferred or caused the Affiliated
Transferors to transfer, substantially all of the assets held or owned by, or
used to conduct, the Business and to assign certain liabilities associated
with the Business to Newco, and Newco has received such assets and assumed
such liabilities;
WHEREAS, Lehman Brothers Capital Partners III L.P. has assigned
certain of its rights and obligations under the Agreement to Lehman Brothers
Holdings Inc., and Newco has assigned certain of its rights and obligations
under the Agreement to L-3 Communications Corporation, a Delaware corporation
and wholly owned subsidiary of Newco; and
WHEREAS, Lockheed Martin, Newco and the Purchasers desire to amend
the Agreement in accordance with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties contained herein, the parties agree as follows:
Section 1. Capitalized terms used but not defined herein have the
meanings given to them in the Transaction Agreement dated as of March 28,
1997, by and among Lockheed Martin, Newco and the Purchasers, as amended by
Amendment No. 1 to Transaction Agreement dated as of April 11, 1997, and by
Amendment No. 2 to the Transaction Agreement dated as of April 30, 1997 (as
amended, the "Agreement").
Section 2. Section G.06(c) of the Transaction Agreement shall be
amended to read as follows:
With respect to all Lockheed Martin Defined Contribution Plans
except the Transferred Savings Plans described in Section
G.06(b) (the "Lockheed Martin Savings Plans"), the Transferred
Employees shall cease to accrue benefits and service credits
under such plans as of the Closing Date and, effective as of
<PAGE>
the Closing Date, Newco shall establish new savings plans
("Newco's Savings Plans") and associated trusts to hold the
assets of those plans for the Transferred Employees, to be
effective as of the Closing Date, and shall provide to
Lockheed Martin evidence reasonably satisfactory to Lockheed
Martin that Newco's Savings Plans and the associated trusts
have been established and that Newco's Savings Plans qualify
under the requirements of Section 401(a) of the Code, and that
the trusts are exempt from tax under Section 501(a) of the
Code. Lockheed Martin shall provide to Newco evidence
reasonably satisfactory to Newco that the Lockheed Martin
Savings Plans remain qualified under the requirements of
Section 401(a) of the Code. Provided Lockheed Martin and Newco
have received evidence reasonably satisfactory to them in
accordance with the preceding sentences, as soon as is
reasonably practicable following the Closing Date, but in no
event later than 60 days following receipt of such mutually
satisfactory evidence, (i) Lockheed Martin shall take all
action required or appropriate to transfer the account
balances of all Transferred Employees and Transferred
Beneficiaries (other than account balances in the Lockheed
Martin Savings Plan, Lockheed Martin Savings Plan II and
Lockheed Martin Performance Sharing Plan, collectively the
"Camden Plans") to the respective trust associated with
Newco's Savings Plans; and (ii) with respect to account
balances in the Camden Plans, Lockheed Martin shall amend the
Camden Plans, to the extent permitted by Section 401(k)(10) of
the Code, to permit each Transferred Employee or Transferred
Beneficiary with an account balance in the Camden Plans during
the period between the Closing and the end of the second
calendar year following the Closing, to (x) receive a
distribution from the Camden Plans; (y) make a direct rollover
in accordance with Section 401(a)(31) of the Code; or (z)
leave his or her account balances in the Camden Plans.
Transfers shall be made in the form of cash in an amount equal
to the value of the account balances to be transferred,
determined as of the close of business on the last business
day immediately preceding the transfer, except that (i) to the
extent a participant's or beneficiary's account balance in the
transferor plan includes one or more promissory notes
evidencing a participant loan or loans, such promissory note
shall be transferred in kind for the participant's or
beneficiary's credit under the transferee plan and (ii) any
assets in the transferor trust consisting of securities issued
by Lockheed Martin, Martin Marietta Materials, Inc. and Loral
Space & Communications, Ltd. that are allocable to the
respective transferee plan shall be transferred in kind.
Amounts distributed or rolled over from the Camden Plans shall
be payable in cash only. For the period from the Closing Date
until such time as the Transferred Employee or Transferred
Beneficiary no longer has an account balance in any Lockheed
Martin Defined Contribution Plan, Newco shall collect by
payroll deduction and promptly pay over to the respective
Lockheed Martin Defined Contribution Plan all loan payments
required on participant loans made by the respective plan to
any Transferred Employee and Lockheed Martin shall cause the
respective Lockheed Martin Defined Contribution Plan to
<PAGE>
administer and pay all distributions, withdrawals and loans
payable under the terms of the respective plan. Contingent
upon the transfer of an account balance to each of Newco's
Savings Plans, Newco shall assume all liabilities of Lockheed
Martin and its affiliates with respect to that Transferred
Employee or Transferred Beneficiary under the Lockheed Martin
Defined Contribution Plan from which that transfer was made
and shall become with respect to such Transferred Employee and
Transferred Beneficiary responsible for all acts, omissions
and transactions under or in connection with such Lockheed
Martin Defined Contribution Plan, whether arising before or
after the Closing; provided, however, that in the case of any
liabilities with respect to Camden Transferees (other than
Camden Transferrees for whom no such transfer was made), Newco
shall only assume liabilities and shall only become
responsible for all acts, omissions and transactions under or
in connection with that Lockheed Martin Defined Contribution
Plan arising after the Closing or disclosed in Section B.21 of
the Disclosure Schedules."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their respective authorized officers on the day and
year first above written.
WITNESS: LOCKHEED MARTIN CORPORATION
_______________________________ By: ____________________________
Name: Marian S. Block
Title: Associate General
Counsel
LEHMAN BROTHERS CAPITAL
PARTNERS III, L.P.
By: LEHMAN BROTHERS HOLDINGS
INC., its General Partner
_______________________________ By: ____________________________
Name: Robert B. Millard
Title: Managing Director
LEHMAN BROTHERS HOLDINGS INC.
_______________________________ By: ____________________________
Name: Steven J. Berger
Title: Managing Director
L-3 COMMUNICATIONS HOLDINGS,
INC.
_______________________________ By: ____________________________
Name: Michael T. Strianese
Title: VP Finance and
Controller
FRANK C. LANZA
_______________________________ ____________________________
ROBERT V. LAPENTA
_______________________________ ____________________________
<PAGE>
L-3 COMMUNICATIONS CORPORATION
_______________________________ By: ____________________________
Name: Michael T. Strianese
Title: VP Finance and
Controller
<PAGE>
AMENDMENT NO. 3
Dated as of May 21, 1997
to
TRANSACTION AGREEMENT
Dated as of March 28, 1997
By and Among
LOCKHEED MARTIN CORPORATION
LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.
LEHMAN BROTHERS HOLDINGS INC.
FRANK C. LANZA
ROBERT V. LAPENTA
L-3 COMMUNICATIONS HOLDINGS, INC.
and
L-3 COMMUNICATIONS CORPORATION
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
AGREEMENT, made April 30, 1997 by and between L-3 Communications
Holdings, Inc., a Delaware corporation (the "Company") and Frank C. Lanza
(the "Executive").
RECITALS
In order to induce Executive to serve as the Chairman and Chief
Executive Officer of the Company, the Company desires to provide Executive
with compensation and other benefits on the terms and conditions set forth in
this Agreement.
Executive is willing to accept such employment and perform services
for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Term hereof as its Chairman and
Chief Executive Officer. In his capacity as the Chairman and Chief Executive
Officer of the Company, Executive shall report to the Board of Directors of
the Company (the "Board") and shall have the customary powers,
responsibilities and authorities of chairmen and chief executive officers of
corporations of the size, type and nature of the Company, as it exists from
time to time, and as are assigned by the Board.
1.2 Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as the Chairman and Chief Executive
Officer of the Company commencing as of the date hereof (the "Commencement
Date") and agrees to devote his full business time and efforts to the
<PAGE>
performance of services, duties and responsibilities in connection therewith,
subject at all times to review and control of the Board. In addition, during
the Initial Term and any Renewal Term, (i) the Company agrees to nominate
Executive for election to the Board and use its best efforts to cause his
election to the Board and Executive agrees to serve on the Board of the
Company and (ii) during the Term of Employment, Executive also agrees to
serve, if elected, as an officer and/or director of any Subsidiary of the
Company, without the payment of any additional compensation therefor. Upon
the termination of Executive's employment for any reason, Executive shall
resign as a member of the Board of the Company or any Subsidiary of the
Company.
1.3 Nothing in this Agreement shall preclude Executive from
engaging in charitable work and community affairs, from managing any
investment made by him with respect to which Executive is not substantially
involved with the management or operation of the entity in which Executive
has invested (provided that no such investment in publicly traded equity
securities or other property may exceed 5% of the equity of any entity,
without the prior approval of the Board) or from serving, subject to the
prior approval of the Board, as a member of boards of directors or as a
trustee of any other corporation, association or entity, to the extent that
any of the above activities do not materially interfere with the performance
of his duties hereunder. For purposes of the preceding sentence, any
approval by the Board required therein shall not be unreasonably withheld.
2. Term of Employment. Executive's term of employment under this
Agreement (the "Term of Employment") shall commence on the Commencement Date
and, subject to the terms hereof, shall terminate on the earlier of (i) the
fifth anniversary of the Commencement Date (the "Initial Term") or (ii)
termination of Executive's employment pursuant to this Agreement.
Notwithstanding the foregoing, subsequent to the Initial Term, Executive's
<PAGE>
Term of Employment under this Agreement shall automatically renew annually
for one year renewal terms (the "Renewal Term") unless either party shall
deliver to the other written notice, at least 90 days prior to the expiration
of the Initial Term or any Renewal Term, that the Term of Employment shall
not be extended. In such event, the Term of Employment will end at its then
scheduled expiration date and shall not be further extended except by written
agreement of the Company and Executive.
3. Compensation.
3.1 Salary. During the Initial Term of Executive's employment
under the terms of this Agreement, the Company shall pay Executive a base
salary ("Base Salary") at an initial rate of $750,000 per annum. Base Salary
shall be payable in accordance with the ordinary payroll practices of the
Company. During the Term of Employment, the Board shall, in good faith,
review, at least annually, the Executive's Base Salary in accordance with the
Company's customary procedures and practices regarding the salaries of senior
executives and may, if determined by the Board to be appropriate, increase
Executive's Base Salary following such review. Increases in the rate of
salary, once granted, shall not be subject to revocation or decrease
thereafter, and "Base Salary" for all purposes herein shall be deemed to be a
reference to such higher amount.
4. Employee Benefits.
4.1 Equity and Stock Options. Simultaneously with the execution
of this Agreement, the Company and Executive are entering into the
Subscription Agreement, the Option Agreement and the Stockholders' Agreement
in the forms attached hereto as Exhibits A, B and C, respectively (the
"Ancillary Documents"). Executive shall not be eligible to receive any stock
option or other equity incentive other than as set forth in the Ancillary
Documents.
<PAGE>
4.2 Employee Benefit Programs, Plans and Practices. The Company
shall provide Executive while employed hereunder with coverage under such
employee benefits (commensurate with his position in the Company and to the
extent permitted under any employee benefit plan) in accordance with the
terms thereof, which the Company makes available to its senior executives.
4.3 Vacation. Executive shall be entitled to twenty (20) business
days paid vacation each calendar year, which shall be taken at such times as
are consistent with Executive's responsibilities hereunder. Any vacation
days not taken during the calendar year in which they are accrued may be
carried over into the next subsequent year.
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the Board, the Company will reimburse
Executive for all reasonable expenses incurred by Executive in carrying out
his duties.
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The
Company or Executive may terminate Executive's Term of Employment at any time
for any reason by written notice at least thirty (30) days in advance. If
Executive's employment is terminated (i) by the Company other than for Cause
(as defined in Section 6.2(b) hereof), Disability (as defined in Section 6.3
hereof) or death or (ii) by Executive for Good Reason (as defined in Section
6.1(b) hereof) prior to the end of the Initial Term or any Renewal Term, the
Company shall continue to pay Executive's Base Salary through the end of the
Initial Term or the Renewal Term (the "Continuation Period"), as the case may
be, with such payments to be made in accordance with the terms of Section
3.1. (the "Severance Payments"). In addition, the Company shall continue to
provide Executive during the Continuation Period with life insurance, medical
and hospitalization benefits (collectively, the "Continuation Benefits")
comparable to those provided to other senior executives; provided, however,
<PAGE>
that any such coverage shall terminate to the extent that Executive is
offered or obtains comparable life insurance, medical or hospitalization
benefits coverage from any other employer during the Continuation Period.
Notwithstanding the foregoing, if Executive breaches any provision of Section
11 hereof, the remaining balance of the Severance Payments and any
Continuation Benefits shall be forfeited. Executive shall be entitled to
receive the benefits, if any, provided under the employee benefit programs,
plans and practices referred to in Section 4.2, in accordance with their
terms.
(b) For purposes of this Agreement, "Good Reason" shall mean any
of the following (without Executive's express prior written consent):
(i) A reduction by the Company in Executive's Base Salary (in
which event Severance Payments shall be made based upon Executive's Base
Salary in effect prior to any such reduction); or
(ii) Any material diminution or material adverse change in
Executive's titles, duties or responsibilities, unless due to a
promotion or increased responsibility of Executive.
(c) Termination by Executive for Good Reason shall be made by
delivery to the Company by Executive of written notice, given at least 45
days prior to such termination, which sets forth the conduct believed to
constitute Good Reason; provided, however, that the Company shall have the
opportunity to cure the Good Reason during the first 30 days of such notice
period and if the Good Reason is cured within such 30-day period, Executive's
notice of termination shall be deemed withdrawn. If no notice is given
within 90 days of the event giving rise to Good Reason, the Good Reason shall
be deemed waived.
6.2 Voluntary Termination by Executive; Discharge for Cause. (a)
In the event that Executive's employment is terminated (i) by the Company for
Cause, as hereinafter defined or (ii) by Executive other than for Good
Reason, Disability or death, Executive shall only be entitled to receive (A)
any Base Salary accrued but unpaid prior to such termination and (B) any
<PAGE>
benefits provided under the employee benefit programs, plans and practices
referred to in Section 4.2 hereof, in accordance with their terms. After the
termination of Executive's employment under this Section 6.2, the obligations
of the Company under this Agreement to make any further payments, or provide
any benefits specified herein, to Executive shall thereupon cease and
terminate.
(b) As used herein, the term "Cause" shall be limited to (i) gross
neglect of or willful and continuing refusal by Executive to substantially
perform Executive's duties hereunder (other than due to death or Disability,
as such term is defined in Section 6.3 hereof), (ii) any breach of the
provisions of Section 11 of this Agreement by Executive, (iii) willfully
engaging in conduct that is demonstrably injurious to the Company or the
Company's subsidiaries or affiliates by Executive or (iv) conviction of, or
plea of nolo contendere, by Executive to (a) any felony or (b) a misdemeanor
involving moral turpitude. Termination of Executive pursuant to this Section
6.2 shall be made by delivery to Executive of written notice, given at least
30 days prior to such Termination, from the Board specifying the particulars
of the conduct by Executive set forth in any of clauses (i) through (iv)
above. Termination shall be effected by a majority vote of the Board at a
meeting at which Executive shall have had the opportunity (along with
counsel) to be heard unless within 30 days after receiving such notice,
Executive shall have cured Cause to the reasonable satisfaction of the Board;
provided, however, that no cure shall be possible if termination for Cause is
made pursuant to this Section 6.2(b)(ii) or (iv). As long as Executive is on
the Board, he shall reasonably cooperate to cause a valid Board meeting to
occur.
6.3 Disability. In the event of the Disability (as defined below)
of Executive during the Term of Employment, the Company may terminate
Executive's Term of Employment upon written notice to Executive (or
<PAGE>
Executive's personal representative, if applicable) effective upon the date
of receipt thereof (the "Disability Commencement Date"). The obligation of
the Company to make any further payments under this Agreement shall, except
for earned but unpaid Base Salary, cease as of the Disability Commencement
Date; provided, however, that Executive shall continue to receive payments
equal to Executive's Base Salary otherwise payable under this Agreement for a
period equal to the lesser of (i) six months after the date of the occurrence
of the incapacity causing Executive's Disability and (ii) the number of
months otherwise remaining in the Term of Employment, in either case, reduced
by the amount of any disability payments otherwise payable to Executive under
any insurance program of the Company. The term "Disability," for purposes of
this Agreement, shall mean Executive's absence from the full-time performance
of Executive's duties pursuant to a reasonable determination made in
accordance with the Company's disability plan that Executive is disabled as a
result of incapacity due to physical or mental illness that lasts, or is
reasonably expected to last, for at least six months.
6.4 Death. In the event of Executive's death during his Term of
Employment hereunder or at any time thereafter while payments are still owing
to Executive under the terms of this Agreement, all obligations of the
Company to make any further payments, other than the obligation to pay any
accrued but unpaid Base Salary or remaining payments that were payable to
Executive by reason of his termination of employment under Section 6.1 to
which Executive was entitled at the time of his death, shall terminate upon
Executive's death, and benefits shall become payable under the Company's life
and accidental death insurance program in accordance with its terms.
Benefits under all other employee benefit programs, plans and practices shall
be paid in accordance with their terms.
6.5 No Further Notice or Compensation. Executive understands and
agrees that he shall not be entitled to any further notice or compensation
<PAGE>
upon Termination of Employment under this Agreement, other than amounts
specified in this Section 6 and the Ancillary Documents. Executive shall not
have any obligation to seek comparable employment following such termination
or resignation, nor shall any compensation received from any subsequent
employment reduce the Company's obligations hereunder.
6.6 Executive's Duty to Provide Materials. Upon the termination
of the Term of Employment for any reason, Executive or his estate shall
surrender to the Company all correspondence, letters, files, contracts,
mailing lists, customer lists, advertising materials, ledgers, supplies,
equipment, checks, and all other materials and records of any kind that are
the property of the Company or any of its subsidiaries or affiliates, that
may be in Executive's possession or under his control, including all copies
of any of the foregoing; provided, however, Executive shall not be required
to surrender his personal rolodex, telephone book, appointment book and
personal materials acquired by Executive prior to the date hereof.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Frank C. Lanza
37 Murray Hill Road
Scarsdale, NY 10583
with a copy to:
Robert C. Schwenkel
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
<PAGE>
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after
the actual date of sending shall constitute the time at which notice was
given.
8. Separability. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity
or unenforceability shall not affect the remaining provisions hereof which
shall remain in full force and effect.
9. Assignment. This contract shall be binding upon and inure to
the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or, in the case of the Options, by
trust for the benefit of Executive's spouse and/or children or by operation
of the laws of intestate succession) or by the Company, except that the
Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
businesses of the Company, if such successor expressly agrees to assume the
obligations of the Company hereunder.
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information: Non-Competition.
(a) While employed by the Company, and at any time thereafter, the Executive
shall not, without the prior written consent of the Company, use, divulge,
disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed
<PAGE>
by the Company, in the business of and for the benefit of the Company or (ii)
when required to do so by applicable law, by a court, by any governmental
agency, or by any administrative body or legislative body (including a
committee thereof); provided, however, that Executive shall give reasonable
notice under the circumstances to the Company that he has been notified that
he will be required to so disclose as soon as possible after receipt of such
notice in order to permit the Company to take whatever action it reasonably
deems necessary to prevent such disclosure and Executive shall cooperate with
the Company to the extent that it reasonably requests him to do so. For
purposes of this Section 11(a), "Confidential Information" shall mean
non-public information concerning the financial data, strategic business
plans, product development (or other proprietary product data), customer
lists, marketing plans and other non-public, proprietary and confidential
information of the Company, its subsidiaries, its affiliates or customers,
that, in any case, is not otherwise available to the public (other than by
Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement, Executive agrees that during the period of his employment
hereunder and for a period of twelve (12) months thereafter, without the
prior written consent of the Board, (A) he will not, directly or indirectly,
either as principal, manager, agent, consultant, officer, stockholder,
partner, investor, lender or employee or in any other capacity, carry on, be
engaged in or have any financial interest in, any entity which is in
competition with the business of the Company or its subsidiaries and (B) he
shall not, on his own behalf or on behalf of any person, firm or company,
directly or indirectly, solicit or offer employment to any person who is or
has been employed by the Company or its subsidiaries at any time during the
twelve (12) months immediately preceding such solicitation; provided,
however, that if the Executive's employment terminates following the
<PAGE>
expiration of the Initial Term, this subsection 11(b) shall only be effective
during the period, if any, that the Company pays the Executive the Severance
Payments.
(c) For purposes of this Section 11, an entity shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any
service purchased, sold, dealt in or rendered by the Company as a part of the
business of the Company within the same geographic area in which the Company
effects such sales or dealings or renders such services. Notwithstanding
this subsection 11(c) or subsection 11(b), nothing herein shall (i) prohibit
Executive from serving as an officer, employee or independent consultant of
any business unit or subsidiary which would not otherwise be in competition
with the Company or its subsidiaries, but which business unit is a part of,
or which subsidiary is controlled by, or under common control with, an entity
that would be in competition with the Company or its subsidiaries, so long as
Executive does not engage in any activity which is in competition with any
business of the Company or its subsidiaries or (ii) be construed so as to
preclude Executive from investing in any publicly or privately held company,
provided Executive's beneficial ownership of any class of such company's
securities does not exceed 5% of the outstanding securities of such class.
(d) Executive agrees that this covenant not to compete is
reasonable under the circumstances and will not interfere with his ability to
earn a living or to otherwise meet his financial obligations. Executive and
the Company agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect, such court
shall have the right, power and authority to excise or modify such provision
or provisions of this covenant as to the court shall appear not reasonable
and to enforce the remainder of the covenant as so amended. Executive agrees
that any breach of the covenants contained in this Section 11 would
<PAGE>
irreparably injure the Company. Accordingly, Executive agrees that, in the
event the Company determines that Executive has breached the covenants
contained in this Section 11, the Company may, in addition to pursuing any
other remedies it may have in law or in equity, cease making any payments
otherwise required by this Agreement and obtain an injunction against
Executive from any court having jurisdiction over the matter restraining any
further violation of this Agreement by Executive.
12. Beneficiaries; References. Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference
in this Agreement to Executive shall be deemed, where appropriate, to refer
to his beneficiary, estate or other legal representative. Any reference to
the masculine gender in this Agreement shall include, where appropriate, the
feminine.
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and obligations.
The provisions of this Section 13 are in addition to the survivorship
provisions of any other section of this Agreement.
14. Dispute Resolution; Legal Fees. Any dispute or controversy
arising under or in connection with this Agreement shall be resolved by the
court with the appropriate jurisdiction in the State of New York. The
prevailing party shall be entitled to be reimbursed for any reasonable legal
fees and other fees and expenses which may be incurred in respect of
enforcing its respective rights under this Agreement.
<PAGE>
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the State of New York, without
reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement and the Ancillary
Documents contain the entire understanding between the parties hereto and
supersedes in all respects any prior or other agreement or understanding,
both written and oral, between the Company, any affiliate of the Company or
any predecessor of the Company or affiliate of the Company and Executive.
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is reasonably necessary to give effect thereto in accordance with the
terms hereof.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
L-3 Communications Holdings, Inc.
By /s/ Michael T. Strianese
Name: Michael T. Strianese
Title: Vice President, Finance and Controller
/s/ Frank C. Lanza
EXHIBIT 10.61
EMPLOYMENT AGREEMENT
AGREEMENT, made April 30, 1997 by and between L-3 Communications
Holdings, Inc., a Delaware corporation (the "Company") and Robert V. LaPenta
(the "Executive").
RECITALS
In order to induce Executive to serve as the President and Chief
Financial Officer of the Company, the Company desires to provide Executive
with compensation and other benefits on the terms and conditions set forth in
this Agreement.
Executive is willing to accept such employment and perform services
for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the Term hereof as its President
and Chief Financial Officer. In his capacity as the President and Chief
Financial Executive Officer of the Company, Executive shall report to the
Chief Executive Officer (the "CEO") and shall have the customary powers,
responsibilities and authorities of presidents and chief financial officers
of corporations of the size, type and nature of the Company, as it exists
from time to time, and as are assigned by the CEO.
1.2 Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as the President and Chief Financial
Officer of the Company commencing as of the date hereof (the "Commencement
Date") and agrees to devote his full business time and efforts to the
<PAGE>
performance of services, duties and responsibilities in connection therewith,
subject at all times to review and control of the CEO. In addition, during
the Initial Term and any Renewal Term, (i) the Company agrees to nominate
Executive for election to the Board of Directors of the Company (the "Board")
and use its best efforts to cause his election to the Board and Executive
agrees to serve on the Board of the Company and (ii) during the Term of
Employment, Executive also agrees to serve, if elected, as an officer and/or
director of any Subsidiary of the Company, without the payment of any
additional compensation therefor. Upon the termination of Executive's
employment for any reason, Executive shall resign as a member of the Board of
the Company or any Subsidiary of the Company.
1.3 Nothing in this Agreement shall preclude Executive from
engaging in charitable work and community affairs, from managing any
investment made by him with respect to which Executive is not substantially
involved with the management or operation of the entity in which Executive
has invested (provided that no such investment in publicly traded equity
securities or other property may exceed 5% of the equity of any entity,
without the prior approval of the Board) or from serving, subject to the
prior approval of the Board, as a member of boards of directors or as a
trustee of any other corporation, association or entity, to the extent that
any of the above activities do not materially interfere with the performance
of his duties hereunder. For purposes of the preceding sentence, any approval
by the Board required therein shall not be unreasonably withheld.
2. Term of Employment. Executive's term of employment under this
Agreement (the "Term of Employment") shall commence on the Commencement Date
and, subject to the terms hereof, shall terminate on the earlier of (i) the
fifth anniversary of the Commencement Date "Initial Term") or (ii)
termination of Executive's employment pursuant to this Agreement.
Notwithstanding the foregoing, subsequent to the Initial Term, Executive's
<PAGE>
Term of Employment under this Agreement shall automatically renew annually
for one year renewal terms (the "Renewal Term") unless either party shall
deliver to the other written notice, at least 90 days prior to the expiration
of the Initial Term or any Renewal Term, that the Term of Employment shall
not be extended. In such event, the Term of Employment will end at its then
scheduled expiration date and shall not be further extended except by written
agreement of the Company and Executive.
3. Compensation.
3.1 Salary. During the Initial Term of Executive's employment
under the terms of this Agreement, the Company shall pay Executive a base
salary ("Base Salary") at an initial rate of $500,000 per annum. Base Salary
shall be payable in accordance with the ordinary payroll practices of the
Company. During the Term of Employment, the Board shall, in good faith,
review, at least annually, the Executive's Base Salary in accordance with the
Company's customary procedures and practices regarding the salaries of senior
executives and may, if determined by the Board to be appropriate, increase
Executive's Base Salary following such review. Increases in the rate of
salary, once granted, shall not be subject to revocation or decrease
thereafter, and "Base Salary" for all purposes herein shall be deemed to be a
reference to such higher amount.
4. Employee Benefits.
4.1 Equity and Stock Options. Simultaneously with the execution
of this Agreement, the Company and Executive are entering into the
Subscription Agreement, the Option Agreement and the Stockholders' Agreement
in the forms attached hereto as Exhibits A, B and C, respectively (the
"Ancillary Documents"). Executive shall not be eligible to receive any stock
option or other equity incentive other than as set forth in the Ancillary
Documents.
<PAGE>
4.2 Employee Benefit Programs, Plans and Practices. The Company
shall provide Executive while employed hereunder with coverage under such
employee benefits (commensurate with his position in the Company and to the
extent permitted under any employee benefit plan) in accordance with the
terms thereof, which the Company makes available to its senior executives.
4.3 Vacation. Executive shall be entitled to twenty (20) business
days paid vacation each calendar year, which shall be taken at such times as
are consistent with Executive's responsibilities hereunder. Any vacation days
not taken during the calendar year in which they are accrued may be carried
over into the next subsequent year.
5. Expenses. Subject to prevailing Company policy or such
guidelines as may be established by the Board, the Company will reimburse
Executive for all reasonable expenses incurred by Executive in carrying out
his duties.
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The
Company or Executive may terminate Executive's Term of Employment at any time
for any reason by written notice at least thirty (30) days in advance. If
Executive's employment is terminated (i) by the Company other than for Cause
(as defined in Section 6.2(b) hereof), Disability (as defined in Section 6.3
hereof) or death or (ii) by Executive for Good Reason (as defined in Section
6.1(b) hereof) prior to the end of the Initial Term or any Renewal Term, the
Company shall continue to pay Executive's Base Salary through the end of the
Initial Term or the Renewal Term (the "Continuation Period"), as the case may
be, with such payments to be made in accordance with the terms of Section
3.1. (the "Severance Payments"). In addition, the Company shall continue to
provide Executive during the Continuation Period with life insurance, medical
and hospitalization benefits (collectively, the "Continuation Benefits")
comparable to those provided to other senior executives; provided, however,
<PAGE>
that any such coverage shall terminate to the extent that Executive is
offered or obtains comparable life insurance, medical or hospitalization
benefits coverage from any other employer during the Continuation Period.
Notwithstanding the foregoing, if Executive breaches any provision of Section
11 hereof, the remaining balance of the Severance Payments and any
Continuation Benefits shall be forfeited. Executive shall be entitled to
receive the benefits, if any, provided under the employee benefit programs,
plans and practices referred to in Section 4.2, in accordance with their
terms.
(b) For purposes of this Agreement, "Good Reason" shall mean any
of the following (without Executive's express prior written consent):
(i) A reduction by the Company in Executive's Base Salary (in
which event Severance Payments shall be made based upon Executive's Base
Salary in effect prior to any such reduction); or
(ii) Any material diminution or material adverse change in
Executive's titles, duties or responsibilities, unless due to a
promotion or increased responsibility of Executive.
(c) Termination by Executive for Good Reason shall be made by
delivery to the Company by Executive of written notice, given at least 45
days prior to such termination, which sets forth the conduct believed to
constitute Good Reason; provided, however, that the Company shall have the
opportunity to cure the Good Reason during the first 30 days of such notice
period and if the Good Reason is cured within such 30-day period, Executive's
notice of termination shall be deemed withdrawn. If no notice is given within
90 days of the event giving rise to Good Reason, the Good Reason shall be
deemed waived.
6.2 Voluntary Termination by Executive; Discharge for Cause. (a)
In the event that Executive's employment is terminated (i) by the Company for
Cause, as hereinafter defined or (ii) by Executive other than for Good
Reason, Disability or death, Executive shall only be entitled to receive
(A) any Base Salary accrued but unpaid prior to such termination and (B) any
<PAGE>
benefits provided under the employee benefit programs, plans and practices
referred to in Section 4.2 hereof, in accordance with their terms. After the
termination of Executive's employment under this Section 6.2, the obligations
of the Company under this Agreement to make any further payments, or provide
any benefits specified herein, to Executive shall thereupon cease and
terminate.
(b) As used herein, the term "Cause" shall be limited to (i) gross
neglect of or willful and continuing refusal by Executive to substantially
perform Executive's duties hereunder (other than due to death or Disability,
as such term is defined in Section 6.3 hereof), (ii) any breach of the
provisions of Section 11 of this Agreement by Executive, (iii) willfully
engaging in conduct that is demonstrably injurious to the Company or the
Company's subsidiaries or affiliates by Executive or (iv) conviction of, or
plea of nolo contendere, by Executive to (a) any felony or (b) a misdemeanor
involving moral turpitude. Termination of Executive pursuant to this Section
6.2 shall be made by delivery to Executive of written notice, given at least
30 days prior to such Termination, from the Board specifying the particulars
of the conduct by Executive set forth in any of clauses (i) through (iv)
above. Termination shall be effected by a majority vote of the Board at a
meeting at which Executive shall have had the opportunity (along with
counsel) to be heard unless within 30 days after receiving such notice,
Executive shall have cured Cause to the reasonable satisfaction of the Board;
provided, however, that no cure shall be possible if termination for Cause is
made pursuant to this Section 6.2(b)(ii) or (iv). As long as Executive is on
the Board, he shall reasonably cooperate to cause a valid Board meeting to
occur.
6.3 Disability. In the event of the Disability (as defined below)
of Executive during the Term of Employment, the Company may terminate
Executive's Term of Employment upon written notice to Executive (or
<PAGE>
Executive's personal representative, if applicable) effective upon the date
of receipt thereof (the "Disability Commencement Date"). The obligation of
the Company to make any further payments under this Agreement shall, except
for earned but unpaid Base Salary, cease as of the Disability Commencement
Date; provided, however, that Executive shall continue to receive payments
equal to Executive's Base Salary otherwise payable under this Agreement for a
period equal to the lesser of (i) six months after the date of the occurrence
of the incapacity causing Executive's Disability and (ii) the number of
months otherwise remaining in the Term of Employment, in either case, reduced
by the amount of any disability payments otherwise payable to Executive under
any insurance program of the Company. The term "Disability," for purposes of
this Agreement, shall mean Executive's absence from the full-time performance
of Executive's duties pursuant to a reasonable determination made in
accordance with the Company's disability plan that Executive is disabled as a
result of incapacity due to physical or mental illness that lasts, or is
reasonably expected to last, for at least six months.
6.4 Death. In the event of Executive's death during his Term of
Employment hereunder or at any time thereafter while payments are still owing
to Executive under the terms of this Agreement, all obligations of the
Company to make any further payments, other than the obligation to pay any
accrued but unpaid Base Salary or remaining payments that were payable to
Executive by reason of his termination of employment under Section 6.1 to
which Executive was entitled at the time of his death, shall terminate upon
Executive's death, and benefits shall become payable under the Company's life
and accidental death insurance program in accordance with its terms. Benefits
under all other employee benefit programs, plans and practices shall be paid
in accordance with their terms.
6.5 No Further Notice or Compensation. Executive understands and
agrees that he shall not be entitled to any further notice or compensation
<PAGE>
upon Termination of Employment under this Agreement, other than amounts
specified in this Section 6 and the Ancillary Documents. Executive shall not
have any obligation to seek comparable employment following such termination
or resignation, nor shall any compensation received from any subsequent
employment reduce the Company's obligations hereunder.
6.6 Executive's Duty to Provide Materials. Upon the termination
of the Term of Employment for any reason, Executive or his estate shall
surrender to the Company all correspondence, letters, files, contracts,
mailing lists, customer lists, advertising materials, ledgers, supplies,
equipment, checks, and all other materials and records of any kind that are
the property of the Company or any of its subsidiaries or affiliates, that
may be in Executive's possession or under his control, including all copies
of any of the foregoing; provided, however, Executive shall not be required
to surrender his personal rolodex, telephone book, appointment book and
personal materials acquired by Executive prior to the date hereof.
7. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Robert V. LaPenta
749 Riversville Road
Greenwich, CT 06831
with a copy to:
Robert C. Schwenkel
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
<PAGE>
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after
the actual date of sending shall constitute the time at which notice was
given.
8. Separability. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity
or unenforceability shall not affect the remaining provisions hereof which
shall remain in full force and effect.
9. Assignment. This contract shall be binding upon and inure to
the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or, in the case of the Options, by
trust for the benefit of Executive's spouse and/or children or by operation
of the laws of intestate succession) or by the Company, except that the
Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
businesses of the Company, if such successor expressly agrees to assume the
obligations of the Company hereunder.
10. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
11. Nondisclosure of Confidential Information; Non-Competition.
(a) While employed by the Company, and at any time thereafter, the Executive
shall not, without the prior written consent of the Company, use, divulge,
disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company or any of its affiliates, except (i) while employed
<PAGE>
by the Company, in the business of and for the benefit of the Company or (ii)
when required to do so by applicable law, by a court, by any governmental
agency, or by any administrative body or legislative body (including a
committee thereof); provided, however, that Executive shall give reasonable
notice under the circumstances to the Company that he has been notified that
he will be required to so disclose as soon as possible after receipt of such
notice in order to permit the Company to take whatever action it reasonably
deems necessary to prevent such disclosure and Executive shall cooperate with
the Company to the extent that it reasonably requests him to do so. For
purposes of this Section 11(a), "Confidential Information" shall mean
non-public information concerning the financial data, strategic business
plans, product development (or other proprietary product data), customer
lists, marketing plans and other non-public, proprietary and confidential
information of the Company, its subsidiaries, its affiliates or customers,
that, in any case, is not otherwise available to the public (other than by
Executive's breach of the terms hereof).
(b) In consideration of the Company's obligations under this
Agreement, Executive agrees that during the period of his employment
hereunder and for a period of twelve (12) months thereafter, without the
prior written consent of the Board, (A) he will not, directly or indirectly,
either as principal, manager, agent, consultant, officer, stockholder,
partner, investor, lender or employee or in any other capacity, carry on, be
engaged in or have any financial interest in, any entity which is in
competition with the business of the Company or its subsidiaries and (B) he
shall not, on his own behalf or on behalf of any person, firm or company,
directly or indirectly, solicit or offer employment to any person who is or
has been employed by the Company or its subsidiaries at any time during the
twelve (12) months immediately preceding such solicitation; provided,
however, that if the Executive's employment terminates following the
<PAGE>
expiration of the Initial Term, this subsection 11(b) shall only be effective
during the period, if any, that the Company pays the Executive the Severance
Payments.
(c) For purposes of this Section 11, an entity shall be deemed to
be in competition with the Company if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any
service purchased, sold, dealt in or rendered by the Company as a part of the
business of the Company within the same geographic area in which the Company
effects such sales or dealings or renders such services. Notwithstanding this
subsection 11(c) or subsection 11(b), nothing herein shall (i) prohibit
Executive from serving as an officer, employee or independent consultant of
any business unit or subsidiary which would not otherwise be in competition
with the Company or its subsidiaries, but which business unit is a part of,
or which subsidiary is controlled by, or under common control with, an entity
that would be in competition with the Company or its subsidiaries, so long as
Executive does not engage in any activity which is in competition with any
business of the Company or its subsidiaries or (ii) be construed so as to
preclude Executive from investing in any publicly or privately held company,
provided Executive's beneficial ownership of any class of such company's
securities does not exceed 5% of the outstanding securities of such class.
(d) Executive agrees that this covenant not to compete is
reasonable under the circumstances and will not interfere with his ability to
earn a living or to otherwise meet his financial obligations. Executive and
the Company agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect, such court
shall have the right, power and authority to excise or modify such provision
or provisions of this covenant as to the court shall appear not reasonable
and to enforce the remainder of the covenant as so amended. Executive agrees
that any breach of the covenants contained in this Section 11 would
<PAGE>
irreparably injure the Company. Accordingly, Executive agrees that, in the
event the Company determines that Executive has breached the covenants
contained in this Section 11, the Company may, in addition to pursuing any
other remedies it may have in law or in equity, cease making any payments
otherwise required by this Agreement and obtain an injunction against
Executive from any court having jurisdiction over the matter restraining any
further violation of this Agreement by Executive.
12. Beneficiaries; References. Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference
in this Agreement to Executive shall be deemed, where appropriate, to refer
to his beneficiary, estate or other legal representative. Any reference to
the masculine gender in this Agreement shall include, where appropriate, the
feminine.
13. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and obligations.
The provisions of this Section 13 are in addition to the survivorship
provisions of any other section of this Agreement.
14. Dispute Resolution; Legal Fees. Any dispute or controversy
arising under or in connection with this Agreement shall be resolved by the
court with the appropriate jurisdiction in the State of New York. The
prevailing party shall be entitled to be reimbursed for any reasonable legal
fees and other fees and expenses which may be incurred in respect of
enforcing its respective rights under this Agreement.
<PAGE>
15. Governing Law. This Agreement shall be construed, interpreted
and governed in accordance with the laws of the State of New York, without
reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement and the Ancillary
Documents contain the entire understanding between the parties hereto and
supersedes in all respects any prior or other agreement or understanding,
both written and oral, between the Company, any affiliate of the Company or
any predecessor of the Company or affiliate of the Company and Executive.
17. Withholding. The Company shall be entitled to withhold from
payment any amount of withholding required by law.
18. Survival. Notwithstanding the expiration of the term of this
Agreement, the provisions of Section 11 hereunder shall remain in effect as
long as is reasonably necessary to give effect thereto in accordance with the
terms hereof.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
L-3 Communications Holdings, Inc.
By /s/ Michael T. Strianese
Name: Michael T. Strianese
Title: Vice President, Finance and Controller
/s/ Robert V. LaPenta
Robert V. LaPenta
Exhibit 10.7
Interim Services Agreement
This Interim Services Agreement, made as of the 30th day of April, 1997
by and among Lockheed Martin Corporation, a Maryland corporation ("LM"), L-3
Communications Holdings, Inc., a Delaware corporation ("Newco") and L-3
Communications Corporation, a Delaware corporation that is a wholly owned
Subsidiary of Newco ("L-3").
W I T N E S S E T H:
WHEREAS, LM and Newco, together with Lehman Brothers Capital Partners
III, L.P., Frank C. Lanza and Robert V. LaPenta, have entered into a
Transaction Agreement (the "Transaction Agreement"); and
WHEREAS, pursuant to Section 2.01(vi) of the Transaction Agreement, LM
has agreed to provide to Newco and Newco has agreed to provide to LM certain
services including the Services described herein; and
WHEREAS, pursuant to Section 15.04 of the Transaction Agreement, Newco
has assigned its rights and obligations under Section 2.01(vi) of the
Transaction Agreement to L-3; and
WHEREAS, the provision of certain other services contemplated by Section
2.01(vi) of the Transaction Agreement are the subjects of various real
property leases, a Transition Services Agreement concerning information and
communication systems services and a MAC/MAR Service Agreement all of even
date herewith between LM or its Affiliates and L-3 or its Affiliates
(collectively, the "Other Agreements").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties hereby covenant and agree as
follows:
1. Definitions. Defined terms used in this Interim Services Agreement
shall have the meanings specified in the Transaction Agreement (including all
<PAGE>
Exhibits, Schedules and Attachments thereto). In addition, the following
terms shall have the following meanings:
"Other Agreements" has the meaning set forth in the Preamble to this
Interim Services Agreement.
"Provider" means any of LM, L-3, or any of their respective Affiliates
designated on the relevant Schedule as the operating unit which is to provide
a Service to another party pursuant to the terms of this Interim Services
Agreement.
"Recipient" means any of LM, L-3, or any of their respective Affiliates
designated on the relevant Schedule as the operating unit which is to receive
a Service from the Provider pursuant to the terms of this Interim Services
Agreement.
"Schedule" means each Schedule attached hereto.
"Service" means each service (including the provision of limited space
or equipment) described on a Schedule attached hereto to be provided by a
Provider to a Recipient pursuant to the terms of this Interim Services
Agreement excluding any service addressed in any of the Other Agreements or
in the Transaction Agreement including, without limitation, in Sections 7.02
and 8.02 thereof.
2. Services To Be Provided. During the term of this Interim Services
Agreement, each of LM and L-3 shall provide or shall cause each of its
respective Affiliates that is designated as a Provider on a Schedule or a
third party provider that such Provider reasonably believes to be competent
to provide the Services described on such Schedule to the Recipient
designated on such Schedule. The parties acknowledge that the Services to
be provided by L-3 include providing certain services to Loral Space &
Communications, Ltd. relating to its offices at 600 Third Avenue, New York,
New York that currently are provided to Loral Space & Communications, Ltd. by
LM.
<PAGE>
3. Consideration; Disbursements.
(a) In consideration for the Services provided, the Recipient shall pay
to the Provider amounts determined on a basis consistent with methodologies
used to allocate costs for the provision of such Services prior to the date
hereof. The Provider shall invoice the Recipient for the Services provided
hereunder on a monthly basis and the Recipient shall pay the amount of such
invoice in immediately available funds within 15 days of the date hereof.
(b) In addition to amounts due pursuant to Section 3(a), if the
provision of a Service will result in the Provider's incurring incremental
"systematic costs" (such as the costs of partitioning data bases or
establishing firewalls) which costs would not be reimbursed under Section
3(a), then the Provider shall provide the Recipient with a written
explanation of such costs and the reason that they will be incurred.
Thereafter, the Provider and the Recipient shall in good faith discuss the
matter. If the Recipient agrees in writing to be responsible for such costs,
then such amounts shall be included within the invoices contemplated by
Section 3(a). If the Recipient declines to be responsible for such costs,
then, notwithstanding any other provision of this Agreement, if such Service
cannot be provided in a commercially reasonable manner absent the incurrence
of such costs then the Provider may curtail or limit the Provider's provision
of the related Service; provided, however, that such limitation or
curtailment shall be the minimum reasonably necessary to allow, if possible,
the provision of the related Service in a commercially reasonable manner
absent the incurrence of such costs.
(c) In addition to amounts due pursuant to Section 3(a), if the
provision of a Service results in the Provider's incurring reasonable
incremental out-of-pocket expenses (such as travel expenses, accounting fees
and the fees of outside counsel) other than the costs of retaining third-
party providers to perform Services that ordinarily would be performed by the
<PAGE>
Provider, such reasonable incremental out-of-pocket expenses shall be charged
to and paid by the Recipient.
(d) No Provider shall be required to disburse its own funds for or on
behalf of a Recipient. If the provision of a Service requires the Provider
to disburse funds for or on behalf of a Recipient, the Provider may require
the Recipient to advance such funds to the Provider prior to such
disbursement.
4. Provision and Retention of and Access to Information.
(a) Where input or other information has been provided by the Recipient
in the past in connection with a Service, the Recipient shall provide the
Provider with information in the same general format and in accordance with
the same schedule followed previously by the Recipient in furnishing such
information to the Provider.
(b) The Provider will preserve all records supporting the amounts
charged to the Recipient pursuant to Section 3 for a period of five years
following the invoicing of such amounts, or such longer period as may be
required by Applicable Law, and thereafter, not destroy or dispose of such
records without giving notice to the Recipient of such pending disposal and
offering the Recipient the right to obtain and retain such records at its
expense. In the event the Recipient has not obtained such materials within
30 days following the receipt of notice from the Provider, the Provider may
proceed to destroy or dispose of such materials without any liability.
Subject to any disclosure, copying or other limitations imposed by Applicable
Law and to any applicable privileges (including, without limitation, the
attorney-client privilege), the Provider shall (i) at its expense afford the
Recipient and its Representatives reasonable access upon reasonable prior
notice during normal business hours to all such records and (ii) at the
Recipient's expense provide copies of such records as the Recipient may
reasonably request for any proper purpose (including, without limitation, in
<PAGE>
connection with any judicial, quasi judicial, administrative, tax, audit or
arbitration proceeding).
5. Performance Standard; Confidentiality.
(a) Nothing in this Interim Services Agreement shall be construed to
require a Provider to provide a Service to a Recipient beyond the scope and
content of such Service provided by the Provider to the Recipient immediately
prior to the date of this Interim Services Agreement. Each Provider will
perform each Service in the same general manner and according to the same
standards that the Service is performed by the Provider for its own
operations or for its Affiliates.
(b) The Provider will handle, and will cause its Affiliates and any
third party provider retained by it to handle, all information disclosed to
it or them by a Recipient which the Recipient informs the Provider that it
considers proprietary and confidential in the same manner as the Provider
handles its own information which it considers proprietary and confidential.
The provisions of this Section 5(b) will not be deemed to prohibit the
disclosure of confidential information concerning the operations or affairs
of the Business by any of the Lockheed Martin Companies or by L-3, as the
case may be, to the extent reasonably required (i) in connection with audits
or other proceedings by or on behalf of a Governmental Authority or (ii) to
the extent necessary to comply with any Applicable Law. Notwithstanding the
foregoing, the provisions of this Section 5(b) shall not apply to information
that (i) is or becomes publicly available other than as a result of a
disclosure by the Provider, (ii) is or becomes available to the Provider on a
non-confidential basis from a source that, to the Provider's knowledge, is
not prohibited from disclosing such information by a legal, contractual or
fiduciary obligation, or (iii) is or has been independently developed by the
Provider (other than solely for the Recipient or its Affiliates).
<PAGE>
6. Force Majeure. Neither party shall be liable for any loss or
damage whatsoever arising out of any delay or failure in the performance of
its obligations pursuant to this Interim Services Agreement which delay or
failure results from events beyond the control of that party including but
not limited to acts of God, acts or regulations of any Governmental
Authority, war, accident, fire, flood, strikes, industrial disputes or
inability to secure goods or materials nor shall any party be entitled to
terminate this Interim Services Agreement in respect of any such delay or
failure resulting from any such event.
7. Dispute Resolution. In the event of any dispute between a Provider
and a Recipient with respect to the provision of any Service pursuant to this
Interim Service Agreement, the individuals designated as the "Individual
Responsible" for each party on the Schedule relating to such Schedule will
use commercially reasonable efforts to resolve such dispute promptly. If
such individuals are unable to resolve such dispute promptly, the dispute
will be submitted to a member of senior management of each party. Such
members of senior management will meet in person or by telephone conference
at least once in the ten (10) day period following the submission of the
dispute to them and will use commercially reasonable efforts to resolve such
dispute promptly. If such members of senior management are unable to resolve
such dispute within thirty (30) days of the submission of the dispute to
them, the parties may exercise any rights or remedies available to them in
the Transaction Documents.
8. Limited Liability. Each Provider and its Affiliates shall not be
liable whether in negligence, breach of contract or otherwise for any loss,
damage or expense suffered or incurred by a Recipient or a related person or
entity arising out of or in connection with the rendering of a Service or any
failure to provide a Service except to the extent that such loss, damage or
expense is caused by the willful misconduct or gross negligence of the
<PAGE>
Provider or any of its Affiliates. In no event shall any Provider or its
Affiliates be liable for special, indirect, punitive, incidental or
consequential losses, damages or expenses, including, without limitation,
loss of profits.
9. Indemnification. The Recipient of each Service shall indemnify and
hold harmless the Provider of such Service in accordance with Article XIII of
the Transaction Agreement in respect of any Damages incurred or suffered by
the Provider arising out of the provision of or failure to provide such
Service unless the Provider shall have been finally determined by a court of
competent jurisdiction to have been guilty of willful misconduct or gross
negligence with respect thereto.
10. Term, Termination and Effect of Termination.
(a) This Interim Services Agreement shall become effective on the date
hereof and, unless sooner terminated pursuant to the terms hereof, shall
continue in effect until:
(i) in the case of each Service as to which the Communications
Systems Business Unit is the Recipient, the date that is [one year] from the
date hereof unless such term is extended for up to an additional six (6)
months by the Communications Systems Business Unit giving written notice to
the Provider of a Service of its election to extend the term of this Interim
Services Agreement with respect to such Service (and all related Services)
not less than sixty (60) days prior to the expiration of the initial one year
term;
(ii) in the case of Services to be provided to LM in support of
the Internal Revenue Service's audit of the tax returns of Loral Corporation,
the date upon which such audit is completed;
(iii) in the case of Services to be provided by either party to
the other with respect to the preparation and submission to the U.S.
Government of indirect rates and negotiations with the U.S. Government with
<PAGE>
respect to such submissions, until the date such negotiations are concluded;
and
(iv) in all other cases, December 31, 1997.
(b) Each Recipient of a Service will use its reasonable commercial
efforts to obtain or develop alternative sources for such Service to
eliminate its dependency upon the Provider for such Service (and all related
Services) as soon as practicable and, thereupon, to terminate such Service
(and all related Services) pursuant to this Section 10(b). The Recipient of
any Service may terminate any Service (provided that related Services may not
be terminated in part) prior to the expiration of the term thereof by
providing to the Provider thereof written notice of termination not less than
sixty (60) days before the date of such earlier termination and the provision
of such Service shall terminate at the end of the period of notice.
(c) The Provider of any Service may terminate any Service (provided
that related Services may not be terminated in part) prior to the expiration
of the term thereof if the Provider discontinues the provision of such
Service to its own operations by providing to the Recipient thereof not less
than sixty (60) days prior written notice of termination and the provision of
such Service shall terminate at the end of the period of notice.
(d) In the case of any employee benefit administration Service to be
provided by LM or its Affiliates to L-3 or its Affiliates with respect to an
employee benefit plan or arrangement of L-3 or its Affiliates (each a
"Duplicate Plan") that is modeled on an Employee Plan or Benefit Arrangement
of a Lockheed Martin Company (each a "Model Plan"), the Provider may
terminate any such employee benefit administration Service if, after the date
hereof, (i) the Duplicate Plan is amended and the Model Plan is not so
amended or (ii) the Model Plan is amended and the Duplicate Plan is not
simultaneously so amended, provided that LM has given L-3 at least [sixty
(60)] days prior written notice of the amendment or proposed amendment of the
<PAGE>
Model Plan and, in either case, the effect is to increase the burden on the
Provider in continuing to provide the Service.
(e) This Interim Services Agreement may be terminated in whole or in
part (provided that related Services may not be terminated in part) as
follows:
(i) by either party if the other party is in material breach of any
provision of this Interim Services Agreement, provided that the party seeking
to terminate this Interim Services Agreement for breach shall notify the
other party of such breach and provide such other party with thirty (30) days
to cure such breach;
(ii) by either party if its provision or receipt of any such
Service is prohibited by Law or subjects it to increased regulation by any
Governmental Authority;
(iii) by the Provider if it is required to obtain any license or
permit not otherwise required of the Provider; or
(iv) by the Provider if the Recipient ceases to be an Affiliate of
LM or L-3.
(f) Other than the parties' rights and obligations under Sections 4(b)
and 5(b) hereof which will survive any termination of this Interim Services
Agreement, whether in whole or in part, (i) neither the Provider nor the
Recipient of any terminated Service shall have any rights or obligations
hereunder with respect to any terminated Service after the effective date of
such termination and (ii) no party shall have any rights or obligations
hereunder after the termination of this Interim Services Agreement with
respect to post-termination periods.
11. No Agency. Nothing in this Interim Services Agreement shall be
deemed in any way or for any purpose to constitute either party an agent of
the other party in the conduct of such party's business.
<PAGE>
12. Sole Agreement. This Interim Services Agreement, including the
Schedules attached hereto, represents the sole agreement of the parties with
respect to the Services, and no waiver, alteration, or modification of any
provision hereof shall be effective unless in writing and signed by
authorized representatives of both LM and L-3. No provision in the Schedules
shall be of any force and effect to the extent that it is inconsistent with
the express terms of this Interim Services Agreement.
13. Notices.
(a) Any notice, request, instruction or other communication by a
party concerning the administration of a Services to be provided under this
Interim Services Agreement shall be directed to the individual designated on
the applicable Schedule as the "Individual Responsible" with respect to the
other party.
(b) Any notice required or permitted to be given under this
Interim Services Agreement (other than notices specified in Section 13(a))
shall be in writing and shall be deemed to be given upon delivery in person
or upon being deposited in the mail, postage prepaid, for mailing by
certified or registered mail or upon being deposited with an overnight
courier, charges prepaid, as follows:
If to LM: Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Marcus C. Bennett
Telecopy (301) 897-6083
with a copy to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Frank H. Menaker, Jr.
Telecopy (301) 897-6791
if to Newco or L-3:
L-3 Communications Holdings, Inc.
600 Third Avenue
New York, New York 10016
Attention: Robert V. LaPenta
<PAGE>
Telecopy: (212) 805-5470
with copies to:
L-3 Communications Holdings, Inc.
600 Third Avenue
New York, New York 10016
Attention: General Counsel
Telecopy: (212) 805-5494
The place for notice may be changed by notice sent in accordance with this
Section 13.
14. Successors and Assigns. This Interim Services Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that this Interim Services
Agreement may not be assigned in whole or in part (except in the case of an
assignment to an Affiliate of LM or L-3 that remains an Affiliate of such
party for the remainder of the term hereof) without the prior written consent
of the other party hereto.
15. Third Party Beneficiaries. No provision of this Interim Services
Agreement shall create any third party beneficiary rights in any Person.
16. Governing Law. This Interim Services Agreement shall be construed
in accordance with and governed by the law of the State of New York.
17. Counterparts; Effectiveness. This Interim Services Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Interim Services Agreement shall be effective as of
April 30, 1997.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Interim
Services Agreement on the dates indicated below but as of the day and year
first above written.
LOCKHEED MARTIN CORPORATION
Date:
BY:__________________________(SEAL)
L-3 COMMUNICATIONS HOLDINGS, INC.
Date:
BY:__________________________(SEAL)
L-3 COMMUNICATIONS CORPORATION
Date:
BY:__________________________(SEAL)
Exhibit 10.8
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is
dated as of April 29, 1997 among Lockheed Martin Tactical Systems, Inc., a
New York corporation (the "Assignor"), L-3 COMMUNICATIONS CORPORATION, a
Delaware corporation (the "Assignee"), and KSL, Division of Bonneville
International, a Utah corporation (the "Landlord"), with reference to the
following:
RECITALS
A. The Landlord, as landlord, and the Assignor, as tenant,
executed a Lease Agreement dated November 1, 1995, (which, together with all
modifications, amendments and supplements thereof, is hereinafter referred to
collectively as the "Lease"), a copy of which is attached hereto and
incorporated by reference as Exhibit A, pursuant to which Landlord leased to
the Assignor and the Assignor leased from Landlord property and improvements
described therein located in Oquirrh Mountains Range, Utah (the "Premises").
B. The Assignee is acquiring certain assets and assuming certain
liabilities from the Assignor including the Assignor's rights, leasehold
interest and obligations under the Lease.
C. In connection with such acquisition, the Assignor desires to
assign the Lease to the Assignee, and the Assignee desires to accept the
assignment of the Lease from the Assignor.
D. The Landlord has agreed to enter into this Assignment to, among
other things, evidence its consent to such assignment of the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Assignor, the Assignee and
the Landlord hereby covenant and agree as follows:
1. Assignment. The Assignor grants, assigns and transfers to the
Assignee, its successors and assigns, all of the Assignor's right, title and
interest in, to and under the Lease (including, without limitation, any
options under the Lease and any rights to extend or renew the Lease) and the
Assignee accepts from the Assignor all of the Assignor's right, title and
interest in, to and under the Lease.
2. Assumption of Lease Obligation. The Assignee assumes and
agrees to perform and fulfill all terms, covenants, conditions and
obligations required to be performed and fulfilled by the Assignor under the
Lease, including, without limitation, the obligation to make all payments due
or payable on behalf of the Assignor under the Lease as they become due and
payable.
3. Representations of Assignor and Landlord. The Assignor and the
Landlord represent to the Assignee as follows:
(a) The Lease attached hereto as Exhibit A is a true, correct and
complete copy of the Lease (including all modifications, amendments and
supplements thereof) and the same are the only agreements between
Landlord and the Assignor with respect to the subject matter thereof.
<PAGE>
(b) The Lease is in full force and effect and, except for the
modifications, amendments and supplements included in Exhibit A, the
Lease has not been modified, amended or supplemented.
(c) Except as net forth on Exhibit B, no default by the Assignor
or the Landlord has occurred and is continuing under the Lease, and no
event has occurred and is continuing which with the giving of notice or
the lapse of time or both would constitute a default thereunder.
(d) No minimum or base rent or other rental has been paid in
advance (except for the current month).
(e) The monthly amount of base rent due under the Lease as of May
1, 1997, is $1,050, and the minimum or base rent and all other rentals
and other payments due, owing and accruing under the Lease have been
paid through April 30, 1997.
(f) The term of the Lease commenced on November 1, 1995, and the
current term of the Lease expires on October 31, 1998.
4. Landlord's Consent.
The Landlord hereby consents to the Assignor's assignment of the
Lease to the Assignee and the Assignee's assumption of the Lease. On and
from the date of this Assignment forward, the Landlord hereby releases and
relieves the Assignor from any and all liability and obligation under the
Lease, and agrees to look solely to the Assignee for performance of the
terms, covenants and conditions of tenant under the Lease.
5. Successors and Assigns. This Assignment shall be binding on
and inure to the benefit of the parties hereto, and their respective heirs,
personal representatives, successors and assigns, provided that this Section
5 shall not be construed to permit any future assignments of the Lease or
subletting of the Premises except as permitted by the Lease.
6. Counterparts. This Assignment may be signed in counterpart
and, as so executed, shall constitute a binding agreement.
7. Governing Law. This Assignment shall be governed by and
construed in accordance with the laws of the state in which the Premises are
located.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment as of the date first above written.
WITNESS/ATTEST: ASSIGNOR:
LOCKHEED MARTIN TACTICAL SYSTEMS,
INC.
___________________________ By:________________________(SEAL)
Name: Stephen M. Piper
Title: Vice President and Assistant
Secretary
ASSIGNEE:
L-3 COMMUNICATIONS CORPORATION
___________________________ By:________________________(SEAL)
Name: Michael T. Strianese
Title: Vice President, Finance and
Controller
WITNESS/ATTEST: LANDLORD:
KSL, a division of BONNEVILLE
INTERNATIONAL CORPORATION
___________________________ By:________________________(SEAL)
Name: Brent Robinson
Title: Chief Engineer
<PAGE>
STATE OF NEW YORK, COUNTY OF NEW YORK, TO WIT:
On this 30th day of April, 1997, before me a notary public of said
State, Stephen M. Piper, the undersigned officer, personally appeared Stephen
M. Piper, who acknowledged himself to be a Vice President and Assistant
Secretary of Lockheed Martin Tactical Systems, a New York corporation, and
that he, as such Vice President and Assistant Secretary, being authorized so
to do, executed the foregoing instrument for the purposes therein contained,
by signing the name of the Corporation by himself as a Vice President and
Assistant Secretary.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
____________________________
Notary Public
My Commission Expires:
STATE OF NEW YORK, COUNTY OF NEW YORK, TO WIT:
On this 30th day of April, 1997, before me a notary public of said
State, Michael T. Strianese, the undersigned officer, personally appeared
Michael T. Strianese, who acknowledged himself to be a Vice President of L-3
Communications Corporation, a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as a Vice President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
____________________________
Notary Public
My Commission Expires:
<PAGE>
STATE OF UTAH, COUNTY OF SALT LAKE, TO WIT:
On this 28th day of April, 1997, before me a notary public of said
State, Brent Robinson, the undersigned officer, personally appeared Brent
Robinson, who acknowledged himself to be a Chief Engineer of KSL-TV, a Utah
corporation, and that he, as such Chief Engineer, being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as a Chief Engineer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
____________________________
Notary Public
My Commission Expires:
<PAGE>
EXHIBIT A
THE LEASE
<PAGE>
TO: Julia Michael
FROM: Bruce J. Garner
DATE: January 10, 1996
SUBJECT: LCS Facilities Lease Request
Julia, attached is the Lease request documentation for the Far Field Test
Antenna Range we have been discussing. I understand you will attached the
general liability, automobile coverage and workers compensation insurance
certification requested in paragraph 11 on page 6 of the lease. LCS will
make the helicopter insurance requirement noted in the same paragraph a
requirement of the purchase order(s) issued for that service.
If you have any questions you can call me at 801-594-2356.
Thank you for your assistance in this matter.
cc: W.B. Booker
D.C. Freeze
T.O. Miiller
<PAGE>
LEASE AGREEMENT
This Lease Agreement (the "Agreement") is entered into this 1st day
of November, 1995 between KSL, a division of Bonneville International
Corporation, a Utah corporation, with its principal place of business at
Broadcast House, 55 North 300 West, P. O. Box 1160, Salt Lake City, Utah
84110-1160 ("Lessor") and Loral Communication Systems, a New York
corporation, with its principal place of business at 640 North 2200 West,
Salt Lake City, Utah 84116 ("Lessee"), in light of the following
circumstances:
Recitals
Whereas, Lessor is the owner of certain television and radio
transmission facilities located in the Oquirrh mountain range in Salt Lake
and Tooele counties, Utah at a location commonly known as Farnsworth Peak
(the "Site"); and
Whereas, Lessee is engaged in the business of satellite
communications and data link services; and
Whereas, Lessee desires to lease from Lessor certain space and
equipment at the Site;
Now, therefore, for good and valuable consideration, the receipt
and sufficiency of which are acknowledged, Lessor and Lessee agree as
follows:
Terms and Conditions
1. Leased Premises. Lessor hereby leases to Lessee, and Lessee
hereby accepts from Lessor, that certain space and equipment at the Site
identified on Schedule A to this Agreement (the "Premises") for the location
and operation of a test antenna of approximately six feet in length. A
complete list of Lessee's equipment to be located at the Premises (the
"Equipment") is attached to this Agreement as Schedule B.
2. During Furnished Items. During the term of this Agreement,
Lessor shall furnish Lessee with the following:
A. Access to the Site over the access road available to Lessor for
that purpose. Lessee understands that it will be subject to the same
restrictions on the use of such road as may be imposed on Lessor from
time to time by the entities controlling the property upon which the
road is located, including the Kennecott Copper Corporation, Alpha
Communications and Hercules Corporation;
B. Heat, light and toilet facilities at the Site;
C. The right to connect to the power load center at the Site for
the operation of the Equipment. Lessee's use of electricity will be
separately metered by Lessor. Lessor shall invoice Lessee monthly for
such electrical usage at the established commercial rates of the Utah
Power and Light Company, plus the lesser of ten percent of Lessee's
monthly statement or $30.00 for administration and general expenses.
<PAGE>
Invoices shall be payable within twenty days of the date of billing. In
the event an invoice is more than ten days delinquent, Lessor, upon five
days written notice, shall be entitled to cease supplying Lessee with
electricity;
D. Upon Lessee's request, emergency service, if available, for the
Equipment. Rates for emergency service are set forth in Schedule O to
this Agreement and may be adjusted from time to time as determined by
Lessor;
E. The right to make reasonable alterations, attach fixtures and
erect additions to the Premises as required to operate the Equipment,
but only so long as plans for such alterations, attachments or additions
are submitted, along with a list of added and/or replaced materials, to
Lessor for approval, which approval shall not be unreasonably withheld.
In no event shall any of Lessee's alterations, attachments or additions
interfere with the operation or work of Lessor or of other tenants at
the Site;
F. Other services, such as the use of tools and parts owned by
Lessor, at the rates listed on Schedule O, as such may be adjusted from
time to time as determined by Lessor; and
G. Maintenance of the Site in good operating order.
3. Monthly Payments by Lessee. In exchange for the right to
occupy the Premises and operate the Equipment, Lessee shall pay to Lessor the
monthly rental payment and other fees set forth in Schedule C to this
Agreement. The monthly rental payment shall be payable in advance on or
before the first day of each calendar month at Lessor's principal place of
business or at such other place or in such other manner as Lessor may from
time to time direct; provided, however, that in the event the term of this
Agreement shall commence on other than the first day of a calendar month or
terminate on other than the last day of a calendar month, the monthly rental
payment shall be prorated on a daily basis for such partial calendar month.
Unless otherwise specifically set forth elsewhere in this Agreement, all
other payments required to be made by Lessee to Lessor shall be paid by
within twenty days of the date of invoice.
4. Other Costs. Lessee recognizes that additional expenses may be
incurred by Lessor from time to time for the benefit of Lessee and other
tenants at the Site, such as the cost of transporting various government
inspectors, tax assessors, state and/or county officers/officials and the
like to and from the Site. Lessee agrees to pay its share of such costs on a
pro rata basis as calculated by Lessor. Lessor shall provide Lessee with
proof of such costs, along with calculations for determining the amount
charged to Lessee.
5. Compliance. Lessee's operations at the Site shall be in full
compliance with all applicable laws, statutes, ordinances, rules and
regulations of any governmental authority having jurisdiction over Lessor,
Lessee or the Site, including, but not limited to, the Federal Communications
Commission (the "FCC"). Lessee shall bear the cost and responsibility for
all matters pertaining to its operations at the Site, including, but not
limited to, applications, renewals, regular or special reports, discrepancy
citations, inspections or any changes in equipment which may be required from
time to time by the FCC or standards of good engineering practice.
<PAGE>
Lessee shall protect all persons at the Site at all times from
exposure to excessive non-ionizing radiation (as determined by the FCC, the
Occupational Safety and Health Agency, the Environmental Protection Agency or
any other governmental authority) which may be generated as a result of
Lessee's operations. In the event Lessee's operations appear to be causing
excessive non-ionizing radiation, Lessor shall have the right, but not the
obligation, to take whatever action Lessor deems appropriate to reduce the
amount of such radiation, including, but not limited to, the interruption of
Lessee's operations or the reduction of Lessee's transmission power. Lessor
shall invoice Lessee for the costs of any such action and Lessee shall
promptly pay such amount within twenty days of the date of invoice.
6. Interference. Lessee acknowledges that Lessor reserves the
right to grant space, premises, facilities and/or rights to third parties at
the Site that are the same as or similar to those granted herein to Lessee.
Lessee shall endeavor in good faith to conduct its activities in accordance
with sound electronic and engineering practices and applicable FCC standards
and will cooperate with Lessor and other tenants at the Site so as to
anticipate and prevent Interference, as that term is defined below. A list
of Tenants at the Site as of the commencement of this Agreement is attached
hereto as Schedule S.
If Lessee's operations cause Interference, Lessee shall, at its
sole cost and expense and without recourse to Lessor, cause any such
Interference to be corrected within ten days following written notice thereof
to Lessee. Pending correction, Lessee shall immediately cease the activity
or remove the equipment causing the Interference. If Lessee fails to act
within the given time frame, Lessor may cause the required corrections to be
made. Lessor shall invoice Lessee for the costs of any such action and
Lessee shall promptly pay such amount within twenty days of the date of
invoice.
"Interference" shall be deemed to exist if (i) a final
determination to that effect is made by an authorized representative of the
FCC pursuant to its rules and regulations; (ii) a condition exists which
constitutes interference within the meaning of the provisions of the rules
and regulations of the FCC in effect at the time; or (iii) Lessor makes a
good faith determination that its technical operations or the technical
operations of any other tenants at the Site are being adversely affected by
Lessee's activities.
7. Lessor Improvements. Lessor reserves the right to replace or
install additional equipment at the Site necessary or desirable for its own
operations. Lessor shall not be liable for any disruption of or interference
to Lessee's operations by reason of such replacement or installation, but
Lessor agrees to cooperate with Lessee and to use reasonable efforts to
resolve in advance any problems that might arise in connection with these
activities.
8. Assignment or Sublease. Lessee may not assign or transfer this
Agreement or any interest therein, sublease any interest covered by this
Agreement or encumber, hypothecate or otherwise give as security this
Agreement or any interest therein without the prior written consent of
Lessor, which consent shall not be unreasonably withheld. No assignment,
transfer or sublease shall be effective as against Lessor for any purpose,
unless Lessor shall have consented thereto in writing prior to such
assignment, transfer or sublease and unless all sums due from Lessee,
<PAGE>
together with any costs to Lessor to cover reasonable legal and other
expenses of Lessor in connection with such assignment, transfer or sublease,
shall have been paid to Lessor.
Each and every attempt to assign, sell, transfer or encumber this
Agreement or any interest therein and each and every attempt to sublease any
interest covered hereby in a manner contrary to that set forth in this
paragraph may be deemed a default by Lessee hereunder.
Lessor's consent to one assignment, transfer or sublease by Lessee
or acceptance of performance from an assignee, transferee or sublessee shall
not be deemed a waiver by Lessor of the restrictions of this paragraph as to
subsequent attempts to assign, transfer or sublet by Lessee or by Lessee's
heirs, successors, assigns, transferees or sublessees. As used herein, the
terms Lessor and Lessee shall be deemed to include their respective heirs,
successors, assigns, transferees or sublessees.
The terms, conditions and covenants contained in this Agreement
shall apply to, inure to the benefit of and be binding upon the parties
hereto and their respective legal representatives, successors, assigns,
transferees and sublessees.
Lessor shall have the right to transfer and assign, in whole or in
part, all of its rights and obligations hereunder and in the Site and in such
event Lessor shall be released from any further obligations hereunder and the
successor-in-interest of Lessor shall have all the rights and obligations
hereunder and in the Site with respect to Lessee.
9. Term. The initial term of this Agreement shall begin on
November 1, 1995 and shall end on October 31, 1996. This Agreement shall
thereafter be renewed for up to three additional two year periods (from
November 1, 1996 through October 31, 1998; from November 1, 1998 through
October 31, 2000; and from November 1, 2000 through October 31, 2002,
respectively) upon the same terms and conditions set forth herein unless
Lessee provides Lessor with written notice at least ninety days prior to the
expiration of the then current term.
10. Default by Lessee. The following events shall be deemed to be
events of default by Lessee under this Agreement (each such event of default
is hereinafter referred to as an "Event of Default"):
A. Lessee shall fail to timely pay any monthly rental payment as
referenced in paragraph 3 above or any other sum of money due hereunder
and such failure shall continue for a period of ten days;
B. Lessee shall fail to comply with any provision of this
Agreement not requiring the payment of money, all of which provisions
shall be deemed material, and such failure shall continue for a period
of twenty days after written notice of such default is delivered to
Lessee;
C. Lessee shall become insolvent or fail to pay its debts as they
become due or Lessee notifies Lessor that it anticipates either
condition;
D. Lessee takes any action to file a petition under any section or
chapter of the United States Bankruptcy Code or under any similar law or
<PAGE>
statute of the United States or any state thereof or a petition shall be
filed against Lessee under any such statute or Lessee or any creditor of
Lessee notifies Lessor that it knows such a petition will be filed or
Lessee notifies Lessor that it expects such a petition to be filed; or
E. A receiver or trustee shall be appointed for Lessee's leasehold
interest in the Premises or for all or a substantial part of Lessee's
assets.
Upon the occurrence of any Event of Default, Lessor may at its
option and without further notice to all other remedies given hereunder or by
law or in equity, do any one or more of the following: (i) terminate this
Agreement, in which event Lessee shall immediately surrender possession of
the Premises to Lessor; (ii) enter upon the Premises and expel or remove
Lessee's Equipment therefrom, with or without having terminated this
Agreement; and (iii) change or re-key all locks to entrances to the Site and
Lessor shall have no obligation to give Lessee notice thereof or to provide
Lessee with a new key to the Site.
The exercise by Lessor of any one or more remedies hereunder shall
not constitute an acceptance of the surrender of the Premises by Lessee.
Lessee acknowledges that a surrender of the Premises can be effected only by
a written agreement between Lessor and Lessee.
If Lessor terminates this Agreement by reason of an Event of
Default, Lessee shall pay to Lessor the sum of (i) the cost of recovering the
Premises; (ii) the unpaid monthly payments and all other indebtedness accrued
hereunder to the date of such termination; (iii) to the extent the same were
not paid, the cost of repairing, altering or otherwise putting the Premises
into a condition acceptable to a new tenant or tenants (if Lessor elects to
so relet) (collectively, the "Reletting Expenses"); (iv) all expenses
incurred by Lessor in enforcing Lessor's remedies, including attorneys' fees
and court costs; (v) the total monthly payments and other benefits which
Lessor would have received under this Agreement for the remainder of the
term, minus any net sums thereafter received by Lessor through reletting the
Premises during such period; and (vi) any other damages or relief which
Lessor may be entitled to at law or in equity. Lessee shall not be entitled
to any excess rent obtained by reletting the Premises.
If Lessor repossesses the Premises without terminating this
Agreement by reason of an Event of Default, then Lessee shall pay to Lessor
the sum of (i) the cost of recovering the Premises; (ii) the unpaid monthly
payments and all other indebtedness accrued hereunder to the date of such
repossession; (iii) the Reletting Expenses; (iv) all expenses incurred by
Lessor in enforcing Lessor's remedies, including attorneys' fees and court
costs; (v) the total monthly payments and other benefits which Lessor would
have received under this Agreement for the remainder of the term, minus any
net sums thereafter received by Lessor through reletting the Premises during
such period; and (vi) any other damages or relief which Lessor may be
entitled to at law or in equity. Re-entry by Lessor will not affect the
obligations of Lessee for the unexpired term of this Agreement. Lessee shall
not be entitled to any excess rent obtained by reletting the Premises.
Actions to collect amounts due by Lessee may be brought on one or more
occasions without the necessity of Lessor's waiting until the expiration of
the term of this Agreement.
<PAGE>
Upon termination of this Agreement or repossession of the Premises
due to an Event of Default, Lessor shall not be obligated to relet or attempt
to relet the Premises or any portion thereof or to collect rent after
reletting, but Lessor shall have the option to relet the whole or any portion
of the Premises for any period to any tenant and for any use and purpose.
11. Insurance. Lessee shall at its own cost and expense procure
and maintain general liability insurance coverage and automobile coverage in
the face amount of at least $1,000,000.00 per occurrence and workers
compensation insurance as prescribed by Utah state law. A certificate of
insurance naming Lessor as an additional insured shall be attached to this
Agreement as Schedule I. In addition, Lessee shall use only certified and
insured helicopter carriers for trips and from the Site. Such carriers shall
carry liability insurance in the face amount of at least $5,000,000.00 per
occurrence. All such insurance shall cover Lessee's employees, agents and
invitees while in, or about the Site and while traveling to and from the
Site, including losses attributable to the presence of the Equipment,
Lessee's employees, agents or invitees while in, on or about the Site.
Lessee shall be solely responsible for procuring and maintaining property
insurance on the Equipment.
12. Indemnification. Lessee shall indemnify, defend and hold
harmless Lessor and any officer, director, employee, contractor, agent or
affiliate of Lessor (collectively, a "Lessor Related Party") from and
against any and all liabilities, obligations, damages, claims, suits, losses,
causes of action, liens, judgments and expenses (including court costs,
attorneys' fees and costs of investigation) or any kind, nature or
description resulting from any injuries to or death of any person or any
damage to the Site which either (i) arises from or is claimed to arise from
any act, omission or negligence of Lessee or any employee, officer,
contractor, agent, subtenant, guest, licensee or invitee of Lessee; (ii)
arises from a breach, violation or nonperformance of any term, provision,
covenant or agreement of Lessee hereunder or a breach or violation by Lessee
of any court order or any law, regulation or ordinance of any federal, state
or local authority; or (iii) arises from the activities of Lessee in and
around the Site or the operations or conduct of Lessee's business upon the
Site (collectively, the "Claims"), except to the extent such Claims are
directly caused by the gross negligence or willful misconduct of Lessor. If
any such Claim is made against Lessor, Lessee shall at its sole cost and
expense defend such Claim by or through attorneys satisfactory to Lessor. In
resolving or settling any Claim, Lessee shall obtain a release of such Claim
made against Lessor or any Lessor Related Party. The indemnity obligations
of Lessee are in addition to Lessee's obligations to obtain and maintain
insurance as otherwise provided herein.
Lessee specifically agrees to look solely to Lessor's interest in
the Site for the recovery of any judgment against Lessor.
13. Limits on Liability. Lessor shall have no liability to Lessee
or any other party for any loss allegedly occasioned by the nontransmission
or partial transmission of Lessee's data or damage to the Equipment by reason
of the physical collapse of a tower or antennas, breakdown of a transmitter
or its components, failure or inability of Utah Power and Light Company to
supply electrical power, failure of Lessor's emergency generator, acts of
God, sabotage, earthquake, fire, theft, burglary, windstorm or any other
hazard (natural or man-made), strikes or walkouts,cancellation of Lessee's
licenses or any other cause beyond Lessor's control. Lessor shall have no
<PAGE>
liability to Lessee or any other party and Lessee shall indemnify Lessor from
and against all claims, costs and expenses for non-ionizing radiation claimed
to originate as a result of Lessee's operations at the Site.
14. Lessor's Facilities. Lessor shall have first call on
personnel and all Lessor's equipment at the Site, which personnel and/or
equipment may be temporarily limited by reason of personnel or power shortage
and/or demand for reconstruction following a general breakdown caused by acts
within or beyond Lessor's control. Lessor's emergency power supply equipment
at the Site will not be available to Lessee in the event of a Utah Power and
Light Company failure, except as otherwise provided in Schedule O.
15. Property Tax. Lessee shall be responsible for any property
taxes which arise from the operation of the Equipment at the Site. Lessee
acknowledges that the Equipment may be located in Salt Lake and/or Tooele
counties.
16. Late Charges. Any amount owing to Lessor from Lessee under
this Agreement that is thirty days past due shall be assessed a late charge
of $50.00 per invoice per month for each invoice totaling less than $500.00
and a late charge of $200.00 per invoice per month for each invoice that is
equal to or greater than $500.00.
17. Road Maintenance Charge. Lessee acknowledges and agrees that
an annual charge shall be assessed by Lessor to Lessee to cover access
roadway maintenance and repairs. This cost shall be prorated among the
various users of the Farnsworth Peak/Little Farnsworth Peak areas and is due
and payable from Lessee on or before July 1st annually.
18. Notices. All notices to be given under this Agreement shall
be in writing and shall be deemed to have been given if delivered personally,
mailed by certified mail, return receipt requested, or delivered by
recognized commercial courier to the other party at its last known business
address.
19. Governing Law. This Agreement shall be interpreted under and
governed by the laws of the State of Utah.
20. Environmental Representations and Warranties. Neither Lessee
nor Lessee's agents, contractors, authorized representatives or employees
shall engage in any of the following prohibited activities in, on or about
the Site:
A. Cause or permit any releases, discharges or spills of
Hazardous Material on or from the Site;
B. Cause or permit any manufacturing, holding, handling,
retaining, transporting spilling, leaking, treating, disposing or
dumping of Hazardous Material in or on any portion of the Site;
C. Cause or permit to be located on the Site any underground or
above-ground tanks for the storage of fuel oil, gasoline and/or other
petroleum products or by-products;
D. Cause or permit any releases, discharges or spills of fuel
oil, gasoline and/or other petroleum products or by-products; or
<PAGE>
E. Otherwise place, keep, or maintain, or allow to be placed,
kept or maintained, any Hazardous Material on any portion of the Site.
For purposes of this paragraph, "Hazardous Material" means any
radioactive, hazardous or toxic substance, material, waste or similar terms,
including, without limitation, petroleum and petroleum products, the presence
of which at the Site or the discharge or emission of which from the Site or
the collection, storage, treatment or disposal of which is regulated by
governmental requirements or regulations.
21. Waiver. The parties agree that the waiver of any breach of
this Agreement by either party shall in no event constitute a waiver as to
any further breach.
22. Headings. Headings on each paragraph of this Agreement are
for reference purposes only and shall not be deemed to have any substantive
effect.
23. Entire Agreement; Construction: This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, contracts or other arrangements.
No amendments, modifications or supplements to this Agreement shall be
binding unless executed in writing by the parties hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first listed above.
KSL, a Division of Bonneville
International Corporation
By:__________________________
Its:_________________________
Loral Communication Systems
By:__________________________
Its:_________________________
<PAGE>
Schedule A
The Premises are marked on the attached drawing of the site. The premises
include approximately 210 square feet of space in the attic above the kitchen
in the Transmitter Building shown in the attached drawing for Lessee to
install one six foot antenna with associated equipment of Schedule B.
Attachment: Drawing KSLFPSD002 Site Plot Farnsworth Peak
<PAGE>
Schedule B
List of Lessee's Equipment
Item Description Qty.
- ------- ----------- ----
1 HP-83751B Frequency Generator 1
2 HP-8563E Spectrum Analyzer 1
3 HP-3488A Switch Control Unit 1
4 486 Personal Computer 1
5 Video Monitor 1
6 Parabolic Reflector, 6 ft. diameter 1
7 Antenna Feeds (C, X, and Ku) 3
8 Az/El Antenna Positioner 1
9 Antenna Positioner Control Unit 1
10 3 dB 90 degree Coaxial Hybrid 1
11 Coaxial Line Stretcher 2
12 Wideband Coaxial Low Noise Amplifier 1
13 Power Meter 1
14 Directional Coupler 1
15 24V DC Power Supply 1
16 Misc. Cables and Connectors
<PAGE>
Schedule C
For the period November 1, 1995 through October 31, 1996, Lessee's
monthly rental payment shall be $1,100.00. If this Agreement is extended as
set forth in paragraph 9, beginning November 1, 1996 and continuing every
year thereafter, the monthly rental payment shall be increased at the rate of
five percent per year.
If Lessee increases and/or modifies the Equipment or otherwise
materially changes the nature of its operations at the Site, Lessor shall be
entitled to increase the monthly rental payment accordingly.
The above-described monthly rental payment shall include the right
of access to one telephone line to be provided by Lessor to Lessee.
<PAGE>
Schedule I
Certificate of Insurance
<PAGE>
Schedule O
1. Requested Emergency Engineering/Technical Services. $50.00
per hour. Hours shall be invoiced in tenths, with a minimum charge per
request of two-tenths of an hour.
2. Emergency Power Generator Use. This service is available only
to the capacity of the system. Tenants have priority based on their length
of time at the Site. Cost is $8.00/KVA (peak demand rate) per month. Should
operation time exceed fifty hours per year, an additional charge will be made
to cover the cost of additional fuel.
3. Use of Tools and Workshop. The room known as the PI room is
equipped with a work bench and tools, tool board, ladders, drill press,
grinder, extension power cords, goggles and face shield which may be used by
Lessee. Lessee shall be responsible for any loss, breakage or damage. The
cabinet labeled "Tenant Use" contains a minimal assortment of electronic test
equipment that is also available for use.
4. Specialized Equipment and Supplies. An additional charge will
be made for use of some items. The listing of such items is posted on the
bulletin board at the Site and use of these items is subject to permission of
Lessor's engineer on site.
5. Use of Parts and Supplies. Lessor does not stock, inventory,
sell or supply parts. In an emergency, the following rules apply:
A. The requested item must be available and not in immediate need
by Lessor;
B. Approval to use the item must be obtained from Lessor's
engineer on site; and
C. No exchange of money or parts will be allowed, but replacement
with identical and new parts on the basis of replace two items for any
one used within seven days.
<PAGE>
Schedule S
Seniority
1. KSL-TV (Operations Began) . . . . . . . . . . . . 1952
2. KSFI (FM) . . . . . . . . . . . . . . . . . . . . Nov. 1, 1957
3. KISN (FM) . . . . . . . . . . . . . . . . . . . . Nov. 11, 1968
4. U.S. Government, Secret Service . . . . . . . . . Jun. 1, 1972
5. KSOP (FM) . . . . . . . . . . . . . . . . . . . . Sep. 15, 1973
6. KRSP (FM) . . . . . . . . . . . . . . . . . . . . Dec. 14, 1973
7. Utah Transit Authority . . . . . . . . . . . . . Nov. 3, 1976
8. Petersen Electric . . . . . . . . . . . . . . . . Apr. 4, 1977
9. KBUL (FM) . . . . . . . . . . . . . . . . . . . . Jul. 1, 1977
10. KBER (FM) . . . . . . . . . . . . . . . . . . . . Jul. 1, 1977
11. Utah Transit Authority . . . . . . . . . . . . . Dec. 1, 1978
12. KBZN (FM) . . . . . . . . . . . . . . . . . . . . Feb. 1, 1979
13. KRCL (FM) . . . . . . . . . . . . . . . . . . . . Aug. 30, 1979
14. Questar . . . . . . . . . . . . . . . . . . . . . Jun. 20, 1981
15. Precision Electronics . . . . . . . . . . . . . . Jun. 26, 1981
16. KKAT (FM) . . . . . . . . . . . . . . . . . . . . Mar. 23, 1983
17. GTE Airfone . . . . . . . . . . . . . . . . . . . Sep. 14, 1990
18. KUMT (FM) . . . . . . . . . . . . . . . . . . . . Aug. 20, 1991
19. Technivision Inc., dba Omnivision . . . . . . . . Mar. 1992
20. Clairtel Communications Group, L.P. . . . . . . . Jun. 15, 1992
21. SMR of Utah, Inc. . . . . . . . . . . . . . . . . Nov. 15, 1992
22. Family Stations, Inc. . . . . . . . . . . . . . . July 6, 1994
23. Loral Communications Systems . . . . . . . . . . Nov. 1, 1995
<PAGE>
LEASE AGREEMENT
This Lease Agreement (the "Agreement") is entered into this 18th
day of March, 1996 to be effective November 1, 1995, between KSL, a division
of Bonneville International Corporation, a Utah corporation, with its
principal place of business at Broadcast House, 55 North 300 West, P. O.
Box 1160, Salt Lake City, Utah 84110-1160 ("Lessor") and Loral Corporation, a
New York corporation, with its principal place of business at 600 Third
Avenue, New York, New York 10016 ("Lessee"), in light of the following
circumstances:
Recitals
Whereas, Lessor is the owner of certain television and radio
transmission facilities located in the Oquirrh mountain range in Salt Lake
and Tooele counties, Utah at a location commonly known as Farnsworth Peak
(the "Site"); and
Whereas, Lessee is engaged in the business of satellite
communications and data link services; and
Whereas, Lessee desires to lease from Lessor certain space and
equipment at the Site;
Now, therefore, for good and valuable consideration, the receipt
and sufficiency of which are acknowledged, Lessor and Lessee agree as
follows:
Terms and Conditions
1. Leased Premises. Lessor hereby leases to Lessee, and Lessee
hereby accepts from Lessor, that certain space and equipment at the Site
identified on Schedule A to this Agreement (the "Premises") for the location
and operation of a test antenna of approximately six feet in length. A
complete list of Lessee's equipment to be located at the Premises (the
"Equipment") is attached to this Agreement as Schedule B.
2. Lessor Furnished Items. During the term of this Agreement,
Lessor shall furnish Lessee with the following:
A. Access to the Site over the access road available to Lessor for
that purpose. Lessee understands that it will be subject to the same
restrictions on the use of such road as may be imposed on Lessor from
time to time by the entities controlling the property upon which the
road is located, including the Kennecott Copper Corporation, Alpha
Communications and Hercules Corporation;
B. Heat, light and toilet facilities at the Site;
C. The right to connect to the power load center at the Site for
the operation of the Equipment. Lessee's use of electricity will be
separately metered by Lessor. Lessor shall invoice Lessee monthly for
such electrical usage at the established commercial rates of the Utah
Power and Light Company, plus the lesser of ten percent of Lessee's
monthly statement or $30.00 for administration and general expenses.
<PAGE>
Invoices shall be payable within twenty days of the date of billing. In
the event an invoice is more than ten days delinquent, Lessor, upon five
days written notice, shall be entitled to cease supplying Lessee with
electricity;
D. Upon Lessee's request, emergency service, if available, for the
Equipment. Rates for emergency service are set forth in Schedule O to
this Agreement and may be adjusted from time to time as determined by
Lessor;
E. The right to make reasonable alterations, attach fixtures and
erect additions to the Premises as required to operate the Equipment,
but only so long as plans for such alterations, attachments or additions
are submitted, along with a list of added and/or replaced materials, to
Lessor for approval, which approval shall not be unreasonably withheld.
In no event shall any of Lessee's alterations, attachments or additions
interfere with the operation or work of Lessor or of other tenants at
the Site;
F. Other services, such as the use of tools and parts owned by
Lessor, at the rates listed on Schedule O, as such may be adjusted from
time to time as determined by Lessor; and
G. Maintenance of the Site in good operation order.
3. Monthly Payments by Lessee. In exchange for the right to
occupy the Premises and operate the Equipment, Lessee shall pay to Lessor the
monthly rental payment and other fees set forth in Schedule C to this
Agreement. The monthly rental payment shall be payable in advance on or
before the first day of each calendar month at Lessor's principal place of
business or at such other place or in such other manner as Lessor may from
time to time direct; provided, however, that in the event the term of this
Agreement shall commence on other than the first day of a calendar month or
terminate on other than the last day of a calendar month, the monthly rental
payment shall be prorated on a daily basis for such partial calendar month.
Unless otherwise specifically set forth elsewhere in this Agreement, all
other payments required to be made by Lessee to Lessor shall be paid by
within twenty days of the date of invoice.
4. Other Costs. Lessee recognizes that additional expenses may be
incurred by Lessor from time to time for the benefit of Lessee and other
tenants at the Site, such as the cost of transporting various government
inspectors, tax assessors, state and/or county officers/officials and the
like to and from the Site. Lessee agrees to pay its share of such costs on a
pro rata basis as calculated by Lessor. Lessor shall provide Lessee with
proof of such costs, along with calculations for determining the amount
charged to Lessee.
5. Compliance. Lessee's operations at the Site shall be in full
compliance with all applicable laws, statutes, ordinances, rules and
regulations of any governmental authority having jurisdiction over Lessor,
Lessee or the Site, including, but not limited to, the Federal Communications
Commission (the "FCC"). Lessee shall bear the cost and responsibility for
all matters pertaining to its operations at the Site, including, but not
limited to, applications, renewals, regular or special reports, discrepancy
citations, inspections or any changes in equipment which may be required from
time to time by the FCC or standards of good engineering practice.
<PAGE>
Lessee shall protect all persons at the Site at all times from
exposure to excessive non-ionizing radiation (as determined by the FCC, the
Occupational Safety and Health Agency, the Environmental Protection Agency or
any other governmental authority) which may be generated as a result of
Lessee's operations. In the event Lessee's operations appear to be causing
excessive non-ionizing radiation, Lessor shall have the right, but not the
obligation, to take whatever action Lessor deems appropriate to reduce the
amount of such radiation, including, but not limited to, the interruption of
Lessee's operations or the reduction of Lessee's transmission power. Lessor
shall invoice Lessee for the costs of any such action and Lessee shall
promptly pay such amount within twenty days of the date of invoice.
6. Interference. Lessee acknowledges that Lessor reserves the
right to grant space, premises, facilities and/or rights to third parties at
the Site that are the same as or similar to those granted herein to Lessee.
Lessee shall endeavor in good faith to conduct its activities in accordance
with sound electronic and engineering practices and applicable FCC standards
and will cooperate with Lessor and other tenants at the Site so as to
anticipate and prevent Interference, as that term is defined below. A list
of Tenants at the Site as of the commencement of this Agreement is attached
hereto as Schedule S.
If Lessee's operations cause Interference, Lessee shall, at its
sole cost and expense and without recourse to Lessor, cause any such
Interference to be corrected within ten days following written notice thereof
to Lessee. Pending correction, Lessee shall immediately cease the activity
or remove the equipment causing the Interference. If Lessee fails to act
within the given time frame, Lessor may cause the required corrections to be
made. Lessor shall invoice Lessee for the costs of any such action and
Lessee shall promptly pay such amount within twenty days of the date of
invoice.
"Interference" shall be deemed to exist if (i) a final
determination to that effect is made by an authorized representative of the
FCC pursuant to its rules and regulations; (ii) a condition exists which
constitutes interference within the meaning of the provisions of the rules
and regulations of the FCC in effect at the time; or (iii) Lessor makes a
good faith determination that its technical operations or the technical
operations of any other tenants at the Site are being adversely affected by
Lessee's activities.
7. Lessor Improvements. Lessor reserves the right to replace or
install additional equipment at the Site necessary or desirable for its own
operations. Lessor shall not be liable for any disruption of or interference
to Lessee's operations by reason of such replacement or installation, but
Lessor agrees to cooperate with Lessee and to use reasonable efforts to
resolve in advance any problems that might arise in connection with these
activities.
8. Assignment or Sublease. Lessee may not assign or transfer this
Agreement or any interest therein, sublease any interest covered by this
Agreement or encumber, hypothecate or otherwise give as security this
Agreement or any interest therein without the prior written consent of
Lessor, which consent shall not be unreasonably withheld. No assignment,
transfer or sublease shall be effective as against Lessor for any purpose,
unless Lessor shall have consented thereto in writing prior to such
assignment, transfer or sublease and unless all sums due from Lessee,
<PAGE>
together with any costs to Lessor to cover reasonable legal and other
expenses of Lessor in connection with such assignment, transfer or sublease,
shall have been paid to Lessor.
Each and every attempt to assign, sell, transfer or encumber this
Agreement or any interest therein and each and every attempt to sublease any
interest covered hereby in a manner contrary to that set forth in this
paragraph may be deemed a default by Lessee hereunder.
Lessor's consent to one assignment, transfer or sublease by Lessee
or acceptance of performance from an assignee, transferee or sublessee shall
not be deemed a waiver by Lessor of the restrictions of this paragraph as to
subsequent attempts to assign, transfer or sublet by Lessee or by Lessee's
heirs, successors, assigns, transferees or sublessees. As used herein, the
terms Lessor and Lessee shall be deemed to include their respective heirs,
successors, assigns, transferees or sublessees.
The terms, conditions and covenants contained in this Agreement
shall apply to, inure to the benefit of and be binding upon the parties
hereto and their respective legal representatives, successors, assigns,
transferees and sublessees.
Lessor shall have the right to transfer and assign, in whole or in
part, all of its rights and obligations hereunder and in the Site and in such
event Lessor shall be released from any further obligations hereunder and the
successor-in-interest of Lessor shall have all the rights and obligations
hereunder and in the Site with respect to Lessee.
9. Term. The initial term of this Agreement shall begin on
November 1, 1995 and shall end on October 31, 1996. This Agreement shall
thereafter be renewed for up to three additional two year periods (from
November 1, 1996 through October 31, 1998; from November 1, 1998 through
October 31, 2000; and from November 1, 2000 through October 31, 2002,
respectively) upon the same terms and conditions set forth herein, provided
Lessee gives Lessor written notice at least ninety days prior to the
expiration of the then current term.
10. Default by Lessee. The following events shall be deemed to be
events of default by Lessee under this Agreement (each such event of default
is hereinafter referred to as an "Event of Default"):
A. Lessee shall fail to timely pay any monthly rental payment as
referenced in paragraph 3 above or any other sum of money due hereunder
and such failure shall continue for a period of ten days after written
notice of such default is delivered to Lessee;
B. Lessee shall fail to comply with any provision of this
Agreement not requiring the payment of money, all of which provisions
shall be deemed material, and such failure shall continue for a period
of twenty days after written notice of such default is delivered to
Lessee;
C. Lessee shall become insolvent or fail to pay its debts as they
become due or Lessee notifies Lessor that it anticipates either
condition;
<PAGE>
D. Lessee takes any action to file a petition under any section or
chapter of the United States Bankruptcy Code or under any similar law or
site of the United States or any state thereof or a petition shall be
filed against Lessee under any such statute or Lessee or any creditor of
Lessee notifies Lessor that it knows such a petition will be filed or
Lessee notifies Lessor that it expects such a petition to be filed; or
E. A receiver or trustee shall be appointed for Lessee's leasehold
interest in the Premises or for all or a substantial part of Lessee's
assets.
Upon the occurrence of any Event of Default, Lessor may at its
option and without further notice to Lessee and in addition to all other
remedies given hereunder or by law or in equity, do any one or more of the
following: (i) terminate this Agreement, in which event Lessee shall
immediately surrender possession of the Premises to Lessor; (ii) enter upon
the Premises and expel or remove Lessee's Equipment therefrom, with or
without having terminated this Agreement; and (iii) change or re-key all
locks to entrances to the Site and Lessor shall have no obligation to give
Lessee notice thereof or to provide Lessee with a new key to the Site.
The exercise by Lessor of any one or more remedies hereunder shall
not constitute an acceptance of the surrender of the Premises by Lessee.
Lessee acknowledges that a surrender of the Premises can be effected only by
a written agreement between Lessor and Lessee.
If Lessor terminates this Agreement by reason of an Event of
Default, Lessee shall pay to Lessor the sum of (i) the cost of recovering the
Premises; (ii) the unpaid monthly payments and all other indebtedness accrued
hereunder to the date of such termination; (iii) to the extent the same were
not paid, the cost of repairing, altering or otherwise putting the Premises
into a condition acceptable to a new tenant or tenants (if Lessor elects to
so relet) (collectively, the "Reletting Expenses"); (iv) all expenses
incurred by Lessor in enforcing Lessor's remedies, including attorneys' fees
and court costs; (v) the total monthly payments and other benefits which
Lessor would have received under this Agreement for the remainder of the
term, minus any net sums thereafter received by Lessor through reletting the
Premises during such period; and (vi) any other damages or relief which
Lessor may be entitled to at law or in equity. Lessee shall not be entitled
to any excess rent obtained by reletting the Premises.
If Lessor repossesses the Premises without terminating this
Agreement by reason of an Event of Default, then Lessee shall pay to Lessor
the sum of (i) the cost of recovering the Premises; (ii) the unpaid monthly
payments and all other indebtedness accrued hereunder to the date of such
repossession; (iii) the Reletting Expenses; (iv) all expenses incurred by
Lessor in enforcing Lessor's remedies, including attorneys' fees and court
costs; (v) the total monthly payments and other benefits which Lessor would
have received under this Agreement for the remainder of the term, minus any
net sums thereafter received by Lessor through reletting the Premises during
such period; and (vi) any other damages or relief which Lessor may be
entitled to at law or in equity. Re-entry by Lessor or will not affect the
obligations of Lessee for the unexpired term of this Agreement. Lessee shall
not be entitled to any excess rent obtained by reletting the Premises.
Actions to collect amounts due by Lessee may be brought on one or more
occasions without the necessity of Lessor's waiting until the expiration of
the term of this Agreement.
<PAGE>
Upon termination of this Agreement or repossession of the Premises
due to an Event of Default, Lessor shall not be obligated to relet or attempt
to relet the Premises or any portion thereof or to collect rent after
reletting, but Lessor shall have the option to relet the whole or any portion
of the Premises for any period to any tenant and for any use and purpose.
11. Insurance. Lessee shall at its own cost and expense procure
and maintain general liability insurance coverage and automobile coverage in
the face amount of at least $1,000,000.00 per occurrence and workers
compensation insurance as prescribed by Utah state law. A certificate of
insurance naming Lessor as an additional insured shall be attached to this
Agreement as Schedule I. In addition, Lessee shall use only certified and
insured helicopter carriers for trips and from the Site. Such carriers shall
carry liability insurance in the face amount of at least $5,000,000.00 per
occurrence. All such insurance shall cover Lessee's employees, agents and
invitees while in, on or about the Site and while traveling to and from the
Site, including losses attributable to the presence of the Equipment,
Lessee's employees, agents or invitees while in, on or about the Site.
Lessee shall be solely responsible for procuring and maintaining property
insurance on the Equipment.
12. Indemnification. Lessee shall indemnify, defend and hold
harmless Lessor and any officer, director, employee, contractor, agent or
affiliate of Lessor (collectively, a "Lessor Related Party") from and
against any and all liabilities, obligations, damages, claims, suits, losses,
causes of action, liens, judgments and expenses (including court costs,
attorneys' fees and costs of investigation) or any kind, nature or
description resulting from any injuries to or death of any person or any
damage to the Site which either (i) arises from or is claimed to arise from
any act, omission or negligence of Lessee or any employee, officer,
contractor, agent, subtenant, guest, licensee or invitee of Lessee; (ii)
arises from a breach, violation or nonperformance of any term, provision,
covenant or agreement of Lessee hereunder or a breach or violation by Lessee
of any court order or any law, regulation or ordinance of any federal, state
or local authority; or (iii) arises from the activities of Lessee in and
around the Site or the operations or conduct of Lessee's business upon the
Site (collectively, the "Claims"), except to the extent such Claims are
directly caused by the gross negligence or willful misconduct of Lessor. If
any such Claim is made against Lessor, Lessee shall at its sole cost and
expense defend such Claim by or through attorneys satisfactory to Lessor. In
resolving or settling any Claim, Lessee shall obtain a release of such Claim
made against Lessor or any Lessor Related Party. The indemnity obligations
of Lessee are in addition to Lessee's obligations to obtain and maintain
insurance as otherwise provided herein.
Lessee specifically agrees to look solely to Lessor's interest in
the Site for the recovery of any judgment against Lessor.
13. Limits on Liability. Lessor shall have no liability to Lessee
or any other party for any loss allegedly occasioned by the nontransmission
or partial transmission of Lessee's data or damage to the Equipment by reason
of the physical collapse of a tower or antennas, breakdown of a transmitter
or its components, failure or inability of Utah Power and Light Company to
supply electrical power, failure of Lessor's emergency generator, acts of
God, sabotage, earthquake, fire, theft, burglary, windstorm or any other
hazard (natural or man-made), strikes or walkouts,cancellation of Lessee's
licenses or any other cause beyond Lessor's control. Lessor shall have no
<PAGE>
liability to Lessee or any other party and Lessee shall indemnify Lessor from
and against all claims, costs and expenses for non-ionizing radiation claimed
to originate as a result of Lessee's operations at the Site.
14. Lessor's Facilities. Lessor shall have first call on
personnel and all Lessor's equipment at the Site, which personnel and/or
equipment may be temporarily limited by reason of personnel or power shortage
and/or demand for reconstruction following a general breakdown caused by acts
within or beyond Lessor's control. Lessor's emergency power supply equipment
at the Site will not be available to Lessee in the event of a Utah Power and
Light Company failure, except as otherwise provided in Schedule O.
15. Property Tax. Lessee shall be responsible for any property
taxes which arise from the operation of the Equipment at the Site. Lessee
acknowledges that the Equipment may be located in Salt Lake and/or Tooele
counties.
16. Late Charges. Any amount owing to Lessor from Lessee under
this Agreement that is thirty days past due shall be assessed a late charge
of $50.00 per invoice per month for each invoice totaling less than $500.00
and a late charge of $200.00 per invoice per month for each invoice that is
equal to or greater than $500.00.
17. Road Maintenance Charge. Lessee acknowledges and agrees that
an annual charge shall be assessed by Lessor to Lessee to cover access
roadway maintenance and repairs. This cost shall be prorated among the
various users of the Farnsworth Peak/Little Farnsworth Peak areas and is due
and payable from Lessee on or before July 1st annually.
18. Notices. All notices to be given under this Agreement shall
be in writing and shall be deemed to have been given if delivered personally,
mailed by certified mail, return receipt requested, or delivered by
recognized commercial courier to the other party at its last known business
address.
19. Governing Law. This Agreement shall be interpreted under and
governed by the laws of the State of Utah.
20. Environmental Representations and Warranties. Neither Lessee
nor Lessee's agents, contractors, authorized representatives or employees
shall engage in any of the following prohibited activities in, on or about
the Site:
A. Cause or permit any releases, discharges or spills of
Hazardous Material on or from the Site;
B. Cause or permit any manufacturing, holding, handling,
retaining, transporting spilling, leaking, treating, disposing or
dumping of Hazardous Material in or on any portion of the Site;
C. Cause or permit to be located on the Site any underground or
above-ground tanks for the storage of fuel oil, gasoline and/or other
petroleum products or by-products;
D. Cause or permit any releases, discharges or spills of fuel
oil, gasoline and/or other petroleum products or by-products; or
<PAGE>
E. Otherwise place, keep, or maintain, or allow to be placed,
kept or maintained, any Hazardous Material on any portion of the Site.
For purposes of this paragraph, "Hazardous Material" means any
radioactive, hazardous or toxic substance, material, waste or similar terms,
including, without limitation, petroleum and petroleum produce, the presence
of which at the Site or the discharge or emission of which from the Site or
the collection, storage, treatment or disposal of which is regulated by
governmental requirements or regulations.
The last paragraph 12 of this Lease shall not be applicable to any
representation, warranty or indemnification given to Lessee by Lessor
pursuant to the terms of this paragraph 20.
21. Waiver. The parties agree that the waiver of any breach of
this Agreement by either party shall in no event constitute a waiver as to
any further breach.
22. Headings. Headings on each paragraph of this Agreement are
for reference purposes only and shall not be deemed to have any substantive
effect.
23. Entire Agreement; Construction: This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, contracts or other arrangements.
No amendments, modifications or supplements to this Agreement shall be
binding unless executed in writing by the parties hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first listed above.
KSL, a Division of Bonneville
International Corporation
By:__________________________
Its:_________________________
Loral Communication Systems
Corporation
By:__________________________
Stephen B. Jackson
Its: Vice President
<PAGE>
Schedule A
The Premises are marked on the attached drawing of the site. The
Premises include approximately 210 square feet of space in the attic above
the kitchen in the transmitter building shown in the attached drawing for
Lessee to install one six foot antenna with associated equipment of
Schedule B.
Attachment: Drawing KSLFPSD002 Site Plot Farnsworth Peak
<PAGE>
Schedule B
List of Lessee's Equipment
Item Description Qty.
- ---- ----------- ----
1 HP-83751B Frequency Generator 1
2 HP-8563E Spectrum Analyzer 1
3 HP-3488A Switch Control Unit 1
4 486 Personal Computer 1
5 Video Monitor 1
6 Parabolic Reflector, 6 ft. diameter 1
7 Antenna Feeds (C, X, and Ku) 3
8 Az/El Antenna Positioner 1
9 Antenna Positioner Control Unit 1
10 3 dB 90 degree Coaxial Hybrid 1
11 Coaxial Line Stretcher 2
12 Wideband Coaxial Low Noise Amplifier 1
13 Power Meter 1
14 Directional Coupler 1
15 24V DC Power Supply 1
16 Misc. Cables and Connectors
<PAGE>
Schedule C
For the period November 1, 1995 through October 31, 1996, Lessee's
monthly rental payment shall be $1,000.00. If Lessee exercises its right to
extend this Agreement as set forth in paragraph 9, beginning November 1, 1996
and continuing every year thereafter, the monthly rental payment shall be
increased at the rate of five percent per year.
If Lessee increases and/or modifies the Equipment or otherwise
materially changes the nature of its operations at the Site, Lessor shall be
entitled to increase the monthly rental payment accordingly.
In addition to the above-described monthly rental payment, Lessee
shall pay Lessor the sum of $96.00 per month for access to one telephone line
to be provided by Lessor to Lessee.
<PAGE>
Schedule I
Certificate of Insurance
CERTIFICATE OF INSURANCE ISSUE DATE
(MM/DD/YY)
02/15/96
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF
INFORMATION ONLY AND CONFERS NO RIGHTS
UPON THE CERTIFICATE HOLDER. THIS
CERTIFICATE DOES NOT AMEND, EXTEND OR
Alexander & Alexander of ALTER THE COVERAGE AFFORDED BY THE
New York, Inc. POLICIES BELOW.
1185 Avenue of the
Americas COMPANIES AFFORDING COVERAGE
New York, New York 10036
TRANSPORTATION INSURANCE CO.
COMPANY
LETTER A
CONTINENTAL CASUALTY COMPANY
COMPANY
LETTER B
INSURED ZURICH INSURANCE COMPANY
COMPANY
LETTER C
COMPANY
LORAL COMMUNICATIONS LETTER D
SYSTEMS
M/S F1-E10 COMPANY
640 N. 3200 WEST LETTER E
SALT LAKE CITY, UT 84116
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED.
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR
OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR
MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS
SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES.
LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
<PAGE>
CO LTR TYPE OF INSURANCE POLICY NUMBER
- ------ ----------------- -------------
B GENERAL LIABILITY GL 402521597
/x/ COMMERCIAL GENERAL LIABILITY
/_/_/ CLAIMS MADE /x/ OCCUR.
/_/ OWNER'S & CONTRACTOR'S PROT.
/x/ B.F. VENDORS
POLICY EFFECTIVE POLICY EXPIRATION LIMITS
DATE (MM/DD/YY) DATE (MM/DD/YY)
- ---------------- ------------------ ---------------------------------------
04/01/95 04/01/96 GENERAL AGGREGATE $ 2,500,000
PROD. COMP/OP AGG. $ 2,500,000
PERS. & ADV. INJURY $ 2,500,000
EACH OCCURRENCE $ 2,500,000
FIRE DAMAGE $ 50,000
(Any one fire)
MED. EXPENSE $ 5,000
(Any one person)
<PAGE>
CO LTR TYPE OF INSURANCE POLICY NUMBER
- ------ ----------------- -------------
AUTOMOBILE LIABILITY BUA 802521600 A/S
A /x/ ANY AUTO BUA 002521599 TX
A /_/ ALL OWNED AUTOS PHYSICAL DAMAGE
/_/ SCHEDULED AUTOS COLL. DED. $500
/x/ HIRED AUTOS COMP. DED. $250
/x/ NON-OWNED AUTOS
/_/ GARAGE LIABILITY
/_/
POLICY EFFECTIVE POLICY EXPIRATION LIMITS
DATE (MM/DD/YY) DATE (MM/DD/YY)
- ---------------- ----------------- ---------------------------------------
04/01/95 04/01/96 COMBINED SINGLE $ 1,000,000
04/01/95 04/01/96 LIMIT
BODILY INJURY $
(Per person)
BODILY INJURY $
(Per accident)
PROPERTY DAMAGE $
<PAGE>
CO LTR TYPE OF INSURANCE POLICY NUMBER
- ------ ----------------- -------------
C EXCESS LIABILITY AUO 684722502
/x/ UMBRELLA FORM
/_/ OTHER THAN UMBRELLA FORM
POLICY EFFECTIVE POLICY EXPIRATION LIMITS
DATE (MM/DD/YY) DATE (MM/DD/YY)
- ---------------- ----------------- ---------------------------------------
04/01/95 04/01/96 EACH OCCURRENCE $ 2,500,000
AGGREGATE $ 2,500,000
<PAGE>
CO LTR TYPE OF INSURANCE POLICY NUMBER
- ------ ----------------- -------------
A WORKER'S COMPENSATION WC 802521594 (RETRO)
9 AND WC 802521595 (DED.)
EMPLOYERS' LIABILITY
POLICY EFFECTIVE POLICY EXPIRATION LIMITS
DATE (MM/DD/YY) DATE (MM/DD/YY)
- ---------------- ----------------- --------------------------------------
04/01/95 04/01/96 STATUTORY LIMITS
04/01/95 04/01/96
EACH ACCIDENT $ 1,000,000
DISEASE--POLICY
LIMIT $ 1,000,000
DISEASE--EACH EMP. $ 1,000,000
<PAGE>
CO LTR TYPE OF INSURANCE POLICY NUMBER
- ------ ----------------- -------------
OTHER
POLICY EFFECTIVE POLICY EXPIRATION LIMITS
DATE (MM/DD/YY) DATE (MM/DD/YY)
- ---------------- ----------------- --------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS KSL, A
DIVISION OF BONNEVILLE INTERNATIONAL CORPORATION A UTAH CORPORATION ARE
INCLUDED AS ADDITIONAL INSUREDS BUT ONLY WITH RESPECT TO LIABILITIES
ARISING OUT OF THE LEASING OF PREMISES AT FAR FIELD TEST ANTENNA RANGE
LOCATED ON THE OQUIRRH MOUNTAINS RANGE IN SALT LAKE AND TOOELE COUNTIES,
UTAH, COMMONLY KNOWN AS FARNSWORTH PEAK BY THE NAME ISSUED.
CERTIFICATE HOLDER CANCELLATION
- ------------------ ------------
KSL SHOULD ANY OF THE ABOVE DESCRIBED
ATTN: GREG JAMES POLICIES BE CANCELLED BEFORE THE
BROADCAST HOUSE EXPIRATION DATE THEREOF. THE
55 NORTH 200 WEST ISSUING COMPANY WILL ENDEAVOR TO
P.O. BOX 1160 MAIL 30 DAYS WRITTEN NOTICE TO THE
SALT LAKE CITY, UT 84110-1160 CERTIFICATE HOLDER NAMED TO THE
LEFT, BUT FAILURE TO MAIL SUCH
NOTICE SHALL IMPOSE NO OBLIGATION
OR LIABILITY OF ANY KIND UPON THE
COMPANY, ITS AGENTS OR
REPRESENTATIVES.
authorized representative
<PAGE>
Schedule O
1. Requested Emergency Engineering/Technical Services. $50.00
per hour. Hours shall be invoiced in tenths, with a minimum charge per
request of two-tenths of an hour.
2. Emergency Power Generator Use. This service is available only
to the capacity of the system. Tenants have priority based on their length
of time at the Site. Cost is $8.00/KVA (peak demand rate) per month. Should
operation time exceed fifty hours per year, an additional charge will be made
to cover the cost of additional fuel.
3. Use of Tools and Workshop. The room known as the PI room is
equipped with a work bench and tools, tool board, ladders, drill press,
grinder, extension power cords, goggles and face shield which may be used by
Lessee. Lessee shall be responsible for any loss, breakage or damage. The
cabinet labeled "Tenant Use" contains a minimal assortment of electronic test
equipment that is also available for use.
4. Specialized Equipment and Supplies. An additional charge will
be made for use of some items. The listing of such items is posted on the
bulletin board at the Site and use of these items is subject to permission of
Lessor's engineer on site.
5. Use of Parts and Supplies. Lessor does not stock, inventory,
sell or supply parts. In an emergency, the following rules apply:
A. The requested item must be available and not in immediate need
by Lessor;
B. Approval to use the item must be obtained from Lessor's
engineer on site; and
C. No exchange of money or parts will be allowed, but replacement
with identical and new parts on the basis of replace two items for any
one used within seven days.
<PAGE>
Schedule S
Seniority
1. KSL-TV (Operations Began) . . . . . . . . . . . . 1952
2. KSFI (FM) . . . . . . . . . . . . . . . . . . . . Nov. 1, 1957
3. KISN (FM) . . . . . . . . . . . . . . . . . . . . Nov. 11, 1968
4. U.S. Government, Secret Service . . . . . . . . . Jun. 1, 1972
5. KSOP (FM) . . . . . . . . . . . . . . . . . . . . Sep. 15, 1973
6. KRSP (FM) . . . . . . . . . . . . . . . . . . . . Dec. 14, 1973
7. Utah Transit Authority . . . . . . . . . . . . . Nov. 3, 1976
8. Petersen Electric . . . . . . . . . . . . . . . . Apr. 4, 1977
9. KBUL (FM) . . . . . . . . . . . . . . . . . . . . Jul. 1, 1977
10. KBER (FM) . . . . . . . . . . . . . . . . . . . . Jul. 1, 1977
11. Utah Transit Authority . . . . . . . . . . . . . Dec. 1, 1978
12. KBZN (FM) . . . . . . . . . . . . . . . . . . . . Feb. 1, 1979
13. KRCL (FM) . . . . . . . . . . . . . . . . . . . . Aug. 30, 1979
14. Questar . . . . . . . . . . . . . . . . . . . . . Jun. 20, 1981
15. Precision Electronics . . . . . . . . . . . . . . Jun. 26, 1981
16. KKAT (FM) . . . . . . . . . . . . . . . . . . . . Mar. 23, 1983
17. GTE Airfone . . . . . . . . . . . . . . . . . . . Sep. 14, 1990
18. KUMT (FM) . . . . . . . . . . . . . . . . . . . . Aug. 20, 1991
19. Technivision Inc., dba Omnivision . . . . . . . . Mar. 1992
20. Clairtel Communications Group, L.P. . . . . . . . Jun. 15, 1992
21. SMR of Utah, Inc. . . . . . . . . . . . . . . . . Nov. 15, 1992
22. Family Stations, Inc. . . . . . . . . . . . . . . July 6, 1994
23. Heywood Engineering and Consulting . . . . . . . July 1, 1995
24. Loral Communications Systems . . . . . . . . . . Nov. 1, 1995
<PAGE>
August 20, 1996
KSL, Division of Bonneville International
Broadcast House
55 North 300 West
P.O. Box 1160
Salt Lake City, Utah 84110-1160
Subject: Lockheed Martin Tactical Systems, Inc.
Exercise of Option for the Far Field Test Antenna Range
Located on the Oquirrh Mountains Range in Salt Lake and Tooele
Counties, Utah, Commonly Known as Farnsworth Peak
November 1, 1996 - October 31, 1998
Gentlemen:
Lockheed Martin Tactical Systems, Inc. formerly exercises its first two year
option for the subject Far Field Test Antenna Range for the period November
1, 1996 through October 31, 1998. The rental payment for the period November
1, 1996 through October 31, 1997 shall be $1,050/month plus the sum of
$96/month for access to one telephone line to be provided by Lessor. The
rental payment for the period of November 1, 1997 through October 31, 1998
shall be $1,102.50/month plus the sum of $96/month for access to one
telephone line to be provided by Lessor.
Please indicate your concurrence with the above by signing below and
returning one of the two originals to us, letterhead address. Thank you.
Landlord Concurrence: Very truly yours,
KSL, a division of Bonneville
International Corporation LOCKHEED MARTIN TACTICAL
SYSTEMS, INC.
By: LMC Properties, Inc. a Lockheed
Martin company its duly
authorized representative, per
CPS 420
By: _________________________ John W. Wissmann
Date: _______________________ Senior Manager, Real Estate
<PAGE>
August 29, 1996
SENT BY FACSIMILE MACHINE
Ms. Joan Perkins
Lockheed Martin Tactical Systems, Inc.
3825 Fabian Way, M/S Z02
Palo Alto, California 94303-4697
Dear Ms. Perkins:
I write in follow-up to a telephone conversation yesterday with Tony
Tigert in your Salt City, Utah office. During my conversation, I agreed, on
behalf of my client, KSL, a division of Bonneville International Corporation,
to extend the time in which Lockheed Martin Tactical Systems, Inc. may
exercise its option to renew that certain Lease Agreement dated March 18,
1996 from August 31, 1996 to September 30, 1996.
Please contact me if you have any questions or comments concerning
the foregoing. Thank you for your attention to this matter.
Very truly yours,
Boyd L. Hawkins
BJH/tmp
<PAGE>
October 9, 1996
KSL, Division of Bonneville International
Broadcast House
Attn: Kim Hake
55 North 300 West
P.O. Box 1160
Salt Lake City, Utah 84110-1160
Subject: Lockheed Martin Corporation
Exercise of Option for the Far Field Test Antenna Range
Located on the Oquirrh Mountains Range in Salt Lake and
Tooele Counties, Utah, Commonly Known as Farnsworth Peak.
November 1, 1996 - October 31, 1998
Dear Ms. Hake:
Lockheed Martin Corporation formally exercises its first two year option for
the subject Far Field Test Antenna Range for the period November 1, 1996
through October 31, 1998. The rental payment for the period November 1, 1996
through October 31, 1997 shall be $1,050/month plus the sum of $96/month for
access to one telephone line to be provided by Lessor. The rental payment
for the period November 1, 1997 through October 31, 1998 shall be
$1,102.50/month plus the sum of $96/month for access to one telephone line to
be provided by Lessor.
Please indicate your concurrence with the above by signing below and
returning one of the two originals to us at 191 Chesapeake Park Plaza,
Baltimore, Maryland 21220. Thank you.
Landlord Concurrence: Very truly yours,
KSL, a division of Bonneville
International Corporation LOCKHEED MARTIN TACTICAL
SYSTEMS, INC.
By: LMC Properties, Inc. a Lockheed
Martin Company its duly
authorized representative, per
CPS 420
By: _________________________ John W. (Jack) Wissmann
Senior Manager, Real Estate
Date: _______________________
<PAGE>
EXHIBIT B
DEFAULTS
EXHIBIT 10.81
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is
dated as of April 29, 1997 among LOCKHEED MARTIN TACTICAL SYSTEMS, INC., a
New York corporation (the "Assignor"), L-3 COMMUNICATIONS CORPORATION, a
Delaware corporation (the "Assignee"), and UNISYS CORPORATION, a Delaware
corporation (the "Landlord"), with reference to the following:
RECITALS
A. The Landlord, as landlord, and the Assignor, as tenant,
executed a Lease Agreement dated May 5, 1995 (which, together with all
modifications, amendments and supplements thereof, is hereinafter referred to
collectively as the "Lease"), a copy of which is attached hereto and
incorporated by reference as Exhibit A, pursuant to which Landlord leased to
the Assignor and the Assignor leased from Landlord property and improvements
described therein located at 322 North 2200 West, Salt Lake City, Utah
(Buildings D, D Annex and Z) (the "Premises").
B. The Assignee is acquiring certain assets and assuming certain
liabilities from the Assignor including the Assignor's rights, leasehold
interest and obligations under the Lease.
C. In connection with such acquisition, the Assignor desires to
assign the Lease to the Assignee, and the Assignee desires to accept the
assignment of the Lease from the Assignor.
D. The Landlord has agreed to enter into this Assignment to, among
other things, evidence its consent to such assignment of the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Assignor, the Assignee and
the Landlord hereby covenant and agree as follows:
1. Assignment. The Assignor grants, assigns and transfers to the
Assignee, its successors and assigns, all of the Assignor's right, title and
<PAGE>
interest in, to and under the Lease (including, without limitation, any
options under the Lease and any rights to extend or renew the Lease) and the
Assignee accepts from the Assignor all of the Assignor's right, title and
interest in, to and under the Lease.
2. Assumption of Lease Obligation. Assignee assumes and agrees to
perform and fulfill all terms, covenants, conditions and obligations required
to be performed and fulfilled by the Assignor under the Lease, including,
without limitation, the obligation to make all payments due or payable on
behalf of the Assignor under the Lease as they become due and payable.
3. Representations of Assignor and Landlord. The Assignor and the
Landlord represent to the Assignee as follows:
(a) The Lease attached hereto as Exhibit A is a true, correct and
complete copy of the Lease (including all modifications, amendments and
supplements thereof) and the same are the only agreements between Landlord
and the Assignor with respect to the subject matter thereof.
(b) The Lease is in full force and effect and, except for the
modifications, amendments and supplements included in Exhibit A, the Lease
has not been modified, amended or supplemented.
(c) Except as set forth on Exhibit B, no default by the Assignor
or the Landlord has occurred and is continuing under the Lease, and no event
has occurred and is continuing which with the giving of notice or the lapse
of time or both would constitute a default thereunder.
(d) No minimum or base rent or other rental has been paid in
advance (except for the current month).
(e) The monthly amount of base rent due under the Lease as of May
1, 1997, is $64,417, and the minimum or base rent and all other rentals and
other payments due, owing and accruing under the Lease have been paid through
April 30, 1997.
<PAGE>
(f) The term of the Lease commenced on May 5, 1995, and the
current term of the Lease expires on December 31, 2001.
4. Landlord's Consent.
The Landlord hereby consents to the Assignor's assignment of the
Lease to the Assignee and the Assignee's assumption of the Lease. Landlord's
consent to the Assignor's assignment of the Lease to the Assignee shall not
be deemed to release the Assignor from any of its obligations under the Lease
or to alter any provision of the Lease and/or the primary liability of the
Assignor for the payment of minimum or base rent or any additional rent due
under the Lease or for the performance of any other obligations to be
performed by the Assignor under the Lease.
5. Successors and Assigns. This Assignment shall be binding on
and inure to the benefit of the parties hereto, and their respective heirs,
personal representatives, successors and assigns, provided that this Section
5 shall not be construed to permit any future assignments of the Lease or
subletting of the Premises except as permitted by the Lease.
6. Counterparts. This Assignment may be signed in counterpart
and, as so executed, shall constitute a binding agreement.
7. Governing Law. This Assignment shall be governed by and
construed in accordance with the laws of the state in which the Premises are
located.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment as of the date first above written.
WITNESS/ATTEST: ASSIGNOR:
LOCKHEED MARTIN TACTICAL
SYSTEMS, INC.
___________________________ By:_______________________(SEAL)
Name:
Title:
<PAGE>
ASSIGNEE:
L-3 COMMUNICATIONS CORPORATION
_____________________________ By:_______________________(SEAL)
Name:
Title:
<PAGE>
WITNESS/ATTEST LANDLORD:
UNISYS CORPORATION
_____________________________ By:_______________________(SEAL)
Name:
Title:
<PAGE>
STATE OF NEW YORK, COUNTY OF QUEENS, TO WIT:
On this the 23 day of May 1997, before me a notary public of
said State, Michael T. Shianese, the undersigned officer, personally appeared
Michael T. Shianese, who acknowledge himself to be an office of L-3
Communication, a Delaware corporation, and that he, as such Vice President,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signed the name of the corporation by himself as a Vice
President.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
________________________
Notary Public
My Commission Expires:
STATE OF Maryland, COUNTY OF Montgomery, TO WIT:
On this the 30th day of April 1997, before me a notary
public of said State, Stephen M. Piper, the undersigned officer, personally
appeared before me, who acknowledge himself to be a Vice President & Asst.
Secretary of Lockheed Martin Tactical Systems, Inc., a New York corporation,
and that he, as such officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signed the name
of the corporation by himself as a Vice President & Asst. Secretary.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
________________________
Notary Public
My Commission Expires: Dec. 1, 2000
<PAGE>
__________________________
Notary Public
My Commission Expires: Dec. 1, 2000
STATE OF PENNSYLVANIA, COUNTY OF MONTGOMERY, TO WIT:
On this the 29th day of April 1997, before me a notary
public of said State, Pennsylvania, the undersigned officer, personally
appeared Gregory T. Fisher, who acknowledged himself to be a Vice President
of Unisys Corporation, a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as a Vice President.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
________________________
Notary Public
My Commission Expires:
<PAGE>
EXHIBIT A
THE LEASE
<PAGE>
EXHIBIT B
DEFAUTLS
NONE
<PAGE>
THIRD AMENDMENT TO LEASE
LORAL CORPORATION/UNISYS CORPORATION
Buildings D, D Annex and Z
322 North 2200 West
Salt Lake City, UT
In consideration of the mutual covenants contained herein, and for other good
and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree to amend the Lease dated May 5, 1995 as amended by
First, and _______ Second Amendments between Loral Corporation, as Lessor,
and Unisys Corporation, as Lessee, for the Demised Premises located in
Buildings D, D Annex and Z at 322 North 2200 West, Salt Lake City, Utah as
follows:
1. Effective January 15, 1996 through December 31, 2001, Schedule B (the
"Demised Premises") as used in the Lease shall be increased by 4,584
rentable square feet which additional space is identified on Exhibit
A attached hereto.
2. Effective January 15, 1996 the rental shall be increased to reflect
said additional space utilizing the method described on Schedule C of
the Lease.
3. Except as modified herein and amended herein, all other terms and
conditions of the Sublease shall remain unchanged and in full force
and effect.
LESSEE: LESSOR:
UNISYS CORPORATION LORAL CORPORATION
a Delaware Corporation a New York Corporation
By: _____________________ By:___________________________
Richard J. L'Ecuyer W. B. Booker
Corporate Director Vice President and Controller
Real Estate Operations Loral Communication Systems
By:___________________________
Stephen L. Jackson,
Vice President
Loral Corporation
<PAGE>
SECOND AMENDMENT TO LEASE
LORAL Corporation/UNISYS CORPORATION
Buildings D, D Annex and Z
322 North 2200 West
Salt Lake City, UT
In consideration of the mutual covenants contained herein, and for other good
and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree to amend the Lease dated May 5, 1995 as amended by First
Amendment between Loral Corporation, as Lessor, and Unisys Corporation, as
Lessee, for the Demised Premises located in Buildings D, D Annex and Z at 322
North 2200 West, Salt Lake City, Utah as follows:
1. Effective December 1, 1995 through December 31, 2001, Schedule B (the
"Demised Premises") as used in the Lease shall be increased by 20,000
rentable square feet which additional space is identified on Exhibit
A attached hereto.
2. Effective December 1, 1995 the rental shall be increased to reflect
said additional space utilizing the method described on Schedule C of
the Lease.
3. Except as modified herein and amended herein, all other terms and
conditions of the Sublease shall remain unchanged and in full force
and effect
LESSEE: LESSOR:
UNISYS CORPORATION LORAL CORPORATION
a Delaware Corporation a New York Corporation
By:______________________ By:_________________________
Richard J. L'Ecuyer W. B. Booker
Corporate Director Vice President and Controller
Real Estate Operations Loral Communication Systems
By:___________________________
Stephen L. Jackson,
Vice President
LORAL CORPORATION
<PAGE>
FIRST AMENDMENT TO LEASE
LORAL CORPORATION/UNISYS CORPORATION
Buildings D, D Annex and Z
322 North 2200 West
Salt Lake City, UT
In consideration of the mutual covenants contained herein, and for other good
and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree to amend the Lease dated May 5, 1995 between Loral
Corporation, as Lessor, and Unisys Corporation, as Lessee, for the Demised
Premises located in Buildings D, D Annex and Z at 322 North 2200 West, Salt
Lake City, Utah as follows:
1. Effective December 1, 1995 through December 31, 2001, Schedule B (the
"Demised Premises") as used in the Lease shall be increased by 37,034
rentable square feet which additional spaces are identified on
Exhibit A attached hereto.
2. Effective December 1, 1995 the rental shall be increased to reflect
said additional space utilizing the method described on Schedule C of
the Lease.
3. Effective December 1, 1995 the parking site plan shown on Exhibit B
of the Lease shall be replaced with the attached Exhibit B. Lessee
will have exclusive use of the Building D Annex dock area, however
Lessee must continue to provide the U.S. Postal Service access as
provided in their Lease.
4. Except as modified herein and amended herein, all other terms and
conditions of the Sublease shall remain unchanged and in full force
and effect.
LESSEE: LESSOR:
UNISYS CORPORATION LORAL CORPORATION
a Delaware Corporation a New York Corporation
By:______________________ By:_________________________
Richard J. L'Ecuyer W. B. Booker
Corporate Director Vice and Controller
Real Estate Operations Loral Communication Systems
By:___________________________
Stephen L. Jackson,
Vice President
LORAL CORPORATION
<PAGE>
LEASE
Between
UNISYS CORPORATION,
as Lessor
and
LORAL CORPORATION,
as Lessee
<PAGE>
TABLE OF CONTENTS
Article Page
1. Demised Premises . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6. Alterations; Demising Costs; Signage . . . . . . . . . . . . . . . . 18
7. Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . . 19
8. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9. Assignment, Subletting and Encumbrances . . . . . . . . . . . . . . . 20
10. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
11. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . 25
14. Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16. Damage and Destruction . . . . . . . . . . . . . . . . . . . . . . . 27
17. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 28
18. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . 28
19. Release of Lessor . . . . . . . . . . . . . . . . . . . . . . . . . 28
20. Surrender of Demised Premises . . . . . . . . . . . . . . . . . . . 28
21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
22. Lessor's Inability to Perform . . . . . . . . . . . . . . . . . . . 29
23. Limitations or Liability . . . . . . . . . . . . . . . . . . . . . . 30
24. Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . 30
25. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
26. Rider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
LEASE
LEASE, dated as of May 5, 1995, between UNISYS CORPORATION,
a Delaware corporation having an office at Township Line and Union Meeting
Roads, Blue Bell, Pennsylvania 19424 ("Lessor") and LORAL CORPORATION, a New
York corporation having an office at 600 Third Avenue, New York, New York
10016 ("Lessee").
W I T N E S S E T H :
WHEREAS, Lessor is the owner of the real property, including
improvements thereon (collectively, the "Property") referenced on Schedule A
hereto; and
WHEREAS, Lessor desires to lease to Lessee, and Lessee
desires to hire from Lessor, certain premises at the Property upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter provided, Lessor and Lessee hereby agree as follows:
1. Demised Premises.
1.1. Lessor hereby leases to Lessee, and Lessee hereby
leases and hires from Lessor, the Demised Premises, as defined in Schedule B
hereto, together with the non-exclusive right to use the common areas of the
Property and such other rights as are necessary or desirable to provide
Sublessee with substantially the same rights and benefits as have been
generally afforded to and enjoyed by the Defense Systems unit of Unisys
Corporation ("Defense Systems") prior to the date hereof (including, without
limitation, rights of ingress and egress, parking consistent with past
practice or otherwise as set forth in the Rider attached to this Sublease,
and access to public and private utilities) for the lease term hereinafter
stated and for the Base Rent and Additional Rent (both as hereinafter
defined) set forth herein, upon and subject to all of the terms and
provisions hereinafter provided or incorporated in this Lease by reference.
1.2. Lessee agrees to accept the Demised Premises on the
Commencement Date (as hereinafter defined) in its "as is" condition and
Lessor shall not be obligated to perform any work or furnish any materials
in, to or about the Demised Premises in order to prepare the Demised Premises
for occupancy by Lessee or otherwise. Lessee hereby releases Lessor from any
and all liability resulting from (i) any latent or patent defects in the
Demised Premises, (ii) the failure of the Demised Premises to comply with any
legal requirements applicable thereto or (iii) the status of the title to the
Demised Premises, provided that the foregoing release of liability is not
intended to limit or otherwise affect any liability that Lessor or any
affiliate of Lessor may have to Lessee or any affiliate of Lessee which
arises under any of the other terms and conditions of this Lease or under the
terms and conditions of any other agreement. Lessee acknowledges that,
except as expressly set forth herein or as expressly set forth in any
separate document, Lessor has made no statements, representations, covenants
or warranties with respect to (x) the condition or manner of construction of
the Property or any improvements constructed in the Demised Premises, (y) the
uses or purposes for which the Demised Premises may be lawfully occupied or
(z) any encumbrances, covenants, restrictions or agreements affecting title
<PAGE>
to the Property or the Demised Premises. Lessee also agrees that, in
executing this Lease, it has not relied upon or been induced by any
statements, representations, covenants or warranties of any person other than
those, if any, set forth expressly in this Lease or in any other separate
agreements by or between Lessor and/or Lessee or any of their respective
affiliates.
2. Term.
2.1. (a) The term of this Lease shall commence on the date
hereof (the "Commencement Date") and, unless earlier terminated or extended
as herein provided, shall expire on the Expiration Date. As used in this
Lease, (i) "Term" shall mean the term of this Lease, and (ii) "Expiration
Date" shall mean the Scheduled Expiration Date, as defined in Schedule C
hereto; provided that in the event of a termination of this Lease pursuant to
the terms hereof prior to the Scheduled Expiration Date, the "Expiration
Date" shall mean such date of termination of this Lease.
(b) References in this Lease to the "termination" of this
Lease include the stated expiration of the Term and any earlier termination
thereof pursuant to the provisions of this Lease, or by law. Except as
otherwise expressly provided in this Lease with respect to those obligations
of Lessee which by their nature or under the circumstances can only be, or
under the provisions of this Lease may be, performed after the termination of
this Lease, the Term and estate granted hereby shall end at noon on the date
of termination of this Lease as if such date were the Expiration Date, and
neither party shall have any further obligation or liability to the other
after such termination. Notwithstanding the foregoing, any liability of
Lessor or Lessee to make any payment under this Lease, including, without
limitation, amounts payable by Lessee as Base Rent or Additional Rent
hereunder (both as hereinafter defined), which shall have accrued prior to
the termination of this Lease shall survive the termination of this Lease.
3. Rent.
3.1. The rent ("Rent") payable during the Term under this
Lease shall consist of the following:
(a) the Base Rent, as defined in Schedule C hereto.
(b) additional rent ("Additional Rent") in an amount equal
to any and all other sums payable by Lessee to Lessor under this Lease.
3.2. Except as otherwise specifically provided in this
Lease (a) all payments of Base Rent shall be in equal monthly installments
and shall be made in advance on the first (1st) day of each month during the
Term, without notice (provided that if the amount of Base Rent is required to
be calculated by Lessor in accordance with Schedule C hereof, then Lessor
shall give Lessee prior written notice of such calculation, which notice
shall include an explanation of the basis for such calculation and reasonable
backup documentation relating thereto), and (b) all payments of Additional
Rent shall be made within 30 days after written notice from Lessor, in each
case by check payable to the order of "UNISYS CORPORATION" and addressed to
Unisys Corporation, P.O. Box 500, Blue Bell, Pennsylvania 19424-0003,
Attention: Disbursement & Control Dept., or to such other person or at such
other place as Lessor may from time to time designate in writing.
<PAGE>
3.3. Lessee shall pay all Rent when due, in lawful money of
the United States which shall be legal tender for the payment of all debts,
public and private, at the time of payment. All sums due and payable by
Lessor or Lessee pursuant to the terms of this Lease that are not paid within
five (5) days of the due date therefor shall from and after the due date bear
interest at an annual percentage rate of ten percent (10%). All interest
accrued and payable by Lessee under this subsection as hereinabove provided
shall be deemed to be Additional Rent payable hereunder and due at such time
or times as the rent with respect to which such interest shall have accrued
shall be payable under this Lease.
3.4. Lessee agrees to pay, an Additional Rent, any revenue
tax or charge, occupancy tax, business privilege tax, business use tax or any
other tax that may be levied against the Demised Premises or Lessee's use or
occupancy thereof during the Term; provided, however, that in no event shall
Lessee be obligated to pay any income tax that is imposed upon and/or payable
by Lessor, and provided further that payments made by Lessee pursuant to this
Section 3.4 shall not be duplicative of amounts paid by Lessee pursuant to
any other provision of this Lease.
3.5. In the event that Lessee shall dispute any calculation
of Rent charged to Lessee by Lessor, then Lessee shall send to Lessor a
written notice, within 30 days of receipt by Lessee of such charge, setting
forth the basis for Lessee's dispute. Lessor and Lessee shall thereupon use
reasonable and good faith efforts to resolve such dispute. If the parties are
unable to resolve such dispute within 30 days after submission by Lessee of
its dispute notice, then the parties shall designate an independent certified
public accountant mutually acceptable to both parties (the "Independent
Accountant") to resolve such dispute and the fees and charges of the
Independent Accountant shall be shared equally by the parties. Both parties
shall provide the Independent Accountant with all information reasonably
requested by the Independent Accountant in connection with its review of such
dispute, and both parties shall request that the Independent Accountant
complete its work expeditiously and issue a written report to both parties
setting forth its determination. The written determination of the
Independent Accountant shall be final and shall be binding upon both Lessor
and Lessee. All disputes to be resolved pursuant to this Section 3.5 shall
be so resolved in accordance with the principles and standards set forth in
Section 3.6 below.
3.6. All calculations by Lessor of Base Rent, Additional
Rent and any other amounts that are payable by Lessee hereunder shall be made
in accordance with Lessor's past practices during calendar year 1994 with
respect to Defense Systems, and all charges and allocations relating to the
Demised Premises and all accounting practices utilized by Lessor with respect
to amounts charged to Lessee under this Lease (including the capitalization,
amortization and expensing of costs incurred and funds expended) shall also
be made in such manner.
4. Use.
4.1. Lessee shall occupy and use the Demised Premises
solely for manufacturing, light assembly, engineering, research and
development, office and warehouse and such other uses as may be approved by
Lessor (which approval shall not be unreasonably withheld, delayed or
conditioned), provided that any such use shall be subject in all respects to
the other terms and provisions of this Lease, and subject to any and all
<PAGE>
laws, statutes, ordinances, orders, regulations and requirements of all
federal, state and local governmental, public or quasi-public authorities,
whether now or hereafter in effect, which may be applicable to or in any way
affect the Demised Premises or any part thereof and all requirements,
obligations and conditions of all instruments of record on the date of this
Lease affecting the Demised Premises (collectively, "Legal Requirements").
5. Services.
5.1. It is the intent of the parties that Lessor shall
continue to provide to Lessee all services generally and customarily provided
by Unisys Corporation to the occupants of the Demised Premises prior to the
Commencement Date, together with any other services that may be appropriate
under the circumstances from time to time (such services being hereinafter
referred to collectively as the "Services"). In connection with the
foregoing, such Services shall include, without limitation, each of the
services set forth on Schedule D hereto, and such Services shall not include
any of those items set forth on Schedule D-1 hereto. Lessee shall pay to
Lessor, in consideration for the Services and as Additional Rent, an amount
equal to Lessor's actual costs in, to or for the benefit of the Demised
Premises or Lessee which shall be determined in accordance with the
principles set forth in Section 3.6 above ("Actual Costs"). On a quarterly
basis, Lessor shall provide to Lessee a written statement, in reasonable
detail, setting forth such Actual Costs for Services. In the event that
Lessee disputes Lessor's statement of Actual Costs, such dispute shall be
resolved in accordance with Section 3.5 hereof.
5.2. It is the intent of the parties that Lessee shall
continue to provide to Lessor, during the Term hereof, all reasonable
services generally and customarily provided by Defense Systems, prior to the
Commencement Date, to any other portions of the Property. Lessee shall
perform such services, and Lessor shall pay to Lessee a proportionate share
of Lessee's actual costs incurred in performing such services. On a
quarterly basis, Lessee shall provide to Lessor a written statement, in
reasonable detail, setting forth such costs. In the event of a dispute with
respect to such costs, such dispute shall be resolved in accordance with
Section 3.5 hereof.
5.3. In the event that telephone switching equipment or
other telecommunications equipment utilized by Lessor or Lessee is located
within the premises occupied by the other party, then the party occupying
such premises shall grant the other party reasonable access to such telephone
switching equipment or other telecommunications equipment and other areas
reasonably required for such telecommunications use, subject in each case to
reasonable security requirements of the party granting such access.
5.4. The provisions of this Section shall survive the
expiration or earlier termination of this Lease.
6. Alterations; Demising Costs; Signage.
6.1. As used herein, the term "Alterations" shall mean,
collectively, any alterations, modifications installations, additions or
improvements to the Demised Premises. Without the prior written consent of
Lessor in each instance, which consent shall not be unreasonably withheld
conditioned or delayed, Lessee shall not make any (a) structural Alterations
or (b) non-structural Alterations having a design and construction cost in
<PAGE>
excess of $50,000 on a per project basis. Any Alterations consented to by
Lessor, or otherwise permitted under this Lease, shall be performed by
Lessee, at its sole cost and expense, in a good and workmanlike manner.
Lessor shall have the right to post notices of non-responsibility and similar
notices, as Lessor shall reasonably deem appropriate, on the Demised Premises
while Alterations are occurring.
6.2. Lessor and Lessee shall use reasonable and good faith
efforts to reach a mutual agreement as to whether any Alterations are
necessary and appropriate in order to separate the Demised Premises from the
premises in the Property occupied by Lessor. In the event that the parties
reach such a mutual agreement, then Lessor shall perform such agreed upon
Alterations, and Lessee shall, within 30 days after written demand by Lessor,
reimburse Lessor for one-half of the costs and expenses relating to such
Alterations. Lessor may request payment of Lessee's share of such costs, and
(if requested) Lessee shall pay its share of such costs, as such costs are
incurred by Lessor during the course of design and construction of such
Alterations. Lessor shall require that (a) any contractors or subcontractors
performing any such work maintain reasonable and appropriate liability
insurance and (b) any such insurance policies shall name Lessor and Lessee as
additional insureds.
6.3. Lessee shall have the right to install reasonable and
appropriate signage, both at the entrance to the Demised Premises and in the
common areas of the Property, indicating Lessee's occupancy of the Demised
Premises, provided that the location, size and design of any such signage
shall be subject to the prior written consent of Lessor, which consent shall
not be unreasonably withheld or delayed.
6.4. In the event that the Demised Premises are measured or
re-measured pursuant to the terms of this Lease (inclusive of the Rider, if
any, and Schedule's attached hereto), Lessor and Lessee shall each pay
one-half (1/2) of the costs and expenses relating to such measurement or re-
measurement.
7. Maintenance and Repair.
7.1. Except as provided to the contrary in Schedule D and
Schedule D-1 attached hereto, Lessor shall, at its sole cost and expense,
maintain the Premises in reasonably satisfactory repair and condition, except
for ordinary wear and tear, and will make all structural and nonstructural
repairs which may be required by law or required to keep the Premises in
reasonably satisfactory repair and condition, except for ordinary wear and
tear, and Lessor's Actual Costs for providing such maintenance and repair
Services shall be charged to Lessee as Additional Rent in accordance with
Section 5.1 hereof.
8. Insurance.
8.1. Lessee, at Lessee's sole expense, shall maintain for
the benefit of Lessor such policies of insurance (and in such form) with
respect to the Demised Premises which shall be reasonably satisfactory to
Lessor as to coverage and insurer (who shall be licensed to do business in
the State in which the Demised Premises are located) provided that such
insurance shall at a minimum include comprehensive general liability
insurance protecting and indemnifying Lessor and Lessee against any and all
claims and liabilities for injury or damage to persons or property occurring
<PAGE>
upon, in or about the Demised Premises, and the public portions of the Prop-
erty, caused by or resulting from or in connection with any act or omission
of Lessee or Lessee's employees, agents or invitees. Lessor shall be named
as an additional insured under any such policies of insurance obtained by
Lessee, and no such policy shall be subject to termination or modification
unless at least thirty (30) days' prior written notice (or ten (10) days'
prior written notice, if such termination results from Lessee's failure to
pay the premiums for such insurance) shall have been given by the applicable
insurance company to Lessor. Upon execution of this Lease by Lessee and at
least thirty (30) days prior to the expiration date of such policies, Lessee
shall furnish to Lessor a certificate or certificates of insurance confirming
that the required insurance is in full force and effect with all premiums
paid current. Nothing contained herein shall limit, or prohibit, Lessee from
providing such coverage through "blanket" policies of insurance and/or
self-insuring therefor in a manner that is consistent with the general
corporate practices of Lessee.
8.2. Nothing contained in this Lease shall relieve Lessee
from any liability as a result of damage from fire or other casualty, but
each party shall look first to any insurance in its favor before making any
claim against the other party for recovery for loss or damage resulting from
fire or other casualty. To the extent that such insurance is in force and
collectible and to the extent permitted by law, Lessor and Lessee each hereby
releases and waives all right to recovery against the other or anyone
claiming through or under the other by way of subrogation or otherwise. The
foregoing release and waiver shall be in force only if the insurance policies
of Lessor and Lessee provide that such release or waiver does not invalidate
the insurance; each party agrees to use reasonable efforts to include such a
provision in its applicable insurance policies. If the inclusion of said
provision would involve an additional expense, either party, at its sole
expense, may require such provision to be inserted in the other's policy.
9. Assignment, Subletting and Encumbrances.
9.1. Lessee shall not sublease or mortgage, pledge or
otherwise encumber all or any part of the Demised Premises, assign or
mortgage this Lease (by operation of law or otherwise) or permit the Demised
Premises to be used or occupied by anyone other than Lessee, Lessee's
divisions and other Affiliates and Lessee's licensees, invitees, customers
and vendors, without the prior written consent of Lessor in each instance,
which consent shall not be unreasonably withheld, conditioned or delayed;
provided, however, that Lessee, upon at least 30 days' prior written notice
to Lessor, may assign this Lease or sublet all or part of the Demised
Premises to (A) an Affiliate of Lessee, (B) an entity into which Lessee is
merged or consolidated, and (C) an entity which acquires all or substantially
all of the business or operations of Lessee. Any consent by Lessor as
hereinabove required shall not excuse Lessee from its obligation to obtain
the express written consent of Lessor to any further action or matter with
respect to which the consent of Lessor is hereinabove required and Lessee
shall not be released from any of its obligations hereunder. The term
"Affiliate", as used in this Section 9.1, shall have the same meaning as is
set forth in the Asset Purchase Agreement.
10. Liens.
10.1. Lessee shall not suffer or permit any mechanic's,
materialman's, vendor's, supplier's, laborer's or other similar liens
<PAGE>
(collectively, "mechanic's liens") to be filed against the Demised Premises,
or any part thereof, nor against Lessee's interest therein, by reason of
work, labor, services or materials supplied or claimed to have been supplied
to Lessee (except for mechanic's liens for payments that are not yet
delinquent or for payments that Lessee is contesting in good faith and in a
diligent manner). If any mechanic's lien described in the preceding sentence
shall at any time be filed against the Demised Premises, or any part thereof,
or Lessee's interest therein, Lessee shall, within forty-five (45) days after
notice of the filing thereof, cause the same to be discharged of record by
payment, deposit, bond, order of a court of competent jurisdiction or
otherwise, or provide Lessor with reasonable assurances as to Lessee's
ability to satisfy such lien. If Lessee shall fail to cause such lien to be
discharged within such forty-five (45) day period, then, in addition to any
other right or remedy of Lessor, Lessor may, but shall not be obligated to,
discharge the same either by paying the amount claimed to be due or by
procuring the discharge of such lien by deposit or by bonding proceedings,
and in any such event Lessor shall be entitled to reimbursement from Lessee
for any reasonable costs expended by Lessor.
11. Default.
11.1. (a) Each of the following shall constitute an Event
of Default hereunder:
(i) if Lessee shall fail to pay when due any Rent or
any other amount Lessee may be required to pay hereunder, and Lessee shall
fail to remedy such default within seven (7) business days after written
notice thereof has been given to Lessee by Lessor, provided that an Event of
Default shall not be deemed to have occurred hereunder if Sublessee shall
have timely disputed in good faith its obligation to pay such Rent or the
amount thereof; or
(ii) if Lessee shall default in the observance or
performance of any term, covenant or condition of this Lease on Lessee's part
to be observed, performed or complied with (other than the payment of Base
Rent and Additional Rent and other amounts payable hereunder) and Lessee
shall fail to remedy such default within thirty (30) days after written no-
tice to cure, or, if such default is of such a nature that for reasons beyond
Lessee's control it cannot be completely remedied within said period of
thirty (30) days, then if Lessee (A) shall not promptly institute and
thereafter diligently prosecute to completion all steps necessary to remedy
the same and (B) shall not remedy the same within a reasonable time after the
date of default; or
(iii) if any event shall occur or any contingency shall
arise whereby this Lease or the estate hereby granted or the unexpired
balance of the Term would, except as expressly permitted herein, by operation
of law or otherwise, devolve upon or pass to any person or entity other than
Lessee, and Lessee shall fail to remedy such default within sixty (60) days
after written notice thereof has been given to Lessee by Lessor;
(b) Upon the occurrence of any such Event of Default,
Lessor may, in addition to exercising any other available rights or remedies
available to Lessor under law, give to Lessee notice of its intention to end
the Term at the expiration of three (3) days from the date of the giving of
such notice, and, in the event such notice is given, this Lease and the Term
and estate hereby granted (whether or not the Term shall have commenced)
<PAGE>
shall terminate upon the expiration of said three (3) days with the same
force and effect as if that day were the Expiration Date, provided, however,
that Lessor and Lessee shall remain liable for the performance of their
respective obligations hereunder which survive the termination of this Lease
and for damages as provided in this Lease.
11.2. Notwithstanding anything to the contrary set forth
herein, this Lease shall immediately terminate if any of the following events
shall occur with respect to Lessee: (a) if Lessee shall (i) have applied for
or consented to the appointment of a receiver, trustee or liquidator, or
other custodian of Lessee, or any of its properties or assets, (ii) have made
a general assignment for the benefit of creditors, (iii) have commenced a
voluntary case for relief as a debtor under the United States Bankruptcy
Code, or any other applicable federal or state laws, or filed a petition to
take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debts, dissolution or liquidation law or statute or an answer admitting the
material allegations of a petition filed against it in any proceeding under
any such law, or (iv) be adjudicated a bankrupt or insolvent; or (b) if
without the acquiescence or consent of Lessee, an order, judgment or decree
shall have been entered by any court of competent jurisdiction approving as
properly filed a petition seeking relief under the United States Bankruptcy
Code, or any other applicable federal or state laws, or any bankruptcy,
reorganization, insolvency, readjustment of debts, dissolution or liquidation
law or statute with respect to Lessee, or all or a substantial part of their
respective properties or assets, and such order, judgment or decree shall
have continued unstayed and in effect for any period of not less than ninety
(90) days. Neither Lessee, nor any person claiming through or under Lessee or
by reason of any statute or order of court shall, after such termination, be
entitled to possession of the Demised Premises but shall forthwith quit and
surrender the Demised Premises. Without limiting any of the foregoing
provisions of this Section 10.2, if pursuant to the United States Bankruptcy
Code, or any other applicable federal or state laws, Lessee is permitted to
assign this Lease, Lessee agrees that adequate assurance of future
performance by an assignee expressly permitted under such law shall be deemed
to mean evidence in the form of financial statements prepared and certified
by a certified public accountant that the assignee will have a net worth,
after excluding the value of the leasehold, sufficient to meet the remaining
obligations under this Lease.
11.3. In the event of any breach by Lessee or any persons
claiming through or under Lessee of any of the terms, covenants or conditions
contained in this Lease, Lessor, after the giving of any notice required by
the terms of this Lease and the expiration of any notice and cure periods
hereunder, (a) shall be entitled to enjoin such breach and (b) shall have the
right to invoke any right and remedy available at law or in equity or by
statute or otherwise. The provisions of this Section 11.3 shall survive the
expiration or sooner termination of this Lease.
11.4. If this Lease and the Term shall terminate as
provided in Section 11.1 or in Section 11.2 above, or by or under any summary
proceeding or any other action or proceeding or if Lessor shall re-enter the
Demised Premises as hereinabove provided or by or under any summary
proceeding or any other action or proceeding, then in any of said events:
(a) Lessee shall pay to Lessor all Base Rent, Additional
Rent and other amount payable by Lessee hereunder to the date upon which this
<PAGE>
Lease and the Term shall have terminated or to the date of re-entry upon the
Demised Premises by Lessor, as the case may be;
(b) Lessor shall be entitled to retain all monies, if any,
paid by Lessee to Lessor, whether as advance Rent, security or otherwise, but
such monies shall be credited by Lessor against any Rent due at the time of
such termination or re-entry or, at Lessor's option, against any damages pay-
able by Lessee;
(c) Lessee shall be liable for and shall pay to Lessor, as
damages, any deficiency between the Base Rent and Additional Rent payable
hereunder for the period which otherwise would have constituted the unexpired
portion of the Term (conclusively presuming the Base Rent and Additional Rent
to be at the same rate as was payable for the year immediately preceding such
termination or re-entry less any Additional Rent for such one-year period
payable to Lessor by Lessee pursuant to Section 5.1 above) and the net
amount, if any, of rents ("Net Rent") collected under any reletting effected
by Lessor for any part of such period (after first deducting from the rents
collected under any such reletting all of Lessor's reasonable expenses in
connection with the termination of this Lease or Lessor's re-entry upon the
Demised Premises and in connection with such reletting including all
reasonable repossession costs, brokerage commissions, legal expenses,
attorneys' fees, alteration or similar costs and other expenses of preparing
the Demised Premises for such reletting);
(d) In the event that Lessor shall not have collected any
monthly deficiencies as aforesaid, Lessor shall be entitled to recover from
Lessee, and Lessee shall pay to Lessor, on demand, as and for liquidated and
agreed final damages, a sum equal to the amount by which the Base Rent and
Additional Rent payable hereunder for the period which otherwise would have
constituted the unexpired portion of the Term (conclusively presuming the
Base Rent and Additional Rent to be at the same rate as was payable for the
year immediately preceding such termination or re-entry less any Additional
Rent for such one-year period payable to Sublessor by Sublessee pursuant to
Section 5.1 above) exceeds the then fair and reasonable rental value of the
Demised Premises for the same period, both discounted to present value at the
rate of eight percent (8%) per annum. If before presentation of proof of
such liquidated damages to any court, commission or tribunal, the Demised
Premises, or any part thereof, shall have been relet by Lessor for the period
which otherwise would have constituted the unexpired portion of the Term, or
any part thereof, the amount of rent upon such reletting shall be deemed,
prima facie, to be the fair and reasonable rental value for the part or the
whole of the Demised Premises so relet during the term of the reletting; and
(e) In no event shall Lessee be entitled to receive any
excess of Net Rent over the sums payable by Lessee to Lessor hereunder, and
in no event shall Lessee be entitled in any suit for the collection of
damages pursuant to this Article to a credit in respect of any Net Rent from
a reletting except to the extent actually received by Lessor prior to the
commencement of such suit.
11.5. If a default by Lessee shall have occurred and be
continuing with respect to any obligations of Lessee under this Lease, Lessor
may, at its option, upon reasonable prior notice to Lessee (unless Lessor
reasonably believes there to be an emergency threatening Lessor's property
outside the Demised Premises, or threatening substantial damage to Lessor's
interest in the Demised Premises as Lessor, in which event no notice shall be
<PAGE>
required and Lessor may act immediately), perform such obligations for the
account of, and at the expense of, Lessee. The sums so paid or incurred by
Lessor, in its sole discretion, together with interest at the rate specified
in Section 3.3 hereof, costs and damages shall be due from and paid by
Lessee, as Additional Rent, upon Lessee's receipt of written demand therefor
from Lessor.
11.6. Nothing herein contained shall be construed as
limiting or precluding the recovery by Lessor against Lessee of any sums or
damages to which, in addition to the damages particularly provided above,
Lessor may lawfully be entitled by reason of any default hereunder on the
part of Lessee; provided, however, that in no event shall Lessor or Lessee be
entitled to special or consequential damages with respect to any matter
arising hereunder or relating hereto.
12. Indemnification.
12.1. Lessee shall indemnify and hold harmless Lessor and
its employees and agents from and against any and all loss, cost, liability,
claim, damage and expense, including, without limiting the generality of the
foregoing, reasonable attorneys' fees and expenses and court costs, penalties
and fines incurred in connection with or arising from any injury to Lessee or
for any damage to, or loss (by theft or otherwise) of, any of the property of
Lessee, irrespective of the cause of such injury, damage or loss and whether
occurring in or about the Demised Premises or the Property.
12.2. Lessee shall indemnify and hold harmless Lessor and
its officers, directors, shareholders and employees from and against any and
all loss, cost, liability, claims, damage and expenses, including, without
limiting the generality of the foregoing, reasonable attorneys' fees and
expenses and court costs, penalties and fines, whether or not due to third
party claims, suits or proceedings, incurred in connection with or arising
from (a) any default by Lessee in the observance or performance of, or
compliance with, any of the terms, covenants or conditions of this Lease on
Lessee's part to be observed, performed or complied with, (b) the use or
occupancy or manner of use or occupancy of the Demised Premises by Lessee or
any of its agents, employees or contractors, or the exercise by Lessee or any
of its agents, employees or contractors, of any rights granted to Lessee
hereunder, (c) any acts, omissions or negligence of Lessee or any of its
agents, employees or contractors, in or about the Demised Premises or the
Property either prior to, during, or after the termination of this Lease or
(d) the condition of the Demised Premises, but only to the extent that Lessee
fails to perform any of its obligations hereunder with respect to the
condition of the Demised Premises. If any action or proceeding shall be
brought against Lessor by reason of any such claim, Lessee shall be given
prompt notice thereof and, upon notice from Lessor, shall resist and defend
such action or proceeding at Lessee's sole expense and employ counsel
therefor reasonably satisfactory to Lessor. Lessee shall pay to Lessor on
demand all sums which may be owing to Lessor by reason of the provisions of
this subsection. Lessee's obligations under this subsection shall survive
the Expiration Date or earlier termination of this Lease.
12.3. Lessor shall indemnify and hold harmless Lessee and
Lessee's officers, directors, shareholders and employees from and against any
and all loss, cost, liability, claims, damage and expenses, including,
without limiting the generality of the foregoing, reasonable attorneys' fees
and expenses and court costs, penalty and fines, whether or not due to third
<PAGE>
party claims, suits or proceedings, incurred in connection with or arising
from (a) any default by Lessor in the observance or performance of, or
compliance with, any of the terms, covenants or conditions of this Lease on
Lessor's part to be observed, performed or complied with, or (b) the gross
negligence or wilful misconduct of Lessor (in its capacity as lessor
hereunder) or any of its agents, employees or contractors (retained by Lessor
in its capacity as lessor hereunder), in or about the Demised Premises or the
Property either prior to, during, or after the termination of this Lease. If
any action or proceeding shall be brought against Lessee by reason of any
such claim, Lessor shall be given prompt notice thereof and, upon notice from
Lessee, shall resist and defend such action or proceeding at Lessor's sole
expense and employ counsel therefor reasonably satisfactory to Lessee.
Lessor shall pay to Lessee on demand all sums which may be owed to Lessee by
reason of the provisions of this subsection. Lessor's obligations under this
subsection shall survive the Expiration Date or earlier termination of this
Lease.
12.4. Lessor shall not be liable for any loss or damage to
property of Lessee or any of its employees, guests, invitees or licensees by
reason of theft or otherwise. Lessor shall not be liable for any injury or
damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water, rain or leaks from any part of the
Demised Premises or from the pipes, appliances or plumbing works or from the
roof, street or subsurface or from any other place or by dampness or by any
other cause of whatsoever nature, unless such injury or damage has been shown
to have been due solely to the gross negligence or willful act or omission of
Lessor, its affiliates, or the officers, directors, employees or agents of
Lessor or its affiliates in the course of their employment. Subject to the
foregoing, all property of Lessee or others kept or stored on the Demised
Premises shall be so kept or stored at the risk of Lessee only.
12.5. Notwithstanding anything in this Section 12 to the
contrary, neither party shall be required to indemnify the other party (an
"indemnitee") against the indemnitee's own negligence or wilful misconduct.
13. Hazardous Materials.
13.1. Lessee shall not cause or permit any Hazardous
Material (as hereinafter defined) to be brought upon, kept or used in or
about the Demised Premises by the agents, principals, employees, assigns,
sublessees, contractors, subcontractors, consultants or invitees of Lessee,
except in full compliance with applicable Legal Requirements. If Lessee
breaches the obligations stated in the preceding sentence, or if the
introduction or release of a Hazardous Material on the Demised Premises
caused or permitted by Lessee (or the aforesaid others) results in
contamination of the Demised Premises or any surrounding area(s), or if
contamination of the Demised Premises or any surrounding area(s) by Hazardous
Material otherwise occurs for which Lessee is legally, actually or factually
liable or responsible (other than liability which arises solely as a result
of the tenancy created hereby or solely as a result of Lessor's mere occu-
pancy of the Demised Premises), then Lessee shall fully and completely
indemnify, defend and hold harmless Lessor (or any party claiming by, through
or under Lessor) from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, expenses or losses, including, without limitation:
(i) diminution in the value of the Demised Premises; (ii) any asserted damage
to the Property or to neighboring properties or the occupants of the Property
or neighboring properties, and (iii) any sums paid in settlement of claims,
<PAGE>
reasonable attorneys' fees, consultants fees and expert fees which arise or
arose before, during or after the term of this Lease as a consequence of such
contamination. This indemnification includes, without limitation, costs
incurred in connection with any investigation or site conditions or any
clean-up, remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision because of
Hazardous Materials present in the soil or ground water on or under the
Demised Premises for which Lessee is responsible pursuant to the terms of
this Lease. Without limiting the foregoing, if the introduction or release
of any Hazardous Materials on, under or about the Demised Premises or any
other surrounding area(s) caused or permitted by Lessee (or the aforesaid
others) results in any contamination of the Demised Premises, Lessee shall
immediately take all actions at its sole expense as are necessary or
appropriate to return the Demised Premises to the condition existing prior to
the introduction by Lessee of any such Hazardous Materials thereto; provided
that the prior written approval (which approval shall not be unreasonable
withheld, conditioned or delayed) of such actions by Lessor shall be first
obtained. The foregoing obligations and responsibilities shall survive the
expiration or earlier termination of this Lease.
13.2. As used herein, the term "Hazardous Materials" means
any hazardous or toxic substance, material or waste, including, but not
limited to, those substances, materials, and wastes listed in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reorganization Act of 1986 (42
U.S.C. Section 9601 et seq., as amended), the Federal Clean Water Act, the
Federal Clean Air Act, the Federal Resource Conservation and Recovery Act,
the Federal Toxic Substances Control Act, the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.101) or by the Envi-
ronmental Protection Agency as hazardous substances (40 CFR Part 301 and
amendments thereto), and all substances, materials and wastes that are
defined as "toxic", "hazardous" or "extremely hazardous" or are otherwise
regulated under any applicable local, state or federal law. In furtherance
of, and not in limitation of the foregoing, the term "Hazardous Materials"
shall include asbestos, asbestos-containing materials and petroleum.
13.3. Lessor and Lessee acknowledge and agree that the
Asset Purchase Agreement shall govern all matters relating to the presence of
Hazardous Materials in, on, under and about the Demised Premises prior to the
execution and delivery hereof.
14. Right to Inspect.
14.1. Lessor and the authorized representatives of Lessor
shall have the right to enter upon the Demised Premises upon reasonable
advance notice to Lessee at all reasonable times during usual business hours
(and at any time without notice in the case of an emergency) for the purpose
of inspecting the same, conducting an environmental review of Lessee's
business operations or exhibiting the same to prospective purchasers, tenants
or mortgagees.
15. Eminent Domain.
15.1. If all of the Demised Premises are taken by exercise
of the power of eminent domain (or conveyed by Lessor in lieu of such
exercise) this Lease will terminate on a date (the "termination date") which
<PAGE>
is the earlier of the date upon which the condemning authority takes
possession of the Demised Premises or the date on which title to the Demised
Premises is vested in the condemning authority. If more than 25% of the
rentable area of the Demised Premises is so taken, or if Lessee's rights of
access to the Demised Premises or Lessee's use of parking facilities at the
Property are materially impaired as a result of such a taking, then Lessee
will have the right to cancel this Lease by written notice to Lessor given
within 20 days after the termination date. If less than 25% of the rentable
area of the Demised Premises is so taken, or if the Lessee does not cancel
this Lease according to the preceding sentence, the Base Rent will be abated
in the proportion of the rentable area of the Demised Premises so taken to
the rentable area of the Demised Premises immediately before such taking, and
Lessee's Share will be appropriately recalculated. If 25% or more of the
Property is so taken, Lessor may cancel this Lease by written notice to
Lessee given within 30 days after the termination date. In the event of any
such taking, the entire award will be paid to Lessor and Lessee will have no
right or claim to any part of such award; however, Lessee will have the right
to assert a claim against the condemning authority in a separate action, so
long as Lessor's award is not otherwise reduced, for Lessee's moving expenses
and leasehold improvements owned by Lessee.
16. Damage and Destruction.
16.1. If the Demised Premises or the Property are damaged
by fire or other insured casualty, Lessor will give Lessee written notice of
the time which will be needed to repair such damage, as determined by Lessor
in its reasonable judgment, and the election (if any) which Lessor has made
according to this Section 16. Such notice will be given before the 30th day
(the "notice date") after the fire or other insured casualty.
16.2. If the Demised Premises or the building are damaged
by fire or other insured casualty to an extent which may be repaired within
120 days after the notice date, as reasonably determined by Lessor, Lessor
will promptly begin to repair the damage after the notice date and will dili-
gently pursue the completion of such repair. In that event this Lease will
continue in full force and effect except that Base Rent and (as appropriate)
Additional Rent will be abated on a pro rata basis from the date of the
damage until the date of the completion of such repairs (the "repair period")
based on the proportion of the rentable area of the Demised Premises that
Lessee is unable to use during the repair period.
16.3. If the Demised Premises or the Property are damaged
by fire or other insured casualty to an extent that may not be repaired
within 120 days after the notice date, as reasonably determined by Lessor,
then (a) Lessor may cancel this Lease as of the date of such damage by
written notice given to Lessee on or before the notice date or (b) Lessee may
cancel this Lease as of the date of such damage by written notice given to
Lessor within 10 business days after Lessor's delivery of a written notice
that the repairs cannot be made within such 120-day period. If neither
Lessor nor Lessee so elects to cancel this Lease, Lessor will diligently
proceed to repair the Property and the Demised Premises, and Base Rent and
(as appropriate) Additional Rent will be abated on a pro rata basis during
the repair period based on the proportion of the rentable area of the Demised
Premises that Lessee is unable to use during the repair period.
16.4. Notwithstanding the provisions of this Section 16, if
a material portion of the Demised Premises or the Property is damaged by an
<PAGE>
uninsured casualty, or if the proceeds of insurance are insufficient to pay
for the repair of any material damage to the Demised Premises or the Prop-
erty, Lessor will have the option to repair such damage or cancel this Lease
as of the date of such casualty by written notice to Lessee on or before the
notice date, provided, however, that such termination shall not be effective
if Lessee, within 10 days after its receipt of such notice, delivers to
Lessor the written agreement of Lessee (in form and substance reasonably
satisfactory to Lessor) to pay or reimburse Lessor for the uninsured portion
of the cost of such repairs.
16.5. If any such damage by fire or other casualty is the
result of the negligence or wilful misconduct of Lessee, its agents,
contractors, employees, or invitees, there will be no abatement of Base Rent
or Additional Rent as otherwise provided for in this Section 16. Lessee will
have no rights to terminate this Lease on account of any damage to the
Demised Premises or the Property except as set forth in this Lease.
17. Remedies Cumulative.
17.1. Each right and remedy of Lessor under this Lease
shall be cumulative and be in addition to every other right and remedy of
Lessor under this Lease and now or hereafter existing at law or in equity, by
statute or otherwise.
18. Quiet Enjoyment.
18.1. Lessor covenants that, as long as Lessee shall pay
the Base Rent and Additional Rent and all other amounts Lessee shall be
required to pay hereunder and shall duly observe, perform and comply with all
of the terms, covenants and conditions of this Lease on its part to be ob-
served, performed or complied with, Lessee shall, subject to all of the terms
of this Lease, peaceably have, hold and enjoy the Demised Premises during the
Term without molestation or hindrance by Lessor.
19. Release of Lessor.
19.1. The term "Lessor", as used in this Lease so far as
covenants or obligations on the part of Lessor are concerned, shall be
limited to mean and include only the owner or owners at the time in question
of the Property, and in the event of any transfer or transfers of the fee
interest in the Property, Lessor herein named shall be automatically freed
and relieved from and after the date of such transfer of all liability with
respect to the performance of any covenants or obligations on the part of
Lessor contained in this Lease thereafter to be performed; provided, however,
that no Lessor shall be freed or relieved from any of its obligations or
liabilities hereunder which first arise or accrue prior to the transfer of
such Lessor's interest in the Property.
20. Surrender of Demised Premises.
20.1. Lessee shall, no later than the termination of this
Lease and in accordance with all of the terms of this Lease, vacate and
surrender to Lessor the Demised Premises, together with all Alterations, in
similar order, condition and repair as the same were in as of the
Commencement Date, and broom clean, reasonable wear and tear, damages
resulting from a casualty for which Lessee is not responsible, and other
items the repair or remediation of which is the responsibility of Lessor
<PAGE>
excepted. Tenant's obligation to observe or perform this covenant shall
survive the termination of this Lease.
20.2. Notwithstanding any provision of law or any judicial
decision to the contrary, no notice shall be required to terminate the Term
on the Expiration Date, and the Term shall expire on the Expiration Date
without notice being required from either party. In the event that Lessee
remains beyond the Expiration Date, it is the intention of the parties and it
is hereby agreed that a tenancy at sufferance shall arise at a monthly rent
equal to 150% of the monthly Base Rent in effect at the expiration of the
Term. It is further agreed that Lessee shall indemnify and hold harmless
Lessor from and against any and all liability, claims, demands, expenses,
damages and judgments (other than consequential or special damages) incurred
by Lessor as a result of Lessee's retaining possession, which indemnification
obligation shall survive the Expiration Date.
21. Notices.
21.1. All notices, consents, approvals or other
communications (collectively, a "Notice") required to be given under this
Lease or pursuant to law shall be in writing and, unless otherwise required
by law, shall be delivered personally or by overnight courier service or
given by registered or certified mail, return receipt requested, postage
prepaid, to the parties at the following addresses (unless such address shall
be changed by Notice from one party to the other):
To Lessor:
Unisys Corporation
P.O. Box 500
Blue Bell, PA 19424
Attention: Real Estate Administration
To Lessee:
Loral Corporation
600 Third Avenue
New York, NY 10016
Attention: Vice President/General Counsel
Any Notice given pursuant hereto shall be deemed to have been given and shall
be effective when received, or when delivered and refused.
22. Lessor's Inability to Perform.
22.1. This Lease and the obligation of Lessee to pay Rent
hereunder and perform all of the other covenants and agreements hereunder on
the part of Lessee to be performed shall in no way be affected, impaired or
excused because Lessor is unable to fulfill any of its obligations under this
Lease expressly or impliedly to be performed by Lessor or because Lessor is
unable to make, or is delayed in making, any repairs, additions, alterations,
improvements or decorations or is unable to supply or is delayed in supplying
any equipment or fixtures, if Lessor is prevented or delayed from so doing by
reason of strikes or labor trouble or by accident, adjustment of insurance or
by any cause whatsoever reasonably beyond Lessor's control, including but not
limited to, laws, governmental preemption in connection with a national
emergency or by reason of any rule, order or regulation or any federal,
<PAGE>
state, county or municipal authority or any department or subdivision thereof
or any government agency or by reason of the conditions of supply and demand
which have been or are affected by war or other emergency.
23. Limitations or Liability.
23.1. It is specifically understood and agreed that there
shall be absolutely no personal liability on the part of Lessor in respect of
any of the terms, covenants and conditions of this Lease, and Lessee shall
look solely to the interest of Lessor in the Demised Premises for the
satisfaction of each and every remedy of Lessee in the event of any breach or
default by Lessor, or by any successor in interest to Lessor, of any of the
terms, covenants and conditions of this Lease to be performed by Lessor.
23.2. Nothing in this Section is intended to limit or
affect any obligations of Lessor or any affiliate of Lessor which are
contained in any separate agreement.
24. Asset Purchase Agreement.
24.1. Notwithstanding anything to the contrary contained
herein, in the event of a conflict between the terms of this Lease and the
terms of the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement shall govern.
24.2. As used herein, (a) the term "Asset Purchase
Agreement" shall mean the Asset Purchase Agreement, dated as of March 20,
1995, between Unisys Corporation and Loral Corporation, as amended from time
to time, and (b) the term "Transaction Documents" shall mean all agreements
between Lessor and Lessee executed pursuant to, or in connection with, the
Asset Purchase Agreement.
25. Miscellaneous.
25.1. This Lease shall be governed by and construed in
accordance with the internal laws of the State in which the Demised Premises
are located, without regard to the conflicts of law principles thereof.
25.2. The section headings in this Lease and the table of
contents are inserted only as a matter of convenience for reference and are
not to be given any effect in construing this Lease.
25.3. If any of the provisions of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision or provisions to persons or circumstances other than those as
to whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Lease shall be valid and enforceable to
the fullest extent permitted by law.
25.4. All of the terms and provisions of this Lease shall
be binding upon and inure to the benefit of the parties hereto and, subject
to the provisions of Article 9 hereof, their respective successors and
assigns.
25.5. Lessor has made no representations, warranties or
covenants to or with Lessee with respect to the subject matter of this Lease
<PAGE>
except as expressly provided herein or in the Transaction Documents and all
prior negotiations and agreements relating thereto are merged into this
Lease. This Lease may not be amended or terminated, in whole or in part, nor
may any of the provisions be waived, except by a written instrument executed
by the party against whom enforcement of such amendment, termination or
waiver is sought.
26. Rider. A Rider to this Lease is attached hereto and
incorporated herein by reference.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this
Lease as of the day and year first above written.
UNISYS CORPORATION, as Lessor
By:___________________________
Name: Harold S. Barron
Title: Senior Vice President
LORAL CORPORATION, as Lessee
By:____________________________
Name: Eric J. Zahler
Title: Vice President
<PAGE>
Salt Lake City, UT (Owned)
RIDER
1. This Rider is a part of this Lease. In the event of any
contradiction or inconsistency between the provisions of this Rider and the
provisions of the other portions of this Lease, the provisions of this Rider
shall govern and prevail, and the contradicting and inconsistent provisions
of the other portions of this Lease shall be deemed amended accordingly.
2. Lessee (together with its employees, licensees, and
invitees) shall have the non-exclusive right to use the 280 parking spaces at
the Property designated on Schedule B to this Lease.
3. Lessee hereby agrees to provide the services described
on Schedule D-1 attached hereto, which services were previously provided by
Lessor's non-Defense Systems personnel, to the Demised Premises during the
Term hereof. In connection therewith, Lessor and Lessee shall share supplies
and equipment located at the Property for performance of their respective
service obligations with respect to the Property until the exhaustion of such
supplies and equipment. Thereafter, Lessor and Lessee shall separately
purchase and use such supplies and equipment as each may determine it
requires for performance of its respective service obligations.
4. With respect to contracts entered into by Lessor prior
to the date of this Lease relating in whole or in part to the provision of
services to the Demised Premises, which services Lessee has assumed the
obligation to provide as of the date of this Lease and which services were
previously provided by Lessor's non-Defense Systems personnel, (a) Lessor
shall endeavor to terminate such contracts at the earliest possible time,
provided Lessor shall not be obligated to breach such contracts and (b)
Lessee shall be obligated to pay all sums due under such contracts for the
provision of goods and services to the Demised Premises.
5. From the date hereof until the earlier of (a) the
Expiration Date and (b) the service of written notice by Lessor of its
election to terminate receipt of such services, Lessee shall continue to
provide security services to the portions of the Property not part of the
Demised Premises, of the type generally and customarily provided by Lessor's
Defense Systems unit to the Property prior to the date hereof.
<PAGE>
SCHEDULE A
PROPERTY
As used in this Lease, the "Property" shall mean Buildings
D, D Annex and Z at 322 North 2200 West, Salt Lake City, Utah.
<PAGE>
SCHEDULE B
DEMISED PREMISES
As used in this Lease, the "Demised Premises" shall mean
133,888 rentable square feet, minus the usable square footage of the
cafeteria located in Building D, measured in accordance with BOMA standards,
located in Buildings D, D Annex and Z at 322 North 2200 West, Salt Lake City,
Utah, which premises are identified on the plans attached hereto.
<PAGE>
SCHEDULE C
SCHEDULED EXPIRATION DATE/BASE RENT
As used in this Lease, "Scheduled Expiration Date" means
December 31, 2001.
As used in this Lease, "Base Rent" shall mean, with respect
to any calendar month, all actual costs and expenses relating to the Property
(including common areas and facilities) that are allocated by Lessor to the
Demised Premises for such month, provided that Lessor's method of allocation
shall be consistent with the method of allocation used by Unisys Corporation
to allocate costs to the Unisys Defense Systems unit with respect to the
occupancy of the Demised Premises by the Unisys Defense Systems unit during
calendar year 1994. Such costs and expenses shall include cash items and
non-cash items, such as depreciation. In the event that Base Rent for any
calendar quarter (as calculated above) shall not be determinable by Lessor
until after the end of such calendar quarter, then Base Rent shall be payable
during such calendar quarter based upon Lessor's reasonable estimate of costs
and expenses to be allocated to the Demised Premises. Lessor shall, as soon
as practicable after the end of such calendar quarter, provide Lessee with a
written statement of the Base Rent amount for such calendar quarter and,
subject to Section 3.5 of the Lease, the parties shall promptly thereafter
make any necessary reconciliation payments.
<PAGE>
SCHEDULE D
SERVICES TO BE PROVIDED BY LESSOR
With respect to Buildings D and D-Annex:
1. Repair and maintenance of building structure, including
building shell, windows, exterior doors and roof.
2. Repair and maintenance of all common mechanical and
electrical equipment and equipment exterior to the building, including
boilers, major air conditioning equipment, air compressor, major electrical
panels, main fire water systems and risers, main water supplies and building
sewer systems.
3. Repair and maintenance of all building grounds including
parking lots, landscaping and snow removal.
With respect to Building Z:
1. Repair and maintenance of all building grounds,
including parking lots, landscaping and snow removal.
2. Repair and maintenance of all utilities up to the
termination point with the building.
3. Repair and maintenance of main fire water systems and
risers.
<PAGE>
SCHEDULE D-1
SERVICES NOT TO BE PROVIDED BY LESSOR
With respect to the Demised Premises in Buildings D, D-Annex
and Z:
1. Interior maintenance, repairs and janitorial services.
2. Alterations (as permitted by this Lease), moving and
rearranging services.
3. Fire protection services and monitoring.
EXHIBIT 10.82
SUBLEASE
Between
UNISYS CORPORATION,
as Sublessor
and
LORAL CORPORATION,
as Sublessee
BLDG E-F
<PAGE>
TABLE OF CONTENTS
Article Page
1. Demised Premises . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Master Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7. Alterations and Repairs; Demising Costs; Signage . . . . . . . . . . 12
8. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9. Assignment, Subletting and Encumbrances . . . . . . . . . . . . . . . 14
10. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . 19
13. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 20
14. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15. Release of Sublessor . . . . . . . . . . . . . . . . . . . . . . . . 20
16. Surrender of Demised Premises . . . . . . . . . . . . . . . . . . . 21
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. Landlord Consents During Term . . . . . . . . . . . . . . . . . . . 22
19. Sublessor's Inability to Perform . . . . . . . . . . . . . . . . . . 22
20. Time Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21. Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . 23
22. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
23. Rider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
ASSIGNMENT AND ASSUMPTION OF SUBLEASE
THIS ASSIGNMENT AND ASSUMPTION OF SUBLEASE (this "Assignment") is
dated as of April 29, 1997 among Lockheed Martin Tactical Systems, Inc., a
New York corporation (the "Assignor"), L-3 Communications Corporation, a
Delaware corporation (the "Assignee"), and Unisys Corporation, a Delaware
corporation, tenant under a master lease by and between Unisys Corporation
and Harris Trust and Savings Bank as Trustee for Burroughs Employee's
Retirement Fund (the "Landlord"), with reference to the following:
RECITALS
A. The Landlord, as landlord, and the Assignor, as tenant,
executed a Sublease Agreement dated May 5, 1995, (which, together with all
modifications, amendments and supplements thereof, is hereinafter referred to
collectively as the "Sublease"), a copy of which is attached hereto and
incorporated by reference as Exhibit A, pursuant to which Landlord subleased
to the Assignor and the Assignor subleased from Landlord property and
improvements described therein located in Salt Lake City, Utah, (Buildings E
and F) (the "Premises").
B. The Assignee is acquiring certain assets and assuming certain
liabilities from the Assignor including the Assignor's rights, leasehold
interest and obligations under the Sublease.
C. In connection with such acquisition, the Assignor desires to
assign the Sublease to the Assignee, and the Assignee desires to accept the
assignment of the Sublease from the Assignor.
D. The Landlord has agreed to enter into this Assignment to, among
other things, evidence its consent to such assignment of the Sublease.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Assignor, the Assignee and
the Landlord hereby covenant and agree as follows:
1. Assignment. The Assignor grants, assigns and transfers to the
Assignee, its successors and assigns, all of the Assignor's right, title and
interest in, to and under the Sublease (including, without limitation, any
options under the Sublease and any rights to extend or renew the Sublease)
and the Assignee accepts from the Assignor all of the Assignor's right, title
and interest in, to and under the Sublease.
2. Assumption of Sublease Obligation. The Assignee assumes and
agrees to perform and fulfill all terms, covenants, conditions and
obligations required to be performed and fulfilled by the Assignor under the
Sublease, including, without limitation, the obligation to make all payments
due or payable on behalf of the Assignor under the Sublease as they become
due and payable.
3. Representations of Assignor and Landlord. The Assignor and the
Landlord represent to the Assignee as follows:
(a) The Sublease attached hereto as Exhibit A is a true, correct
and complete copy of the Sublease (including all modifications, amendments
<PAGE>
and supplements thereof) and the same are the only agreements between
Landlord and the Assignor with respect to the subject matter thereof.
(b) The Sublease is in full force and effect and, except for the
modifications, amendments and supplements included in Exhibit A, the Sublease
has not been modified, amended or supplemented.
(c) Except as set forth on Exhibit B, no default by the Assignor
or the Landlord has occurred and is continuing under the Sublease, and no
event has occurred and is continuing which with the giving of notice or the
lapse of time or both would constitute a default thereunder.
(d) No minimum or base rent or other rental has been paid in
advance (except for the current month) and a security deposit in the amount
of $0.00 has been paid to the Landlord.
(e) The monthly amount of base rent due under the Sublease as of
May 1, 1997, is $221,500 and the minimum or base rent and all other rentals
and other payments due, owing and accruing under the Sublease have been paid
through April 30, 1997.
(f) The term of the Sublease commenced on May 5, 1995, and the
current term of the Sublease expires on December 31, 2001.
4. Landlord's Consent. The Landlord hereby consents to the
Assignor's assignment of the Sublease to the Assignee and the Assignee's
assumption of the Sublease. Landlord's consent to the Assignor's assignment
of the Sublease to the Assignee shall not be deemed to release the Assignor
from any of its obligations under the Sublease or to alter any provision of
the Sublease and/or the primary liability of the Assignor for the payment of
minimum or base rent or any additional rent due under the Sublease or for the
performance of any other obligations to be performed by the Assignor under
the Sublease.
5. Successors and Assigns. This Assignment shall be binding on
and inure to the benefit of the parties hereto, and their respective heirs,
personal representatives, successors and assigns, provided that this Section
5 shall not be construed to permit any future assignments of the Sublease or
subletting of the Premises except as permitted by the Sublease.
6. Counterparts. This Assignment may be signed in counterpart
and, as so executed, shall constitute a binding agreement.
7. Governing Law. This Assignment shall be governed by and
construed in accordance with the laws of the state in which the Premises are
located.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment as of the date first above written.
WITNESS/ATTEST: ASSIGNOR:
LOCKHEED MARTIN TACTICAL SYSTEMS,
INC.
Renata J. Baker By: Stephen M. Piper (SEAL)
Name: Stephen M. Piper
Title: Vice President & Asst.
Secretary
ASSIGNEE:
L-3 COMMUNICATIONS CORPORATION
Robert By: M. Strianese (SEAL)
Name: Michael T. Strianese
Title: Vice President
WITNESS/ATTEST: LANDLORD:
UNISYS CORPORATION
Ronald C. Anderson By: Gregory T. Fischer (SEAL)
Assistant Secretary Name: Gregory T. Fischer
Title: Vice President
<PAGE>
STATE OF NEW YORK, COUNTY OF QUEENS, TO WIT:
On this the 23rd day of May, 1997, before me a notary public
of said State, Michael T. Strianese, the undersigned officer, personally
appeared Michael T. Strianese, who acknowledged himself to be an officer of
L-3 Communications, a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as a Vice President.
IN WITNESS WHEREOF, I hereunder set my hand and official
seal.
Elizabeth A. Maki
Notary Public
My Commission Expires: June 30, 1997
STATE OF MARYLAND, COUNTY OF MONTGOMERY, TO WIT:
On this the 2nd day of June, 1997, before me a notary public
of said State, Stephen M. Piper, the undersigned officer, personally appeared
before me, who acknowledged himself to be a Vice President & Asst. Secretary
of Lockheed Martin Tactical Systems, Inc., a New York corporation, and that
he, as such Officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as a Vice President & Asst. Secretary.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
Jennifer E. Bashaw
Notary Public
My Commission Expires: December 1, 2000
<PAGE>
STATE OF PENNSYLVANIA, COUNTY OF MONTGOMERY, TO WIT:
On this the 29th day of April, 1997, before me a notary
public of said State, Pennsylvania, the undersigned officer, personally
appeared Gregory T. Fischer, who acknowledged himself to be a Vice President
of Unisys Corporation, a Delaware corporation, and that he, as such Vice
President, being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as a Vice President.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
Robin Angstadt
Notary Public
My Commission Expires: Oct. 5, 1998
<PAGE>
EXHIBIT A
THE SUBLEASE
<PAGE>
SUBLEASE
SUBLEASE, dated as of May 5, 1995, between UNISYS
CORPORATION, a Delaware corporation having an office at Township Line and
Union Meeting Roads, Blue Bell, Pennsylvania 19424 ("Sublessor") and LORAL
CORPORATION, a New York corporation having an office at 600 Third Avenue, New
York, New York 10016 ("Sublessee").
W I T N E S S E T H :
WHEREAS, the landlord under the Master Lease described on
Schedule A hereto (the "Landlord") is the owner of the real property
(including improvements) described on such Schedule A (collectively, the
"Property"), and under the Master Lease the Landlord has leased to Sublessor
certain premises at the Property; and
WHEREAS, Sublessor desires to sublet to Sublessee, and
Sublessee desires to hire from Sublessor, a portion of the premises demised
under the Master Lease upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter provided, Sublessor and Sublessee hereby agree as follows:
1. Demised Premises.
1.01. Sublessor hereby sublets to Sublessee, and Sublessee
hereby sublets and hires from Sublessor, the Demised Premises, as defined in
Schedule B hereto, together with the non-exclusive right to use the common
areas of the Property and such other rights as are necessary or desirable to
provide Sublessee with substantially the same rights and benefits as have
been generally afforded to and enjoyed by the Defense Systems unit of Unisys
Corporation ("Defense Systems") prior to the date hereof (including, without
limitation, rights of ingress and egress, parking consistent with past
practice or otherwise as set forth in the Rider attached to this Sublease,
and access to public and private utilities) for the sublease term hereinafter
stated and for the Base Rent and Additional Rent (both as hereinafter
defined) set forth herein, upon and subject to all of the terms and
provisions hereinafter provided or incorporated in this Sublease by
reference.
1.02. Sublessee agrees to accept the Demised Premises on
the Commencement Date (as hereinafter defined) in its "as is" condition and
Sublessor shall not be obligated to perform any work or furnish any materials
in, to or about the Demised Premises in order to prepare the Demised Premises
for occupancy by Sublessee or otherwise. Sublessee hereby releases Sublessor
from any and all liability resulting from (i) any latent or patent defects in
the Demised Premises, (ii) the failure of the Demised Premises to comply with
any legal requirements applicable thereto or (iii) the status of the title to
the Demised Premises, provided that the foregoing release of liability is not
intended to limit or otherwise affect any liability that Sublessor or any
affiliate of Sublessor may have to Sublessee or any affiliate of Sublessee
which arises under any of the other terms and conditions of this Sublease or
under the terms and conditions of any other agreement. Sublessee
acknowledges that, except as expressly set forth herein or as expressly set
forth in any separate document, Sublessor has made no statements,
representations, covenants or warranties with respect to (x) the condition or
<PAGE>
manner of construction of the Property or any improvements constructed in the
Demised Premises, (y) the uses or purposes for which the Demised Premises may
be lawfully occupied or (z) any encumbrances, covenants, restrictions or
agreements affecting title to the Property or the Demised Premises.
Sublessee also agrees that, in executing this Sublease, it has not relied
upon or been induced by any statements, representations, covenants or
warranties of any person other than those, if any, set forth expressly in
this Sublease or in any other separate agreements by or between Sublessor
and/or Sublessee or any of their respective affiliates.
2. Term.
2.01. (a) The term of this Sublease shall commence on the
date hereof (the "Commencement Date") and, unless earlier terminated or
extended as herein provided, shall expire on the Expiration Date. As used in
this Sublease, (i) "Term" shall mean the term of this Sublease, and (ii)
"Expiration Date" shall mean the Scheduled Expiration Date, as defined in
Schedule C hereto; provided that (A) in no event shall the Expiration Date
occur later than 11:59 p.m. on the day immediately preceding the expiration
of the term of the Master Lease, and (B) in the event of a termination of
this Sublease pursuant to the terms hereof prior to the Scheduled Expiration
Date, the "Expiration Date" shall mean such date of termination of this
Sublease.
(b) Notwithstanding anything to the contrary in this
Sublease, the Term shall be immediately terminated if the term of the Master
Lease is terminated for any reason prior to the Scheduled Expiration Date.
(c) References in this Sublease to the "termination" of
this Sublease include the stated expiration of the Term and any earlier
termination thereof pursuant to the provisions of this Sublease, or the
Master Lease or by law. Except as otherwise expressly provided in this
Sublease with respect to those obligations of Sublessee which by their nature
or under the circumstances can only be, or under the provisions of this
Sublease may be, performed after the termination of this Sublease, the Term
and estate granted hereby shall end at noon on the date of termination of
this Sublease as if such date were the Expiration Date, and neither party
shall have any further obligation or liability to the other after such
termination. Notwithstanding the foregoing, any liability of Sublessor or
Sublessee to make any payment under this Sublease, including, without
limitation, amounts payable by Sublessee as Base Rent or Additional Rent
hereunder (both as hereinafter defined), which shall have accrued prior to
the termination of this Sublease shall survive the termination of this
Sublease.
3. Rent.
3.01. The rent ("Rent") payable during the Term under this
Sublease shall consist of the following:
(a) the Base Rent, as defined in Schedule C hereto.
(b) additional rent ("Additional Rent") in an amount equal
to any and all other sums payable by Sublessee to Sublessor under this
Sublease.
<PAGE>
3.02. Except as otherwise specifically provided in this
Sublease (a) all payments of Base Rent shall be in equal monthly installments
and shall be made in advance on the first (1st) day of each month during the
Term, without notice (provided that if the amount of Base Rent is required to
be calculated by Sublessor in accordance with Schedule C hereof, then
Sublessor shall give Sublessee prior written notice of such calculation,
which notice shall include an explanation of the basis for such calculation
and reasonable backup documentation relating thereto), and (b) all payments
of Additional Rent shall be made within 30 days after written notice from
Sublessor, in each case by check payable to the order of "UNISYS CORPORATION"
and addressed to Unisys Corporation, P.O. Box 500, Blue Bell, Pennsylvania
19424-0003, Attention: Disbursement & Control - Dept. or to such other
person or at such other place as Sublessor may from time to time designate in
writing.
3.03. Sublessee shall pay all Rent when due, in lawful
money of the United States which shall be legal tender for the payment of all
debts, public and private, at the time of payment. All sums due and payable
by Sublessor or Sublessee pursuant to the terms of this Sublease that are not
paid within five (5) days of the due date therefor shall from and after the
due date bear interest at an annual percentage rate of ten percent (10%).
All interest accrued and payable by Sublessee under this subsection as
hereinabove provided shall be deemed to be Additional Rent payable hereunder
and due at such time or times as the rent with respect to which such interest
shall have accrued shall be payable under this Sublease.
3.04. Sublessee agrees to pay, as Additional Rent, any
revenue tax or charge, occupancy tax, business privilege tax, business use
tax or any other tax that may be levied against the Demised Premises or
Sublessee's use or occupancy thereof during the Term; provided, however, that
in no event shall Sublessee be obligated to pay any income tax that is
imposed upon and/or payable by Sublessor, and provided further that payments
made by Sublessee pursuant to this Section 3.4 shall not be duplicative of
amounts paid by Sublessee pursuant to any other provision of this Sublease.
3.05. In the event that Sublessee shall dispute any
calculation of Rent charged to Sublessee by Sublessor, then Sublessee shall
send to Sublessor a written notice, within 30 days of receipt by Sublessee of
such charge, setting forth the basis for Sublessee's dispute. Sublessor and
Sublessee shall thereupon use reasonable and good faith efforts to resolve
such dispute. If the parties are unable to resolve such dispute within 30
days after submission by Sublessee of its dispute notice, then the parties
shall designate an independent certified public accountant mutually
acceptable to both parties (the "Independent Accountant") to resolve such
dispute, and the fees and charges of the Independent Accountant shall be
shared equally by the parties. Both parties shall provide the Independent
Accountant with all information reasonably requested by the Independent
Accountant in connection with its review of such dispute, and both parties
shall request that the Independent Accountant complete its work expeditiously
and issue a written report to both parties setting forth its determination.
The written determination of the Independent Accountant shall be final and
shall be binding upon both Sublessor and Sublessee. All disputes to be
resolved pursuant to this Section 3.5 shall be so resolved in accordance with
the principles and standards set forth in Section 3.7 below.
3.06. Sublessor shall furnish to Sublessee copies of any
material statements and other material documents and information which are
<PAGE>
provided to Sublessor by Landlord pursuant to the Master Lease. Without
limiting any other obligations of Sublessor hereunder, Sublessor agrees it
will, upon reasonable request from Sublessee, exercise on Sublessee's behalf,
and at Sublessee's sole cost, any rights of Sublessor under the Master Lease
to review and inspect records and otherwise obtain information from Landlord.
3.07. All calculations by Sublessor of Base Rent,
Additional Rent and any other amounts that are payable by Sublessee hereunder
shall be made in accordance with Sublessor's past practices during calendar
year 1994 with respect to Defense Systems, and all charges and allocations
relating to the Demised Premises and all accounting practices utilized by
Sublessor with respect to amounts charged to Sublessee under this Sublease
(including the capitalization, amortization and expensing of costs incurred
and funds expended) shall also be made in such manner.
4. Use.
4.01. Sublessee shall occupy and use the Demised Premises
only for the uses permitted under the Master Lease and for no other purpose,
and in all respects only as permitted under the terms and provisions of this
Sublease and the Master Lease, and in accordance with any and all laws,
statutes, ordinances, orders, regulations and requirements of all federal,
state and local governmental, public or quasipublic authorities, whether now
or hereafter in effect, which may be applicable to or in any way affect the
Demised Premises or any part thereof and all requirements, obligations and
conditions of all instruments of record on the date of this Sublease
affecting the Demised Premises (collectively, "Legal Requirements").
5. Master Lease.
5.01. Subject to Section 5.3 below, this Sublease and all
of Sublessee's rights hereunder are and shall remain in all respects subject
and subordinate to (i) all of the terms and provisions of the Master Lease, a
true and complete copy of which has been delivered to and reviewed by
Sublessee, (ii) any and all amendments to the Master Lease or supplemental
agreements relating thereto hereafter made between Landlord and Sublessor and
(iii) any and all matters to which the tenancy of Sublessor, as tenant under
the Master Lease, is or may be subordinate. Sublessee shall in no case have
any rights under this Sublease greater than Sublessor's rights as tenant
under the Master Lease. The foregoing provisions shall be self-operative and
no further instrument of subordination shall be necessary to effectuate such
provisions unless required by Landlord or Sublessor, in which event Sublessee
shall, upon demand by Landlord or Sublessor at any time and from time to
time, execute, acknowledge and deliver to Sublessor and Landlord any and all
instruments that Sublessor or Landlord, in the reasonable discretion of
either of them, may deem necessary or proper to confirm such subordination of
this Sublease, and the rights of Sublessee hereunder, subject to Section
5.3(a) hereof.
5.02. Sublessee agrees that it shall neither act, nor omit
to act, in such a manner as to result in a default under the Master Lease,
provided that in no event shall Sublessee be responsible for acts and
omissions of Sublessor or Sublessor's agents, employees or contractors.
Except as otherwise specifically provided in the next sentence and elsewhere
in this Sublease, (i) all of the terms, covenants, conditions and agreements
which Sublessor is required to observe or perform with respect to the Demised
Premises as tenant under the Master Lease are hereby incorporated herein by
<PAGE>
reference and Sublessee shall observe and perform all of such terms,
covenants, conditions and agreements as if such terms, covenants, conditions
and agreements were set forth herein at length, and (ii) Sublessor may
exercise all of the rights, powers, privileges and remedies reserved to
Landlord under the Master Lease to the same extent as if fully set forth
herein at length, including, without limitation, all rights and remedies
arising out of or with respect to any default by Sublessee in the payment of
Rent hereunder or the observance or performance of the terms, covenants,
conditions and agreements of this Sublease and the Master Lease (except as
specifically provided herein). The terms and conditions of the Master Lease
described on Schedule D hereto shall not be incorporated herein by reference,
nor shall any terms or conditions of the Master Lease that, by their terms,
are inapplicable to, or inconsistent with this Sublease, be incorporated by
reference herein. In amplification of, and not in limitation of, the
foregoing, in no event shall any rights or options under the Master Lease to
renew or extend the term thereof be incorporated by reference in this
Sublease for the benefit of Sublessee. Notwithstanding the foregoing, any
inconsistencies between the terms of the Master Lease incorporated by
reference hereunder and the other terms of this Sublease or any of the
Transaction Documents (as hereinafter defined) shall be resolved in favor of
such other terms of this Sublease or the terms of the Transaction Documents,
provided, however, that if such construction of terms would cause Sublessor
to be in default under the terms of the Master Lease, then such inconsistency
shall be resolved in favor of the Master Lease. In addition, in the event
that Sublessor is in default of any of its obligations under the Master Lease
as of the date hereof and such obligation is not a DS Liability (as defined
in the Asset Purchase Agreement), then Sublessee shall not be required to
cure such default by virtue of the incorporation by reference provisions of
this Sublease.
5.03. Sublessor agrees that it shall neither act, nor omit
to act, in such a manner as to result in a default under the Master Lease,
provided that in no event shall Sublessor be responsible for acts and
omissions of Sublessee or Sublessee's agents, employees or contractors.
Provided that Sublessee is not then in default under the terms of this
Sublease beyond applicable grace periods, Sublessor agrees that, during the
Term hereof, without the prior written consent of Sublessee, which consent
shall not be unreasonably withheld or delayed, Sublessor will not (a) consent
to a termination of the Master Lease (to the extent that Sublessor's consent
is required pursuant to the Master Lease) or amend or modify the Master Lease
in any way which would materially reduce, materially interfere with or
otherwise materially impair any rights, powers or remedies of Sublessee,
decrease in any material respect the obligations of Landlord or Sublessor
which, under the terms of this Sublease, run to the benefit of Sublessee or
increase the monetary obligations of Sublessee or increase in any material
respect any other obligations of Sublessor for which Sublessee is responsible
hereunder, or (b) consent (in the event that Sublessor's consent is required
pursuant to the Master Lease) to the subordination of the Master Lease to any
mortgage, underlying lease or similar instrument. Notwithstanding the
foregoing, in no event shall Sublessor be required under this Sublease to
exercise any renewal or extension option set forth in the Master Lease.
5.04. Notwithstanding anything to the contrary contained
herein, in the event of a conflict between the terms of this Sublease and the
terms of the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement shall govern.
<PAGE>
5.05. As used herein, (a) the term "Asset Purchase
Agreement" shall mean the Asset Purchase Agreement, dated as of March 20,
1995, between Unisys Corporation and Loral Corporation, as amended from time
to time, and (b) the term "Transaction Documents" shall mean all agreements
between Sublessor and Sublessee executed pursuant to, or in connection with,
the Asset Purchase Agreement other than this Sublease.
6. Services.
6.01. It is the intent of the parties that Sublessor shall
continue to provide to Sublessee all services, utilities, repairs and
facilities generally and customarily provided by Unisys Corporation to the
occupants of the Demised Premises prior to the Commencement Date, together
with any other services that may be appropriate under the circumstances from
time to time (such services being hereinafter referred to collectively as the
"Services"). In connection with the foregoing, such Services shall include,
without limitation, each of the services set forth on Schedule E hereto, and
such Services shall not include any of those items set forth on Schedule E-1
hereto. Sublessee shall pay to Sublessor, in consideration for the Services
and as Additional Rent, an amount equal to Sublessor's actual costs to
perform such Services in, to or for the benefit of the Demised Premises or
Sublessee, which shall be determined in accordance with the principles set
forth in Section 3.7 above ("Actual Costs"). On a quarterly basis, Sublessor
shall provide to Sublessee a written statement, in reasonable detail, setting
forth such Actual Costs for Services. In the event that Sublessee disputes
Sublessor's statement of Actual Costs, such dispute shall be resolved in
accordance with Section 3.5 hereof.
6.02. It is the intent of the parties that Sublessee shall
continue to provide to Sublessor, during the Term hereof, all reasonable
services generally and customarily provided by Defense Systems, prior to the
Commencement Date, to the other portions of the Property leased by Sublessor
under the Master Lease. Sublessee shall perform such services, and Sublessor
shall pay to Sublessee a proportionate share of Sublessee's actual costs
incurred in performing such services. On a quarterly basis, Sublessee shall
provide to Sublessor a written statement, in reasonable detail, setting forth
such costs. In the event of a dispute with respect to such costs, such
dispute shall be resolved in accordance with Section 3.5 hereof.
6.03. In the event that telephone switching equipment or
other telecommunications equipment utilized by Sublessor or Sublessee is
located within the premises occupied by the other party, then the party
occupying such premises shall grant the other party reasonable access to such
telephone switching equipment or other telecommunications equipment and other
areas reasonably required for such telecommunications use, subject in each
case to reasonable security requirements of the party granting such access.
6.04. The provisions of this Section shall survive the
expiration or earlier termination of this Sublease.
7. Alterations and Repairs; Demising Costs; Signage.
7.01. As used herein, the term "Alterations" shall mean,
collectively, any alterations, modifications, installations, additions or
improvements to the Demised Premises. Without the prior written consent of
Sublessor in each instance, which consent shall not be unreasonably withheld,
conditioned or delayed, Sublessee shall not make any (a) structural
<PAGE>
Alterations or (b) non-structural Alterations having a design and
construction cost in excess of $100,000 on a per project basis. Any
Alterations consented to by Sublessor, or otherwise permitted under this
Sublease, shall be performed by Sublessee, at its sole cost and expense, and
in compliance with all of the provisions of the Master Lease, including the
provisions requiring Landlord's prior written consent, and such other
reasonable requirements of Sublessor. Sublessor shall have the right to post
notices of non-responsibility and similar notices, as Sublessor shall
reasonably deem appropriate, on the Demised Premises while Alterations are
occurring.
7.02. Sublessor shall have no obligations whatsoever to
Sublessee to make any repairs (except to the extent provided in Schedule E
and Schedule E-1 hereto) or Alterations in the Demised Premises to any
systems serving the Demised Premises or to any equipment, fixtures or
furnishings in the Demised Premises, or to comply with any violations of law
with respect thereto, or to restore the Demised Premises in the event of a
fire or other casualty therein or to perform any other duty with respect to
the Demised Premises which Landlord is required to perform under the Master
Lease. Subject to Section 6.2 and 6.3 hereof and Schedule E and Schedule E-1
hereto, Sublessee shall look solely to Landlord for the making of any and all
repairs in the Demised Premises and the performance of any and all such other
work and responsibilities and only to the extent required by the terms of the
Master Lease.
7.03. Sublessor and Sublessee shall use reasonable and good
faith efforts to reach a mutual agreement as to whether any Alterations are
necessary and appropriate in order to separate the Demised Premises from the
premises in the Property occupied by Sublessor. In the event that the
parties reach such a mutual agreement, then Sublessor shall perform such
agreed upon Alterations, and Sublessee shall, within thirty (30) days after
written demand by Sublessor, reimburse Sublessor for one-half of the costs
and expenses relating to such Alterations. Sublessor may request payment of
Sublessee's share of such costs, and (if requested) Sublessee shall pay its
share of such costs, as such costs are incurred by Sublessor during the
course of design and construction of such Alterations. Sublessor shall
require that (a) any contractors or subcontractors performing any such work
maintain reasonable and appropriate liability insurance and (b) any such
insurance policies shall name Sublessor, Sublessee and Landlord as additional
insureds.
7.04. Sublessee shall have the right to install reasonable
and appropriate signage, both at the entrance to the Demised Premises and in
the common areas of the Property, indicating Sublessee's occupancy of the
Demised Premises, provided that the location, size and design of any such
signage shall be subject to the prior written consent of Sublessor, which
consent shall not be unreasonably withheld or delayed.
7.05. Sublessee shall indemnify and hold harmless Sublessor
and Landlord from all costs, expenses, liabilities and obligations arising
out of the filing of any mechanic's or materialman's lien against the Demised
Premises by reason of any act or omission of Sublessee.
7.06. In the event that the Demised Premises are measured
or re-measured pursuant to the terms of this Sublease (inclusive of the
Rider, if any, and Schedules attached hereto), Sublessor and Sublessee shall
<PAGE>
each pay one-half ( 1/2) of the costs and expenses relating to such
measurement or re-measurement.
8. Insurance.
8.01. Sublessee, at Sublessee's sole expense, shall
maintain for the benefit of Sublessor and Landlord such policies of insurance
(and in such form) as are required by the Master Lease with respect to the
Demised Premises which shall be reasonably satisfactory to Sublessor as to
coverage and insurer (who shall be licensed to do business in the State in
which the Demised Premises are located) provided that such insurance shall at
a minimum include comprehensive general liability insurance protecting and
indemnifying Sublessor, Landlord and Sublessee against any and all claims and
liabilities for injury or damage to persons or property occurring upon, in or
about the Demised Premises, and the public portions of the Property, caused
by or resulting from or in connection with any act or omission of Sublessee
or Sublessee's employees, agents or invitees. Sublessor and Landlord shall
each be named as an additional insured under any such policies of insurance
obtained by Sublessee, and no such policy shall be subject to termination or
modification unless at least thirty (30) days' prior written notice (or ten
(10) days' prior written notice, if such termination results from Sublessee's
failure to pay the premium for such insurance) shall have been given by the
applicable insurance company to Sublessor and Landlord. Upon execution of
this Sublease by Sublessee and at least thirty (30) days prior to the
expiration date of such policies, Sublessee shall furnish to Landlord and
Sublessor a certificate or certificates of insurance confirming that the
required insurance is in full force and effect with all premiums paid
current. Nothing contained herein shall limit, or prohibit Sublessee from
providing such coverage through "blanket" policies of insurance and/or self-
insuring therefor in a manner that is consistent with the general corporate
practices of Sublessee.
8.02. Nothing contained in this Sublease shall relieve
Sublessee from any liability as a result of damage from fire or other
casualty, but each party shall look first to any insurance in its favor
before making any claim against the other party for recovery for loss or
damage resulting from fire or other casualty. To the extent that such
insurance is in force and collectible and to the extent permitted by law,
Sublessor and Sublessee each hereby releases and waives all right to recovery
against the other or anyone claiming through or under the other by way of
subrogation or otherwise. The foregoing release and waiver shall be in force
only if the insurance policies of Sublessor and Sublessee provide that such
release or waiver does not invalidate the insurance; each party agrees to use
reasonable efforts to include such a provision in its applicable insurance
policies. If the inclusion of said provision would involve an additional
expense, either party, at its sole expense, may require such provision to be
inserted in the other's policy.
9. Assignment, Subletting and Encumbrances.
9.01. Sublessee shall not sublease or mortgage, pledge or
otherwise encumber all or any part of the Demised Premises, assign or
mortgage this Sublease (by operation of law or otherwise) or permit the
Demised Premises to be used or occupied by anyone other than Sublessee,
Sublessee's divisions and other Affiliates, and Sublessee's licensees,
invitees, customers and vendors, without the prior written consent of
Sublessor in each instance, which consent shall not be unreasonably withheld,
<PAGE>
conditioned or delayed; provided, however, that Sublessee, upon at least 30
days prior written notice to Sublessor and upon Sublessee's obtaining any
required consent of Landlord under the Master Lease, may assign this Sublease
or sublet all or part of the Demised Premises to (A) an Affiliate of
Sublessee, (B) an entity into which Sublessee is merged or consolidated, and
(C) an entity which acquires all or substantially all of the business or
operations of Sublessee. Any consent by Sublessor and/or Landlord as
hereinabove required shall not excuse Sublessee from its obligation to obtain
the express written consent of Sublessor and/or Landlord to any further
action or matter with respect to which the consent of Sublessor and Landlord
is hereinabove required and Sublessee shall not be released from any of its
obligations hereunder. The term "Affiliate", as used in this Section 9.1,
shall have the same meaning as is set forth in the Asset Purchase Agreement.
10. Default.
10.01. (a) Each of the following shall constitute an Event
of Default hereunder:
(i) if Sublessee shall fail to pay when due any Rent
or any other amount Sublessee may be required to pay hereunder, and Sublessee
shall fail to remedy such default within seven (7) business days after
written notice thereof has been given to Sublessee by Sublessor, provided
that any Event of Default shall not be deemed to have occurred hereunder if
Sublessee shall have timely disputed in good faith its obligation to pay such
Rent or the amount thereof; or
(ii) subject to Section 10.1(b) below, if Sublessee
shall default in the observance or performance of any term, covenant or
condition of this Sublease on Sublessee's part to be observed, performed or
complied with (other than the payment of Base Rent and Additional Rent and
other amounts payable hereunder) and Sublessee shall fail to remedy such
default within thirty (30) days after written notice to cure, or, if such
default is of such a nature that for reasons beyond Sublessee's control it
cannot be completely remedied within said period of thirty (30) days, then if
Sublessee (A) shall not promptly institute and thereafter diligently
prosecute to completion all steps necessary to remedy the same and (B) shall
not remedy the same within a reasonable time after the date of default; or
(iii) if any event shall occur or any contingency shall
arise whereby this Sublease or the estate hereby granted or the unexpired
balance of the Term would, except as expressly permitted herein, by operation
of law or otherwise, devolve upon or pass to any person or entity other than
Sublessee, and Sublessee shall fail to remedy such default within sixty (60)
days after written notice thereof has been given to Sublessee by Sublessor;
(b) Upon the occurrence of any such Event of Default,
Sublessor may, in addition to exercising any other available rights or
remedies, give to Sublessee notice of its intention to end the Term at the
expiration of three (3) days from the date of the giving of such notice, and,
in the event such notice is given, this Sublease and the Term and estate
hereby granted (whether or not the Term shall have commenced) shall terminate
upon the expiration of said three (3) days with the same force and effect as
if that day were the Expiration Date, provided, however, that Sublessor and
Sublessee shall remain liable for the performance of their respective
obligations hereunder which survive the termination of this Sublease and for
damages as provided in this Sublease.
<PAGE>
10.02. Notwithstanding anything to the contrary set forth
herein, this Sublease shall immediately terminate if any of the following
events shall occur with respect to Sublessee: (a) if Sublessee shall (i)
have applied for or consented to the appointment of a receiver, trustee or
liquidator, or other custodian of Sublessee, or any of its properties or
assets, (ii) have made a general assignment for the benefit of creditors,
(iii) have commenced a voluntary case for relief as a debtor under the United
States Bankruptcy Code, or any other applicable federal or state laws, or
filed a petition to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debts, dissolution or liquidation law or statute
or an answer admitting the material allegations of a petition filed against
it in any proceeding under any such law, or (iv) be adjudicated a bankrupt or
insolvent; or (b) if without the acquiescence or consent of Sublessee, an
order, judgment or decree shall have been entered by any court of competent
jurisdiction approving as properly filed a petition seeking relief under the
United States Bankruptcy Code, or any other applicable federal or state laws,
or any bankruptcy, reorganization, insolvency, readjustment of debts,
dissolution or liquidation law or statute with respect to Sublessee, or all
or a substantial part of their respective properties or assets, and such
order, judgment or decree shall have continued unstayed and in effect for any
period of not less than ninety (90) days. Neither Sublessee, nor any person
claiming through or under Sublessee or by reason of any statute or order of
court shall, after such termination, be entitled to possession of the Demised
Premises but shall forthwith quit and surrender the Demised Premises.
Without limiting any of the foregoing provisions of this Section 10.2, if
pursuant to the United States Bankruptcy Code, or any other applicable
federal or state laws, Sublessee is permitted to assign this Sublease,
Sublessee agrees that adequate assurance of future performance by an assignee
expressly permitted under such law shall be deemed to mean evidence in the
form of financial statements prepared and certified by a certified public
accountant that the assignee will have a net worth, after excluding the value
of the leasehold, sufficient to meet the remaining obligations under this
Sublease.
10.03. In the event of any breach by Sublessee or any
persons claiming through or under Sublessee of any of the terms, covenants or
conditions contained in this Sublease, Sublessor, after the giving of any
notice required by the terms of this Sublease and the expiration of any
notice and cure periods hereunder, (a) shall be entitled to enjoin such
breach and (b) shall have the right to invoke any right and remedy available
at law or in equity or by statute or otherwise. The provisions of this
Section 10.3 shall survive the expiration or sooner termination of this
Sublease.
10.04. If this Sublease and the Term shall terminate as
provided in Section 10.1 or in Section 10.2 above, or by or under any summary
proceeding or any other action or proceeding or if Sublessor shall re-enter
the Demised Premises as hereinabove provided or by or under any summary
proceeding or any other action or proceeding, then in any of said events:
(a) Sublessee shall pay to Sublessor all Base Rent,
Additional Rent and other amount payable by Sublessee hereunder to the date
upon which this Sublease and the Term shall have terminated or to the date of
re-entry upon the Demised Premises by Sublessor, as the case may be;
(b) Sublessor shall be entitled to retain all monies, if
any, paid by Sublessee to Sublessor, whether as advance Rent, security or
<PAGE>
otherwise, but such monies shall be credited by Sublessor against any Rent
due at the time of such termination or re-entry or, at Sublessor's option,
against any damages payable by Sublessee;
(c) Sublessee shall be liable for and shall pay to
Sublessor, as damages, any deficiency between the Base Rent and Additional
Rent payable hereunder for the period which otherwise would have constituted
the unexpired portion of the Term (conclusively presuming the Base Rent and
Additional Rent to be at the same rate as was payable for the year
immediately preceding such termination or re-entry less any Additional Rent
for such one-year period payable to Sublessor by Sublessee pursuant to
Section 6.2 above) and the net amount, if any, of rents ("Net Rent")
collected under any reletting effected pursuant to the incorporation herein
of any provision of the Master Lease for any part of such period (after first
deducting from the rents collected under any such reletting all of
Sublessor's reasonable expenses in connection with the termination of this
Sublease or Sublessor's re-entry upon the Demised Premises and in connection
with such reletting including all reasonable repossession costs, brokerage
commissions, legal expenses, attorneys' fees, alteration or similar costs and
other expenses of preparing the Demised Premises for such reletting);
(d) In the event that Sublessor shall not have collected
any monthly deficiencies as aforesaid, Sublessor shall be entitled to recover
from Sublessee, and Sublessee shall pay to Sublessor, on demand, as and for
liquidated and agreed final damages, a sum equal to the amount by which the
Base Rent and Additional Rent payable hereunder for the period which
otherwise would have constituted the unexpired portion of the Term
(conclusively presuming the Base Rent and Additional Rent to be at the same
rate as was payable for the year immediately preceding such termination or
re-entry less any Additional Rent for such one-year period payable to
Sublessor by Sublessee pursuant to Section 6.2 above) exceeds the then fair
and reasonable rental value of the Demised Premises for the same period, both
discounted to present value at the rate of eight percent (8%) per annum. If
before presentation of proof of such liquidated damages to any court,
commission or tribunal, the Demised Premises, or any part thereof, shall have
been relet by Sublessor for the period which otherwise would have constituted
the unexpired portion of the Term, or any part thereof, the amount of rent
upon such reletting shall be deemed, prima facie, to be the fair and
reasonable rental value for the part or the whole of the Demised Premises so
relet during the term of the reletting; and
(e) In no event shall Sublessee be entitled to receive any
excess of Net Rent over the sums payable by Sublessee to Sublessor hereunder,
and in no event shall Sublessee be entitled in any suit for the collection of
damages pursuant to this Article to a credit in respect of any Net Rent from
a reletting except to the extent actually received by Sublessor prior to the
commencement of such suit.
10.05. Nothing herein contained shall be construed as
limiting or precluding the recovery by Sublessor against Sublessee of any
sums or damages to which, in addition to the damages particularly provided
above, Sublessor may lawfully be entitled by reason of any default hereunder
or under the terms of the Master Lease incorporated herein on the part of
Sublessee; provided, however, that notwithstanding any provision of the
Master Lease or the Sublease to the contrary, in no event shall Sublessor or
Sublessee be entitled to special or consequential damages with respect to any
matter arising hereunder or relating hereto.
<PAGE>
11. Indemnification.
11.01. Sublessee shall indemnify and hold harmless
Sublessor and its employees and agents from and against any and all loss,
cost, liability, claim, damage and expense, including, without limiting the
generality of the foregoing, reasonable attorneys' fees and expenses and
court costs, penalties and fines incurred in connection with or arising from
any injury to Sublessee or for any damage to, or loss (by theft or otherwise)
of, any of the property of Sublessee, irrespective of the cause of such
injury, damage or loss and whether occurring in or about the Demised Premises
or the Property.
11.02. Sublessee shall indemnify and hold harmless
Sublessor and its officers, directors, shareholders and employees from and
against any and all loss, cost, liability, claims, damage and expenses,
including, without limiting the generality of the foregoing, reasonable
attorneys' fees and expenses and court costs, penalties and fines, whether or
not due to third party claims, suits or proceedings, incurred in connection
with or arising from (a) any default by Sublessee in the observance or
performance of, or compliance with, any of the terms, covenants or conditions
of this Sublease or the terms of the Master Lease incorporated herein on
Sublessee's part to be observed, performed or complied with, (b) the use or
occupancy or manner of use or occupancy of the Demised Premises by Sublessee
or any of its agents, employees or contractors, or the exercise by Sublessee
or any of its agents, employees or contractors, of any rights granted to
Sublessee hereunder, (c) any acts, omissions or negligence of Sublessee or
any of its agents, employees or contractors, in or about the Demised Premises
or the Property either prior to, during, or after the termination of this
Sublease or (d) the condition of the Demised Premises, but only to the extent
that Sublessee fails to perform any of its obligations hereunder with respect
to the condition of the Demised Premises. If any action or proceeding shall
be brought against Sublessor by reason of any such claim, Sublessee shall be
given prompt notice thereof and, upon notice from Sublessor, shall resist and
defend such action or proceeding at Sublessee's sole expense and employ
counsel therefor reasonably satisfactory to Sublessor. Sublessee shall pay
to Sublessor on demand all sums which may be owing to Sublessor by reason of
the provisions of this subsection. Sublessee's obligations under this
subsection shall survive the Expiration Date or earlier termination of this
Sublease.
11.03. Sublessor shall indemnify and hold harmless
Sublessee and Sublessee's officers, directors, shareholders and employees
from and against any and all loss, cost, liability, claims, damage and
expenses, including, without limiting the generality of the foregoing,
reasonable attorneys' fees and expenses and court costs, penalty and fines,
whether or not due to third party claims, suits or proceedings, incurred in
connection with or arising from (a) any default by Sublessor in the
observance or performance of, or compliance with, any of the terms, covenants
or conditions of this Sublease or the Master Lease on Sublessor's part to be
observed, performed or complied with, or (b) the gross negligence or wilful
misconduct of Sublessor (in its capacity as sublessor hereunder) or any of
its agents, employees or contractors (retained by Sublessor in its capacity
as sublessor hereunder), in or about the Demised Premises or the Property
either prior to, during, or after the termination of this Sublease. If any
action or proceeding shall be brought against Sublessee by reason of any such
claim, Sublessor shall be given prompt notice thereof and, upon notice from
Sublessee, shall resist and defend such action or proceeding at Sublessor's
<PAGE>
sole expense and employ counsel therefor reasonably satisfactory to
Sublessee. Sublessor shall pay to Sublessee on demand all sums which may be
owed to Sublessee by reason of the provisions of this subsection.
Sublessor's obligations under this subsection shall survive the Expiration
Date or earlier termination of this Sublease.
11.04. Sublessor shall not be liable for any loss or damage
to property of Sublessee or any of its employees, guests, invitees or
licensees by reason of theft or otherwise. Sublessor shall not be liable for
any injury or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water, rain or leaks from any part
of the Demised Premises or from the pipes, appliances or plumbing works or
from the roof, street or subsurface or from any other place or by dampness or
by any other cause of whatsoever nature, unless such injury or damage has
been shown to have been due solely to the gross negligence or willful act or
omission of Sublessor, its affiliates, or the officers, directors, employees
or agents of Sublessor or its affiliates in the course of their employment.
Subject to the foregoing, all property of Sublessee or others kept or stored
on the Demised Premises shall be so kept or stored at the risk of Sublessee
only.
11.05. Notwithstanding anything in this Section 11 to the
contrary, neither party shall be required to indemnify the other party (an
"indemnitee") against the indemnitee's own negligence or wilful misconduct.
12. Hazardous Materials.
12.01. Sublessee shall not cause or permit any Hazardous
Material (as hereinafter defined) to be brought upon, kept or used in or
about the Demised Premises by the agents, principals, employees, assigns,
sublessees, contractors, subcontractors, consultants or invitees of
Sublessee, except in full compliance with applicable Legal Requirements. If
Sublessee breaches the obligations stated in the preceding sentence, or if
the introduction or release of a Hazardous Material on the Demised Premises
caused or permitted by Sublessee (or the aforesaid others) results in
contamination of the Demised Premises or any surrounding area(s), or if
contamination of the Demised Premises or any surrounding area(s) by Hazardous
Material otherwise occurs for which Sublessee is legally, actually or
factually liable or responsible (other than liability which arises solely as
a result of the subtenancy created hereby or solely as a result of
Sublessee's mere occupancy of the Demised Premises), then Sublessee shall
fully and completely indemnify, defend and hold harmless Sublessor (or any
party claiming by, through or under Sublessor) from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, expenses or losses,
including, without limitation: (i) diminution in the value of the Demised
Premises; (ii) any asserted damage to the Property or to neighboring
properties or the occupants of the Property or neighboring properties, and
(iii) any sums paid in settlement of claims, reasonable attorneys' fees,
consultants fees and expert fees which arise or arose before, during or after
the term of this Sublease as a consequence of such contamination. This
indemnification includes, without limitation, costs incurred in connection
with any investigation or site conditions or any clean-up, remedial, removal
or restoration work required by any federal, state or local governmental
agency or political subdivision because of Hazardous Materials present in the
soil or ground water on or under the Demised Premises for which Sublessee is
responsible pursuant to the terms of this Sublease. Without limiting the
foregoing, if the introduction or release of any Hazardous Materials on,
<PAGE>
under or about the Demised Premises or any other surrounding area(s) caused
or permitted by Sublessee (or the aforesaid others) results in any
contamination of the Demised Premises, Sublessee shall immediately take all
actions at its sole expense as are necessary or appropriate to return the
Demised Premises to the condition existing prior to the introduction by
Sublessee of any such Hazardous Materials thereto; provided that the prior
written approval (which approval shall not be unreasonably withheld,
conditioned or delayed) of such actions by Sublessor shall be first obtained.
The foregoing obligations and responsibilities shall survive the expiration
or earlier termination of this Sublease.
12.02. As used herein, the term "Hazardous Materials" means
any hazardous or toxic substance, material or waste, including, but not
limited to, those substances, materials, and wastes listed in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reorganization Act of 1986 (42
U.S.C. Section 9601 et seq., as amended), the Federal Clean Water Act, the
Federal Clean Air Act, the Federal Resource Conservation and Recovery Act,
the Federal Toxic Substances Control Act, the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 301) and
amendments thereto, and all substances, materials and wastes that are defined
as "toxic", "hazardous" or "extremely hazardous" or are otherwise regulated
under any applicable local, state or federal law. In furtherance of, and not
in limitation of, the foregoing, the term "Hazardous Materials" shall include
asbestos, asbestos-containing materials and petroleum.
12.03. Sublessor and Sublessee acknowledge and agree that
the Asset Purchase Agreement shall govern all matters relating to the
presence of Hazardous Materials in, on, under and about the Demised Premises
prior to the execution and delivery hereof.
13. Remedies Cumulative.
13.01. Each right and remedy of Sublessor under this
Sublease shall be cumulative and be in addition to every other right and
remedy of Sublessor under this Sublease and now or hereafter existing at law
or in equity, by statute or otherwise.
14. Quiet Enjoyment.
14.01. Sublessor covenants that, as long as Sublessee shall
pay the Base Rent and Additional Rent and all other amounts Sublessee shall
be required to pay hereunder and shall duly observe, perform and comply with
all of the terms, covenants and conditions of this Sublease on its part to be
observed, performed or complied with, Sublessee shall, subject to all of the
terms of the Master Lease and this Sublease, peaceably have, hold and enjoy
the Demised Premises during the Term without molestation or hindrance by
Sublessor.
15. Release of Sublessor.
15.01. The term "Sublessor", as used in this Sublease so
far as covenants or obligations on the part of Sublessor are concerned, shall
be limited to mean and include only the owner or owners at the time in
question of the tenant's interest under the Master Lease, and in the event of
any transfer or transfers of the tenant's interest in the Master Lease,
<PAGE>
Sublessor herein named (and in case of any subsequent transfer or conveyance,
the then transferor of the tenant's interest in the Master Lease) shall be
automatically freed and relieved from and after the date of such transfer of
all liability with respect to the performance of any covenants or obligations
on the part of Sublessor contained in this Sublease thereafter to be
performed; provided, however, that no Sublessor shall be freed or relieved
from any of its obligations or liabilities hereunder which first arise or
accrue prior to the transfer of such Sublessor's interest as tenant under the
Master Lease.
16. Surrender of Demised Premises.
16.01. Sublessee shall, no later than the termination of
this Sublease and in accordance with all of the terms of this Sublease and
the Master Lease (including, without limitation, any restoration obligations
in the Master Lease that are applicable to the Demised Premises and are
incorporated by reference herein), vacate and surrender to Sublessor the
Demised Premises, together with all Alterations, in similar order, condition
and repair, as the same were in as of the Commencement Date, and broom clean,
reasonable wear and tear, damages resulting from a casualty for which
Sublessee is not responsible, and other items the repair or remediation of
which is the responsibility of Sublessor or Landlord excepted. Tenant's
obligation to observe or perform this covenant shall survive the termination
of this Sublease.
16.02. Notwithstanding any provision of law or any judicial
decision to the contrary, no notice shall be required to terminate the Term
on the Expiration Date, and the Term shall expire on the Expiration Date
without notice being required from either party. In the event that Sublessee
remains beyond the Expiration Date, it is the intention of the parties and it
is hereby agreed that a tenancy at sufferance shall arise at a monthly rent
equal to 150% of the monthly Base Rent in effect at the expiration of the
Term plus any amounts charged against Sublessor as lessee under the Master
Lease for holdover rent or penalty. It is further agreed that Sublessee
shall indemnify and hold harmless Sublessor from and against any and all
liability, claims, demands, expenses, damages and judgments (other than
consequential or special damages) incurred by Sublessor as a result of
Sublessee's retaining possession, which indemnification obligation shall
survive the Expiration Date.
17. Notices.
17.01. All notices, consents, approvals or other
communications (collectively, a "Notice") required to be given under this
Sublease or pursuant to law shall be in writing and, unless otherwise
required by law, shall be delivered personally or by overnight courier
service or given by registered or certified mail, return receipt requested,
postage prepaid, to the parties at the following addresses (unless such
address shall be changed by Notice from one party to the other):
To Sublessor:
Unisys Corporation
P.O. Box 500
Blue Bell, PA 19424
Attention: Real Estate Administration
<PAGE>
To Sublessee:
Loral Corporation
600 Third Avenue
New York, NY 10016
Attention: Vice President/General Counsel
Any Notice given pursuant hereto shall be deemed to have been given and shall
be effective when received, or when delivered and refused.
18. Landlord Consents During Term.
18.01. Wherever in this Sublease the consent or approval of
Sublessor is required for any act or thing, Sublessor agrees that it shall
not unreasonably withhold, condition or delay such consent or approval. If
the consent or approval of Landlord is required under the Master Lease for
the same act or thing, if Sublessor is required or willing to give its
consent or approval to Sublessee when such consent or approval is required
hereunder, Sublessor agrees that it will promptly forward Sublessee's request
for such a consent or approval to Landlord. If Sublessor is required or has
determined to give its consent or approval, Sublessor shall cooperate
reasonably with Sublessee in endeavoring to obtain Landlord's consent or
approval (including commencing and prosecuting an appropriate legal action
if, in Sublessor's judgment, Landlord wrongfully withholds or delays its
approval or consent) upon and subject to the following terms and conditions:
(a) Sublessee shall reimburse Sublessor for any reasonable out-of-pocket
costs incurred by Sublessor in connection with seeking such consent or
approval, (b) Sublessor shall not be required to make any payments to
Landlord or to enter into any agreements or to modify the Master Lease or
this Sublease in order to obtain any such consent or approval and (unless
Sublessee reimburses Sublessor for such payment or performs any other
obligations imposed on Sublessor by Landlord) and (c) if Sublessee agrees or
is otherwise obligated to make any payments to Sublessor or Landlord in
connection with such request for such consent or approval, Sublessee shall
have made arrangements for such payments which are satisfactory to Sublessor.
Except as hereinafter expressly provided, nothing contained in this Section
shall be deemed to require Sublessor to give any consent or approval because
Landlord has given such consent or approval. Whenever either party to this
Sublease expressly agrees not to unreasonably withhold its consent, such
consent shall also not be unreasonably delayed or conditioned.
18.02. Notwithstanding the foregoing provisions of this
Section or any other provision of this Sublease to the contrary, if and to
the extent that it is provided in the consent to this Sublease from Landlord
or in any other agreement entered into by and among Landlord, Sublessor and
Sublessee in connection with the approval by Landlord of this Sublease that
Landlord and Sublessee may deal directly in connection with the provision of
various services to be provided to the Demised Premises or for Sublessee to
deal directly with Landlord in connection with obtaining certain consents and
approvals then if and to the extent so provided in such consent and/or
agreement the granting of a consent or approval by Landlord shall be deemed
to be the granting of a like consent or approval by Sublessor.
19. Sublessor's Inability to Perform.
19.01. This Sublease and the obligation of Sublessee to pay
Rent hereunder and perform all of the other covenants and agreements
<PAGE>
hereunder on the part of Sublessee to be performed shall in no way be
affected, impaired or excused because Sublessor is unable to fulfill any of
its obligations under this Sublease expressly or impliedly to be performed by
Sublessor or because Sublessor is unable to make, or is delayed in making,
any repairs, additions, alterations, improvements or decorations or is unable
to supply or is delayed in supplying any equipment or fixtures, if Sublessor
is prevented or delayed from so doing by reason of strikes or labor trouble
or by accident, adjustment of insurance or by any cause whatsoever reasonably
beyond Sublessor's control, including but not limited to, laws, governmental
preemption in connection with a national emergency or by reason of any rule,
order or regulation or any federal, state, county or municipal authority or
any department or subdivision thereof or any government agency or by reason
of the conditions of supply and demand which have been or are affected by war
or other emergency.
20. Time Limits.
20.01. Except with respect to actions to be taken by
Sublessee for which time limits are specifically set forth in this Sublease,
which time limits shall control for the purposes of this Sublease, the time
limits provided in the Master Lease for the giving or making of any Notice
(as hereinafter defined) by the tenant thereunder to Landlord, the holder of
any leasehold mortgage or any other party, or for the performance of any act,
condition or covenant by the tenant thereunder, or for the exercise of any
right, remedy or option by the tenant thereunder, are changed for the
purposes of this Sublease, by shortening the same in each instance by five
(5) days, provided that in no event shall such time limit be reduced to less
that two (2) business days) so that any Notice may be given or made, or any
act, condition or covenant performed, or option hereunder exercised, by
Sublessor within the time limit relating thereto contained in the Master
Lease.
20.02. Except with respect to actions to be taken by
Sublessor for which longer time limits are specifically set forth in this
Sublease, which time limits shall control for the purposes of this Sublease,
the time limits provided in the Master Lease for the giving or making of any
Notice by Landlord or the performance of any act, covenant or condition by
Landlord for the exercise of any right, remedy or option by Landlord
thereunder are changed for the purposes of this Sublease, by lengthening the
same in each instance by five (5) days, so that any Notice may be given or
made, or any act, condition or covenant performed or option hereunder
exercised by Landlord within the number of days respectively set forth above,
after the time limits relating thereto contained in the Master Lease.
21. Limitations on Liability.
21.01. Nothing in this Section is intended to limit or
affect any obligations of Sublessor or any affiliate of Sublessor which are
contained in any separate agreement.
22. Miscellaneous.
22.01. This Sublease shall be governed by and construed in
accordance with the internal laws of the State in which the Demised Premises
are located, without regard to the conflicts of law principles thereof.
<PAGE>
22.02. The section headings in this Sublease and the table
of contents are inserted only as a matter of convenience for reference and
are not to be given any effect in construing this Sublease.
22.03. If any of the provisions of this Sublease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Sublease, or the application
of such provision or provisions to persons or circumstances other than those
as to whom or which it is held invalid or unenforceable, shall not be
affected thereby, and every provision of this Sublease shall be valid and
enforceable to the fullest extent permitted by law.
22.04. All of the terms and provisions of this Sublease
shall be binding upon and inure to the benefit of the parties hereto and,
subject to the provisions of Article 9 hereof, their respective successors
and assigns.
22.05. Sublessor has made no representations, warranties or
covenants to or with Sublessee with respect to the subject matter of this
Sublease except as expressly provided herein or in the Transaction Documents
and all prior negotiations and agreements relating thereto are merged into
this Sublease. This Sublease may not be amended or terminated, in whole or
in part, nor may any of the provisions be waived, except by a written
instrument executed by the party against whom enforcement of such amendment,
termination or waiver is sought and unless the same is permitted under the
terms and provisions of the Master Lease.
23. Rider. A Rider to this Sublease is attached hereto and
incorporated herein by reference.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Sublessor and Sublessee have executed
this Sublease as of the day and year first above written.
UNISYS CORPORATION, as Sublessor
By: Harold S. Barron
Name: Harold S. Barron
Title: Senior Vice President
LORAL CORPORATION, as Sublessee
By: Eric J. Zahler
Name: Eric J. Zahler
Title: Vice President
<PAGE>
Salt Lake City, UT
(Leased)
RIDER
1. This Rider is a part of this Sublease. In the event of
any contradiction or inconsistency between the provisions of this Rider and
the provisions of the other portions of this Sublease, the provisions of this
Rider shall govern and prevail, and the contradicting and inconsistent
provisions of the other portions of this Sublease shall be deemed amended
accordingly.
2. (a) The parties agree to endeavor in good faith to
cause the Landlord to execute, in substitution for the Master Lease, (i) a
lease directly with Unisys Corporation for Building B at the Property (the
"Unisys Lease") and (ii) a lease directly with Loral Corporation for
Buildings E and F at the Property (the "Loral Lease"), which leases shall be
on terms and conditions satisfactory to Sublessor and Sublessee, each in the
exercise of its reasonable discretion, provided, however, that Sublessor
shall in no event be required to execute any lease in substitution for the
Master Lease unless Landlord agrees to release Sublessor from all continued
liability with respect to Buildings E and F at the Property from and after
the date of any such substitute lease. Sublessor and Sublessee shall each
pay one half of all mutually agreed upon costs directly related to the
substitution of the Loral Lease and the Unisys Lease for the Master Lease.
(b) If the Landlord requires the Unisys Lease and the Loral
Lease to contain an obligation to purchase the Property in substitution for
the Purchase Obligation (as defined below) (a "Substitute Purchase
Obligation"), then (i) the Unisys Lease shall contain such Substitute
Purchase Obligation with respect to the introduction or release of a
Hazardous Material on the portion of the Property demised under the Unisys
Lease, (ii) the Loral Lease shall contain such Substitute Purchase Obligation
with respect to the introduction or release of a Hazardous Material on the
portion of the Property demised under the Loral Lease, and (iii) the Unisys
Lease and the Loral Lease shall provide that Sublessor and Sublessee shall
share such Substitute Purchase Obligation in proportion to their relative
fault and shall acquire the Property pursuant to such Substitute Purchase
Obligation as tenants in common. Sublessor shall be obligated to perform
Sublessee's obligation under the Substitute Purchase Obligation, as provided
in this Section 2(b), in proportion to Sublessor's fault in causing such
obligation to arise. Sublessee shall be obligated to perform Sublessor's
obligation under the Substitute Purchase Obligation, as provided in this
Section 2(b), in proportion to Sublessee's fault in causing such obligation
to arise.
(c) Sublessor and Sublessee shall use reasonable and good
faith efforts to reach a mutual agreement as to whether any Alterations are
necessary and appropriate in order to separate the premises demised under the
Unisys Lease from the premises demised under the Loral Lease. In the event
that the parties reach such a mutual agreement, then Sublessor shall perform
such agreed upon Alterations, and Sublessee shall, within thirty (30) days
after written demand by Sublessor, reimburse Sublessor for one-half of the
costs and expenses relating to such Alterations. Sublessor may request
payment of Sublessee's share of such costs, and (if requested) Sublessee
shall pay its share of such costs, as such costs are incurred by Sublessor
<PAGE>
during the course of design and construction of such Alterations. Sublessor
shall require that (i) any contractors or subcontractors performing any such
work maintain reasonable and appropriate liability insurance and (ii) any
such insurance policies shall name Sublessor, Sublessee and Landlord as
additional insureds.
(d) In the event that the Unisys Lease and the Loral Lease
are executed in substitution of the Master Lease, then this Sublease shall
terminate upon such execution.
3. The respective obligations of Sublessor and Sublessee in
respect of the obligation to purchase the Property pursuant to Section
13.2(d) of the Master Lease (the "Purchase Obligation") shall be governed by
the terms of the Asset Purchase Agreement. In the event that Sublessor
purchases the Property pursuant to the Purchase Obligation, Sublessor and
Sublessee shall enter into a lease with respect to the Demised Premises on
substantially the same terms and conditions as set forth in this sublease.
4. Except as provided in the Asset Purchase Agreement,
Sublessee shall have no liability under this Sublease for Hazardous Materials
existing on the Demised Premises as of the date hereof.
5. Sublessee (together with its employees, licensees, and
invitees) shall have the exclusive right to use the 978 parking spaces at the
Property designated on Schedule B to this Sublease.
6. Sublessee hereby agrees to perform repairs and
maintenance on, and to provide such other services as may be required to the
Demised Premises, other than the services enumerated on Schedule E attached
hereto, during the Term hereof, which services were previously provided by
Sublessor's non-Defense Systems personnel. In connection therewith,
Sublessor and Sublessee shall share supplies and equipment located at the
Property for performance of their respective service obligations with respect
to the Property until the exhaustion of such supplies and equipment.
Thereafter, Sublessor and Sublessee shall separately purchase and use such
supplies and equipment as each may determine it requires for performance of
its respective service obligations.
7. With respect to contracts entered into by Sublessor
prior to the date of this Sublease relating in whole or in part to the
provision of services to the Demised Premises, which services Sublessee has
assumed the obligation to provide as of the date of this Sublease and which
services were previously provided by Sublessor's non-Defense Systems
personnel, (a) Sublessor shall endeavor to terminate such contracts at the
earliest possible time, provided Sublessor shall not be obligated to breach
such contracts and (b) Sublessee shall be obligated to pay all sums due under
such contracts for the provision of goods and services to the Demised
Premises.
8. From the date hereof until the earlier of (a) the
Expiration Date or (b) the service of written notice by Sublessor of its
election to terminate receipt of such services, Sublessee shall continue to
provide security services to the portions of the Property not part of the
Demised Premises, of the type generally and customarily provided by
Sublessor's Defense Systems unit to the Property prior to the date hereof.
<PAGE>
SCHEDULE A
MASTER LEASE
As used in this Sublease, (a) "Master Lease" shall mean the
Special Net Lease dated December 31, 1986 between Harris Trust and Savings
Bank as Trustee for Burroughs Employees' Retirement Fund as lessor and Unisys
Corporation as lessee, as amended by the letter dated October 15, 1991 from
Unisys Corporation to Harris Trust Savings Bank, Trustee and (b) the
"Property" shall mean the real property located at 640 North 2200 West,
Buildings B, E and F, Salt Lake City, Utah.
<PAGE>
SCHEDULE B
DEMISED PREMISES
As used in this Sublease, the "Demised Premises" shall mean
261,945 rentable square feet at 640 North 2200 West, Salt Lake City, Utah in
Buildings E and F together with the portion of the Property located to the
north of the line marked "Dividing Line" on the plan attached hereto.
<PAGE>
SCHEDULE C
SCHEDULED EXPIRATION DATE/BASE RENT
As used in this Sublease, "Scheduled Expiration Date" shall
mean December 31, 2001.
As used in Sublease, "Base Rent" shall mean, with respect to
any calendar month, all actual costs and expenses relating to the Property
(including common areas and facilities) that are allocated by Sublessor to
the Demised Premises for such month, provided that Sublessor's method of
allocation shall be consistent with the method of allocation used by Unisys
Corporation to allocate costs to the Unisys Defense Systems unit with respect
to the occupancy of the Demised Premises by the Unisys Defense Systems unit
during calendar year 1994 and notwithstanding the fact that some portion of
such costs are disallowed as "contract pass-through items" under certain
government contracts performed by Sublessee at the Demised Premises. The
foregoing costs and expenses shall include cash items and non-cash items,
such as depreciation. In the event that Base Rent for any calendar quarter
(as calculated above) shall not be determinable by Sublessor until after the
end of such calendar quarter, then Base Rent shall be payable during such
calendar quarter based upon Sublessor's reasonable estimate of costs and
expenses to be allocated to the Demised Premises. Sublessor shall, as soon
as practicable after the end of such calendar quarter, provide Sublessee with
a written statement of the Base Rent amount for such calendar quarter and,
subject to Section 3.5 of the Sublease, the parties shall promptly thereafter
make any necessary reconciliation payments.
<PAGE>
SCHEDULE D
EXCLUDED MASTER LEASE TERMS
Sections 3 (with respect only to the options to extend the term of the Master
Lease granted thereon), 5, 42-44, inclusive, and 45.1(a) of the Master Lease.
<PAGE>
SCHEDULE E
SERVICES TO BE PROVIDED BY SUBLESSOR
Repair and maintenance of major utilities until the
Expiration Date.
<PAGE>
SCHEDULE E-1
SERVICES NOT TO BE PROVIDED BY SUBLESSOR
[Intentionally left blank.]
<PAGE>
EXHIBIT B
DEFAULTS
NONE
EXHIBIT 10.9
LIMITED NONCOMPETITION AGREEMENT
This Limited Noncompetition Agreement between Lockheed Martin
Corporation ("Lockheed Martin") and L-3 Communications Corporation ("L-3") is
dated as of April 30, 1997 with reference to the following:
Recitals
WHEREAS, Lockheed Martin, Lehman Brothers Capital Partners III, L.P.,
Frank C. Lanza, Robert V. LaPenta and L-3 Communications Holdings, Inc.
("Holdings") have entered into a Transaction Agreement dated as of March 28,
1997 (as amended by Amendment No. 1 to Transaction Agreement dated as of
April 11, 1997, and as it may be further amended from time to time, the
"Transaction Agreement"); and
WHEREAS, the Transaction Agreement contemplates that the business and
assets of certain business elements of Lockheed Martin, the Business Units,
will be sold upon the terms and subject to the conditions of the Transaction
Agreement to Holdings; and
WHEREAS, Section 12.01 of the Transact on Agreement provides that the
obligations of Lockheed Martin, Holdings and the Purchasers to consummate the
Closing are subject to the satisfaction (or waiver) of certain enumerated
conditions one of which (contained with Section 12.01(e)) is that Lockheed
Martin and Holdings shall have executed and delivered the noncompetition
agreement contemplated by Section 9.09 of the Transaction Agreement; and
WHEREAS, Holdings will conduct the businesses sold to it under the
Transaction Agreement through L-3, a wholly-owned subsidiary of Holdings.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties contained herein, Lockheed Martin and
L-3 agree as follows:
1. Capitalized terms used but not defined in this Limited
Noncompetition Agreement shall have the meanings ascribed to them in the
Transaction Agreement.
2. Subject to the provisions of Paragraph 3, Paragraph 4, Paragraph 5
and Paragraph 6 hereof, the Lockheed Martin Companies shall not sell products
anywhere in the world in competition with products of L-3 listed on
"Attachment A" hereto, or being supplied as of the Closing Date by the
Business in connection with its Performance of the specific programs listed
on "Attachment A" hereto (collectively, the "competing businesses"), in each
instance for the applications listed opposite the product or program listed
on Attachment A and for a period of three years commencing as of the Closing
Date.
3. The provisions of Paragraph 2 shall prohibit the acquisition by
Lockheed Martin or any of its Affiliates of all or any part of a business or
Person (whether through the acquisition of assets, securities or other
ownership interest, the effecting of a merger, business combination,
reorganization, exchange or recapitalization or other similar transaction)
<PAGE>
(the "Acquired Business") with any Person where a primary purpose of the
acquisition is the avoidance of the prohibitions of Paragraph 2. For
purposes of the foregoing, in the case of any such acquisition by Lockheed
Martin or any of its Affiliates where the competing business conducted by the
Acquired Business represents greater than 35% of the revenues of the Acquired
Business for its most recently completed fiscal year, a primary purpose of
the transaction shall be deemed to be the avoidance of the prohibitions of
Paragraph 2. Notwithstanding the provisions of the preceding sentence, the
provisions of Paragraph 2 shall not prohibit the acquisition by Lockheed
Martin or any of its Affiliates of an Acquired Business where the competing
business conducted by the Acquired Business represents greater than 35% of
the revenues of the Acquired Business (a "Disqualifying Acquisition," and the
portion of the Acquired Business that is a competing business being the
"Disqualified Business"), provided that Lockheed Martin or any of its
Affiliates offers to sell and assign the Disqualified Business (and
associated liabilities) obtained and assumed in the Disqualifying Acquisition
for cash to L-3 within 90 days of the consummation of the Disqualifying
Acquisition at the fair market value of such Disqualified Business (and
associated liabilities) with the benefit of substantially similar
representations, warranties and indemnification periods from the fair market
value of such Disqualified Business (and associated liabilities), L-3 and
such Lockheed Martin or their representatives shall meet within 15 days of
the date such offer is made and attempt mutually to determine in good faith
such fair market value. If L-3 and Lockheed Martin are unable to determine a
mutually acceptable fair market value within 20 days after their initial
meeting, L-3 and Lockheed Martin shall mutually engage (and share equally in
the fees and expenses of) an investment banking firm to determine within 20
days of such firm's engagement the fair market value of the Disqualified
Business (and associated liabilities), which determination shall be binding
upon L-3 and Lockheed Martin for purposes of Lockheed Martin's offer to L-3
as contemplated herein. Lockheed Martin shall not be obligated to keep its
offer to L-3 open for more than 20 days after final determination of the fair
market value of the Disqualified Business and its assumption of the
associated liabilities within 75 days of such acceptance, otherwise Lockheed
Martin and its Affiliates shall be permitted to keep and operate, or divest,
such Disqualified Business (and associated liabilities) in Lockheed Martin's
sole discretion.
4. The prohibitions of Paragraph 2 shall not apply to:
(a) businesses operated and managed by Lockheed Martin or its
Affiliates on behalf of the U.S. Government; or
(b) Acquired Businesses where the acquisition is permitted under
Paragraph 3; provided that in the case of any such acquisition (i) the
competing business was being conducted by the Acquired Business as of the
closing of the acquisition of the Acquired Business or (ii) Lockheed Martin
or the Acquired Business can affirmatively demonstrate that the Acquired
Business was considering entering the competing business as of the closing of
the acquisition of the Acquired Business, or (iii) the competing business is
reasonably related to the businesses referenced in either or both of the
preceding clauses (i) or (ii); or
(c) the acquisition by Lockheed Martin or any of its Affiliates of
not greater than twenty percent of the voting securities of any Person
engaged in a competing business; or
<PAGE>
(d) the acquisition by Lockheed Martin or any of its Affiliates of
any non-voting securities of any Person engaged in a competing business.
5. Notwithstanding the provisions of Paragraph 2, nothing in this
Limited Noncompetition Agreement shall prevent Lockheed Martin or any of its
Affiliates from:
(a) continuing to engage without impediment in any business,
including but not limited to the unrestricted sale of products related to
that business, conducted by Lockheed Martin or any of its Affiliates as of
Closing (other than businesses conducted by Lockheed Martin solely through
the Business Units), any such business being hereinafter referred to as an
"Existing Business"; or
(b) entering into any business and thereafter engaging without
impediment in such business, including but not limited to the unrestricted
sale of products related to that business where Lockheed Martin can
affirmatively demonstrate that, as of the Closing, Lockheed Martin or any of
its Affiliates or any business element thereof (excluding the Business Units)
was considering entering such business, any such business being hereinafter
referred to as a "Planned Business"; or
(c) entering into any business and thereafter engaging without
impediment in such business, including but not limited to the unrestricted
sale of products related to that business, where such business is reasonably
related to either or both an Existing Business or a Planned Business.
6. For the purposes of Paragraph 2, the sale by Lockheed Martin or its
Affiliates (including, without limitation, any Acquired Business) of systems
manufactured, assembled, fabricated or integrated by Lockheed Martin or its
Affiliates (which systems may themselves be subsystems or components of
larger systems) where the system manufactured, assembled, fabricated or
integrated by Lockheed Martin or its Affiliates (A) includes as one or more
subsystems, components, subcomponents or other parts of the system products
sold by (i) L-3 or (ii) third-party sources other than L-3 or (B) where such
system includes as one or more subsystems, components, subcomponents or other
parts of the system products manufactured, assembled, fabricated or
integrated by Lockheed Martin or its Affiliates shall be deemed not to be a
sale in competition with products sold by L-3 and, therefore, is permitted
under Paragraph 2; provided, however, that, if sale of the product
manufactured, assembled, fabricated or integrated is not permitted by any of
the exceptions to Paragraph 2 other than by clause (B) of this Paragraph 6,
then prior to manufacturing the subsystem, component, subcomponent or other
part of the system Lockheed Martin shall in its good faith business judgment
(which may include, but is not limited to, consideration of the optimum
combination of performance, schedule, quality, cost, customer preference,
ability to provide a total solution and/or turnkey system and other factors
considered relevant to the decision by the Lockheed Martin company making the
make/buy decision) consider procuring the item from L-3 and provided further
that items manufactured by Lockheed Martin or any of its Affiliates in
reliance on the exception provided by clause (B) of this Paragraph 6 may only
be sold during the term of this Limited Noncompetition Agreement as part of a
system qualifying for the exception provided by clause (B) of this Paragraph
6.
7. Lockheed Martin acknowledges that in the event of its or its
Subsidiaries' breach of the covenants contained in this Limited
<PAGE>
Noncompetition Agreement, money damages would be an inadequate remedy.
Accordingly, without prejudice to the rights of L-3 also to seek such damages
or other remedies available to it, L-3 may seek, and Lockheed Martin shall
not contest the appropriateness of injunctive or other equitable relief in
any proceeding that L-3 may bring to enforce the covenants contained in this
Limited Noncompetition Agreement. No waiver of any breach of the covenants
contained in this Limited Noncompetition Agreement shall be implied from
forbearance or failure of L-3 to take action in respect thereof.
8. Lockheed Martin and L-3 agree that, if any provision of this
Limited Noncompetition Agreement should be adjudicated to be invalid or
unenforceable, such provision shall be deemed deleted herefrom with respect,
and only with respect, to the operation of such provision in the particular
jurisdiction in which such adjudication was made. To the extent any such
provisions may be valid and enforceable in such jurisdiction by limitations
on the scope of the activities, geographical area or time period covered, L-3
and Lockheed Martin agree that such provision instead shall be deemed limited
to the extent, and only to the extent, necessary to make such provision
enforceable to the fullest extent permissible under the laws and public
policies in such jurisdiction.
9. All notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
if to Lockheed Martin:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Marcus C. Bennett
Telecopy: (301) 897-6083
with a copy to:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Frank H. Menaker, Jr.
Telecopy: (301) 897-6791
and
Miles & Stockbridge, a
Professional Corporation
10 Light Street
Baltimore, Maryland 21202
Attention: Glenn C. Campbell
Telecopy: (410) 385-3700
<PAGE>
If to L-3:
L-3 Communications Corporation
600 Third Avenue
New York, New York 10016
Attention: General Counsel
Telecopy: (212) 805-5494
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David B. Chapnick
Telecopy: (212) 455-2502
and
Lehman Brothers Capital Partners III, L.P.
3 World Financial Center
New York, New York 10285
Attention: Steven Berkenfeld
Telecopy: (212) 526-2198
and
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Frank H. Menaker, Jr.
Telecopy: (301) 897-6791
or to such other address or telecopy number and with such other copies, as
such party may hereafter specify for the purpose by notice to the other
parties. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the telecopy
number specified in this Paragraph 9 and evidence of receipt is received or
(ii) if given by any other means, upon delivery or refusal of delivery at the
address specified in this Paragraph 9.
10. Any provision of this Limited Noncompetition Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Lockheed Martin and L-3, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege
under this Limited Noncompetition Agreement shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
11. The provisions of this Limited Noncompetition Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns; provided that no party may assign, delegate or
otherwise transfer any of its right or obligations under this Agreement
without the consent of Lockheed Martin, in the case of L-3, and L-3 in the
case of Lockheed Martin. Notwithstanding the foregoing, the provisions of
<PAGE>
this Limited Noncompetition Agreement shall not apply to any of the Lockheed
Martin Companies to the extent that such companies no longer are Subsidiaries
of Lockheed Martin.
12. As used in this Limited Noncompetition Agreement, any reference to
the plural shall include the singular, and the singular shall include the
plural. With regard to each and every term and condition of this Limited
Noncompetition Agreement, the parties understand and agree that the same have
or has been mutually negotiated, prepared and drafted, and that if at any
time the parties desire or are required to interpret or construe any such
term or condition or any agreement or instrument subject hereto, no
consideration shall be given to the issue of which party actually prepared,
drafted or requested any term or condition of this Limited Noncompetition
Agreement.
13. This Limited Noncompetition Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof,
supersedes all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to the subject matter
thereof, and satisfies all obligations, covenants and agreements of Lockheed
Martin under Section 9.09 of the Transaction Agreement.
14. This Limited Noncompetition Agreement shall be construed in
accordance with and governed by the law of the State of New York.
15. This Limited Noncompetition Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Limited
Noncompetition Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Limited
Noncompetition Agreement as of the date first set forth above.
LOCKHEED MARTIN CORPORATION
By: /s/ Stephen M. Piper
Stephen M. Piper
Assistant Secretary
L-3 COMMUNICATIONS CORPORATION
By: /s/ Michael T. Strianese
Michael T. Strianese
Vice President, Finance and
Controller
EXHIBIT 12
<TABLE>
<CAPTION>
L-3 Communications Corporation
Computation of Ratio of Earnings to Fixed Charges
(in thousands, except for ratio data)
The Company | Predecessor Company
------------ | -------------------------------------------------
For the | For the
three months | three months
Ended | Ended
June 30, | March 31, Years Ended December 31,
------------ | ------------ -----------------------------------
|
1997 | 1997 1996 1995 1994
------------ | ------------ ---------- ---------- -----------
|
<S> <C> | <C> <C> <C> <C>
|
Earnings: |
Income before income taxes . . . $ 5,151 | ($505) $19,494 $ 174 $ 2,929
Add: |
Interest expense . . . . . . . . 10,079 | 8,441 24,197 4,475 5,450
Interest component of rent |
expense . . . . . . . . . . . . 815 | 851 2,832 1,591 1,866
------- | ------ ------- ------ -------
Earnings . . . . . . . . . . . . $16,045 | $8,787 $46,523 $6,240 $10,245
======= | ====== ======= ====== =======
|
Fixed Charges: |
Interest expense . . . . . . . . $ 10,079 | $8,441 $24,197 $4,475 $ 5,450
Interest component of rent |
expense . . . . . . . . . . . . 815 | 851 2,832 1,591 1,866
------- | ------ ------- ------ -------
Fixed charges . . . . . . . . . . $10,894 | $9,292 $27,029 $6,066 $ 7,316
======= | ====== ======= ====== =======
|
Ratio of earnings to fixed charges 1.47x | N/A 1.72x 1.03x 1.40x
======= | ====== ======= ====== =======
</TABLE>
EXHIBIT 23.2
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form
S-4 of our report dated July 16, 1997 on our audit of the balance sheet of L-3
Communications Corporation (a Delaware company) as of April 29, 1997, our
report dated July 11, 1997 on our audit of the combined financial statements
of the Lockheed Martin Predecessor Businesses as of March 31, 1997
and for the three months then ended, our report dated March 20, 1997 on our
audit of the combined financial statements of the Lockheed Martin Predecessor
Businesses as of December 31, 1996 and for the year then ended, and our
report also dated March 20, 1997 on our audits of the Loral Acquired
Businesses for the three months ended March 31, 1996 and for the years ended
December 31, 1995 and 1994. The report dated March 20, 1997 on the combined
financial statements of the Lockheed Martin Predecessor Businesses as of and
for the year ended December 31, 1996 states that Coopers & Lybrand L.L.P.'s
opinion, insofar as it relates to the financial statements of the Lockheed
Martin Communications Systems Division as of December 31, 1996 included in
such combined financial statements, is based solely on the report of other
auditors. We also consent to the reference to our Firm under the caption
"Experts".
Coopers & Lybrand L.L.P.
New York, New York
September 8, 1997
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-4, No. 333-31649) and
related Prospectus of L-3 Communications Corporation for the registration
of $225,000,000 of its Series B Senior Subordinated Notes due 2007.
We also consent to the inclusion therein of our report dated March 7, 1997
with respect to the combined financial statements of Lockheed Martin
Communications Systems Division at December 31, 1996 (not presented
separately herein) and 1995, and the combined results of its operations and
its cash flows for the year ended December 31, 1996 (not presented separately
herein), and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1995, included therein.
/s/ Ernst & Young LLP
Washington, D.C.
September 8, 1997
========================================================================
EXHIBIT 25
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) /__/
------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------------------
L-3 COMMUNICATIONS CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 13-3937436
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
600 Third Avenue
New York, New York 10016
(Address of principal executive offices) (Zip code)
------------------------
10 3/8% Series B Senior Subordinated Notes due 2007
(Title of the indenture securities)
========================================================================
<PAGE>
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- ---------------------------------------------------------------------------
Name Address
- ---------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New York,
State of New York N.Y. 10006, and Albany, N.Y.
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the
Commission, are incorporated herein by reference as an exhibit
hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of
1939 (the "Act") and 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
<PAGE>
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of New
York, and State of New York, on the 5th day of September, 1997.
THE BANK OF NEW YORK
By: /s/ THOMAS E. TABOR
------------------------------
Name: THOMAS E. TABOR
Title: ASSISTANT TREASURER
<PAGE>
EXHIBIT 7
-----------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................32,895,077
LESS: Allowance for loan and
lease losses ..............633,877
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
---------------
Total assets ......................... $ 54,746,131
===============
LIABILITIES
Deposits:
In domestic offices ................ $ 25,614,961
Noninterest-bearing ......10,564,652
Interest-bearing .........15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing .........560,944
Interest-bearing .........14,542,671
<PAGE>
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-------------
Total liabilities .................... 50,560,708
=============
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ ( 19,449)
Cumulative foreign currency transla-
tion adjustments .................. ( 13,034)
-------------
Total equity capital ................ 4,185,423
-------------
Total liabilities and equity
capital ........................... $ 54,746,131
=============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System
and is true and correct.
}
Alan R. Griffith }
J. Carter Bacot }
Thomas A. Renyi } Directors
}
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
10 3/8% SENIOR SUBORDINATED NOTES
DUE 2007
OF
L-3 COMMUNICATIONS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 1997 (THE "EXPIRATION DATE") UNLESS EXTENDED BY L-3
COMMUNICATIONS CORPORATION.
EXCHANGE AGENT:
THE BANK OF NEW YORK
BY HAND: BY MAIL:
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
101 Barclay Street The Bank of New York
New York, New York 10286 101 Barclay Street
Attention: Reorganization Section Corporate Trust Services Window
New York, New York 10286
Attention: Reorganization Section
BY OVERNIGHT EXPRESS: BY FACSIMILE:
The Bank of New York (212) 815-6339
101 Barclay Street (For Eligible Institutions Only)
Corporate Trust Services Window BY TELEPHONE:
New York, New York 10286 (212) 815-4444
Attention: Reorganization Section
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated _________,
1997 (the "Prospectus") of L-3 Communications Corporation (the "Company"),
and this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000 in
principal amount of its new 10 3/8% Series B Senior Subordinated Notes due
2007 (the "Exchange Notes") for each $1,000 in principal amount of
outstanding 10 3/8% Senior Subordinated Notes due 2007 (the "Old Notes"). The
terms of the Exchange Notes are identical in all material respects (including
principal amount, interest rate and maturity) to the terms of the Old Notes
for which they may be exchanged pursuant to the Exchange Offer, except that
the Exchange Notes are freely transferable by holders thereof (except as
provided herein or in the Prospectus) and are not subject to any covenant
regarding registration under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
<PAGE>
<PAGE>2
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
NAME(S) AND
ADDRESS(ES) OF AGGREGATE
REGISTERED PRINCIPAL AMOUNT
HOLDER(S) CERTIFICATE REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN) NUMBER(S)<F1> OLD NOTES<F1> TENDERED<F2>
- ----------------- ---------------- ---------------- ----------------
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
____________________
[FN]
<F1> Need not be completed by book-entry holders.
<F2> Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by such Old Notes. See
instruction 2.
This Letter of Transmittal is to be used either if certificates
representing Old Notes are to be forwarded herewith or if delivery of Old
Notes is to be made by book-entry transfer to an account maintained by the
Exchange Agent at The Depository Trust Company, pursuant to the procedures
set forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the
Prospectus. Delivery of documents to the book-entry transfer facility does
not constitute delivery to the Exchange Agent.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Old Notes
according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer--Procedures for Tendering Old Notes."
<PAGE>
<PAGE>3
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
/ / The Depository Trust Company
Account Number
Transaction Code Number _____________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
Name of Eligible Institution that Guaranteed Delivery
Date of Execution of Notice of Guaranteed Delivery ___________
If Delivered by Book-entry Transfer:
Account Number _________________________________________________________
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name_________________________________________________________________
(Please Print)
Address______________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT
FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address
_____________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name_________________________________________________________________
Address______________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution
of Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Any holder who is an
"affiliate" of the Company or who has an arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to
the Exchange Offer, or any broker-dealer who purchased Old Notes from the
Company to resell pursuant to Rule 144A under the Securities Act or any other
<PAGE>
<PAGE>4
available exemption under the Securities Act must comply with the
registration and prospectus delivery requirements under the Securities Act.
<PAGE>
<PAGE>5
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal
amount of the Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered herewith, the undersigned
hereby exchanges, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to such Old Notes. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge
that said Exchange Agent acts as the agent of the Company, in connection with
the Exchange Offer) to cause the Old Notes to be assigned, transferred and
exchanged. The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Old Notes,
and that, when the same are accepted for exchange, the Company will acquire
good and unencumbered title to the tendered Old Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Old Notes or transfer ownership of such Old Notes on the
account books maintained by the book-entry transfer facility. The undersigned
further agrees that acceptance of any and all validly tendered Old Notes by
the Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that the
Company shall have no further obligations or liabilities thereunder except as
provided in the first paragraph of Section 2 of said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by the Company), as
more particularly set forth in the Prospectus, the Company may not be
required to exchange any of the Old Notes tendered hereby and, in such event,
the Old Notes not exchanged will be returned to the undersigned at the
address shown above. In addition, the Company may amend the Exchange Offer at
any time prior to the Expiration Date if any of the conditions set forth
under "The Exchange Offer--Certain Conditions to the Exchange Offer" occur.
By tendering, each holder of Old Notes represents that the Exchange
Notes acquired in the exchange will be obtained in the ordinary course of
such holder's business, that such holder has no arrangement with any person
to participate in the distribution of such Exchange Notes, that such holder
is not an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and that such holder is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes. Any holder of Old Notes
using the Exchange Offer to participate in a distribution of the Exchange
Notes (i) cannot rely on the position of the staff of the Securities and
Exchange Commission (the "Commission") [enunciated in its interpretive letter
with respect to Exxon Capital Holdings Corporation (available April 13, 1989)
or similar letters] and (ii) must comply with the registration and prospectus
requirements of the Securities Act in connection with a secondary resale
transaction.
<PAGE>
<PAGE>6
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution
of Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any
resale of such Exchange Notes, however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered Old
Notes may be withdrawn at any time prior to the Expiration Date in accordance
with the terms of this Letter of Transmittal. See Instruction 2.
Certificates for all Exchange Notes delivered in exchange for tendered
Old Notes and any Old Notes delivered herewith but not exchanged, and
registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
TENDER HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
Signature(s) of Holder(s)
Dated ______________ Area Code and Telephone Number _______________
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OLD NOTES. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER
PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE
FULL TITLE OF SUCH PERSON.) SEE INSTRUCTION 3.
Name(s)______________________________________________________________________
_____________________________________________________________________________
(Please Print)
Capacity (full title)________________________________________________________
Address______________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.__________________________________________________
Taxpayer Identification No.__________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature________________________________________________________
Name________________________________________________________________________
Title_______________________________________________________________________
Address_____________________________________________________________________
Area Code and Telephone No._________________________________________________
Dated_______________________________________________________________________
<PAGE>
<PAGE>7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
A holder of Old Notes may tender the same by (i) properly completing and
signing this Letter of Transmittal or a facsimile hereof (all references in
the Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Old Notes being tendered and any required
signature guarantees and any other document required by this Letter of
Transmittal, to the Exchange Agent at its address set forth above on or prior
to the Expiration Date (or complying with the procedure for book-entry
transfer described below) or (ii) complying with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND
ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND
EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY
IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE
ALLOWED TO PERMIT TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Old Notes are to be reissued)
in the name of the registered holder (which term, for the purposes described
herein, shall include any participant in The Depository Trust Company (also
referred to as a "book-entry transfer facility") whose name appears on a
security listing as the owner of Old Notes), the signature of such signer
need not be guaranteed. In any other case, the tendered Old Notes must be
endorsed or accompanied by written instruments of transfer in form
satisfactory to the Company and duly executed by the registered holder, and
the signature on the endorsement or instrument of transfer must be guaranteed
by a bank, broker, dealer, credit union, savings association, clearing agency
or other institution (each an "Eligible Institution") that is a member of a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note
register for the Old Notes, the signature on the Letter of Transmittal must
be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after
the date of receipt of this Prospectus to establish accounts with respect to
the Old Notes at the book-entry transfer facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof,
any financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of Old Notes by causing such
book-entry transfer facility to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with the
book-entry transfer facility's procedures for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at the book-entry transfer facility, an appropriate
<PAGE>
<PAGE>8
Letter of Transmittal with any required signature guarantee and all other
required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with, within
the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Old Notes to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if the Exchange Agent
has received on or prior to the Expiration Date, a letter, telegram or
facsimile transmission (receipt confirmed by telephone and an original
delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in
which the Old Notes are registered and, if possible, the certificate numbers
of the Old Notes to be tendered, and stating that the tender is being made
thereby and guaranteeing that within three business days after the Expiration
Date, the Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at
the book-entry transfer facility), will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Old Notes being
tendered by the above-described method are deposited with the Exchange Agent
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of the notice of
guaranteed delivery ("Notice of Guaranteed Delivery") which may be used by
Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i)
the tendering holder's properly completed and duly signed Letter of
Transmittal accompanied by the Old Notes (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent is account at the book-
entry transfer facility) is received by the Exchange Agent, or (ii) a Notice
of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) from an Eligible Institution is received
by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes
tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Letter of Transmittal
(and any other required documents) and the tendered Old Notes.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders
appear on the Old Notes.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Old Notes for exchange.
<PAGE>
<PAGE>9
2. PARTIAL TENDERS; WITHDRAWALS.
[If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but
not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise clearly indicated.]
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent at the address set forth herein prior
to the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having tendered the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
specify the principal amount of Old Notes to be withdrawn, (iv) include a
statement that such holder is withdrawing his election to have such Old Notes
exchanged, (v) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
or as otherwise described above (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee
under the Indenture register the transfer of such Old Notes into the name of
the person withdrawing the tender and (vi) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. The
Exchange Agent will return the properly withdrawn Old Notes promptly
following receipt of notice of withdrawal. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer, any notice of withdrawal
must specify the name and number of the account at the book-entry transfer
facility to be credited with the withdrawn Old Notes or otherwise comply with
the book-entry transfer facility procedure. All questions as to the validity
of notices of withdrawals, including, time of receipt, will be determined by
the Company and such determination will be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder (or, in
the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the book-entry transfer facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be
credited to an account with such book-entry transfer facility specified by
the holder) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under the caption
"Procedures for Tendering Old Notes" in the Prospectus at any time on or
prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of
the Old Notes tendered hereby, the signature must correspond with the name(s)
as written on the face of the certificates without alteration, enlargement or
any change whatsoever.
<PAGE>
<PAGE>10
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Old Notes) of Old Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person or persons other
than the registered holder or holders of Old Notes, such Old Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered holder or holders
appear(s) on the Old Notes.
If this Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority
so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a
registered holder of such Old Notes, for the holder of such Old Notes; or
(ii) for the account of an Eligible Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, any person other than the registered holder of
the Old Notes tendered, or if tendered Old Notes are registered in the name
of any person other than the person signing the Letter of Transmittal, or if
a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exception therefrom is not submitted herewith the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
<PAGE>
<PAGE>11
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in
whole or in part, any of the conditions to the Exchange Offer set forth in
the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent at the address indicated above
for further instructions.
7. SUBSTITUTE FORM W-9.
Each holder of Old Notes whose Old Notes are accepted for exchange (or
other payee) is required to provide a correct taxpayer identification number
("TIN"), generally the holder's Social Security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided under "Important Tax Information" below, and to
certify that the holder (or other payee) is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9
may subject the holder (or other payee) to a $50 penalty imposed by the
Internal Revenue Service and 31% federal income tax backup withholding on
payments made in connection with the Exchange Notes. The box in Part 3 of the
Substitute Form W-9 may be checked if the holder (or other payee) has not
been issued a TIN and has applied for a TIN or intends to apply for a TIN in
the near future. If the box in Part 3 is checked and a TIN is not provided by
the time any payment is made in connection with the Exchange Notes, 31% of
all such payments will be withheld until a TIN is provided.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may
be directed to the Exchange Agent at the address and telephone number set
forth above. In addition, all questions relating to the Exchange Offer, as
well as requests for assistance or additional copies of the Prospectus and
this Letter of Transmittal, may be directed to L-3 Communications
Corporation, 600 Third Avenue, New York, New York 10016, attention: Corporate
Secretary (telephone: (212) 697-1111).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER
WITH CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes
are accepted for exchange may be subject to backup withholding unless the
holder provides The Bank of New York (as payor) (the "Paying Agent"), through
the Exchange Agent, with either (i) such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 attached hereto,
certifying that the TIN provided on Substitute Form W-9 is correct (or that
such holder of Old Notes is awaiting a TIN) and that (A) the holder of Old
Notes has not been notified by the Internal Revenue Service that he or she is
subject to backup withholding as a result of a failure to report all interest
<PAGE>
<PAGE>12
or dividends or (B) the Internal Revenue Service has notified the holder of
Old Notes that he or she is no longer subject to backup withholding; or (ii)
an adequate basis for exemption from backup withholding. If such holder of
Old Notes is an individual, the TIN is such holder's social security number.
If the Paying Agent is not provided with the correct taxpayer identification
number, the holder of Old Notes may be subject to certain penalties imposed
by the Internal Revenue Service.
Certain holders of Old Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. Exempt holders of Old Notes should indicate their
exempt status on Substitute Form W-9. In order for a foreign individual to
qualify as an exempt recipient, the holder must submit a-Form W-8, signed
under penalties of perjury, attesting to that individual's exempt status. A
Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for more instructions.
If backup withholding applies, the Paying Agent is required to withhold
31% of any such payments made to the holder of Old Notes or other payee.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Old Notes has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in
Part 3 is checked, the holder of Old Notes or other payee must also complete
the Certificate of Awaiting Taxpayer Identification Number below in order to
avoid backup withholding. Notwithstanding that the box in Part 3 is checked
and the Certificate of Awaiting Taxpayer Identification Number is completed,
the Paying Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Paying Agent.
The holder of Old Notes is required to give the Paying Agent the TIN
(e.g., social security number or employer identification number) of the
record owner of the Old Notes. If the Old Notes are in more than one name or
are not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
<PAGE>
<PAGE>13
PAYOR'S NAME: THE BANK OF NEW YORK, AS PAYING AGENT
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR Social Security number(s)
TIN IN THE BOX AT RIGHT AND Employer Identification
CERTIFY BY SIGNING AND DATING Number(s)
BELOW.
PART 2--CERTIFICATION-Under penalties of perjury, I
certify that:
(1) The number shown on this form is my correct
taxpayer identification number (or I am waiting for a
number to be issued for me), and
FORM W-9 (2) I am not subject to backup withholding because: (a)
DEPARTMENT OF THE I am exempt from backup withholding, or (b) I have not
TREASURY INTERNAL been notified by the Internal Revenue Service (IRS) that
REVENUE SERVICE I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to
backup withholding.
PAYOR'S REQUEST CERTIFICATION INSTRUCTIONS--You must cross out item (2)
FOR TAXPAYER above if you have been notified by the IRS that you are
IDENTIFICATION currently subject to backup withholding because of
NUMBER ("TIN") underreporting interest or dividends on your tax return.
Signature _________________________ PART 3--Awaiting TIN / /
Date_______________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50
PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
<PAGE>
<PAGE>14
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable cash payments made to me thereafter
will be withheld until I provide a taxpayer identification number.
____________________________________ _____________________________________
Signature Date
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF $225,000,000 OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES
DUE 2007
IN EXCHANGE FOR NEW
10 3/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
OF
L-3 COMMUNICATIONS CORPORATION
Registered holders of outstanding 10 3/8% Senior Subordinated Notes due
2007 (the "Old Notes") who wish to tender their Old Notes in exchange for a
like principal amount of new 10 3/8% Series B Senior Subordinated Notes due
2007 (the "Exchange Notes") and whose Old Notes are not immediately available
or who cannot deliver their Old Notes and Letter of Transmittal (and any
other documents required by the Letter of Transmittal) to The Bank of New
York (the "Exchange Agent") prior to the Expiration Date, may use this Notice
of Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) or mail to the Exchange Agent. See "The
Exchange Offer--Procedure for Tendering Old Notes" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY HAND: BY MAIL:
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
101 Barclay Street The Bank of New York
New York, New York 10286 101 Barclay Street
Attention: Reorganization Section Corporate Trust Services Window
New York, New York 10286
Attention: Reorganization Section
BY OVERNIGHT EXPRESS: BY FACSIMILE:
The Bank of New York (212) 815-6339
101 Barclay Street (For Eligible Institutions Only)
Corporate Trust Services Window BY TELEPHONE:
New York, New York 10286 (212) 815-4444
Attention: Reorganization Section
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
<PAGE>2
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the
Letter of Transmittal for Guarantee of Signatures.
<PAGE>
<PAGE>1
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes
indicated below, upon the terms and subject to the conditions contained in
the Prospectus dated ___________, 1997 of L-3 Communications Corporation (the
"Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
NAME AND ADDRESS
OF
REGISTERED HOLDER
AS IT CERTIFICATE
APPEARS ON THE NUMBER(S) PRINCIPAL AMOUNT
NAME OF TENDERING OLD NOTES OF OLD NOTES OF OLD NOTES
HOLDER (PLEASE PRINT) TENDERED TENDERED
- ----------------- ----------------- ----------------- -----------------
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
_________________ _________________ _________________ _________________
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act
of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at
one of its addresses set forth above, the certificates representing the Old
Notes (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at the book-entry transfer facility), together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, and any other documents
required by the Letter of Transmittal within three business days after the
Expiration Date (as defined in the Prospectus and the Letter of Transmittal).
Name of Firm: (Authorized Signature)
____________________________________
____________________________________ ____________________________________
Address: Title: _____________________________
____________________________________
________________________Zip Code_____ Name: _____________________________
(Please type or print)
Area Code and Telephone No.: Date:
____________________________________ ____________________________________
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
