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                                                                  EXECUTION COPY

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                            ASSET PURCHASE AGREEMENT

                                 relating to the

                             HONEYWELL TCAS BUSINESS

                                  by and among

                                 HONEYWELL INC.,

                         L-3 COMMUNICATIONS CORPORATION

                                      and,

                solely in respect of the guaranty in article xiv,

                          HONEYWELL INTERNATIONAL INC.

                          dated as of February 10, 2000


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                          TCAS Asset Purchase Agreement

                               TABLE OF CONTENTS


ARTICLE I                  DEFINITIONS.......................................1
         Section 1.1.      Acquisition Agreements............................1
         Section 1.2.      Affiliate.........................................1
         Section 1.3.      Assumed Liabilities...............................1
         Section 1.4.      Assumption Agreement..............................2
         Section 1.5.      Bill of Sale......................................2
         Section 1.6.      Break-Up Fee Letter Agreement.....................2
         Section 1.7.      Business..........................................2
         Section 1.8.      Business Intellectual Property Assets.............2
         Section 1.9.      Buyer's Plan......................................2
         Section 1.10.     Buyer's Savings Plans.............................2
         Section 1.11.     Cash Purchase Price...............................2
         Section 1.12.     Closing and Closing Date..........................2
         Section 1.13.     Closing Date Net Assets...........................2
         Section 1.14.     Closing Date Transferred Employees................2
         Section 1.15.     Closing Statement of Net Assets...................2
         Section 1.16.     Code..............................................2
         Section 1.17.     Confidential Attachment A.........................2
         Section 1.18.     Consent...........................................2
         Section 1.19.     Consent Decree....................................3
         Section 1.20.     Contracts.........................................3
         Section 1.21.     DOD...............................................3
         Section 1.22.     DOJ...............................................3
         Section 1.23.     Employee..........................................3
         Section 1.24.     Environmental Laws................................3
         Section 1.25.     Environmental Liabilities and Costs...............3
         Section 1.26.     Excluded Assets...................................3
         Section 1.27.     Excluded Liabilities..............................3
         Section 1.28.     Files and Records.................................3
         Section 1.29.     Final Closing Statement of Net Assets.............3
         Section 1.30.     Financial Statements..............................3
         Section 1.31.     GAAP..............................................3
         Section 1.32.     Government Approval...............................4
         Section 1.33.     Governmental Body.................................4
         Section 1.34.     Government Contract...............................4
         Section 1.35.     Hazardous Substance...............................4
         Section 1.36.     HI TCAS Products..................................4
         Section 1.37.     Hold Separate Order...............................4
         Section 1.38.     Initial Transfer Amount...........................4
         Section 1.39.     Including.........................................4
         Section 1.40.     Intellectual Property Agreement...................4
         Section 1.41.     Inventories.......................................4

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                          TCAS Asset Purchase Agreement

         Section 1.42.     Leased Employees..................................4
         Section 1.43.     Legal Requirement.................................4
         Section 1.44.     Liens.............................................5
         Section 1.45.     Losses............................................5
         Section 1.46.     Material Adverse Effect...........................5
         Section 1.47.     Non-U.S. Transferred Employees....................5
         Section 1.48.     Permitted Liens...................................5
         Section 1.49.     Person............................................5
         Section 1.50.     Post-Closing Retirees.............................5
         Section 1.51.     Post-Closing Transferred Employees................5
         Section 1.52.     Prepaid Expenses..................................5
         Section 1.53.     Proceeding........................................5
         Section 1.54.     Proprietary Information Agreement.................5
         Section 1.55.     Purchased Assets..................................5
         Section 1.56.     Purchased Tangible Personal Property..............6
         Section 1.57.     Release...........................................6
         Section 1.58.     Representative....................................6
         Section 1.59.     Resolution Period.................................6
         Section 1.60.     SEC...............................................6
         Section 1.61.     Seller Retiree Welfare Plans......................6
         Section 1.62.     Seller's Continuing TCAS Business.................6
         Section 1.63.     Seller's Knowledge................................6
         Section 1.64.     Services Agreement................................6
         Section 1.65.     Solectron.........................................6
         Section 1.66.     Statement of Net Assets...........................6
         Section 1.67.     Supplemental Agreement............................6
         Section 1.68.     Supply Agreement..................................6
         Section 1.69.     Support Employees.................................6
         Section 1.70.     Tangible Personal Property........................7
         Section 1.71.     Target Net Assets.................................7
         Section 1.72.     Tax or Taxes......................................7
         Section 1.73.     TCAS..............................................7
         Section 1.74.     Transfer Amount...................................7
         Section 1.75.     Transferred Employees.............................7
         Section 1.76.     True-Up Amount....................................7
         Section 1.77.     True-Up Date......................................7
         Section 1.78.     Warranty Claim....................................7
         Section 1.79.     WARN Act..........................................7

ARTICLE II                 PURCHASE AND SALE.................................7
         Section 2.1.      Closing...........................................7
         Section 2.2.      Purchase and Sale of Assets.......................7
         Section 2.3.      Excluded Assets...................................9
         Section 2.4.      Non-Assignable Assets.............................9
         Section 2.5.      Purchase Price; Payment..........................10
         Section 2.6.      Assumption of Liabilities........................10

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         Section 2.7.      Excluded Liabilities.............................11
         Section 2.8.      Allocation of Cash Purchase Price................12
         Section 2.8A.     Estimated Cash Purchase Price Adjustment.........13
         Section 2.9.      Cash Purchase Price Adjustment...................13

ARTICLE III                REPRESENTATIONS AND WARRANTIES OF SELLER.........16
         Section 3.1.      Organization.....................................16
         Section 3.2.      Authorization; Enforceability....................16
         Section 3.3.      Financial Statements.............................17
         Section 3.4.      No Conflicts.....................................17
         Section 3.5.      Title............................................17
         Section 3.6.      Purchased Tangible Personal Property.............17
         Section 3.7.      Taxes............................................18
         Section 3.8.      Labor Matters....................................18
         Section 3.9.      Employee Benefit Plans...........................18
         Section 3.10.     Employee Benefit Plan Matters....................19
         Section 3.11.     Compliance With Legal Requirements...............20
         Section 3.12.     Environmental Matters............................20
         Section 3.13.     Legal Proceedings; Orders........................20
         Section 3.14.     Absence of Certain Changes and Events............21
         Section 3.15.     Intellectual Property Assets.....................21
         Section 3.16.     Contracts........................................21
         Section 3.17.     Insurance........................................22
         Section 3.18.     Brokerage........................................22
         Section 3.19.     Undisclosed Liabilities..........................22
         Section 3.20.     Real Estate......................................22
         Section 3.21.     Year 2000........................................22
         Section 3.22.     Government Contracts.............................23
         Section 3.23.     Government Furnished Equipment...................24
         Section 3.24.     Affiliate Transactions...........................24
         Section 3.25.     Entire Business..................................24
         Section 3.26.     No Additional Representations....................25

ARTICLE IV                 REPRESENTATIONS AND WARRANTIES OF BUYER..........25
         Section 4.1.      Organization.....................................25
         Section 4.2       Authorization....................................25
         Section 4.3.      No Conflicts.....................................25
         Section 4.4.      Brokerage........................................26
         Section 4.5.      Sufficient Funds.................................26

ARTICLE V                  COVENANTS OF SELLER..............................26
         Section 5.1.      Access and Investigation.........................26
         Section 5.2.      Conduct of Business..............................26
         Section 5.3.      Required Approvals...............................29
         Section 5.4.      No Negotiation...................................29
         Section 5.5.      Additional Information...........................29

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         Section 5.6.      Workers' Compensation............................29
         Section 5.7.      SEC Financial Reporting..........................29
         Section 5.8.      No Inconsistent Action...........................30
         Section 5.9.      Notices of Certain Events........................30
         Section 5.10.     Reasonable Efforts...............................30
         Section 5.11.     Break-Up Fee.....................................31

ARTICLE VI                 COVENANTS OF BUYER...............................31
         Section 6.1.      Required Approvals...............................31
         Section 6.2.      Non Solicitation; Non-Interference...............31
         Section 6.3.      Board Approval...................................31
         Section 6.4.      Reasonable Efforts...............................31

ARTICLE VII                CONDITIONS TO BUYER'S OBLIGATIONS................31
         Section 7.1.      Accuracy of Representations and Warranties.......32
         Section 7.2.      Seller's Performance.............................32
         Section 7.3.      Officer's Certificate............................32
         Section 7.4.      Governmental Approvals...........................32
         Section 7.5.      No Injunctions, Etc..............................32
         Section 7.6.      Consents.........................................32
         Section 7.7.      Conveyances......................................32
         Section 7.8.      Board Approval...................................33
         Section 7.9.      Other Agreements.................................33
         Section 7.10.     Non-Exercise of First Refusal Rights.............33

ARTICLE VIII               CONDITIONS TO SELLER'S OBLIGATIONS...............33
         Section 8.1.      Accuracy of Representations and Warranties.......33
         Section 8.2.      Buyer's Performance..............................33
         Section 8.3.      Officer's Certificate............................33
         Section 8.4.      Governmental Approvals...........................33
         Section 8.5.      No Injunctions, Etc..............................34
         Section 8.6.      Purchase Price...................................34
         Section 8.7.      Other Agreements.................................34

ARTICLE IX                 POST-CLOSING COVENANTS...........................34
         Section 9.1.      Further Assurances...............................34
         Section 9.2.      Retention of Records.............................34
         Section 9.3.      Names............................................35
         Section 9.4.      Supply Contracts.................................35
         Section 9.5.      Research and Experimental Expenses...............36
         Section 9.6.      Novation of Government Contracts.................36
         Section 9.7.      Cooperation in Litigation........................36
         Section 9.8.      Mail; Payments...................................37
         Section 9.9.      Insurance........................................37
         Section 9.10.     Non-Solicitation.................................37
         Section 9.11.     Additional Post-Closing Covenants................37

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                          TCAS Asset Purchase Agreement

         Section 9.12.     Buyer's References to the Business...............39
         Section 9.13.     Use of Seller Aircraft...........................39
         Section 9.14.     New Contracts....................................39
         Section 9.15.     Certain Other Matters............................40
         Section 9.16.     Relocation of the Business.......................40
         Section 9.17.     Post-Closing Warranty Expense....................40
         Section 9.18.     Manufacture and Supply of HI TCAS Products.......41

ARTICLE X                  PENSION, EMPLOYEE AND UNION MATTERS..............41
         Section 10.1.     Scope of Article.................................41
         Section 10.2.     Employment.......................................41
         Section 10.3.     Pension Plans....................................43
         Section 10.4.     Savings Plans....................................45
         Section 10.5.     Retiree Health and Life Insurance Benefits.......46
         Section 10.6.     Employee Welfare Plans...........................46
         Section 10.7.     Severance and WARN Act Liability.................47
         Section 10.8.     Health Care Continuation Coverage................47
         Section 10.9.     Post-Closing Retirees............................47
         Section 10.10.    Support Employees................................48

ARTICLE XI                 TERMINATION AND ABANDONMENT......................48
         Section 11.1.     Termination......................................48
         Section 11.2.     Effect of Termination............................49

ARTICLE XII                INDEMNIFICATION..................................49
         Section 12.1.     Indemnity by Seller..............................49
         Section 12.2.     Indemnity by Buyer...............................49
         Section 12.3.     Tax Indemnification..............................50
         Section 12.4.     Indemnification Procedure........................50
         Section 12.5.     Limitations......................................51
         Section 12.6.     Indemnification Sole Remedy......................51

ARTICLE XIII               MISCELLANEOUS....................................52
         Section 13.1.     Expenses.........................................52
         Section 13.2.     Public Announcements.............................52
         Section 13.3.     Confidentiality..................................52
         Section 13.4.     Notices..........................................52
         Section 13.5.     Survival.........................................53
         Section 13.6.     Entire Agreement.................................53
         Section 13.7.     Waiver and Amendment.............................54
         Section 13.8.     No Third Party Beneficiary.......................54
         Section 13.9.     Severability.....................................54
         Section 13.10.    Headings and Interpretation......................54
         Section 13.11.    Governing Law and Jurisdiction...................54
         Section 13.12.    Assignment.......................................55
         Section 13.13.    Taxes............................................55

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         Section 13.14.    Bulk Transfer Laws...............................55
         Section 13.15.    Attorneys' Fees..................................55
         Section 13.16.    Waiver of Trial by Jury..........................55
         Section 13.17.    Counterparts.....................................56
         Section 13.18.    Consent Decree...................................56

ARTICLE XIV                GUARANTY ........................................57
         Section 14.1.     Guaranty.........................................57
         Section 14.2.     No Modification..................................57
         Section 14.3.     Absolute Guaranty................................57
         Section 14.4.     No Effect of Assignment..........................57

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                          TCAS Asset Purchase Agreement

                                    Exhibits

Exhibit A      Consent Decree (excluding Confidential Attachment A)
Exhibit B      Intellectual Property Assignment and License Agreement
Exhibit C      Transitional Services Agreement
Exhibit D      Proprietary Information Exchange Agreement
Exhibit E      Supply Agreement
Exhibit F      Break-Up Fee Letter Agreement
Exhibit G      Supplemental Agreement

                                    Schedules

1.63           Seller's Knowledge
2.2(c)         Purchased Tangible Personal Property
2.2(g)         Records Retained by Seller
2.3            Excluded Assets
3.3            Financial Statements
3.4            No Conflicts
3.6            Condition of Assets
3.8            Labor Matters
3.9            Employee Benefit Plans
3.10           Employee Benefit Plan Matters
3.11           Compliance with Legal Requirements
3.12           Environmental Matters
3.13           Legal Proceedings; Orders
3.14           Absence of Certain Changes and Events
3.16           Contracts
3.17           Insurance
3.20           Real Estate
3.22           Government Contracts
3.23           Government Furnished Equipment
3.24           Affiliate Transactions
3.25           Declined Assets and Services
7.6            Consents
9.11(a)        Announcement List
9.13           Use of Seller Aircraft
10.2(a)        Employees
10.2(b)(1)     Employees Employed Outside the U.S.
10.2(b)(4)     Retention Agreements
10.2(d)        Leased Employees
10.3(b)        Pension Plans
10.5           Retiree Health and Life Insurance Benefits



                                       vii

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                                                                  EXECUTION COPY

                            ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of the 10th day
of February, 2000, by and between, Honeywell Inc. ("Seller"), a Delaware
corporation, and L-3 Communications Corporation ("Buyer"), a Delaware
corporation, and, solely for purposes of Article XIV, Honeywell International
Inc. ("Parent"), a Delaware corporation.

                              W I T N E S S E T H:

     WHEREAS, Buyer wishes to purchase or acquire from Seller, and Seller wishes
to sell to Buyer, all of the Purchased Assets (as defined herein) (but not the
Excluded Assets as defined herein), and Buyer has agreed to assume the Assumed
Liabilities of the Business (but not the Excluded Liabilities as defined
herein), all for the purchase price and upon the terms and subject to the
conditions hereinafter set forth; and

     WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Seller and Buyer are entering into the Intellectual Property
Agreement (as defined herein);

     NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties made herein and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged, the
parties hereto agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

     The following terms, when used in this Agreement, shall have the meanings
indicated below. Other terms are defined throughout this Agreement.

     SECTION 1.1. Acquisition Agreements shall mean this Agreement, the
Intellectual Property Agreement, the Services Agreement, the Supply Agreement,
the Proprietary Information Exchange Agreement, the Assumption Agreement, the
Bill of Sale, the Break-Up Fee Letter Agreement, the Supplemental Agreement and
any other agreements or instruments which are executed in connection with this
Agreement in order to effectuate the transfer of any of the Purchased Assets or
the assumption of any of the Assumed Liabilities (collectively, the "Acquisition
Agreements").

     SECTION 1.2. Affiliate shall mean, with respect to any Person, a Person
that, directly or indirectly, through one or more intermediaries, has control
of, is controlled by, or is under common control with such Person. For these
purposes, "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management of any Person, whether through
the ownership of voting securities, by contract or otherwise.

     SECTION 1.3. Assumed Liabilities shall have the meaning ascribed to such
term in Section 2.6 hereof.
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                          TCAS Asset Purchase Agreement

     SECTION 1.4. Assumption Agreement shall mean the Assumption Agreement to be
entered into between Buyer and Seller at the Closing with respect to the
assumption of the Assumed Liabilities, in form and substance reasonably
satisfactory to Buyer and Seller.

     SECTION 1.5. Bill of Sale shall mean the Bill of Sale to be given by Seller
to Buyer at the Closing with respect to the sale of the Purchased Assets, in
form and substance reasonably satisfactory to Buyer and Seller.

     SECTION 1.6. Break-Up Fee Letter Agreement shall mean the letter agreement
between Buyer and Seller dated February 1, 2000 a copy of which is attached
hereto as Exhibit F.

     SECTION 1.7. Business shall mean the TCAS business of Seller as generally
described in and currently held separate under the Consent Decree.

     SECTION 1.8. Business Intellectual Property Assets shall have the meaning
ascribed to such term in the Intellectual Property Agreement.

     SECTION 1.9. Buyer's Plan shall have the meaning ascribed to such term in
Section 10.3 hereof.

     SECTION 1.10. Buyer's Savings Plans shall have the meaning ascribed to such
term in Section 10.4 hereof.

     SECTION 1.11. Cash Purchase Price shall have the meaning ascribed to such
term in Section 2.5 hereof.

     SECTION 1.12. Closing and Closing Date shall have the meanings ascribed to
such terms in Section 2.1 hereof.

     SECTION 1.13. Closing Date Net Assets shall have the meaning ascribed to
such term in Section 2.9(a) hereof.

     SECTION 1.14. Closing Date Transferred Employees shall have the meaning
ascribed to such term in Section 10.2(a) hereof.

     SECTION 1.15. Closing Statement of Net Assets shall have the meaning
ascribed to such term in Section 2.9(b) hereof.

     SECTION 1.16. Code shall mean the Internal Revenue Code of 1986, as
amended.

     SECTION 1.17. Confidential Attachment A shall mean Confidential Attachment
A to the Consent Decree.

     SECTION 1.18. Consent shall mean any consent, approval, authorization,
waiver, permit, grant, franchise, concession, agreement, license, exemption or
order of, registration, certificate, declaration or filing with, or report or
notice to, or novation agreement with, any Person, including any Governmental
Body.

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                          TCAS Asset Purchase Agreement

     SECTION 1.19. Consent Decree shall mean the proposed Final Judgment in
United States of America v. AlliedSignal Inc. and Honeywell Inc. a copy of which
is attached hereto as Exhibit A.

     SECTION 1.20. Contracts shall mean all leases, agreements, contracts,
purchase orders and other legally binding commitments, whether written or oral,
relating to the Business that are in effect on the Closing Date. The term
"Contracts" shall not include employee benefit plans.

     SECTION 1.21. DOD shall mean the United States Department of Defense.

     SECTION 1.22. DOJ shall mean the United States Department of Justice.

     SECTION 1.23. Employee shall have the meaning ascribed to such term in
Section 10.2(a).

     SECTION 1.24. Environmental Laws shall mean any and all Legal Requirements
relating to the protection of the environment, to human health and safety, or to
any emission, discharge, generation, processing, storage, holding, abatement,
existence, Release, threatened Release, arranging for the disposal or
transportation of any Hazardous Substances.

     SECTION 1.25. Environmental Liabilities and Costs shall mean any and all
losses, expenses or damages: (a) relating to, or resulting from, the alleged
presence of Hazardous Substances in the environment in quantities or
concentrations exceeding those allowed pursuant to any Environmental Law,
including claims for diminution of property value, personal injury or property
damages; (b) imposed by, under or pursuant to Environmental Laws, based on,
arising out of or otherwise in respect of (i) any real property owned, leased or
operated by Seller in connection with the Business, or (ii) the environmental
conditions existing on the Closing Date on, under or above any real property
owned, leased or operated by Seller in connection with the Business.

     SECTION 1.26. Excluded Assets shall have the meaning ascribed to such term
in Section 2.3 hereof.

     SECTION 1.27. Excluded Liabilities shall have the meaning ascribed to such
term in Section 2.7 hereof.

     SECTION 1.28. Files and Records shall have the meaning ascribed to such
term in Section 2.2(g) hereof.

     SECTION 1.29. Final Closing Statement of Net Assets shall have the meaning
ascribed to such term in Section 2.9(d) hereof.

     SECTION 1.30. Financial Statements shall have the meaning ascribed to such
term in Section 3.3 hereof.

     SECTION 1.31. GAAP shall mean generally accepted U.S. accounting
principles, applied in the case of the TCAS Business on a basis consistent with
the basis on which the Statement of Net Assets and the other Financial
Statements were prepared.

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                          TCAS Asset Purchase Agreement

     SECTION 1.32. Government Approval shall mean any Consent of, with or to any
Governmental Body.

     SECTION 1.33. Governmental Body shall mean any federal, state, local,
foreign or other governmental or administrative authority, board, commission,
body, instrumentality, department or agency or any court, tribunal,
administrative hearing, arbitration panel, commission or similar dispute
resolving panel or body, or any self-regulatory organization.

     SECTION 1.34. Government Contract shall mean any contract relating to the
Business between Seller and (i) the U.S. Government or any non-U.S. government,
(ii) any prime contractor of the U.S. Government or any non-U.S. government, or
(iii) any subcontractor at any tier with respect to any contract described in
clauses (i) and (ii) above.

     SECTION 1.35. Hazardous Substance shall mean any substance that: (i)
requires investigation, removal or redemption under any Environmental Law, or is
defined, listed or identified as a "hazardous waste", "hazardous material",
"toxic substance", "contaminant", "pollutant", "oil" or "hazardous substance"
thereunder; or (ii) is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated as
such under any Environmental Law.

     SECTION 1.36. HI TCAS Products shall mean the products of the Business as
they may exist from time to time.

     SECTION 1.37. Hold Separate Order shall mean the Hold Separate Stipulation
and Order referred to in Section VIII of the Consent Decree.

     SECTION 1.38. Initial Transfer Amount shall have the meaning ascribed to
such term in Section 10.3 (c) hereof.

     SECTION 1.39. Including and words of similar import when used in this
Agreement shall mean "including, without limitation", unless otherwise
specified.

     SECTION 1.40. Intellectual Property Agreement shall mean the Intellectual
Property Assignment and License Agreement to be entered into between Parent and
Buyer at the Closing, substantially in the form of Exhibit B attached hereto.

     SECTION 1.41. Inventories shall have the meaning ascribed to such term in
Section 2.2(d) hereof.

     SECTION 1.42. Leased Employees shall have the meaning ascribed to such term
in Section 10.2(d) hereof.

     SECTION 1.43. Legal Requirement shall mean (i) any federal, state, local,
foreign or other administrative order, constitution, law (including common law),
ordinance, regulation or statute, (ii) Governmental Approvals, and (iii) orders,
decisions, injunctions, judgments, awards and decrees of or agreements,
specifically naming or applicable to the relevant Person, with any Governmental
Body.

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                          TCAS Asset Purchase Agreement

     SECTION 1.44. Liens shall mean any and all mortgages, pledges, liens,
security interests, options, claims, easements, defects and other restrictions,
limitations and encumbrances.

     SECTION 1.45. Losses shall have the meaning ascribed to such term in
Section 12.1 hereof.

     SECTION 1.46. Material Adverse Effect shall mean a material adverse effect
on (i) the operations, condition, results of operations, properties, assets,
liabilities, or business of Seller in relation to the Business, taken as a
whole, or (ii) the ability of Seller or any of its Affiliates to perform its
obligations under any of the Acquisition Agreements to which it is a party.

     SECTION 1.47. Non-U.S. Transferred Employees shall have the meaning
ascribed to such term in Section 10.2(e) hereof.

     SECTION 1.48. Permitted Liens shall mean (i) liens for taxes not yet due
and payable or being contested in good faith for which adequate reserves are
being maintained in accordance with GAAP, and (ii) encumbrances that do not
have, and are not reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect on the value of the Purchased Assets subject thereto
or the ability of Seller or Buyer to conduct the Business as it is now being
conducted.

     SECTION 1.49. Person shall mean any individual, corporation (including any
nonprofit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.

     SECTION 1.50. Post-Closing Retirees shall have the meaning ascribed to such
term in Section 10.9 hereof.

     SECTION 1.51. Post-Closing Transferred Employees shall have the meaning
ascribed to such term in Section 10.2(a) hereof.

     SECTION 1.52. Prepaid Expenses shall have the meaning ascribed to such term
in Section 2.2(a) hereof.

     SECTION 1.53. Proceeding shall mean any action, writ, injunction, decree,
order, judgment, claim, proceeding, directive, arbitration, investigation,
litigation, or suit (including any civil, criminal, administrative,
investigative, or appellate proceeding) commenced, brought, conducted, or heard
by or before any Governmental Body.

     SECTION 1.54. Proprietary Information Agreement shall mean the Proprietary
Information Exchange Agreement to be entered into between Seller and Buyer at
the Closing, substantially in the form of Exhibit D attached hereto.

     SECTION 1.55. Purchased Assets shall have the meaning ascribed to such term
in Section 2.2 hereof.

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                          TCAS Asset Purchase Agreement

     SECTION 1.56. Purchased Tangible Personal Property shall have the meaning
ascribed to such term in Section 2.2(c) hereof.

     SECTION 1.57. Release shall mean any releasing, disposing, discharging,
injecting, spilling, leaking, leaching, pumping, dumping, emitting, escaping,
emptying, seeping, dispersal, migration, transporting, placing and the like,
including the moving of any materials through, into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment.

     SECTION 1.58. Representative shall mean with respect to a particular
Person, any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.

     SECTION 1.59. Resolution Period shall have the meaning ascribed to such
term in Section 2.9(c) hereof.

     SECTION 1.60. SEC shall have the meaning ascribed to such term in Section
5.7

     SECTION 1.61. Seller Retiree Welfare Plans shall have the meaning ascribed
to such term in Section 10.9 hereof.

     SECTION 1.62. Seller's Continuing TCAS Business shall mean the TCAS
business owned and operated by Parent.

     SECTION 1.63. Seller's Knowledge, and words or phrases of similar import,
shall mean the knowledge after due inquiry of any executive officer of Seller or
Parent or any other individual named on Schedule 1.63 hereto.

     SECTION 1.64. Services Agreement shall mean the Transition Services
Agreement to be entered into between Seller and Buyer at the Closing,
substantially in the form of Exhibit C attached hereto.

     SECTION 1.65. Solectron shall have the meaning set forth in Section 2.7(f).

     SECTION 1.66. Statement of Net Assets shall have the meaning ascribed to
such term in Section 3.3 hereof.

     SECTION 1.67. Supplemental Agreement shall mean the Supplemental Agreement
to be entered into between Seller and Buyer at the Closing, substantially in
form of Exhibit G attached hereto.

     SECTION 1.68. Supply Agreement shall mean the Supply Agreement to be
entered into between Seller and Buyer at the Closing, substantially in the form
of Exhibit E attached hereto.

     SECTION 1.69. Support Employees shall have the meaning ascribed to such
term in Section 10.10 hereof.

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     SECTION 1.70. Tangible Personal Property shall mean machinery, equipment,
tools, dies and molds and other tangible personal property (including tooling,
test equipment, work stations and data processing equipment).

     SECTION 1.71. Target Net Assets shall have the meaning ascribed to such
term in Section 2.9(a) hereof.

     SECTION 1.72. Tax or Taxes shall mean all income, gross receipts, sales,
use, stock transfer, excise, bulk transfer, use, employment, franchise, profits,
property, value added or other taxes, fees, stamp taxes and duties, assessments,
levies or charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority (federal, state, local, provincial or foreign) with respect thereto.

     SECTION 1.73. TCAS shall mean "traffic alert and collision avoidance
systems".

     SECTION 1.74. Transfer Amount shall have the meaning ascribed to such term
in Section 10.3(b) hereof.

     SECTION 1.75. Transferred Employees shall have the meaning ascribed to such
term in Section 10.2(a).

     SECTION 1.76. True-Up Amount shall have the meaning ascribed to such term
in Section 10.3(c).

     SECTION 1.77. True-Up Date shall have the meaning ascribed to such term in
Section 10.3(c).

     SECTION 1.78. Warranty Claim shall have the meaning ascribed to such term
in Section 9.17 hereof.

     SECTION 1.79. WARN Act shall mean the Worker Adjustment and Retraining
Notification Act of 1988, as amended.

                                   ARTICLE II
                                PURCHASE AND SALE

     SECTION 2.1. Closing. Subject to the conditions set forth herein, the
consummation of the purchase and sale contemplated by this Agreement (the
"Closing") shall take place at 10:00 a.m. (New York City time), on the date
which is five business days after the fulfillment of the conditions set forth in
Sections 7.4 and 8.4 hereof or at such other time, date, or place, as Buyer and
Seller may agree, at the offices of Whitman Breed Abbott & Morgan LLP, 200 Park
Avenue, New York, New York. The parties shall endeavor to hold the Closing on or
before February 29, 2000. The date on which the Closing shall take place is
referred to as the "Closing Date." The Closing shall be deemed to be effective
as of 11:59 p.m. (New York City time) on the Closing Date.

     SECTION 2.2. Purchase and Sale of Assets. Subject to and upon the terms and
conditions set forth in this Agreement and the other Acquisition Agreements, at
the Closing,


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Seller will sell, set over, convey, transfer, assign and deliver to Buyer, and
Buyer will purchase from Seller, all of Seller's right, title and interest in
and to any of and all of their respective properties, assets and rights of every
nature, kind and description, tangible and intangible (including goodwill),
whether real, personal or mixed, whether accrued, contingent or otherwise and
whether now existing or hereinafter acquired (other than the Excluded Assets)
used exclusively or primarily in relation to the Business, as the same may exist
on the Closing Date (collectively, the "Purchased Assets"), including, without
limitation, the following Purchased Assets:

     (a) All of the deposits of Seller, prepaid assets, prepaid expenses,
credits and deferred charges existing on the accounting records of Seller as of
the Closing Date, except to the extent relating to items specified in Section
2.3 hereof (the "Prepaid Expenses");

     (b) [Deliberately omitted]

     (c) All Tangible Personal Property listed on Schedule 2.2(c) hereto (other
than items disposed of prior to the Closing in accordance with Section 5.2
hereof) (collectively, the "Purchased Tangible Personal Property");

     (d) All inventories of raw materials, goods, spare parts, replacement and
component parts, and office and other supplies (whether on hand, in-transit or
on order) (collectively, the "Inventories");

     (e) All rights of the Business under all Contracts except (i) those set
forth on Schedule 3.16 as Contracts retained by Seller and (ii) set forth on
Exhibit A to the Supply Agreement;

     (f) All Business Intellectual Property Assets, except to the extent set
forth in the Intellectual Property Agreement as being retained by Seller),
subject to the terms of the Intellectual Property Agreement;

     (g) All papers, books and records in Seller's care, custody or control to
the extent relating to any or all of the Purchased Assets or to the operations
of the Business, whether in hard copy, magnetic tape or other format or media,
including, without limitation, customer and prospective customer files, vendor
and prospective vendor files, maintenance records, warranty and customer support
obligation records, sales and advertising material, documentation,
specifications, technical manuals, outstanding proposals, accounting and
financial records, price lists, personnel records for Transferred Employees to
the extent permitted by law, manufacturing and quality control, records and
procedures, research and development files, tax records and litigation files,
except for Business Intellectual Property Assets (which are covered by clause
(f) above) and except to the extent indicated on Schedule 2.2(g) hereto as being
retained by Seller (collectively, "Files and Records");

     (h) All of Seller's transferable rights in connection with the Business to
Federal Aviation Administration certifications (including, without limitation,
all Federal Aviation Administration Facility certifications, Federal Aviation
Administration Supplemental Type certificates and Federal Aviation
Administration Parts Manufacturer Authority certificates) and


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any similar certificates, licenses, permits, authorizations and approvals issued
by any foreign Governmental Body;

     (i) All other transferable Governmental Approvals, including all
applications therefor;

     (j) All rights to causes of action, lawsuits, claims and demands of any
nature available to or being pursued by Seller with respect to the Purchased
Assets, the Business or the Assumed Liabilities;

     (k) All transferable rights of Seller pursuant to any express or implied
warranties, representations or guarantees relating to Purchased Tangible
Personal Property or made by suppliers furnishing goods or services to Seller;
and

     (l) All assets reflected on the Final Closing Statement of Net Assets.

     SECTION 2.3. Excluded Assets. There shall be excluded from the Purchased
Assets the following (collectively, the "Excluded Assets"):

     (a) All cash (including without limitation cash overdrafts) and cash
equivalents held by Seller;

     (b) All accounts receivable due to Seller in respect of the Business;

     (c) Except as otherwise provided herein, all trademarks, trade names,
assumed names, service marks, brands and logos of Seller and its Affiliates
(other than all trademarks, tradenames, assumed names, service marks, brands and
logos included in the Business Intellectual Property Assets), together with all
good will associated therewith, and any applications and registrations therefor;

     (d) All real property located at (i) the Glendale, Arizona facility, (ii)
the Phoenix, Arizona facility, (iii) the Ohio Service Center, (iv) the
Basingstoke, UK and Wales support centers, (v) the AOSA Gauting, Germany repair
station or (vi) the Auckland, New Zealand

     (e) All the Files and Records listed as being retained by Seller in
Schedule 2.2(g) hereto;

     (f) All those other excluded assets set forth on Schedule 2.3 hereto;

     (g) All deferred income tax assets as of the Closing Date; and

     (h) All Contracts of Seller identified on Schedule 3.16 hereto as being
retained by Seller.

     SECTION 2.4. Non-Assignable Assets. Notwithstanding anything herein to the
contrary contained in this Agreement, to the extent the sale, assignment,
transfer, conveyance or delivery to Buyer of any Purchased Asset is prohibited
by any Legal Requirement or would require any Consents which shall not have been
obtained prior to the Closing (after Seller's


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reasonable best efforts to obtain them), this Agreement shall not constitute a
sale, assignment, transfer, conveyance or delivery thereof. Following the
Closing, the parties shall use reasonable best efforts and cooperate with each
other to obtain promptly such Consents; provided, however, that Buyer shall not
be required to pay any consideration therefor, other than filing, recordation or
similar fees payable to any Governmental Body. Pending such Consents, the
parties shall cooperate with each other in any commercially reasonable and
lawful arrangements designed to provide to Buyer the benefits of use of the
Purchased Assets in question and, provided Buyer receives such benefit of use
thereof, Buyer shall pay or satisfy the Assumed Liabilities, if any,
corresponding thereto. Once such Consents are obtained, Seller shall promptly
assign, transfer, convey and deliver such Purchased Asset to Buyer for no
additional consideration. To the extent that any such Purchased Asset cannot be
transferred or the full benefits of use of any such Purchased Asset cannot be
provided to Buyer following the Closing, then Buyer and Seller shall enter into
such arrangements for no additional consideration from Buyer (including
subleasing or subcontracting to the extent permitted) to provide Buyer the
economic (taking into account tax costs and benefits) and operational equivalent
of obtaining such Consents.

     SECTION 2.5. Purchase Price; Payment.

     (a) In consideration for the purchase of the Purchased Assets, Buyer will
pay to Seller the Cash Purchase Price as set forth in Section 2.5(b) hereof,
which shall be subject to adjustment as set forth in Sections 2.8A and 2.9
hereof, and Buyer will assume at the Closing the Assumed Liabilities specified
in Section 2.6 hereof.

     (b) Buyer will deliver to Seller at the Closing, the sum of US$255,000,000
(such amount to be provisionally adjusted on the Closing Date pursuant to
Section 2.8A and subsequently adjusted pursuant to Section 2.9 hereof) (subject
to such adjustments, the "Cash Purchase Price") by wire transfer to an account
specified by Seller at least 3 days prior to the Closing.

     SECTION 2.6. Assumption of Liabilities. Subject to the terms and conditions
set forth herein, at and as of the Closing, Buyer will assume, and agree to pay,
perform and discharge all operating liabilities of the Business incurred in the
ordinary course of business consistent with past practice and (except as
provided below) of the nature of those liabilities set forth on the Statement of
Net Assets (except to the extent any of the same are enumerated as Excluded
Liabilities in Section 2.7) (collectively, the "Assumed Liabilities"),
including, without limitation, (i) all liabilities reflected on the Final
Closing Statement of Net Assets, (ii) except as provided in Sections 2.7(b) and
2.7(c), all of the monetary and non-monetary obligations of Seller under the
Contracts (other than those identified on Schedule 3.16 as being retained by
Seller) to be performed, or arising out of acts or omissions after the Closing
Date (including obligations arising from performance of warranty repairs as
contemplated by Section 9.17 below), (iii) all monetary and non-monetary
obligations arising out of or related to claims of product liability (regardless
of whether such claims are stated to be in contract, tort, strict liability or
any other legal theory) in respect of products of the Business that are
designed, developed, manufactured and sold after the Closing Date and (iv) all
liabilities assumed by Buyer in respect of Transferred Employees pursuant to
Article X hereof. Buyer will not assume or agree to pay, perform or discharge
any debt, claim, commitment, liability or obligation of Seller other than the
Assumed Liabilities.

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     SECTION 2.7. Excluded Liabilities. Other than the Assumed Liabilities,
Buyer shall not assume or be responsible for any other debts, claims,
commitments, liabilities or obligations of Seller, any of its Affiliates or the
Business (collectively, the "Excluded Liabilities"). Without limiting the
generality of the foregoing and notwithstanding anything herein that may be to
the contrary, Excluded Liabilities include any and all debts, claims,
commitments, liabilities or obligations of Seller, its Affiliates or the
Business relating to or arising out of any of the following (which shall not
constitute Assumed Liabilities):

     (a) obligations and liabilities for all Taxes relating to the Business for
all periods to and including the Closing Date;

     (b) debts, claims, commitments, obligations and liabilities arising out of
or related to the ownership or operation of the Purchased Assets or the Business
on or prior to the Closing Date (including, but not limited to, the items
referred to in Schedule 3.13);

     (c) all monetary and non-monetary obligations arising out of or related to
claims of product liability (regardless of whether such claims are stated to be
in contract, tort, strict liability or any other legal theory) in respect of
products of the Business that are designed, developed, manufactured or sold on
or prior to the Closing Date, provided that monetary obligations that are caused
by improper or negligent modifications or repairs performed by Buyer after the
Closing Date shall not constitute Excluded Liabilities;

     (d) all liability for sales credits relating to or arising out of the
bundling of sales of avionics products, including TCAS products, that have
occurred, are in backlog or are subject to an outstanding bid as of the Closing
Date;

     (e) all obligations to third Persons for royalty payments relating to TCAS
products sold that are due on or prior to the Closing Date except to the extent
such royalty payments are reserved for in the Final Closing Statement of Net
Assets;

     (f) any liabilities, costs and expenses arising out of the existence, or
the termination by Seller of, any agreement, contract or legally-binding
commitment with Solectron Corporation ("Solectron") that provides for Solectron
to perform circuit card assembly or other services for the Business or any other
business unit of Seller;

     (g) obligations and liabilities related to former Employees of the Business
and Employees who do not become Transferred Employees, including without
limitation all statutory and other liability associated with the termination of
former employees or Employees who do not become Transferred Employees;

     (h) obligations, liabilities, expenses or charges to earnings or reserves
taken in connection with any restructuring program of Seller not reflected in
the Final Closing Statement of Net Assets;

     (i) debt or payables of Seller or any of its Affiliates, including under
any Contract between or among Seller or any of its Affiliates;

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     (j) the Excluded Assets;

     (k) except as otherwise expressly provided in the Acquisition Agreements,
expenses of Seller incurred in connection with the transactions contemplated
hereby or any obligations relating to the transactions contemplated hereby or
thereby (including any and all claims or amounts owed for any brokerage or
finder's fee, commission or similar compensation, or for any bonus payable to
any officer, director, employee, agent, sales representative, relative of or
consultant to Seller or any of its Affiliates upon consummation of the
transactions contemplated hereby);

     (l) debts, obligations, claims, commitments or liabilities whatsoever to
the extent not primarily related to the Business or the Purchased Assets;

     (m) other debts, claims, commitments, obligations and liabilities for which
Seller has expressly assumed responsibility pursuant to this Agreement;

     (n) Environmental Liabilities and Costs (whether or not currently known,
discoverable or regulated by current Environmental Laws) arising from, relating
to, in respect of or incurred in connection with conditions existing or events
occurring on or prior to the Closing Date, including conditions existing at any
current or past facility of the Business and the operations of the Business on
or prior to the Closing Date;

     (o) obligations and liabilities arising out of past, present or future
claims of infringement or misappropriation of intellectual property by the
Business by V. T. Artemov or an heir, representative or assignee thereof;

     (p) all accounts payable for all periods on or prior to the Closing Date;
and

     (q) all deferred income tax liabilities for all periods through (and
including) the Closing Date.

     SECTION 2.8. Allocation of Cash Purchase Price. The parties shall agree to
an allocation of the aggregate of the Cash Purchase Price and the Assumed
Liabilities among the Purchased Assets in accordance with Section 1060 of the
Code within 180 days following the Closing Date. Buyer shall initially prepare
such allocations and deliver them to Seller within 120 days following the
Closing Date. Such allocation shall be (a) based upon appraisal(s) prepared by
independent firm(s) selected by Buyer and approved by Seller (such approval not
to be unreasonably withheld or delayed), and (b) used by each party in preparing
any filings required pursuant to Section 1060 of the Code or any similar
provisions of state or local law and all relevant income and franchise tax
returns. Seller shall have 30 days after receiving the allocations from Buyer to
object to such allocations. Failure to object within such 30-day period shall be
deemed approval by Seller of the allocations. Neither Buyer nor Seller will take
any position before any taxing authority or in any judicial proceeding that is
inconsistent with an agreed upon allocation without the prior consent of the
other party. The parties shall in good faith exercise reasonable efforts to
support such reported allocations in any audit proceedings initiated by any
taxing authority. The cost and expenses of the appraisal(s) referred to above
shall be borne by Buyer. Prior to the Closing, the parties shall agree upon a
preliminary

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allocation of the Cash Purchase Price to the Intellectual Property Assets. Such
preliminary allocation shall be subject to adjustment, and shall be finalized
within 180 days after the Closing Date, based on the appraisal(s) referred to
above.

     SECTION 2.8A. ESTIMATED CASH PURCHASE PRICE ADJUSTMENT. Not later than four
days prior to the Closing Date, Seller shall deliver to Buyer a good faith
estimate of the Closing Date Net Assets. At the Closing, the amount of the Cash
Purchase Price Buyer shall deliver to Seller shall be adjusted by the difference
between such estimate of the Closing Date Net Assets and the Target Assets. If
such estimate exceeds the Target Assets, the amount of the Cash Purchase Price
paid at the Closing shall be increased dollar-for-dollar by the amount of such
excess, and if such estimate is less than the Target Assets, the amount of the
Cash Purchase Price paid at the Closing shall be decreased dollar-for-dollar by
such shortfall. The Cash Purchase Price shall thereafter be subject to further
adjustment as provided in Section 2.9.

     SECTION 2.9. Cash Purchase Price Adjustment.

     (a) Calculation of Adjustment. The amount of the Cash Purchase Price, as
provisionally adjusted pursuant to Section 2.8A, shall be: (i) increased
dollar-for-dollar by the amount that the Closing Date Net Assets are greater
than $22.1 million (the "Target Net Assets"); or (ii) decreased
dollar-for-dollar by the amount that the Closing Date Net Assets are less than
the Target Net Assets. The term "Closing Date Net Assets" means the excess of
the Purchased Assets set forth on the Final Closing Statement of Net Assets over
the Assumed Liabilities set forth on the Final Closing Statement of Net Assets,
determined in accordance with the procedures set forth in Section 2.9(b). The
amount of any decrease or increase to the Cash Purchase Price pursuant to this
Section 2.9(a), plus simple interest thereon from and including the Closing Date
to but excluding the date of payment at the rate of 8.5% per annum, shall be
paid by Buyer to Seller (in the case of an increase in the Cash Purchase Price),
or by Seller to Buyer (in the case of a decrease in the Cash Purchase Price), in
either case by wire transfer in immediately available funds within five business
days after the Final Closing Statement of Net Assets is agreed to by Seller and
Buyer or is determined by the Neutral Auditor in accordance with this Section
2.9.

     (b) Preparation of Closing Statement of Net Assets. As soon as practicable,
and in any event within 60 days after the Closing Date, Seller shall prepare and
deliver to Buyer a statement of net assets for the Business consisting of the
Purchased Assets and the Assumed Liabilities, as of the close of business on the
Closing Date determined on a pro forma basis as if the parties hereto had not
consummated the transactions contemplated by this Agreement (the "Closing
Statement of Net Assets"), to be prepared as set forth in this Section 2.9(b).
The Closing Statement of Net Assets shall be prepared applying GAAP on a basis
consistent with the Financial Statements (including the Statement of Net Assets)
through full application of the policies and procedures used in preparing the
Financial Statements (including the Statement of Net Assets), except as modified
or set forth in subparagraphs (i) through (vi) below in this Section 2.9(b);
provided, however, that there shall be no accrual on the Closing Statement of
Net Assets for Excluded Assets or Excluded Liabilities:

          (i) Adjustment of Reserves and Valuation Accounts. The amount of any
     reserve or valuation accounts shall be determined by applying methods,
     practices, assumptions,


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     policies, factors and underlying data consistent with those used in
     determining the reserves or valuation accounts included in the Statement of
     Net Assets, and there shall be no changes made to any reserves or valuation
     accounts (including contract reserves, purchase accounting reserves,
     allowances for bad debts, inventory reserves of any kind, warranty reserves
     and other reserves), except to the extent that such changes are required by
     changes in facts and events occurring after September 30, 1999 and on or
     before the Closing Date. It is further understood and agreed that there
     shall be no increase in the Closing Date Net Assets as a result of
     reversal, reduction or other usage of reserves unless such reversal,
     reduction or usage arises out of facts or events that occur after September
     30, 1999 and on or before the Closing Date. In connection with subparagraph
     (vii) below in this Section 2.9(b), it is further understood and agreed
     that there should be no increase in reserves and valuation amounts or
     write-down of Purchased Assets during the period between September 30, 1999
     and the Closing Date which are recorded as purchase accounting adjustments
     with corresponding adjustments to goodwill. It is further understood and
     agreed that there shall be no increase in Closing Date Net Assets as a
     result of the reversal of any general, unspecified, unsubstantiated
     contingency or management reserve, after September 30, 1999 and on or
     before the Closing Date, that was (i) included in the determination of
     Target Net Assets and (ii) not disclosed as such by Seller to Buyer during
     Buyer's due diligence of the Business.

          (ii) Adjustment of Liability and Accrual Accounts. The amount of all
     liability and accrual accounts shall be determined by applying methods,
     practices, assumptions, policies, factors and underlying data consistent
     with those used in determining the liability and accrual accounts included
     in the Statement of Net Assets, and there shall be no changes made to any
     liability and accrual accounts, except to the extent that such changes are
     required by changes in facts and events occurring after September 30, 1999
     and on or before the Closing Date. The Closing Statement of Net Assets
     shall reflect an accrual for warranty of $3,000,000. It is further
     understood that there shall be no increase in the Closing Date Net Assets
     as a result of reversals or reductions of liability and accrual accounts,
     unless such reversal or reduction arises out of facts or events that occur
     after September 30, 1999 and on or before the Closing Date; provided,
     however, that if such facts causing the reversal or reductions also did
     apply, were known or should have been known as of September 30, 1999, the
     reversals or reductions also shall be made to the Statement of Net Assets
     for purposes of increasing the Target Net Assets.

          (iii) Accounting For Certain Assumed Liabilities. The Closing
     Statement of Net Assets shall include liabilities for Assumed Liabilities
     that accrue from the date of the Statement of Net Assets to the Closing
     Date either because of the passage of time or the achievement or reasonably
     expected achievement of a performance measurement, even if such liabilities
     were not included in the Statement of Net Assets. Examples of these types
     of liabilities include, but are not limited to, Taxes, management profit
     sharing (covered in clause (vi) below), profit sharing loans, employer
     matching contributions for Seller sponsored savings plans, compensated
     absences (vacation time, sick pay, etc.) and royalties, in any event, only
     to the extent not retained by Seller.

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          (iv) Management Performance Bonus. Seller shall establish an
     appropriate accrual for the profit sharing, if any, of the Business'
     management for calendar year 1999 through the Closing Date, accrued ratably
     through the Closing Date, to the extent not paid out prior to the Closing.

          (v) Consistent Application of Accounting Policies, Methods, and
     Practices. The accounting policies, methods and practices and their related
     applications used by Seller to prepare the Closing Statement of Net Assets
     shall be consistent with those underlying the Statement of Net Assets. Use
     of different or alternative accounting policies and methods that are
     otherwise in accordance with GAAP is not permitted because such use
     violates this consistency requirement.

          (vi) Goodwill and Other Intangible Assets. There shall be no increases
     or decreases to goodwill and other intangible assets from those used in
     preparation of the Statement of Net Assets and included in the Target Net
     Assets except for amortization expense recorded during the period between
     September 30, 1999 and the Closing Date based on the amortization
     accounting policies and useful lives used in preparing the Financial
     Statements.

     Buyer shall provide Seller and its representatives such access to the Files
and Records as may reasonably be required for the preparation of the Closing
Statement of Net Assets. Buyer and Seller shall each make available to the other
(upon the request of the other) their respective work papers generated in
connection with the preparation or review of the Closing Statement of Net
Assets.

     (c) Review of Closing Statement of Net Assets. After receipt of the Closing
Statement of Net Assets, Buyer shall have 60 days to review it. Unless Buyer
delivers written notice to Seller on or prior to the 45th day after receipt of
the Closing Statement of Net Assets specifying in reasonable detail all disputed
items and the basis therefor, the parties shall be deemed to have accepted and
agreed to the Closing Statement of Net Assets. If Buyer so notifies Seller of an
objection to the Closing Statement of Net Assets, the parties shall, within 30
days following the date of such notice (the "Resolution Period"), attempt to
resolve their differences and any resolution by them as to any disputed amount
shall be final, binding, conclusive and nonappealable for all purposes under
this Agreement.

     (d) Resolution. If at the conclusion of the Resolution Period the parties
have not reached an agreement on the objections, then all amounts remaining in
dispute shall be submitted to a mutually acceptable nationally recognized
accounting firm (the "Neutral Auditor"). If Buyer and Seller are unable to agree
on the choice of a Neutral Auditor, the parties shall select by lot as the
Neutral Auditor a "Big Five" accounting firm other than PricewaterhouseCoopers
LLP. Each party agrees to execute, if requested by the Neutral Auditor, a
reasonable engagement letter. All fees and expenses relating to the work if any,
to be performed by the Neutral Auditor shall be borne equally by Seller and
Buyer. Except as provided in the preceding sentence, all other costs and
expenses incurred by the parties in connection with resolving any dispute
hereunder before the Neutral Auditor shall be borne by the party incurring such
cost and expense. The Neutral Auditor shall act as an arbitrator to determine,
based solely on the presentations by Seller and Buyer and the terms of this
Agreement, and not by independent review, only those issues still in


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dispute. The Neutral Auditor's determination shall be made within 30 days of its
engagement (which engagement shall be made promptly following the conclusion of
the Resolution Period), or as soon thereafter as possible, shall be set forth in
a written statement delivered to Seller and Buyer and shall be final, binding,
conclusive and nonappealable for all purposes hereunder, absent fraud or
manifest error. Nothing herein shall be construed to authorize or permit the
Neutral Auditor to determine (i) any questions or matters whatsoever under or in
connection with this Agreement except the determination of what adjustments, if
any, must be made in one or more of the items reflected in the initial Closing
Statement of Net Assets in response to objections thereto made by the party that
submitted the statement of objections, or (ii) an adjustment to an item on the
initial Closing Statement of Net Assets that is outside of the range defined by
amounts as finally proposed by Seller and Buyer, respectively. The term "Final
Closing Statement of Net Assets" shall mean the definitive Closing Statement of
Net Assets agreed to by Seller and Buyer in accordance with Section 2.9(c) or
the definitive Closing Statement of Net Assets resulting from the determination
made by the Neutral Auditor in accordance with this Section 2.9(d) (in addition
to those items theretofore agreed to by Seller and Buyer). For the avoidance of
doubt, all matters relating to the Closing Statement of Net Assets shall be
finally settled in accordance with this Section 2.9.

                                   ARTICLE III
                    REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller represents and warrants to Buyer as of the date hereof and as of the
Closing Date that:

     SECTION 3.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Seller
has full power and authority to own, lease and operate the properties of the
Business, including the Purchased Assets, and to carry on the Business as now
conducted and own all of its properties and assets. Seller is duly qualified to
do business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification except where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Seller has no
subsidiaries engaged in the Business.

     SECTION 3.2. Authorization; Enforceability. Seller has all requisite
corporate and other power and authority to execute and deliver this Agreement
and the other Acquisition Agreements to which it is or will be a party and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. All acts required to be taken by
Seller to authorize the execution, delivery and the performance of the
Acquisition Agreements to which it is or will be a party, and the consummation
of the transactions contemplated herein and therein, have been taken, and no
other corporate proceedings on the part of Seller are necessary to authorize
such execution, delivery, performance and consummation. This Agreement has been
duly authorized, executed and delivered by Seller and constitutes a legal, valid
and binding obligation of Seller, enforceable against Seller in accordance with
its terms, except to the extent such enforceability may be limited by applicable
bankruptcy and other laws affecting creditors' rights, or by general equitable
principles. Each other Acquisition Agreement to which Seller is or will be a
party will


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be, as of the Closing, duly authorized, executed and delivered by Seller and
will constitute a legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except to the extent such
enforceability may be limited by applicable bankruptcy and other laws affecting
creditors' rights, or by general equitable principles.

     SECTION 3.3. Financial Statements. Schedule 3.3 hereto contains the
unaudited pro forma Statement of Net Assets of the Business as of September 30,
1999 (the "Statement of Net Assets"), and an unaudited pro forma statement of
operations for the years ended December 31, 1998 and 1999 and the related
footnotes thereto (collectively, the "Financial Statements"). Such Financial
Statements (i) are in accordance with the Files and Records of Seller, (ii) are
accurate in all material respects, (iii) each fairly presents, in all material
respects, the financial condition or the results of operations of the Business
for the respective period presented, and (iv) have been prepared in accordance
with GAAP, except as disclosed in the footnotes thereto. Except to the extent
set forth in the Statement of Net Assets and the footnotes related thereto and
except for the Excluded Liabilities, the Business does not have any liabilities
or obligations (absolute, accrued, contingent or otherwise), whether due or to
become due, which would be required, in accordance with GAAP, to be set forth on
a balance sheet of the Business, other than any such liabilities or obligations
incurred since September 30, 1999 in the ordinary course of business consistent
with past practice.

     SECTION 3.4. No Conflicts. Except as set forth on Schedule 3.4 hereto, the
execution, delivery and performance by Seller of this Agreement and the other
Acquisition Agreements to which Seller is or will be a party and the
consummation of the transactions contemplated hereby and thereby (a) do not and
will not violate (with or without giving of notice or the lapse of time or
both), or require any Consent, under any provision of any Contracts with, or
licenses, permits, approvals, certificates of public convenience, orders,
franchises and other authorizations of, any Governmental Body or other Person or
any Legal Requirement applicable to Seller, the Business or any of the Purchased
Assets or the Assumed Liabilities, other than the facilities clearance
requirements of the Defense Investigative Services of the DOD, and (b) do not
and will not (with or without the giving of notice or the lapse of time or both)
(i) violate or conflict with, or result in the breach, suspension or termination
of any provisions of, or constitute a default under, or result in the
acceleration of the performance of the obligations of Seller under, or (ii)
result in the creation of Liens upon the Business or Purchased Assets pursuant
to, as the case may be, the Certificate of Incorporation, by-laws or other
organization documents of Seller or any material agreement, lease, mortgage,
note, deed of trust, bond, indenture, license or other document or undertaking,
oral or written, to which Seller is a party or by which Seller is bound and by
which any of the Purchased Assets or the Business may be affected.

     SECTION 3.5. Title. Seller holds the entire legal, equitable and beneficial
title in and will transfer to Buyer good and merchantable title to, or a valid
and binding leasehold interest in, the Purchased Assets (other than Business
Intellectual Property Assets which are covered in the Intellectual Property
Agreement), free and clear of all Liens other than Permitted Liens.

     SECTION 3.6. Purchased Tangible Personal Property. In all material
respects, and except as set forth on Schedule 3.6 hereto, the Purchased Tangible
Personal Property has been maintained in accordance with standard industry
practices, is in reasonable working condition


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(normal wear and tear excepted) and is sufficient for the conduct of the
Business as it is currently being conducted.

     SECTION 3.7. Taxes. All Taxes with respect to the Purchased Assets that are
or become due and payable or accrue with respect to any period or portion
thereof ending on or prior to the Closing Date have been or will be duly and
properly computed, reported, fully paid and discharged by Seller. There are no
unpaid Taxes with respect to any period or portion thereof ending on or before
the Closing Date that are or could become a Lien on the Purchased Assets, except
for current Taxes not yet due and payable.

     SECTION 3.8. Labor Matters. (a) Schedule 3.8 lists the following as of the
date of this Agreement:

         (i) All written arrangements that compel the employment of any Employee
at a salary in excess of $100,000 (or the equivalent in any foreign currency)
per annum and are not terminable on less than ninety (90) days' notice;

         (ii) All strikes in which any of the Employees are participating or
have participated since January 1, 1997;

         (iii) All pending charges or complaints or petitions filed with or by
the N.L.R.B., the O.F.C.C.P. of the United States Department of Labor, the
Occupational Safety and Health Administration, the E.E.O.C. or any similar unit
of any Governmental Body, including charges of race, sex, national origin,
religious, handicap or age discrimination or similar complaints against the
Business, and all pending employee-related arbitration proceedings and
litigation matters (other than any workers compensation claims) involving the
Business including breach of employment contract/wrongful discharge; and

         (iv) All pending written grievances as of the date of this Agreement.

     (b) There are no collective bargaining agreements covering Employees.

     SECTION 3.9. Employee Benefit Plans. Schedule 3.9 lists the following, as
of the date of this Agreement: all employee benefit plans, as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all material bonus, stock option, stock purchase, restricted
stock, incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, in each case, which are maintained, contributed to or sponsored by
Seller on behalf of Employees (collectively, the "Benefit Plans"). Seller has
furnished Buyer with a complete and accurate copy of (a) each Benefit Plan that
is in writing, (b) the most recently distributed summary plan description and
summary of material modifications relating to each Benefit Plan, and (c), with
respect to each Benefit Plan under which liabilities are being assumed by Buyer
under this Agreement, (i) each trust or other funding agreement, (ii) the most
recently filed IRS Form 5500, (iii) the most recently received IRS determination
letter, and (iv) the most recently prepared actuarial report and financial
statements.

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     SECTION 3.10. Employee Benefit Plan Matters. Except as otherwise stated in
Schedule 3.10, to Seller's Knowledge:

     (a) the Benefit Plans under which liabilities are being assumed by Buyer
under this Agreement comply in all material respects with the applicable
requirements of ERISA and the Code and have been operated and administered in
all material respects in accordance with the applicable requirements of ERISA
and the Code;

     (b) no liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any of the Benefit Plans subject to Title IV of ERISA,
other than premium payments pursuant to Sections 4006 and 4007 of ERISA;

     (c) Seller has not incurred any material liability (either directly or
indirectly, whether by way of indemnification or otherwise) for any tax imposed
under Section 4975 of the Code or Part 5 Subtitle B of Title I of ERISA with
respect to any of the Benefit Plans under which liabilities are being assumed by
Buyer under this Agreement;

     (d) none of the Benefit Plans is a multiemployer plan within the meaning of
Section 3(37)(A) of ERISA;

     (e) no suit, action, litigation or written claim (excluding claims for
benefits incurred in the ordinary course of plan activities) has been brought
against or with respect to any of the Benefit Plans by or on behalf of any
Employee and is pending;

     (f) all contributions to the Benefit Plans under which liabilities are
being assumed by Buyer under this Agreement that will be due as of the Closing
Date have been (or will have been by the Closing Date) paid, accrued or
otherwise fully reserved as of such date, in accordance with GAAP;

     (g) each Benefit Plan which is intended to meet the requirements of Section
401(a) of the Code meets the requirements for qualification under Section 401(a)
of the Code and nothing has occurred which would adversely affect the qualified
status of any such Benefit Plan other than such occurrences as may be corrected
without resulting in a Material Adverse Effect. The Internal Revenue Service has
issued a favorable determination letter with respect to the qualification under
the Code of each such Benefit Plan and the Internal Revenue Service has not
taken any action to revoke any such letter;

     (h) none of the Benefit Plans subject to Part 3 Subtitle B of Title I of
ERISA has incurred any "accumulated funding deficiency" within the meaning of
Section 302 of ERISA or Section 412 of the Code;

     (i) no Benefit Plan is a "multiple employer plan" within the meaning of
Section 413(c) of the Code; and

     (j) except as provided in Article X or as set forth in Schedule 3.10
hereto, the execution, delivery and performance of the Acquisition Agreements or
the consummation of the transactions contemplated by this Agreement will not of
itself constitute an event under any


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Benefit Plan under which liabilities are being assumed by Buyer under this
Agreement that will require any payment (whether of severance pay or otherwise),
acceleration, vesting or increase in material benefits under such Benefit Plan
with respect to any Transferred Employee.

     SECTION 3.11. Compliance With Legal Requirements. Except as set forth in
Schedule 3.11 hereto, Seller has conducted the Business in compliance with all
Legal Requirements applicable to the Business or the Purchased Assets (excluding
Environmental Laws which are covered in Section 3.12), except for such
noncompliance as would not, individually or in the aggregate, have a Material
Adverse Effect.

     SECTION 3.12. Environmental Matters.

     (a) Compliance with Environmental Law. Except as disclosed on Schedule 3.12
hereto, Seller is and has been in compliance in all material respects with all
applicable Environmental Laws pertaining to any of the properties and assets of
the Business and the use by Seller thereof. Except as disclosed on Schedule
3.12, the Business has obtained all material permits, licenses and other
authorizations that are required under Environmental Laws to operate the
Business as it is currently operated. Except as disclosed on Schedule 3.12
hereto, Seller has not received notice of any violation of any applicable
Environmental Law relating to any of the assets or to any premises utilized by
the Business and, to Seller's knowledge, no notice of any such violation has
been threatened.

     (b) Other Environmental Matters. Except as disclosed on Schedule 3.12
hereto, Seller has not caused or taken any action that resulted in, and Seller
is not subject to, any material liability or obligation relating to (i) the
environmental conditions on, under, or about any part of the premises utilized
by the Business or other properties or assets owned, leased, operated or used by
Seller in the Business, including the air, soil and groundwater conditions at
such properties, or (ii) the use, management, handling, transport, treatment,
generation, storage, disposal or Release of any Hazardous Substances by Seller
in the conduct of the Business.

     (c) No Proceedings. Except as disclosed on Schedule 3.12, Seller has not
received within the last five years written notice or other written
communication concerning any alleged liability for Environmental Liabilities and
costs in connection with any part of the premises utilized by the Business, and
there is no Proceeding pending or, to Seller's Knowledge, threatened, relating
to any environmental matters with respect to any such premises.

     SECTION 3.13. Legal Proceedings; Orders. Except as set forth on Schedule
3.13 hereto, there are no Proceedings pending or, to Seller's Knowledge,
threatened against Seller involving, affecting or relating to the Business, the
Purchased Assets or the transactions contemplated by this Agreement, except for
those which would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth in Schedule 3.13, there is no judgment, writ, order,
injunction or decree of any Governmental Body to which Seller, in respect of the
Business, or any of the Purchased Assets is subject. Seller is not in violation
of any judgment, writ, decree, injunction or order entered by any Governmental
Body and outstanding against Seller or with respect to the Business, the
Purchased Assets or the Assumed Liabilities, except for such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.

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     SECTION 3.14. Absence of Certain Changes and Events. Except as set forth in
Schedule 3.14 hereto, since September 30, 1999, Seller has conducted the
Business only in the ordinary course of business consistent with past practice
and no event, circumstance or condition has occurred that has caused or is
reasonably likely to cause a Material Adverse Effect, and there has not been
any:

     (a) change that (i) is materially adverse to the value of the Purchased
Assets taken as a whole or materially adverse to the business, assets,
properties, operations, financial condition or results of operations of the
Business taken as a whole (other than as a result of changes in general economic
conditions or industry-wide developments affecting all companies engaged in
businesses substantially similar to the Business), or (ii) materially impairs or
delays the ability of Seller to effect the Closing;

     (b) Lien created on any Purchased Asset except Permitted Liens;

     (c) unless required by any Legal Requirement or to the extent required
under existing employee and director benefit plans, agreements or arrangements
as in effect on the date of this Agreement (including, but not limited to, any
collective bargaining agreement), increase in the compensation or fringe
benefits of any of the Employees (including any such increase pursuant to any
deferred compensation, severance, bonus, pension, profit-sharing or other plan
or commitment), except for increases in the ordinary course of business
consistent with past practice in salary or wages;

     (d) except as set forth in the current business plan, capital expenditures
or commitment to make any such expenditures with respect to the Purchased Assets
except to the extent such expenditures and commitments do not exceed $100,000
for any individual expenditure and $250,000 in the aggregate;

     (e) condemnation proceedings commenced with respect to any Purchased Assets
or notice received by Seller as to the proposed commencement of any such
proceedings;

     (f) change in any material accounting or auditing principle or policy;

     (g) damage, destruction or loss to any of the Purchased Assets, whether or
not covered by insurance, materially and adversely affecting the Purchased
Assets or the Business or the ability to conduct the Business as it is now
conducted; or

     (h) sale or transfer of any Purchased Assets other than dispositions of
inventory and obsolete or worn out equipment in the ordinary course of business.

     SECTION 3.15. Intellectual Property Assets. Rights granted by Seller to
Buyer in the Business Intellectual Property Assets and Seller's representations
and warranties in respect of the Business Intellectual Property Assets are set
forth in the Intellectual Property Agreement.

     SECTION 3.16. Contracts. Schedule 3.16 hereto sets forth a list of all
Contracts that are material to the Business. Except as set forth on Schedule
3.16 hereto, each such Contract is legal, valid, binding and enforceable against
Seller in accordance with its terms, except to the


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extent such enforceability may be limited by applicable bankruptcy or other laws
affecting creditors' rights, or by general equity principles, and is in full
force and effect. Seller has performed all obligations required to be performed
by it to date under, and is not in material default in respect of, any such
Contract, and no event has occurred which, with due notice or lapse of time or
both, would constitute such a material default. To Seller's Knowledge, no other
party to any such Contract is in material default in respect thereof and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default. Seller has made available to Buyer true and complete
copies of all of such Contracts (or, in the case of oral Contracts, true and
accurate summaries thereof), other than classified Government Contracts. Except
as set forth on Schedule 3.16 hereto, such Contracts included in the Purchased
Assets are assignable to Buyer without any required Consent of any other Person.

     SECTION 3.17. Insurance. Schedule 3.17 is a true and complete list of all
insurance policies held by Seller in respect of the Business. All such insurance
policies are in full force and effect and no notice of cancellation or
non-renewal with respect to any such insurance policy has been received by
Seller.

     SECTION 3.18. Brokerage. Seller has not incurred, directly or indirectly,
any obligation or liability, contingent or otherwise, for any brokerage fees,
finder's fees, agent's commissions or other like payment in connection with this
Agreement or any other Acquisition Agreement, or the transactions contemplated
herein or therein.

     SECTION 3.19. Undisclosed Liabilities. To Seller's Knowledge, there are no
liabilities or obligations of Seller (whether or not reflected, accrued or
provided for, or required to be reflected, accrued or provided for, on a balance
sheet of the Business prepared in accordance with GAAP and whether or not fixed,
liquidated, unliquidated, absolute, contingent or otherwise), which relate to or
arise out of the Business or any of its operations as heretofore or currently
conducted or the past or present operation, condition or use of any of the
Purchased Assets, and are material to the Business taken as a whole, except (a)
Excluded Liabilities, (b) those reflected or otherwise provided for in the
Statement of Net Assets (including the footnotes thereto), (c) those set forth
in this Agreement or the Schedules attached hereto, (d) those arising since the
date of the Statement of Net Assets in the ordinary course of business
consistent with prior practice and which will be reflected in the Final Closing
Statement of Net Assets and (e) those not required to be set forth in the
Schedules attached hereto because of an exception provided for in this
Agreement.

     SECTION 3.20. Real Estate. Schedule 3.20 contains a list of all the real
property owned, leased or used by Seller in the Business.

     SECTION 3.21. Year 2000. Each of the computer-based systems of the
Business, including its information data bases, accounting systems and data
processing systems, as well as all other computer software or hardware owned or
used by the Business, (a) records, stores, processes, calculates, presents and,
where appropriate, inserts correctly entered and formatted time and accurate
dates and calculations for calendar dates falling on or after (and if
applicable, spans of time including) January 1, 2000, and records, stores,
processes,


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calculates and presents correctly entered and formatted information or data
dependent on or relating to such dates with the same functionality, data
integrity and performance, as such item records, stores, processes, calculates
and presents calendar dates on or before December 31, 1999, and in such fashion
as to respond to two-digit date input in a way that eliminates all ambiguities
as to the century of concern, and treats the year 2000 as a leap-year and
correctly and accurately records and processes data and information with respect
thereto; and (b) loses no functionality with respect to the introduction of
records, including back-up and archived information or data, containing dates
falling on or after January 1, 2000.

     SECTION 3.22. Government Contracts.

     (a) With respect to each and every Government Contract or bid to obtain a
Government Contract to which Seller is a party, and which relates to the
Business, and except as set forth in Schedule 3.22(a): (i) Seller has fully
complied with all material terms and conditions of such Government Contract or
bid for a Government Contract as required; (ii) Seller has fully complied with
all material requirements of statute, rule or regulation pertaining to such
Government Contract or bid for a Government Contract; (iii) all representations
and certifications executed with respect to such Government Contract were to
Seller's Knowledge accurate in every material respect as of their effective date
and Seller to Seller's Knowledge has fully complied with all such
representations and certifications in every material respect; and (iv) no
termination for default, cure notice or show cause notice has been issued or, to
Seller's Knowledge will be issued, (v) neither the U.S. Government nor any
non-U.S. government nor any prime contractor, subcontractor or other Person has
notified in writing Seller that Seller has breached or violated any Legal
Requirement, certification, representation, clause, provision or requirement
pertaining to such Government Contract or bid; (vi) no cost incurred by Seller
pertaining to such Government Contract or bid has been questioned or challenged,
is the subject of any investigation or has been disallowed by the U.S.
Government or any non-U.S. government; (vii) no money due to Seller pertaining
to such Government Contract or bid has been withheld or set off and Seller is
entitled to all progress payments with respect thereto and (viii) each
Government Contract is valid and in full force and effect.

     (b) To Seller's Knowledge, except as set forth in Schedule 3.22(b), with
respect to the Business, (i) none of its respective employees, consultants or
agents is (or during the last three years has been) under administrative, civil
or criminal investigation, indictment or information by any Governmental
Authority, (ii) there is not any pending audit or investigation by Seller nor
within the last three years has there been any audit or investigation by Seller
resulting in a material adverse finding with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract or bid, and (iii) during the last three years, Seller has
not made a voluntary disclosure to the U.S. Government or any non-U.S.
government with respect to any alleged irregularity, misstatement or omission
arising under or relating to a Government Contract or bid. Except as set forth
in Schedule 3.22(b), to Seller's Knowledge there are no irregularities,
misstatements or omissions arising under or relating to any Government Contract
or bid that has led or is expected to lead, either before or after the Closing
Date, to any of the consequences set forth in clause (i) or (ii) of the
immediately preceding sentence or any other material damage, penalty assessment,
recoupment of payment or disallowance of cost.

     (c) Except as set forth in Schedule 3.22(c), with respect to the Business,
there exist (i) no outstanding claims against Seller, either by the U.S.
Government or by any non-U.S.



                                      -23-
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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 3.22(a) and (ii) no disputes between Seller and the U.S. Government
or any non-U.S. government under (A) the Contract Disputes Act or any other
Federal statute or (B) any analogous statute of any jurisdiction other than the
United States or between Seller and any prime contractor, subcontractor or
vendor arising under or relating to any such Government Contract or bid. Except
as set forth in Schedule 3.22(c), to Seller's Knowledge there are no facts 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 Schedule 3.22(d), neither Seller nor any of its
employees, consultants or agents is (or during the last three years has been)
suspended or debarred from doing business with the U.S. Government or any
non-U.S. government or is (or during such period was) the subject of a finding
of nonresponsibility or ineligibility for U.S. Government or non-U.S. government
contracting. Except as set forth in Schedule 3.22(d), Seller and its Affiliates
have operated the Business in compliance with all requirements of all material
laws pertaining to all Government Contracts and bids.

     (e) Except as set forth in Schedule 3.22(e), no statement, representation
or warranty made by Seller in any Government Contract, any exhibit thereto or in
any certificate, statement, list, schedule or other document submitted or
furnished to the U.S. Government or any non-U.S. government in connection with
any Government Contract or 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 a material fact.

     SECTION 3.23. Government Furnished Equipment. Schedule 3.23 incorporates
the most recent schedule delivered to the U.S. Government or any non-U.S.
government which identifies by description or inventory number certain equipment
and fixtures loaned, bailed or otherwise furnished to or held by the Business by
or on behalf of the U.S. Government or any non-U.S. government. To Seller'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 ordinary course of
business, except for such inaccuracies that could not reasonably be expected to
have a Material Adverse Effect.

     SECTION 3.24. Affiliate Transactions. Except as set forth in Schedule 3.24,
there are no agreements, arrangements, undertakings or other transactions
between the Business and any other division or businesses of Seller or any of
its Affiliates.

     SECTION 3.25. Entire Business. Except for the Excluded Assets and such
other assets and services of Seller that Seller has offered to sell or furnish
to Buyer but Buyer has declined to accept, as set forth in Schedule 3.25, the
Purchased Assets, together with the rights granted to Buyer under the
Intellectual Property Agreement, the Supply Agreement and the Services


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Agreement, constitute all of the assets, properties and rights necessary to
conduct the Business in all material respects as currently conducted.

     SECTION 3.26. No Additional Representations. NOTWITHSTANDING ANYTHING TO
THE CONTRARY CONTAINED IN THIS ARTICLE III OR ANY OTHER PROVISION OF THIS
AGREEMENT OR THE OTHER ACQUISITION AGREEMENTS, IT IS THE EXPLICIT INTENT OF EACH
PARTY HERETO THAT SELLER IS MAKING NO REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT OR ANY OTHER
ACQUISITION AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR
REPRESENTATION AS TO CONDITION, MERCHANTABILITY OR SUITABILITY AS TO ANY OF THE
PURCHASED ASSETS. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT OR
ANY OTHER ACQUISITION AGREEMENT, THE PURCHASED ASSETS ARE BEING SOLD ON AN "AS
IS, WHERE IS" BASIS.

                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER

                  Buyer represents and warrants to Seller as of the date hereof
and as of the Closing Date that:

     SECTION 4.1. Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.

     SECTION 4.2. Authorization. Buyer has all requisite corporate and other
power and authority to execute and deliver this Agreement and the other
Acquisition Agreements to which it is or will be a party, and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. All acts required to be taken by Buyer to
authorize the execution, delivery and performance of the Acquisition Agreements
to which it is or will be a party, and the consummation of the transactions
contemplated herein and therein, other than approval hereof and thereof by
Buyer's Board of Directors have been taken and, on the Closing Date, all such
actions will have been taken and no other corporate proceedings on the part of
Buyer are or will be necessary to authorize such execution, delivery,
performance and consummation. Subject to approval of Buyer's Board of Directors,
this Agreement has been duly authorized, executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except to the extent such enforceability may
be limited by applicable bankruptcy and other laws affecting creditors' rights,
or by general equitable principles. This Agreement and each other Acquisition
Agreement to which Buyer is or will be a party will be, as of the Closing, duly
authorized, executed and delivered by Buyer and will constitute a legal, valid
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms, except to the extent such enforceability may be limited by applicable
bankruptcy and other laws affecting creditors' rights, or by general equitable
principles.

     SECTION 4.3. No Conflicts. The execution, delivery and performance by Buyer
of this Agreement and the other Acquisition Agreements to which Buyer is or will
be a party and the consummation of the transactions contemplated hereby and
thereby (a) do not and will not


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violate (with or without giving of notice or the lapse of time or both), or
require any Consent, under any provision of any licenses, permits, approvals,
certificates of public convenience, orders, franchises and other authorizations
of any Governmental Body, including any notice to or approval of the Committee
on Foreign Investment in the United States pursuant to the Exon-Florio Amendment
to the Defense Production Act of 1988, as amended, 50 U.S.C. App ss. 2170, and
the regulations thereunder, or other Person or any Legal Requirement applicable
to Buyer, and (b) do not and will not (with or without the giving of notice or
the lapse of time or both) violate or conflict with, or result in the breach,
suspension or termination of any provisions of, or constitute a default under,
or result in the acceleration of the performance of the obligations of Buyer
under, the Certificate of Incorporation, by-laws or other organization documents
of Buyer or any material agreement, lease, mortgage, note, deed of trust, bond,
indenture, license or other document or undertaking, oral or written, to which
Buyer is a party or by which Buyer is bound, other than the Consents required
under Buyer's existing credit facilities which Buyer believes will be obtained
prior to Closing.

     SECTION 4.4. Brokerage. Buyer has not incurred, directly or indirectly, any
obligation or liability, contingent or otherwise, for any brokerage fees,
finder's fees, agent's commissions or other like payment in connection with this
Agreement or any other Acquisition Agreement, or the transactions contemplated
herein or therein.

     SECTION 4.5. Sufficient Funds. On the Closing Date Buyer will have funds
sufficient and available to pay the Cash Purchase Price payable at the Closing.

                                    ARTICLE V
                               COVENANTS OF SELLER

     SECTION 5.1. Access and Investigation. Between the date of this Agreement
and the Closing Date or earlier termination of this Agreement, Seller will (a)
afford Buyer and its Representatives access to Seller's personnel, facilities,
properties, Contracts, Files and Records, on reasonable notice and during
regular business hours, (b) furnish Buyer with such additional financial,
operating, and other data and information in Seller's possession, in each case
to the extent related to the Business, the Purchased Assets, the Assumed
Liabilities or the Employees as Buyer may reasonably request, and (c) make
available for inspection and review all documents, or copies thereof, listed in
the Schedules hereto, and all files, records and papers of any and all
proceedings and matters listed in the Schedules hereto, except to the extent
prohibited or restricted by law, regulation, contract with a third party or
where the documents are subject to the attorney client or work product
privilege.

     SECTION 5.2. Conduct of Business. Prior to the Closing Date, except for
actions taken in accordance with the Consent Decree or Hold Separate Order,
Seller shall, to the extent related to the Business:

     (a) conduct the Business only in the usual, regular and ordinary manner, on
a basis consistent with past practice and, to the extent consistent with such
operation, use its reasonable best efforts to preserve its present business
organization intact, keep available the service of its present employees,
preserve its present business relationships and maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of the Business;

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     (b) maintain its inventory of supplies, parts and other materials and keep
its books, accounts, Files and Records in the usual, regular and ordinary
manner, on a basis consistent with past practice, and comply with and perform in
all material respects all laws and contractual and other obligations applicable
to the Business, the Purchased Assets and the Assumed Liabilities;

     (c) maintain in full force and effect adequate insurance with respect to
the Business, the Purchased Assets and the Employees of the Business covering
risks customarily insured by similar businesses;

     (d) not (i) enter into any Contract, bid, proposal or other commitment for
the purchase of goods or services which is not terminable by the parties upon 30
days' notice or less without penalty or which involves aggregate consideration
in excess of $250,000, (ii) enter into any Contract, bid, proposal or other
commitment for the sale of goods or services which is not terminable by the
parties upon 30 days' notice or less without penalty or which involves aggregate
consideration in excess of $5 million or which would result in a loss in excess
of $100,000 for any individual Contract or $250,000 in the aggregate, or (iii)
amend, supplement, waive or otherwise modify any Contract, other than in the
ordinary course of business consistent with past practice;

     (e) except as required by any Legal Requirement or to the extent required
under existing employee and director benefit plans, agreements or arrangements
as in effect on the date of this Agreement (including, but not limited to, any
collective bargaining agreement), not (i) increase the compensation or fringe
benefits of any of the Employees (including any such increase pursuant to any
deferred compensation, severance, bonus, pension, profit-sharing or other plan
or commitment), except for increases, in the ordinary course of business
consistent with past practice, in salary or wages of Employees who are not
senior managers of the Business, (ii) grant any severance or termination pay,
(iii) hire, except in the ordinary course of business, any new Employees or
consultants or (iv) enter into or amend or terminate any collective bargaining
agreements, bonus, profit sharing, thrift, compensation, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any Employees
or former Employees of the Business except, in each case, for changes in plans,
programs, agreements, policies or arrangements affecting employees of Seller
generally;

     (f) not (i) dispose of or abandon any of the Purchased Assets other than
the disposition of obsolete or worn-out equipment or machinery in the ordinary
course of business, consistent with past practice, or (ii) enter into or engage
in any transaction with or for the benefit of any other division or business of
Seller or any Affiliate of Seller;

     (g) not (i) permit or allow any of the Purchased Assets to become subject
to any Liens, except for Permitted Liens, or (ii) waive any material claims or
rights relating to the Business or the Purchased Assets;

     (h) except for capital expenditures in the current business plan, not
acquire or agree to acquire any assets that are material, individually or in the
aggregate, to the Business, or make or agree to make any capital expenditures;
provided that the aggregate amount of capital


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expenditures permitted by this paragraph, subject to the exception contained
herein, shall not exceed $100,000 for any individual expenditure and $250,000 in
the aggregate;

     (i) not pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except for
the payment, discharge or satisfaction of liabilities or obligations in the
ordinary course of business consistent with past practice or in accordance with
their terms as in effect on the date hereof, or transfer any rights of material
value or modify or change in any material respect any existing Contract or other
document, other than in the ordinary course of business consistent with past
practice;

     (j) not change any material accounting or auditing principle or policy;

     (k) refrain from entering into any Contract with respect to the Assigned
Intellectual Property Assets, the Licensed Intellectual Property Assets and the
Sublicensed Intellectual Property Assets in the Field of Use (as such terms are
defined in the Intellectual Property Agreement);

     (l) use reasonable efforts to maintain the good relations of suppliers of
the Business, customers of the Business and others with whom they have business
relations in connection with the Business;

     (m) notify Buyer of any Material Adverse Effect with respect to the
condition of the Purchased Assets or the Assumed Liabilities or the Business;

     (n) not acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof;

     (o) except for performance guarantees issued in the ordinary course of
business consistent with past practice, not incur any indebtedness for borrowed
money, or guarantee any such indebtedness of another Person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
Seller, guarantee any debt securities of another Person, enter into any "keep
well" or other agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the economic effect of any
of the foregoing, or make any loans, advances or capital contributions to, or
investments in, any other Person;

     (p) not adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;

     (q) not terminate or amend any existing contract with Solectron to
terminate Solectron's obligations to provide circuit card assembly services to
the Business; and

     (r) not authorize any, or commit or agree to take any, of the foregoing
actions.



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     SECTION 5.3. Required Approvals.

     (a) As promptly as practicable after the date of this Agreement, Seller
will, and will cause each of its applicable Affiliates to, make all filings
required by Legal Requirements to be made by them in order to consummate the
transactions contemplated hereby (including all filings pursuant to the Consent
Decree, as contemplated by Section 13.18). Between the date of this Agreement
and the Closing Date, Seller will cooperate with Buyer with respect to all
filings that Buyer is required by Legal Requirements to make in connection with
the transactions contemplated hereby.

     (b) In addition to the foregoing, and subject to the terms and conditions
hereof, Seller and Buyer agree to use their reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all other things
reasonably necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including using their reasonable
efforts (without payment of money, commencement of litigation, the assumption of
any material obligation or the entering of any agreement to divest and hold
separate any asset) to obtain at the earliest practicable date prior to the
Closing Date (pursuant to instruments reasonably satisfactory in form and
substance) all Consents of parties to Contracts with Seller as are necessary for
the consummation of the transactions contemplated hereby.

     SECTION 5.4. No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Article XI, Seller will not, nor will Seller permit any
of its Representatives to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the Business or its assets (other than as
expressly permitted pursuant to Section 5.2 and as necessary and appropriate in
connection with the first refusal right of Thomson-CFS S.A. referred to in
Section 7.10).

     SECTION 5.5. Additional Information. Seller shall promptly furnish to Buyer
all such financial and operating reports with respect to the Business as may be
prepared by the Business from time to time between the date hereof and the
Closing Date as Buyer may reasonably request. Seller shall make available to
Buyer information with respect to any document, event, transaction or condition
entered into or occurring after the date hereof which, had it occurred or been
in effect on or prior to the date hereof, would have been included on the
Schedules to this Agreement, but no such information which would have been
included on a Schedule shall be deemed to amend the relevant Schedule when so
provided.

     SECTION 5.6. Workers' Compensation. Seller shall retain responsibility for
all workers' compensation events which relate to incidents occurring on or
before the Closing Date. Buyer shall have responsibility for all workers'
compensation events which relate to incidents occurring after the Closing Date.

     SECTION 5.7. SEC Financial Reporting. Seller shall reasonably cooperate
with Buyer and Buyer's auditors in the event that Buyer causes such auditors to
audit the following: (i) the historical financial statements for the Business
for the fiscal years ending December 31, 1999 and 1998 (if required) including
unaudited quarterly 1999 income statements, and


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(ii) unaudited historical financial statements for the Business for any interim
period after December 31, 1999 but before the Closing Date as required, in
accordance with the rules and regulations of the U.S. Securities and Exchange
Commission ("SEC"), for purposes of SEC filings or any other filings which must
or may be undertaken by Buyer in connection with the consummation of
transactions contemplated herein or subsequent financing transactions.

     SECTION 5.8. No Inconsistent Action. Subject to Section 11.1, the parties
hereto shall not take any action inconsistent with their obligations under this
Agreement or which could materially hinder or delay the consummation of the
transactions contemplated by this Agreement. Neither of the parties hereto shall
take or omit to take any action that could result in any of its respective
representations and warranties not being true in all material respects on the
Closing Date.

     SECTION 5.9. Notices of Certain Events.

     (a) Seller shall promptly notify Buyer of:

          (i) any notice or other communication to Seller's Knowledge from any
     Person alleging that the Consent of such Person is or may be required in
     connection with the transactions contemplated by this Agreement;

          (ii) any notice or other communication to Seller's Knowledge from any
     Governmental Body in connection with the transactions contemplated by this
     Agreement;

          (iii) to Seller's Knowledge any actions, suits, charges, complaints,
     claims, investigations, proceedings, strikes or written grievances
     commenced or threatened against, relating to, involving or otherwise
     affecting, the Business which, if pending on the date of this Agreement,
     would have been required to have been disclosed pursuant to Section 3.8 or
     3.13 or which relate to the consummation of the transactions contemplated
     by this Agreement; and

          (iv) any (i) Material Adverse Effect (which term does not include the
     result of changes in general economic conditions or industry-wide
     developments affecting all companies engaged in businesses substantially
     similar to the Business), or (ii) event that materially impairs the ability
     of Seller to effect the Closing.

     (b) Seller's notifications of Buyer of any of the events set forth in
Section 5.9(a) above in accordance with this Section 5.9 shall not be deemed to
cure any related breaches of the representations, warranties, covenants or
agreements contained in this Agreement, nor shall the failure of Buyer to take
any action with respect to such notice be deemed a waiver of any such breaches.

     SECTION 5.10. Reasonable Efforts. Seller will use its reasonable efforts to
effectuate the transactions hereby contemplated and to fulfill the conditions to
Buyer's obligations under Article VII of this Agreement.

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     SECTION 5.11. Break-Up Fee. If Thomson - CSF S.A. or any Affiliate thereof
exercises the first refusal right referred to in Section 7.10, Seller shall
perform its obligations pursuant to the Break-Up Fee Letter Agreement.

                                   ARTICLE VI
                               COVENANTS OF BUYER

     SECTION 6.1. Required Approvals. As promptly as practicable after the date
of this Agreement, Buyer will, and will cause each of its applicable Affiliates
to, make all filings required by Legal Requirements to be made by them in order
to consummate the transactions contemplated hereby (including all filings
pursuant to the Consent Decree, as contemplated by Section 13.18). Between the
date of this Agreement and the Closing Date, Buyer will, and will cause each of
its applicable Affiliates to, (a) reasonably cooperate with Seller with respect
to all filings that either Seller is required by Legal Requirements to make in
connection with the transactions contemplated hereby, and (b) reasonably
cooperate with Seller in obtaining all Consents identified in Schedule 3.4
hereto.

     SECTION 6.2. Non Solicitation; Non-Interference. Except as otherwise
contemplated by this Agreement, at no time after the date hereof until the
Closing Date shall Buyer or its subsidiaries:

     (a) directly or indirectly, in any capacity or in association with any
other person, solicit, induce, or in any manner attempt to solicit or induce,
any Employee to terminate his or her employment or to become an employee of
Buyer, or

     (b) directly or indirectly, interfere with Seller's relationship with,
cause the cancellation, discontinuation, termination or alteration (in a manner
detrimental to Seller) of Seller's relationship with, or do business with, any
party who is a customer, supplier, or manufacturer with respect to the Business.

     SECTION 6.3. Board Approval. Not later than February 18, 2000, Buyer shall
cause to be submitted to Buyer's Board of Directors for approval (i) this
Agreement and the transactions contemplated hereby, and (ii) any financing that
Buyer may require in connection therewith, and Buyer's Chief Executive Officer
shall recommend to the Board of Directors that it approve this Agreement and the
transactions contemplated hereby and such financing.

     SECTION 6.4. Reasonable Efforts. Buyer will use its reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill the conditions to
Seller's obligations under Article VIII of this Agreement.

                                   ARTICLE VII
                        CONDITIONS TO BUYER'S OBLIGATIONS

         All obligations of Buyer under this Agreement are subject to the
fulfillment, at the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part at or prior to the Closing by Buyer:

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     SECTION 7.1. Accuracy of Representations and Warranties. All the
representations and warranties of Seller contained in this Agreement shall be
accurate in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time; provided,
however, that if a representation or warranty is qualified by a reference to
materiality or Material Adverse Effect, such representation and warranty shall
be accurate in all respects at and as of the Closing Date as though such
representation and warranty was made at and as of such time.

     SECTION 7.2. Seller's Performance. Seller shall have performed and complied
in all material respects with all agreements and covenants on its part required
by this Agreement to be performed or complied with prior to or at the Closing
Date.

     SECTION 7.3. Officer's Certificate. Buyer shall have received a certificate
of an officer of Seller, dated the Closing Date, certifying on behalf of Seller
as to the fulfillment of the conditions specified in Sections 7.1 and 7.2
hereof.

     SECTION 7.4. Governmental Approvals. Seller shall have made all filings and
petitions required to be made by it prior to the Closing Date (and all
applicable waiting periods shall have expired) with, and Buyer shall have
received all Governmental Approvals required to be obtained prior to the Closing
Date from, all Governmental Bodies in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement and the transactions contemplated hereby
shall have been approved by (i) the DOD and the DOJ pursuant to the Consent
Decree and (ii) the European Commission pursuant to Proposed Undertakings re
Case No. IV/M.1601. No party to this Agreement shall have received notice from
(i) the Federal Trade Commission or the DOJ that the transactions contemplated
by this Agreement violate the Federal Trade Commission Act or the Clayton Act or
(ii) the European Commission that the transactions contemplated by this
Agreement violate the Merger Control Regulation of the European Community.

     SECTION 7.5. No Injunctions, Etc. There shall be no injunction, restraining
order or decree of any nature of any Governmental Body of competent jurisdiction
that is in effect that restrains or prohibits the consummation of the
transactions contemplated by this Agreement or any such injunction, restraining
order or decree or any pending lawsuit, claim or legal action relating to the
transactions contemplated by this Agreement which would reasonably be expected
to materially adversely affect such transactions or Buyer's ownership, use or
enjoyment of the Business or any part thereof.

     SECTION 7.6. Consents. There shall have been obtained the Consent, in form
and substance reasonably satisfactory to counsel for Buyer, of each other party
to those Contracts listed on Schedule 7.6 hereto.

     SECTION 7.7. Conveyances. Buyer shall have received the Bill of Sale and
other conveyances, deeds, assignments, bills of sale, confirmations, and further
instruments (in form and substance reasonably satisfactory to Buyer) as shall be
necessary in order to complete the conveyances, transfers, assignments and
deliveries provided for herein and to convey to Buyer the Purchased Assets.

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     SECTION 7.8. Board Approval. Buyer's Board of Directors shall have approved
(i) this Agreement and the transactions contemplated hereby and (ii) any
financing that Buyer may require in connection therewith.

     SECTION 7.9. Other Agreements. Seller or its Affiliate, as the case may be,
shall have executed and delivered to Buyer the Intellectual Property Agreement,
the Services Agreement, the Proprietary Information Agreement, the Supplemental
Agreement and the Supply Agreement.

     SECTION 7.10. Non-Exercise of First Refusal Rights. Seller shall have
executed and delivered to Buyer a certificate, in form and substance
satisfactory to Buyer, to the effect that (i) Seller has complied with its
obligations pursuant to Section 2(c) of a Cooperation and Settlement Agreement,
dated October 20, 1999, among AlliedSignal Inc., Honeywell Inc, Thomson-CSF S.A.
and Thomson-CSF Sextant S.A., as amended, and (ii) neither Thomson-CSF S.A. nor
any of its Affiliates has the right to purchase the TCAS Business pursuant to
the right of first refusal granted to them pursuant to Section 2(c) of such
agreement.

                                  ARTICLE VIII
                       CONDITIONS TO SELLER'S OBLIGATIONS

         All obligations of Seller under this Agreement are subject to the
fulfillment, at the Closing, of each of the following conditions, any or all of
which may be waived in whole or in part at or prior to the Closing by Seller:

     SECTION 8.1. Accuracy of Representations and Warranties. All the
representations and warranties of Buyer contained in this Agreement shall be
accurate in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time; provided,
however, that if a representation or warranty is qualified by a reference to
materiality, such representation and warranty shall be accurate in all respects
at and as of the Closing Date as though such representation and warranty was
made at and as of such time.

     SECTION 8.2. Buyer's Performance. Buyer shall have performed and complied
in all material respects with all agreements and covenants on its part required
by this Agreement to be performed or complied with prior to or at the Closing
Date.

     SECTION 8.3. Officer's Certificate. Seller shall have received a
certificate of an officer of Buyer, dated the Closing Date, certifying on behalf
of Buyer as to the fulfillment of the conditions specified in Sections 8.1 and
8.2 hereof.

     SECTION 8.4. Governmental Approvals. Buyer shall have made all filings and
petitions required to be made by it prior to the Closing Date (and all
applicable waiting periods shall have expired) with, and Seller shall have
received all Governmental Approvals required to be obtained prior to the Closing
Date from, all Governmental Bodies in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement and the transactions contemplated hereby
shall have been approved by (i) the DOD and the DOJ pursuant to the Consent
Decree and (ii) the European Commission pursuant to Proposed Undertakings re
Case No. IV/M.1601. No party


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to this Agreement shall have received notice from (i) the Federal Trade
Commission or the DOJ that the transactions contemplated by this Agreement
violate the Federal Trade Commission Act or the Clayton Act or (ii) the European
Commission that the transactions contemplated by this Agreement violate the
Merger Control Regulation of the European Community.

     SECTION 8.5. No Injunctions, Etc. There shall be no injunction, restraining
order or decree of any nature of any Governmental Body of competent jurisdiction
that is in effect that restrains or prohibits the consummation of the
transactions contemplated by this Agreement or any such injunction, restraining
order or decree or any pending lawsuit, claim or legal action relating to the
transactions contemplated by this Agreement which would reasonably be expected
to materially adversely affect such transactions or Buyer's ownership, use or
enjoyment of the Business or any part thereof.

     SECTION 8.6. Purchase Price. Seller shall have received the Cash Purchase
Price payable to it from Buyer pursuant to Section 2.5 hereof (as provisionally
adjusted pursuant to Section 2.8A), by wire transfer of immediately available
funds to a bank account designated by it pursuant to Section 2.5(b).

     SECTION 8.7. Other Agreements. Buyer shall have executed and delivered to
Seller or its Affiliate, as the case may be, the Intellectual Property
Agreement, Services Agreement, the Supply Agreement, the Proprietary Information
Agreement and the Assumption Agreement.

                                   ARTICLE IX
                             POST-CLOSING COVENANTS

     SECTION 9.1. Further Assurances. From and after the Closing Date, each
party to this Agreement shall (or shall cause its applicable Affiliate to), at
any time and from time to time, make, execute and deliver, or cause to be made,
executed and delivered, such assignments, assumptions, deeds, bills of sale,
filings and other instruments, consents and assurances and take or cause to be
taken all such action as the other party may reasonably request to carry out the
terms of this Agreement. In addition, each party agrees to, and will cause its
and its Affiliates' Representatives to, cooperate fully with the other party and
provide the other party with such assistance as may reasonably be requested by
the other party in connection with (a) any Proceeding which relates to the
operation or activities of the Business prior to the Closing Date and (b) the
preparation of any tax return and the conduct of any audit or other examination
by any taxing authority relating to the Purchased Assets or the Business.

     SECTION 9.2. Retention of Records. After the Closing, Seller and its
Affiliates and Representatives shall, upon reasonable notice to Buyer, have
access during usual business hours to, and may make copies or extracts from, the
Files and Records of the Business for all periods prior to the Closing Date for
any reasonable purpose, such as for use in litigation or financial reporting,
Tax return preparation, or tax compliance matters. Buyer agrees to retain the
material Files and Records of the Business prior to the Closing Date for at
least six years after the Closing Date except where longer records retention is
required by a Legal Requirement (including Internal Revenue Service
requirements).

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     SECTION 9.3. Names. Except as otherwise permitted under Section 9.12 for
the purpose of identifying the Business as having been the TCAS business of
Seller prior to the Closing, from and after the Closing Date, neither Buyer nor
any of its Affiliates shall use the name "Honeywell", "Honeywell International"
or any other logo, trademark, trade name, assumed name or service mark, or any
logo, trademark, trade name, assumed name, service mark or other name derived
from or confusingly similar to "Honeywell," or any other mark, symbol or trade
name or name not otherwise explicitly transferred in the Intellectual Property
Agreement. Notwithstanding the foregoing, for a period not to exceed 90 days
from the Closing Date, Buyer shall have the limited right (i) to use up
Inventories, stationery and other printed material acquired pursuant to this
Agreement without modifying any trademark or logo thereon, provided that all
such material carrying the "Honeywell" or "Honeywell International" name shall
clearly indicate by stamp, sticker or other similar notice or marking that the
Purchased Assets are now owned by Buyer, and (ii) to use Purchased Tangible
Personal Property acquired pursuant to this Agreement without modifying any
trademark or logo thereon, provided that, in the case of tooling, Buyer marks
any product manufactured with such tooling to indicate the date of manufacture
and shall eliminate such trademark or logo from such tooling prior to abandoning
or disposing thereof.

     SECTION 9.4. Supply Contracts.

     (a) In the case of each Contract in effect on the Closing Date under which
the Business supplies any products to Seller or any of its Affiliates, or Seller
or any of its Affiliates supplies any products to the Business (each such
Contract being referred to hereinafter as a "Supply Contract"), Buyer and Seller
shall honor, and cause their respective Affiliates to honor, all the terms
(including, without limitation, pricing) of such Supply Contract for so long as
such Supply Contract remains in effect. The aforesaid obligation shall also
apply to the terms set forth in any written proposal for the supply of products
by or to the Business pending on the Closing Date, in the event that Seller or
any of its Affiliates, on the one hand, and Buyer or any of its Affiliates, on
the other hand, enter into a Supply Contract relating to such proposal after the
Closing. In the case of any new Supply Contract with respect to the Business
entered into by Seller or any of its Affiliates, on the one hand, and Buyer or
any of its Affiliates, on the other hand, after the Closing (and for which a
written proposal is not pending on the Closing Date), Buyer and Seller agree
that the terms thereof shall be the best commercial terms (including, without
limitation, pricing) available to similarly situated buyers.

     (b) Neither Seller nor Parent has taken any action to cause any Affiliate
of Seller that provides products to the Business under any Supply Contract (i)
to dissolve or liquidate; or cease, suspend or change its business to eliminate
the products it sells to the Business, (ii) to be sold, or (iii) otherwise to
cease to supply any products to the Business; and neither Seller nor Parent has
any current plan to take any of the actions described in the preceding clauses
(i), (ii) and (iii).

     (c) If Seller or Parent shall make a decision to take any of the actions
described in clauses (i), (ii) and (iii) of Section 9.4(b), Seller shall (i)
give Buyer prompt notice of such decision, and (ii) offer Buyer the option to
purchase from Seller's Affiliates sufficient quantities, in accordance with
Buyer's good faith estimate of its requirements, of the products Seller's
Affiliates sell to the Business to satisfy Buyer's requirements therefor during
the remaining term


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of its existing sales contracts with Buyer's customers for which such products
are required. If any such action is taken within two (2) years after the Closing
Date Buyer shall endeavor to locate a qualified, acceptable second source for
such products, if available, that will agree to supply such products on the same
economic terms as Seller's Affiliates. If, after commercially reasonable
efforts, Buyer determines that such a second source does not exist or that it is
not practicable to qualify a second source, or that the products are not
available from a qualified, acceptable second source on the same economic terms,
then Buyer may so notify Seller and Seller shall (i) accept payment for such
products, as Buyer removes such products from its inventory and (ii) provide, or
arrange for provision of, warranty and customer post-sale support for such
products over the remaining term of Buyer's existing sales contracts with
Buyer's customers plus a reasonable period thereafter. If, at the time a sales
contract with Buyer's customer terminates by its terms, there is excess, unsold
inventory of such products remaining in Buyer's warehouse (the "Excess") and
Buyer's good faith estimate for its requirements of such products was
reasonable, then (i) Seller shall have no further claim for payment of purchase
price for the Excess and (ii) Buyer will promptly deliver the Excess to a
location designated by Seller. Buyer shall also endeavor to take advantage of
any provision in its contract with its customer that permits it to mitigate the
expense or loss that may arise from such event. If customers terminates the
existing sales contract for convenience, then Buyer will use commercially
reasonable efforts to enforce customers obligations under such contract
regarding reimbursement of costs for manufactured but undelivered products in
the same manner as it does for its other suppliers under the contract. Buyer
will pay any recovery received from the customer for the Excess over to Seller.

     SECTION 9.5. Research and Experimental Expenses. Seller will furnish to
Buyer on Seller's letterhead as soon as reasonably practicable, but in no event
more than 180 days after Closing, at Seller's cost and expense, all information
reasonably requested relating to the base period research expenses and any other
information to allow Buyer to claim research and experimental credits in
accordance with the relevant sections of the Code and Treasury Regulations
promulgated thereunder.

     SECTION 9.6. Novation of Government Contracts. As soon as reasonably
practicable following the Closing, Seller 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 Buyer in accordance with this Agreement and (ii) enter into a
novation agreement (the "Novation Agreement") substantially in the form
contemplated by such regulations. Seller shall thereby reasonably assist Buyer
in obtaining all Consents 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 9.7. Cooperation in Litigation. The parties shall reasonably
cooperate with each other at the requesting party's expense in the prosecution
or defense of any dispute or litigation or other proceeding arising from their
respective operation of the Business, including but not limited to affording
reasonable access to and providing information regarding amounts in dispute,
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running of the Business relating to such dispute or litigation. Buyer and Seller
shall cooperate fully, as and to the extent reasonably requested by the other
party, and at their own cost and expense, in connection with the filing of Tax
returns, the retention of records and the forwarding of any relevant notices or
other information received from any Tax authority and any audit, litigation or
other proceeding with respect to Taxes, and shall fully and accurately submit
any Tax data packages reasonably requested by Seller within the time periods
established by Seller's tax department consistent with past practices (i.e., on
or before April 15, 2000).

     SECTION 9.8. Mail; Payments. After the Closing, Seller authorizes and
empowers Buyer to receive and open all mail and other communications addressed
to Seller and received by Buyer. With respect to such communications that relate
to the Business after the Closing Date, Buyer may act in such manner as it may
elect, subject to any rights of Seller hereunder. With respect to such
communications that relate to the Business on or prior to the Closing Date,
Buyer shall act reasonably in consideration of the respective rights and
obligations of the parties hereunder. With respect to such communications that
do not relate to the Business, Buyer shall promptly forward such communications
to Seller. Each party promptly shall deliver to the other any cash, checks or
other instruments of payment to which the other is entitled and shall hold the
same in trust for the other until such delivery.

     SECTION 9.9. Insurance. Until the Closing, Seller shall maintain in full
force and effect in respect of the Business the existing insurance covering the
Business and the Purchased Assets, subject to normal variations required by
operation of the Business in the ordinary course of business consistent with
past practice. Seller shall cooperate with Buyer in order to afford Buyer the
full benefit of all insurance policies and all rights thereunder (including
rights to causes of action, lawsuits, claims and demands, rights of recovery and
set-off) covering the Business and the Purchased Assets, and proceeds under or
with respect to such insurance policies, for periods prior to the Closing to the
extent claims thereunder relate to any of the Purchased Assets or the Assumed
Liabilities.

     SECTION 9.10. Non-Solicitation. Seller shall comply with the
non-solicitation provisions in respect of the Business set forth in Section IV.E
of the Consent Decree.

     SECTION 9.11. Additional Post-Closing Covenants. Seller and Buyer
acknowledge that prior to this transaction, Buyer has offered only a single
product to the commercial avionics industry, and, therefore, requires the
benefits of certain limited restrictive covenants. In recognition of these
unique circumstances, from and after the Closing Date, and for the period, if
any, indicated, Seller shall (and shall cause its Affiliates to):

     (a) (i) Not use references to Seller's prior ownership of the Business or
to any of the products and services of the Business developed, provided or sold
on or prior to the Closing Date for the purpose of promoting, advertising,
soliciting orders for, or attempting to sell, any product or service of Seller's
Continuing TCAS Business, (ii) take commercially reasonable efforts to (x)
prevent the impression on the part of customers or other Persons that Seller's
Continuing TCAS Business is the Business and (y) correct any such impression of
which Seller becomes aware, and (iii) for a period of one year from the Closing,
in all brochures, technical and marketing proposals, presentations and other
such materials identify clearly Seller's Continuing TCAS Business as being the
former TCAS business of AlliedSignal and not the Business. The


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phrase "identify clearly" means that such identification appears prominently on
the cover or title page or in the first location in any such materials where
Seller's Continuing TCAS Business is first mentioned. It is understood that,
absent evidence to the contrary, Seller's sending an announcement reasonably
satisfactory to Buyer to all of the persons set forth on Schedule 9.11(a) no
later than fourteen days after the Closing Date and labeling materials in
accordance with clause (iii) above shall constitute prima facie evidence of
Seller's compliance with its obligations pursuant to clause (ii)(x) above.

     (b) Not interfere with Buyer's relationship after the Closing with
customers of the Business under any Contract or in any manner induce, or attempt
to induce, any such customer (i) to terminate such Contract, (ii) to reduce the
amount of business that any such customer does with Buyer pursuant to such
Contract or (iii) to substitute for HI TCAS Products any products of Seller's
Continuing TCAS Business that a customer is required to purchase under its
Contract;

     (c) Except as otherwise provided in the Supply Agreement, refer directly
and promptly to Buyer all oral and written inquiries concerning, or orders for,
HI TCAS Products and services relating to HI TCAS Products that Seller or its
Affiliates receive in their order entry system, including, through customer
service representatives and customer support marketing representatives, from
customers or prospective customers, whether such inquiries relate to HI TCAS
Products on a stand-alone basis or as part of an avionics package. Seller shall
prepare and deliver to each of its telephone operators at Seller's facilities
that support the Business on the date hereof, and each of its customer service
representatives and customer support marketing representatives for HI TCAS
products written instructions concerning the handling of such inquiries in a
form consistent with that provided in writing to Seller by Buyer. Such
instructions shall provide for (i) all telephone inquiries to be immediately
referred to a representative of Buyer whose name and telephone number Buyer will
provide to Seller (and which Buyer may change from time to time) and (ii) all
written inquiries to be forwarded as soon as practical, but no longer than 48
hours after receipt thereof, to a representative of Buyer whose name and address
Buyer will provide to Seller and responded to with a form response prepared by
Buyer. The obligation described in this paragraph shall survive the Closing (i)
for two years with respect to inquiries about HI TCAS Product sales and (ii) as
long as reasonably necessary with respect to inquiries concerning product
support or repair for HI TCAS Products.

     (d) For a period of four years from the Closing, in any sale of, or
proposal to sell, avionic products and TCAS products other than HI TCAS Products
together as part of the same bundle of products, to offer a good faith price
for, such TCAS product separately from the other components of such bundle and
not increase the price of the remaining portion of the bundle if the customer
elects to purchase an HI TCAS Product component in substitution for the product
offered by Seller. If a customer requests alternate sources for any TCAS
products included in the bundle of products, Seller will identify Buyer as an
alternative source for that product in its bundled offering and will give Buyer
notice that it is doing so.

     (e) Seller's Continuing TCAS Business shall offer, and shall cause its
authorized dealers to offer, software upgrades or other products regarding (i)
the conversion of Mode C transponders to Mode S transponders and (ii) the
interface between other avionics products of Seller and TCAS systems to
customers for HI TCAS Products on terms and conditions no less


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favorable than they offer such software upgrades and other products to similarly
situated customers of TCAS Products of Seller's Continuing TCAS Business.

     SECTION 9.12. Buyer's References to the Business. For a period of two years
from and after the Closing Date, Buyer shall be free to identify the Business in
advertisements, brochures, technical and marketing proposals and other written
materials as being the "former Honeywell TCAS business" or as having been the
"Honeywell TCAS business" prior to the Closing. Thereafter, Buyer shall not use
such phrases or similar phrases in such materials or otherwise in advertising or
promoting, or soliciting orders for, the Business. Nothing in this Section 9.12
shall prohibit Buyer from making the factual representation, for purposes other
than advertising and promotion, that, prior to the Closing, the Business was the
TCAS business that Seller owned and operated. Buyer shall not, in any reference
permitted by this Section, use the "Honeywell" logotype (or any confusingly
similar mark) in its business.

     SECTION 9.13. Use of Seller Aircraft. For a period of five years from and
after the Closing Date, Seller shall make available to Buyer access to, and use
of, the aircraft and aircrews Seller uses for testing HI TCAS Products (or
suitable and at least equivalent replacement aircraft) for testing of the HI
TCAS Products in the same manner as they are currently made available to the
Business. A summary of the amount, cost and terms and conditions of use of such
aircraft are set forth in Schedule 9.13. The parties agree that the prices
charged by Seller for the use of such aircraft shall be sufficient to cover
Seller's reasonable estimate of its actual costs and, if applicable, consistent
with the prices Seller would charge to an Affiliate, in each case without taking
into account any profit margin or projected savings from increased efficiency.
Buyer shall schedule its use of such aircraft with Seller's flight operations
department. The parties acknowledge that disruptions in Buyer's scheduled use of
the aircraft can materially and adversely affect Buyer's performance of its
obligations to its customers. Therefore, if Seller's aircraft are not made
available for Buyer's use when scheduled for reasons other than events or causes
outside of Seller's control (such as adverse weather or the sickness of
necessary members of the aircrew), Seller will make available suitable
substitute aircraft at the same cost and otherwise on the same conditions as set
forth on Schedule 9.13. If Seller fails to make aircraft available to Buyer in
accordance with the foregoing, Seller shall be liable to Buyer for Buyer's
actual cost for leasing substitute aircraft equivalent to Seller's aircraft.

     SECTION 9.14. New Contracts. Seller will use commercially reasonable
efforts:

     (a) to maintain in effect, at the same price and on the other terms and
conditions that were used in Seller's approved operating cost budget for the
Business for fiscal year 2000, the existing agreement between Seller and
Solectron for the provision by Solectron to the Business of circuit card
assembly and other services regardless of whether similar services to other
business units of Seller under the existing agreement between Seller and
Solectron are terminated;

     (b) to assist Buyer in locating and in negotiating and consummating an
agreement between Buyer and a Person who can provide Buyer's requirements for
repair and overhaul services for TCAS products outside of the United States in
the event that any of the Persons providing such services to the Business on the
Closing Date terminates its Contract within two years following the Closing
Date; and

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     (c) to maintain in effect, at the same price and on the other terms and
conditions that were used in Seller's operating cost budget for the Business for
fiscal year 2000, the existing agreement between Seller and EFTC for the
provision by EFTC to the Business of circuit card assembly and other services
regardless of whether similar services to other business units of Seller under
the existing agreement between Seller and EFTC are terminated.

     SECTION 9.15. Certain Other Matters. Promptly following the Closing, Seller
shall notify its employees of the sale of the Business pursuant to this
Agreement, and shall inform them that the disclosure or use of the Business
Intellectual Property Assets by Seller and its Affiliates is restricted pursuant
to the terms of this Agreement and the Intellectual Property Agreement.

     SECTION 9.16. Relocation of the Business. Buyer covenants that it shall not
relocate the portion of the Business located in Phoenix, Arizona on the Closing
Date more than thirty (30) miles from its current location at any time within
five (5) years from the Closing Date.

     SECTION 9.17.             Post-Closing Warranty Expense.

     (a) In the event that a customer who has purchased from Seller a TCAS
product manufactured by Seller on or prior to the Closing Date makes a claim
against Buyer for repair or service pursuant to Seller's product warranty for
such product (a "Warranty Claim"), Buyer (or, at Buyer's request, Seller, as
Buyer's agent under the Services Agreement) shall perform such repair or
service. Warranty Claims shall be validated on a basis consistent with the past
practices and written warranty policies of the Business as of the Closing Date.
Any such Warranty Claim that is so validated is referred to herein as a "Valid
Claim".

     (b) Buyer (or, at Buyer's request, Seller as Buyer's agent under the
Services Agreement) shall perform all warranty repairs and services in respect
of Valid Claims at its cost. Buyer shall be responsible for the first $3 million
of such warranty costs with respect to Valid Claims and Seller shall reimburse
Buyer promptly upon receipt of Buyer's invoice for any excess of such warranty
costs above the first $3 million incurred between the Closing Date and the
earlier of (i) the fifth anniversary of the Closing Date and (ii) the expiration
of the warranty period for all TCAS products manufactured on or prior to the
Closing Date. If the aggregate amount of all such warranty costs incurred by
Buyer during the five-year period referred to in the previous sentence is less
than $3 million, Buyer shall reimburse Seller for the shortfall promptly
following the end of such period.

     (c) If a Warranty Claim is determined not to be a Valid Claim, Buyer may,
in its sole discretion, elect (or instruct Seller as its agent under the
Services Agreement) to perform the repairs or services at its own cost. In such
event, such costs shall (i) not be charged against the $3 million threshold nor
(ii) be subject to reimbursement by Seller if the amount of warranty costs
exceeds $3 million.

     (d) No more often than once annually, Seller shall have the option to
review the warranty practices of Buyer. Any Warranty Claim presented shall be
presumed to be a Valid Claim unless the invalidity of such claim is demonstrated
by Buyer's written warranty records which Buyer shall create and maintain
consistent with past practice.

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     SECTION 9.18. Manufacture and Supply of HI TCAS Products. Nothwithstanding
any limitation as to the term of manufacturing services set forth in the
Services Agreement, until such time as Buyer shall obtain appropriate
certifications from the Federal Aviation Administration to manufacture the HI
TCAS Products, Seller shall manufacture such HI TCAS Products on Buyer's behalf
and supply such HI TCAS Products to Buyer on the economic terms set forth in the
Services Agreement.

                                    ARTICLE X
                       PENSION, EMPLOYEE AND UNION MATTERS

     SECTION 10.1. Scope of Article. This Article X contains the covenants and
agreements of the parties with respect to (a) the status of employment of the
Employees employed as of the Closing Date upon the sale of the Business to
Buyer, and (b) the employee benefits and employee benefit plans provided or
covering such Employees. Nothing herein expressed or implied confers upon any
Employee of Seller any rights or remedies of any nature or kind whatsoever under
or by reason of this Article X, including, without limitation, any right of any
Transferred Employee to employment with Buyer for a specified period of time.

     SECTION 10.2. Employment.

     (a) Employment. Buyer shall offer employment, effective as of the Closing
Date, to the employees of Seller identified on Schedule 10.2(a) (the
"Employees") who remain employed by Seller on the Closing Date and who are not
then absent from work due to long-term disability, unless Buyer notifies Seller
of its decision not to offer employment prior to Closing. Buyer and Seller
acknowledge that any Employees identified on Confidential Attachment A who are
not identified on Schedule 10.2(a) have been intentionally omitted therefrom and
Buyer does not intend to offer employment to such Employees. Buyer shall use its
best efforts to expedite and conclude the offer process at least two to five
days prior to Closing. In the event that, as a result of Employees declining to
accept employment with Buyer, Buyer will have insufficient Transferred Employees
to operate the Business as Seller operates it on the date hereof, Seller will
cooperate with Buyer in identifying and making available for employment by Buyer
sufficient additional employees of Seller to enable Buyer to operate the
Business as Seller operates it on the date hereof as provided in the
Supplemental Agreement. All Employees who accept such offer of employment (other
than Non-U.S. Transferred Employees shall be referred to herein as "Closing Date
Transferred Employees". In addition, Buyer may offer employment effective as of
any date within 6 months after the Closing Date to any Employee who is not
offered employment by Buyer effective as of the Closing Date. All Employees who
accept such an offer of employment by Buyer shall be referred to herein as
"Post-Closing Transferred Employees". Closing Date Transferred Employees and
Post-Closing Date Employees are collectively referred to herein as "Transferred
Employees."

     (b) Transferred Employees. Transferred Employees are entitled to the
benefits of the provisions of this Section 10.2(b) and Section 10.3. Employees
who are offered but decline employment with Buyer, but who later become employed
by Buyer will not be entitled to the benefits of such provisions and such
Employees will be entitled only to such terms and conditions of employment with
Buyer as they and Buyer may negotiate.

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          (1) Schedule 10.2(b)(1) identifies those Employees who are employed
     outside of the United States. The terms hereunder relating to such
     Employees are set forth in Section 10.2(e) below.

          (2) Provided they remain employed by Buyer, Buyer shall provide
     Transferred Employees other than those Employees listed on Schedule
     10.2(b)(1), for a period of at least 12 months after the Closing Date, with
     a salary or wage rate, including the timing of merit pay increases and the
     payment of overtime to certain Transferred Employees who would otherwise be
     exempt from overtime requirements under applicable law that is not less
     favorable and benefits (other than any stock-based plans or benefits
     relating to equity securities or their equivalent, such as phantom stock
     plans or stock appreciation rights) that are, in the aggregate, comparable
     to or greater than those provided as of the date hereof. Buyer will offer
     initial employment to each Transferred Employee in substantially the same
     job with substantially the same job responsibilities but will have the
     right to make changes in such employment subsequently. Nothing in this
     Agreement shall limit Buyer's right to terminate the employment of any
     Transferred Employee at any time.

          (3) If Buyer terminates the employment of any Transferred Employee
     within 12 months after the Closing Date, Buyer shall pay such Transferred
     Employee a severance benefit that shall in no event be less than, or paid
     later than, the severance benefit, if any, to which such Transferred
     Employee would have been entitled if Seller's severance plan, as in effect
     as of the date hereof, applied to such termination of employment. For
     purposes of this Section 10.2(b)(2), service with both Seller and Buyer
     shall be taken into account in computing the amount of such benefit.
     Notwithstanding the preceding two sentences, Seller shall be solely
     responsible for and shall pay any amounts as required to be paid by Seller
     under the Consent Decree in respect of Transferred Employees other than
     liabilities assumed by Buyer upon the transfer of assets in respect of
     credited service pursuant to Section 10.3(e) hereof.

          (4) Following the Closing Date, Buyer shall provide all Transferred
     Employees with life insurance, medical coverage, dental, vision,
     prescription drugs and other employee welfare benefit plans (within the
     meaning of Section 3(1) of ERISA), on a basis substantially comparable in
     the aggregate to those provided to Transferred Employees on the date
     hereof; provided however, that except as provided in Section 10.2(f) hereof
     Buyer shall not be required to provide any of the Transferred Employees
     with any stock-based plans or benefits relating to equity securities (or
     their equivalent, such as phantom stock plans or stock appreciation
     rights). Buyer shall assume liability for all deferred compensation,
     supplemental and excess pension and savings benefits, bonus amounts, normal
     and enhanced severance benefits, and relocation benefits in respect of
     Transferred Employees who are employees of the Business to the extent
     accrued on the Statement of Net Assets of the Business as of the Closing
     Date. Buyer shall assume the stay-on bonus agreements for Transferred
     Employees listed on Schedule 10.2(b)(4); provided, however, that Seller
     shall reimburse Buyer for any payments made under


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     such agreements with respect to any Transferred Employee who voluntarily
     terminates employment with Buyer within one year after the Closing Date.

          (5) Except as otherwise provided for under the Services Agreement, at
     no time prior to or subsequent to the Closing Date shall Buyer offer or
     provide any financial or other incentive to any Transferred Employee to
     elect COBRA continuation coverage under any group health plan of Seller or
     its Affiliates.

     (c) Seller agrees to use reasonable efforts to facilitate the transition to
employment with Buyer of Employees to whom Buyer offers employment. Such
reasonable efforts shall include, to the extent permitted by applicable law,
affording Buyer reasonable opportunities to review employment and personnel
records of Employees, to discuss with Employees terms and conditions of
employment with Buyer and to distribute to the active Employees forms and
documents relating to employment with Buyer.

     (d) Leased Employees. Attached hereto as Schedule 10.2(d) is a list of all
leased employees disclosed on Confidential Attachment A ("Leased Employees"). To
the extent such Leased Employees are providing services to the Business on the
Closing Date, Buyer may, at its sole discretion and to the extent assignable,
assume the leasing agreements governing the Leased Employees. Seller shall
cooperate in obtaining the required assignments.

     (e) Non-U.S. Transferred Employees. Subject to the last sentence of Section
10.2(b)(2), Buyer shall assume the employment agreements or terms and conditions
of employment of those Employees listed on Schedule 10.2(b)(1) and those made
available for employment pursuant to the Supplemental Agreement who are employed
outside the United States and who are given offers of employment by Buyer and
accept employment with Buyer ("Non-U.S. Transferred Employees"). Buyer shall
provide the Non-U.S. Transferred Employees with a pension plan that is
comparable (including any ancillary life insurance benefits provided as part of,
or incidental to, such pension plan) to the pension scheme in which they
participate at Closing. To the extent Buyer can, and choose to, assume Seller's
obligation under an existing pension scheme, Seller shall cooperate in effecting
that assumption.

     (f) Options in Buyer's Securities. The most senior executive and other key
employees, as selected in Buyer's discretion, who are Transferred Employees,
shall receive options to purchase Buyer's equity securities.

     SECTION 10.3. Pension Plans.

     (a) Seller shall amend the Honeywell Retirement Benefit Plan ("Pension
Plan") to fully vest all Closing Date Transferred Employees who are
participating in the Pension Plan in their accrued benefits as of the Closing
Date. Buyer shall assume the liabilities and obligations as of the Closing Date
of Seller for the accrued benefits of all Closing Date Transferred Employees
under the Pension Plan including the provision of additional service credit to
such Transferred Employees in accordance with Section 10.3(e) hereof. Buyer
shall have established as of the Closing Date, or shall establish as soon as
practicable after the Closing Date, a tax-qualified defined benefit pension plan
or plans which shall discharge the pension obligations of Buyer set forth in
this Section ("Buyer's Plan"). Buyer's Plan shall credit all service with Seller
for


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purposes of the eligibility, participation, vesting and benefit accrual
requirements under Buyer's Plan. As soon as practicable after the Closing Date,
Seller shall cause a transfer from Seller's Pension Plan to Buyer's Plan of the
pension liabilities and obligations being assumed by Buyer and of the assets, as
calculated below.

     (b) The assets to be transferred from Seller's Pension Plan to Buyer's Plan
shall be an amount equal to the "projected benefit obligation," within the
meaning of Financial Accounting Standard No. 87 ("PBO"), as of the Closing Date
attributable to the Closing Date Transferred Employees under Seller's Pension
Plan with adjustments described below. Seller's actuary shall calculate the
transfer amount (the "Transfer Amount") by applying the assumptions, methods and
methodologies listed on Schedule 10.3(b) and other actuarial assumptions and
methodologies used in the ordinary course in the preparation of Seller's 1998
corporate annual report not inconsistent with those listed in Schedule 10.3(b);
provided, however, that the interest rate used in such calculation shall be
7.75%. Notwithstanding any provision herein to the contrary, the transfer amount
shall be subject to the applicable requirements of Sections 414(l) and
401(a)(12) of the Code. In the event that the applicable requirements of
Sections 414(l) and 401(a)(12) of the Code require that an amount in excess of
the PBO attributable to the Closing Date Transferred Employees covered by one of
Seller's Pension Plan be transferred to Buyer's Plan, then the amount to be
transferred from the other Seller's Pension Plan shall be reduced by such excess
amount provided that such other transfer or transfers meet the applicable legal
requirements of Code Sections 414(l) and 401(a)(12). The amount as so determined
shall be adjusted for investment earnings at the short term investment fund rate
earned by Seller's Pension Plan (the "Earnings") for the period between the
Closing Date and the actual dates of transfer (see below in Section 10.3(c)) and
reduced by the amount of any benefit payments to Closing Date Transferred
Employees and a proportional share of investment and administrative expenses
relative to asset values for such period (see below in Section 10.3(c)). The
amount of assets caused to be transferred pursuant to this Section shall be
calculated by Seller's actuary, and shall be subject to review by Buyer's
actuary for the sole purpose of confirming that the calculation was made in
accordance with this Section. In the event that Buyer's actuary does not agree
that the calculation by Seller's actuary was made in accordance with this
Section, the determination of the amount to be transferred pursuant to this
Section shall be made by a third, nationally recognized actuarial firm selected
by Seller's and Buyer's actuaries (the cost of which shall be borne equally
between Seller and Buyer), and the determination of such third actuary as to the
amount to be transferred shall be binding and conclusive upon the parties
hereto. The transfer of assets from Seller's Pension Plan to Buyer's Plan shall
be made in cash pursuant to Section 10.3(c). The parties shall file any
necessary IRS Forms 5310-A with respect to such transfer. Services performed by
Seller for Buyer relating to pension plan administration pursuant to the
Services Agreement shall be required only to the extent that Buyer's Plan
provides materially similar benefits, distribution option and retirement
eligibility thresholds to those provided under Seller's Plan.

     (c) All transfers from the Pension Plan to Buyer's Plan shall be made in
accordance with the provisions of this Section 10.3(c). As soon as is
administratively practical, but in no event later than 45 days following the
Closing Date, and conditioned upon Seller having been provided evidence
reasonably satisfactory to it that Buyer has established a trust (or trusts) to
hold the assets of Buyer's Plan and that Buyer's Plan is qualified under Section
401(a) of the


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Code and the trusts holding assets of Buyer's Plan are tax exempt under Section
501(a) of the Code ("Initial Transfer Date"), Seller shall cause Seller's
Pension Plan trust to make an initial transfer of assets in cash equal to 85% of
the amount reasonably estimated by Seller in good faith to be equal to the
Transfer Amount (the "Initial Transfer Amount"). In addition, prior to the
Initial Transfer Date Seller shall provide Buyer with evidence reasonably
satisfactory to Buyer that the 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"), Seller shall cause a second transfer
to be made in cash of the "True-Up Amount." The True-Up Amount shall be equal to
the following amount:

     (Transfer Amount minus Initial Transfer Amount), minus benefit payments
     made to Transferred Employees since the Closing Date from the Pension
     Plans, adjusted for Earnings and a proportionate amount of expenses on the
     excess of the Transfer Amount over the Initial Transfer Amount from the
     Closing Date to the True-Up Date.

If the Initial Transfer Amount exceeds the Transfer Amount, as soon as
practicable following such determination Buyer shall cause a transfer to be made
to Seller's Pension Plan equal to the excess of the Initial Transfer Amount over
the Transfer Amount, adjusted to reflect earnings at the short term investment
fund rate earned by Buyer's Plan from the Initial Transfer Date until the date
of transfer.

     (d) As soon as practicable after the end of the 6-month period following
the Closing Date, or such date as Buyer and Seller agree, Seller shall amend
Seller's Pension Plan to fully vest all Post-Closing Transferred Employees in
their accrued benefits as of the end of such 6-month period and a transfer of
assets and liabilities attributable to Post-Closing Transferred Employees shall
be made from Seller's Pension Plan to Buyer's Plan in accordance with the
provisions applicable to Closing Date Transferred Employees in Sections 10.3(b)
and (c) above except that references to the Closing Date in such Sections shall
be deemed to be references to the date that is 6 months after the Closing Date.
Buyer shall assume the liabilities and obligations for accrued benefits of all
Post-Closing Transferred Employees under Seller's Pension Plan as of the date of
such transfer and Buyer's Plan shall credit all service with Seller for purposes
of eligibility, participation, vesting and benefit accrual requirements under
Buyer's Plan.

     (e) Commencing as of the Closing Date, or their date of hire if later, in
addition to service credits to be accrued under the Buyer's Plan attributable to
service with Buyer, Buyer shall concurrently credit Transferred Employees with
additional service credits under the Buyer's Plan to the extent such service
credits would have been earned by the Transferred Employees under the Seller's
severance plan had the Transferred Employees been involuntarily terminated from
the Seller without cause on the Closing Date or immediately prior to their date
of hire with Buyer. For purposes of calculating the amount of the Transfer
Amount, the Seller's actuary shall take into account this additional credited
service.

     SECTION 10.4. Savings Plans.

     (a) Seller shall amend the Honeywell Savings and Stock Ownership Plan
("Seller's Savings Plan") to provide that Closing Date Transferred Employees
shall fully vest in their


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Seller's Savings Plan accounts (the "Accounts") as of the Closing Date. As
promptly as practicable following the Closing Date, Seller and Buyer shall
arrange for the transfer of the Accounts and the corresponding liabilities and
obligations with respect to Closing Date Transferred Employees from Seller's
Savings Plan to one or more tax-qualified plans established by Buyer which
provide benefits and payment options substantially equivalent to the benefits
available under the applicable Seller's Savings Plan ("Buyer's Savings Plans").
Buyer's Savings Plans shall credit all service with Seller for purposes of the
eligibility, participation, vesting and benefit accrual requirements of Buyer's
Savings Plans and shall also (a) provide for tax-deferred contributions and (b)
meet all requirements for a qualified cash or deferred arrangement under Section
401(k) of the Code. The transfer of assets from Seller's Savings Plan shall be
made in cash, promissory notes representing participant loans and shares of
Honeywell International Inc. common stock. Without limiting the generality of
the foregoing, Buyer agrees to accept the transfer of such accounts in Honeywell
International Inc. common stock to the extent invested in Honeywell
International Inc. common stock, and, to the extent permitted by law for such
reasonable period of time, not to exceed six months, to provide Transferred
Employees with an election to retain Honeywell International Inc. common stock
in their accounts under Buyer's Savings Plans or to dispose of such stock and
have the proceeds reinvested in other investment alternatives offered under
Buyer's Savings Plan. The parties shall file any necessary IRS Forms 5310-A with
respect to such transfer. Prior to the transfer date, Buyer shall, to the
reasonable satisfaction of Seller's counsel, present Seller with such evidence
and information as is reasonably necessary to establish that the tax-qualified
plan or plans established or to be established by Buyer to which the transfer or
transfers described in this Section are to be made are in full force and effect
and meet all the requirements for qualification under Sections 401(a) and
411(d)(6) of the Code and Seller shall, to the reasonable satisfaction of
Buyer's counsel, present Buyer with such evidence and information as is
reasonably necessary to establish that Seller's Savings Plan meet the
requirements of Section 401(a) of the Code.

     (b) As soon as practicable after the end of the 6-month period following
the Closing Date, or such earlier date as Buyer and Seller may agree, Seller
shall amend Seller's Savings Plan to provide that Post-Closing Transferred
Employees shall fully vest in their respective Accounts as of the end of such
6-month period and a transfer of Accounts and the corresponding liabilities and
obligations with respect to Post-Closing Transferred Employees shall be made
from Seller's Savings Plan to the applicable Buyer's Savings Plan in accordance
with the provisions applicable to Closing Date Transferred Employees under
Section 10.4(a) above. Buyer's Savings Plans shall credit all service with
Seller for purposes of the eligibility, participation, vesting and benefit
accrual requirements of Buyer's Savings Plans.

     SECTION 10.5. Retiree Health and Life Insurance Benefits. Buyer shall, as
of the Closing Date, assume all liabilities and obligations of Seller for the
benefits payable or to become payable to all Transferred Employees and their
beneficiaries under the medical benefit and life insurance benefit programs
covering retired employees that are identified in Schedule 10.5.

     SECTION 10.6. Employee Welfare Plans. Buyer shall have established as of
the Closing Date, or shall establish after the Closing Date in accordance with
the terms of the Service Agreement, plans or programs to provide medical and
life insurance, disability,


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severance, vacation and other welfare benefits, including plans or programs to
discharge the obligations of Buyer as set forth in Section 10.5. The plan or
plans established by Buyer shall (a) credit all service with Seller for all
purposes under the new plans, including eligibility, participation and benefit
entitlement, (b) waive any pre-existing condition limitation or exclusion, and
(c) credit all payments made for healthcare expenses during the current plan
year for purposes of deductibles, co-payments and maximum out-of-pocket limits.

     SECTION 10.7. Severance and WARN Act Liability. Seller shall pay and be
responsible for all liability, cost or expense for severance, termination
indemnity payments, salary continuation, special bonuses and like costs under
Seller's severance pay plans, policies or arrangements, with respect to any of
the Employees that arise from or relate to the transactions described in or
contemplated by this Agreement, or that arise under Seller's severance plans
other than from the subsequent termination of employment by Buyer after the
Closing Date. Buyer agrees to pay and be responsible for all liability, cost,
expense and sanctions resulting from Buyer's failure to comply after the Closing
Date with the WARN Act, and the regulations thereunder, in connection with any
termination of Transferred Employees or for any action by Buyer taken after the
Closing Date which causes the WARN Act to apply in connection with any
termination of Transferred Employees. Seller agrees to pay and be responsible
for all liability, cost, expense and sanctions resulting from any action taken
by Seller in connection with, on, prior to or after the Closing Date with regard
to any site of employment, facility, operating unit or employee affected by this
Agreement which action by itself causes the WARN Act to apply.

     SECTION 10.8. Health Care Continuation Coverage. Seller agrees to provide
continuation coverage required by Section 4980B of the Code or Sections 601
through 608 of ERISA ("COBRA") under any Seller group health plan with respect
to Employees and their covered beneficiaries who are entitled to COBRA coverage
and to pay and be responsible for all liability, cost, expense, taxes and
sanctions under Section 4980B of the Code, and interest and penalties imposed
upon, incurred by, or assessed against Buyer or Seller that arise by reason of
or relate to any failure by any Seller group health plan to comply with the
health care continuation coverage requirements of COBRA.

     SECTION 10.9. Post-Closing Retirees. If Buyer's period to consider an offer
of employment made pursuant to Section 10.2(a) extends beyond the Closing Date,
an Employee who, as of the Closing Date, is eligible to retire under Seller's
Pension Plan may elect to retire from Seller effective as of a date after the
Closing Date and prior to acceptance of employment with Buyer. An Employee who
makes such an election to retire from Seller (a "Post-Closing Retiree") and
accepts an offer of employment from Buyer pursuant to Section 10.2(a) shall be
treated as a Transferred Employee for purposes of this Agreement, except that

     (a) Notwithstanding anything in Section 10.3 to the contrary, (i) Buyer
shall not assume any liabilities or obligations of Seller's Pension Plan with
respect to Post-Closing Retirees; (ii) Buyer's Plan shall not be required to
credit the service with Seller of any Post-Closing Retiree for purposes of the
benefit accrual requirements of Buyer's Plan; and (iii) there shall be no
transfer of pension assets or liabilities from Seller's Pension Plan to Buyer's
Plan with respect to Post-Closing Retirees (and the amount of assets to be
transferred from Seller's Pension Plan to Buyer's Plan pursuant to Section 10.2
shall be calculated only with respect to Transferred Employees other than
Post-Closing Retirees);

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     (b) Notwithstanding anything in Section 10.4 to the contrary, (i) Buyer
shall not assume any liabilities or obligations of Seller's Savings Plan with
respect to Post-Closing Retirees; (ii) Buyer's Savings Plans shall not be
required to credit the service with Seller of any Post-Closing Retiree for
purposes of the benefit accrual requirements of Buyer's Savings Plans; and (iii)
there shall be no transfer of accounts or corresponding liabilities from
Seller's Savings Plan to Buyer's Savings Plans with respect to Post-Closing
Retirees; and

     (c) Notwithstanding anything in Section 10.5 to the contrary, Buyer shall
not assume liabilities and obligations of Seller for the benefits payable or to
become payable to Post-Closing Retirees and their beneficiaries under the
medical and life insurance benefit programs covering retired employees that are
identified in Schedule 10.5 ("Seller Retiree Welfare Plans"). The medical and
life insurance plan coverage provided to Post-Closing Retirees after the Closing
Date as active employees of Buyer (including any such coverage provided by
Seller pursuant to the Services Agreement) shall be primary to coverage provided
by Seller Retiree Welfare Plans.

     SECTION 10.10. Support Employees. In accordance with the Consent Decree,
Buyer shall have reasonable access to technical, sales, production and
administrative employees of the Business who are not listed on Schedule 10.2(a)
or Confidential Attachment A ("Support Employees") under terms and conditions
more fully described in Section 13.18(g). It is expressly agreed and understood
by the parties hereto that the Support Employees (i) are Seller's employees,
(ii) are not part of Confidential Attachment A, and (iii) are not subject to the
Consent Decree's restrictions on continued employment with Seller if Buyer makes
any such Support Employee an offer of employment.

                                   ARTICLE XI
                           TERMINATION AND ABANDONMENT

     SECTION 11.1. Termination. This Agreement may be terminated at any time
prior to or on the Closing Date:

     (a) by mutual written consent of Buyer and Seller;

     (b) by either Buyer or Seller, if the Closing has not occurred (other than
(i) through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations or (ii) the failure to satisfy the condition
in the second sentence of Sections 7.4 and 8.4 and Section 13.18(a)) on or
before February 29, 2000 or such later date as Buyer and Seller may agree upon;
provided, however, that in the case of the foregoing clause (ii), such
termination right shall apply if such conditions are not satisfied on or before
March 15, 2000;

     (c) by either Buyer or Seller upon written notice to the other if such
other party or its Affiliate if there shall be in effect any Legal Requirement
that prohibits the consummation of the Closing or if the consummation of the
Closing would violate any order, decree or judgment of any court or Governmental
Body having jurisdiction over the transactions contemplated hereby;

     (d) by Buyer, if there has been a material violation or breach by Seller of
any agreement, covenant, representation or warranty contained in this Agreement,
and such violation or breach has not been waived by Buyer and continues without
cure for a period of five days



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after Buyer notifies Seller of its intent to terminate this Agreement pursuant
to this Section 11.1(d); or

     (e) By either Buyer or Seller if the first refusal right referred to in
Sections 5.11 and 7.10 is exercised and Seller enters into an agreement to sell
the Business to Thomson-CFS S.A. or any Affiliate thereof.

     (f) by Seller, if there has been a material violation or breach by Buyer of
any agreement, covenant, representation or warranty contained in this Agreement,
and such violation or breach has not been waived by Seller and continues without
cure for a period of five days after Seller notifies Buyer of its intent to
terminate this Agreement pursuant to this Section 11.1(f).

     SECTION 11.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 11.1, this Agreement and the Intellectual Property Agreement
shall become void and of no further force and effect and neither of the parties
hereto (nor their respective Affiliates, directors, shareholders, officers,
employees, agents, consultants, attorneys-in-fact or other Representatives)
shall have any liability in respect of such termination except that the
obligations contained in Sections 5.11, 11.2, 13.1, 13.3 and 13.11 shall survive
such termination; provided, however, that if such termination is effected
pursuant to Section 11.1(b), (c), (d) or (f) and the failure to consummate the
transactions contemplated hereby was the result of any of the conditions to
Closing having not been fulfilled by reason of the breach by either Buyer or
Seller of their respective covenants, agreements, representations and/or
warranties set forth in this Agreement or in any other Acquisition Agreement,
the party having so breached shall remain liable to the other party for such
breach.

                                   ARTICLE XII
                                 INDEMNIFICATION

     SECTION 12.1. Indemnity by Seller. Seller agrees to indemnify and hold
harmless Buyer and its Affiliates and their respective directors, shareholders,
officers, employees, agents, consultants, attorneys-in-fact and other
Representatives (collectively, "Buyer Indemnitees") from and against, and to
reimburse Buyer Indemnitees on demand with respect to, any and all losses,
damages, liabilities, claims, Taxes, costs and expenses, including reasonable
attorneys', accountants' and experts' fees (collectively, "Losses"), incurred by
Buyer Indemnitees by reason of or arising out of or in connection with (i) the
breach of any of its or its Affiliate's representations or warranties contained
herein or in any Acquisition Agreement, (ii) the failure of Seller or any
Affiliate of Seller to perform any covenant or agreement required by any
Acquisition Agreement to be performed by it, or (iii) the Excluded Liabilities.

     SECTION 12.2. Indemnity by Buyer. Buyer agrees to indemnify and hold
harmless Seller and its Affiliates and their respective directors, shareholders,
officers, employees, agents, consultants, attorneys-in-fact and other
Representatives (collectively, "Seller Indemnitees") from and against, and to
reimburse Seller Indemnitees on demand with respect to, any and all Losses
incurred by Seller Indemnitees by reason of or arising out of or in connection
with (i) the breach of any representation or warranty contained herein or in any
Acquisition Agreement, (ii) the failure of Buyer or any Affiliate of Buyer to
perform any agreement required by any Acquisition Agreement to be performed by
it, (iii) the Assumed Liabilities, or (iv) any third party action, suit,


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claim, charge, complaint, proceeding or investigation to the extent arising out
of or in connection with the operations of the Business by Buyer after the
Closing Date, but excluding for purposes of this clause (iv) any such Losses to
the extent arising out of (A) products or services sold, transferred, performed
or otherwise provided by Seller or any of its Affiliates to or for the Business
after the Closing Date, or any other actions taken by Seller or any of its
Affiliates, pursuant to any Acquisition Agreement, (B) the operations of the
Business on or prior to the Closing Date, (C) all actions or omissions of action
by Seller or its Affiliates other than as described in the preceding clauses (A)
and (B), and (D) all transactions, arrangements or agreements (including the
sale of products or the performance of services) between Seller (or any of its
Affiliates) and Buyer (or any of its Affiliates) other than pursuant to the
Acquisition Agreements.

     SECTION 12.3. Tax Indemnification. Seller shall be responsible for, shall
pay or cause to be paid, and shall indemnify and hold harmless Buyer Indemnitees
from and against, any and all Taxes for or in respect of each of the following:

     (a) any and all Taxes with respect to any taxable period or a portion
thereof ending on or before the Closing Date; and

     (b) any Taxes arising out of a breach of the representations and warranties
contained in Section 3.7.

     SECTION 12.4. Indemnification Procedure.

     (a) Any party seeking indemnification hereunder (the "Indemnitee") shall
notify the party liable for such indemnification (the "Indemnitor") in writing
of any event, omission or occurrence which the Indemnitee believes has given or
could give rise to Losses which are indemnifiable hereunder (such written notice
being hereinafter referred to as a "Notice of Claim"). Any Notice of Claim shall
be given promptly after the Indemnitee becomes aware of such event, omission or
occurrence; provided, however, that the failure of any Indemnitee to give notice
as provided in this Section 12.4 shall not relieve the Indemnitor of its
obligations under this Section 12.4, except to the extent that the Indemnitor is
actually prejudiced by such failure to give notice. A Notice of Claim shall
specify in reasonable detail the nature and the particulars of the event,
omission or occurrence giving rise to a right of indemnification to the extent
known by or available to Indemnitee. The Indemnitor shall satisfy its
obligations hereunder within thirty (30) days of its receipt of a Notice of
Claim.

     (b) All costs and expenses incurred by the Indemnitor in defending any
claim or demand shall be a liability of, and shall be paid by, the Indemnitor.
Except as hereinafter provided, in the event that the Indemnitor notifies the
Indemnitee within the 30-day period that it desires to defend the Indemnitee
against such claim or demand, the Indemnitor shall have the right to defend the
Indemnitee by appropriate proceedings and shall have the sole power to direct
and control such defense (including engagement of counsel in connection
therewith). If any Indemnitee desires to participate in any such defense, it may
do so at its sole cost and expense; provided, however, that such Indemnitee
shall have the right to employ separate counsel to represent such Indemnitee in
such defense, at the Indemnitor's expense, if (i) in such Indemnitee's
reasonable judgment and on the advice of counsel, a conflict of interest between



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such Indemnitor and such Indemnitee exists with respect to such claim or demand,
or (ii) the Indemnitor agrees to the retention of such counsel. So long as the
Indemnitor is reasonably contesting any such claim or demand in good faith, the
Indemnitee shall not pay or settle a claim or demand without the consent of the
Indemnitor (unless the Indemnitee waives in writing any right to indemnity
therefor). The Indemnitor may settle any claim or demand without the consent of
the Indemnitee, provided that such settlement includes a full, unconditional and
complete release of the Indemnitee, and provided also that no such settlement
will, without the prior written consent of the Indemnitee, impose any obligation
or restriction on the Indemnitee or any of its assets or businesses. So long as
the Indemnitor is defending in good faith any such third party claim, demand,
suit, action or proceeding, the Indemnitee shall at all times cooperate in all
reasonable ways with, make its relevant files and records available for
inspection and copying by, and make its employees reasonably available or
otherwise render reasonable assistance to, the Indemnitor and shall be
reimbursed for its reasonable out-of-pocket expenses related thereto. In the
event that the Indemnitor fails to timely defend, contest or otherwise protect
against any such third party claim, demand, suit, action or proceeding, the
Indemnitee, at the Indemnitor's expense, shall have the right, but not the
obligation, to defend, contest, assert crossclaims or counterclaims, or
otherwise protect against, the same and may make any compromise or settlement
thereof and be entitled to all amounts paid as a result of such third party
claim, demand, suit or action or any compromise or settlement thereof.

     (c) The Indemnitor, following receipt of any notice from any Indemnitee
requesting reimbursement for a Loss (which notice documents in reasonable detail
the Loss or portion thereof by the Indemnitee) shall promptly and in any case
within 30 days of receipt provide such reimbursement, unless and only to the
extent that the Indemnitor disputes in good faith its indemnity obligation with
respect to such Loss.

     (d) Each Indemnitee shall reasonably cooperate in complying with any
applicable foreign, federal, state or local laws, rules or regulations or any
discovery or testimony necessary to effectively carry out the Indemnitor's
obligations hereunder. Such Indemnitee shall be reimbursed for any reasonable
out-of-pocket expenses incurred in connection with such compliance.

     SECTION 12.5. Limitations. Anything to the contrary contained herein
notwithstanding, (a) neither party shall assert any claim against the other for
indemnification (not including indemnification for breach of Section 3.7 hereof)
hereunder with respect to any inaccuracy or breach of any representations or
warranties herein and in the other Acquisition Agreements unless and until the
amount of such claim or claims shall exceed $1,000,000 calculated on a
cumulative basis and not a per item basis, and then only in respect to the
excess over said $1,000,000; and (b) neither party shall be entitled to recover
from the other more than 50% of the Cash Purchase Price, as adjusted, with
respect to all claims for indemnity with respect to any inaccuracy or breach of
any warranties or representations.

     SECTION 12.6. Indemnification Sole Remedy. The parties shall only be liable
to indemnify each other for actual damages and neither party shall be liable for
any special, incidental, consequential or punitive damages (collectively,
"Special Damages") hereunder including, without limitation, lost profits;
provided, however, that Special Damages shall be indemnifiable in accordance
with the applicable provisions of the Acquisition Agreements to the


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extent owed by Buyer or Seller, as the case may be, to a third party. The
indemnification provided under this Article XII and elsewhere in this Agreement
and the other Acquisition Agreements shall constitute the parties' sole remedy
for any and all breaches of the Acquisition Agreements, (i) except in the case
of fraud or criminal misconduct and (ii) except for any equitable remedies
provided for in the Acquisition Agreements.

                                  ARTICLE XIII
                                  MISCELLANEOUS

     SECTION 13.1. Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement agrees to pay, without right of
reimbursement from the other party, the costs incurred by it incident to the
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith.

     SECTION 13.2. Public Announcements. Buyer and Seller shall consult with one
another before issuing any press release or public announcement about the
transactions contemplated by this Agreement and except as may be required by
applicable Legal Requirements or the rules of any applicable securities
exchange, no party shall issue any such press release or other public
announcement without the prior consent of the other party.

     SECTION 13.3. Confidentiality. The Confidentiality and Non-Disclosure
Agreement dated October 18, 1999, between Buyer and Seller will remain in full
force and effect until the Closing shall have occurred, and all information
received by Buyer, its Affiliates or Representatives prior to Closing relating
to the Business, whether orally or in writing, shall be subject thereto. Such
Confidentiality and Non-Disclosure Agreement shall terminate automatically with
respect to the Business without any action of the parties upon the occurrence of
the Closing. The confidentiality obligations of (a) Seller with respect to the
Business, (b) the parties with respect to Business Intellectual Property Assets
assigned or licensed under the Intellectual Property Agreement, and (c)
proprietary information exchanged by the parties on or after Closing, shall be
governed by the Intellectual Property Agreement.

     SECTION 13.4. Notices. All notices, consents, waivers, claims and other
communications hereunder (each a "Notice") shall be in writing and shall be (a)
personally delivered, (b) deposited, prepaid in a nationally established
overnight delivery firm such as Federal Express, (c) mailed by certified mail,
return receipt requested, or (d) transmitted by facsimile as follows:

As to Seller or Parent:    Honeywell International Inc.
                           101 Columbia Road
                           Morristown, NJ 07962
                           Attn: Senior Vice President and General Counsel
                           Fax No.:  (973) 455-4413


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    with a copy to:

                           Honeywell International Inc.
                           101 Columbia Road
                           Morristown, NJ 07962
                           Attn: Vice President, Corporate Development
                           Fax No.:  (973) 455-4847

As to Buyer:               L-3 Communications Corporation
                           600 Third Avenue
                           New York, NY 10016
                           Attn: Christopher C. Cambria, Esq.
                           Fax No.:  (212) 805-5494


    with a copy to:

                           Whitman Breed Abbott & Morgan, LLP
                           200 Park Avenue
                           New York, NY 10166
                           Attn: James P. Gerkis, Esq.
                           Fax No.:  (212) 351-3131

or to any other address which such party may have subsequently communicated to
the other party by a Notice given in accordance with the provisions of this
Section. Each Notice shall be deemed given and effective upon receipt (or
refusal of receipt).

     SECTION 13.5. Survival. All statements, certifications, indemnifications,
representations and warranties made hereby by the parties to this Agreement, and
their respective covenants, agreements and obligations to be performed pursuant
to the terms hereof, shall survive the Closing Date, and the representations and
warranties made hereby by the parties shall terminate on the second anniversary
of the Closing Date, except to the extent a party gives written notice to the
other party of any breach thereof on or before the second anniversary; provided,
however, that the representations and warranties contained in (a) Section 3.5
shall survive the Closing Date indefinitely, and (b) Sections 3.4, 3.7, 3.9,
3.10 and 3.12 shall survive the Closing Date until 90 days following the
expiration of any statute of limitations (or extensions thereof) applicable to
the matters described therein; provided further, however, that if notice of any
claim for indemnification is given within the applicable survival period, the
representations and warranties that are subject to such indemnification claim
shall survive until such time as such claim is finally resolved.

     SECTION 13.6. Entire Agreement. This Agreement, the Exhibits and Schedules
attached hereto, the Confidentiality and Non-Disclosure Agreement dated October
18, 1999 between Buyer and Seller and the other Acquisition Agreements contain
every obligation and understanding between the parties relating to the subject
matter hereof and merge all prior discussions, negotiations and agreement, if
any, between them, and none of the parties shall be bound by any
representations, warranties, covenants or other understandings, other than as
expressly provided herein or therein.

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     SECTION 13.7. Waiver and Amendment. Any representation, warranty, covenant,
term or condition of this Agreement which may legally be waived, may be waived,
or the time of performance thereof extended, at any time by the party hereto
entitled to the benefit thereof, and any term, condition or covenant hereto may
be amended by the parties hereto at any time. Any such waiver, extension or
amendment shall be evidenced by an instrument in writing executed on behalf of
the appropriate party by a Person who has been authorized by such party to
execute waivers, extensions or amendments on its behalf. No waiver by any party
hereto, whether express or implied, of its rights under any provision of this
Agreement shall constitute a waiver of such party's rights under such provisions
at any other time or a waiver of such party's rights under any other provision
of this Agreement. No failure by any party hereto to take any action against any
breach of this Agreement or default by another party shall constitute a waiver
of the former party's right to enforce any provision of this Agreement or to
take action against such breach or default or any subsequent breach or default
by such other party.

     SECTION 13.8. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any
Person other than the parties hereto, their respective successors and permitted
assigns and the Indemnitees, any rights or remedies under or by reason of this
Agreement.

     SECTION 13.9. Severability. In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain in
full force and effect, and such invalid, void or unenforceable provision shall
be interpreted as closely as possible to the manner in which it was written.

     SECTION 13.10. Headings and Interpretation. Titles and headings to articles
and sections herein and titles to the Schedules are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. The Schedules and Exhibits referred to herein
shall be construed with and as an integral part of this Agreement to the same
extent as if they were set forth verbatim herein. Any item or matter required to
be disclosed on a particular Schedule to this Agreement shall be deemed to have
been disclosed if it is disclosed to the extent required on another Schedule to
this Agreement where it would be reasonably expected to appear. The inclusion of
any item on a Schedule, which Schedule requires the listing of a "material"
item, is not deemed to be an admission or representation that the included item
is "material".

     SECTION 13.11. Governing Law and Jurisdiction. This Agreement shall be
interpreted and construed in accordance with the laws of New York without giving
effect to the principles of conflicts of laws thereof. Except where equitable
relief is sought, neither party shall commence any Proceeding against the other
party under any Acquisition Agreement unless and until the parties shall have
attempted in good faith to settle the underlying dispute through negotiation or
mediation for a period of not less than 30 days. Subject to the preceding
sentence, each party agrees that any action, proceeding or claim it commences
against the other party pursuant to any Acquisition Agreement shall be brought
in either the courts of the State of New York, sitting in New York County, or
the courts of the United States for the Southern District of New York. Each
party irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in


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any such court, any claim that any such suit, action or proceeding brought in
such a court has been brought in an inconvenient forum and the right to object,
with respect to any such suit, action or proceeding brought in any such court,
that such court does not have jurisdiction over such party. In any such suit,
action or proceeding, each party waives, to the fullest extent it may
effectively do so, personal service of any summons, complaint or other process
and agrees that the service thereof may be made by certified or registered mail,
addressed to such party at its address set forth in Section 13.4 hereof. Each
party agrees that a final non-appealable judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding.

     SECTION 13.12. Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, provided that this Agreement may not be assigned by either party to any
Person without the prior written consent of the other party, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing, either
party may assign any of its rights and obligations under this Agreement, in
whole or in part, to one or more wholly owned subsidiaries of such party. Any
party so assigning this Agreement shall remain fully liable to the other party
for the performance by any assignee of any obligation of such party so assigned.
Any purported assignment in violation of this Section 13.12 shall be void.

     SECTION 13.13. Taxes. Any taxes in the nature of sales or transfer taxes,
documentary stamps or similar taxes payable on the sale or transfer of all or
any portion of the assets, properties, business or equity interests being
transferred hereunder or the consummation of any other transaction contemplated
hereby, shall be paid 50% by Seller and 50% by Buyer.

     SECTION 13.14. Bulk Transfer Laws. The parties hereby waive compliance by
Seller with the provisions of any so-called "bulk sales law" or "bulk transfer
law" of any jurisdiction in connection with the transactions contemplated by
this Agreement. Seller shall indemnify and hold harmless Buyer Indemnitees from
and against any and all Losses that may be asserted against Buyer Indemnitees as
a result of any such non-compliance.

     SECTION 13.15. Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.

     SECTION 13.16. WAIVER OF TRIAL BY JURY. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES,
AND AGREES TO CAUSE EACH OF ITS SUBSIDIARIES TO WAIVE, AND COVENANTS THAT
NEITHER IT NOR ANY OF ITS SUBSIDIARIES WILL ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE OR ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY OTHER
ACQUISITION AGREEMENTS OR THE SUBJECT MATTER HEREOF OR THEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13.16 WITH ANY COURT AS
WRITTEN


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EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL
BY JURY.

     SECTION 13.17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute a single agreement.

     SECTION 13.18. Consent Decree. Buyer acknowledges that Seller is selling
the Purchased Assets to Buyer pursuant to the Consent Decree and that the
Consent Decree imposes certain obligations on Seller and Buyer in connection
with such sale. Accordingly, the parties hereto hereby agree as follows,
notwithstanding any other provision to the contrary in any Acquisition
Agreement:

     (a) Without limiting Sections 7.4 and 8.4 hereof, it shall be a condition
to the parties' respective obligations under this Agreement that the DOJ and
DOD, pursuant to the Consent Decree, shall have approved Buyer's purchase of the
Purchased Assets hereunder. The aforesaid condition may not be waived by either
party.

     (b) Buyer shall comply with the Consent Decree to the extent applicable to
Buyer as the purchaser of the Purchased Assets.

     (c) Buyer shall reasonably cooperate with Seller in seeking the requisite
approval of the DOJ and DOD referred to in paragraph (a) above, including,
without limitation, (i) taking all action reasonably requested by Seller in
order to facilitate and/or expedite such approval and (ii) providing the DOJ and
DOD with all information they may request in connection therewith.

     (d) Neither the Consent Decree nor the Hold Separate Order, nor any events
or circumstances arising thereunder or any actions taken in accordance
therewith, shall (i) be deemed to have a Material Adverse Effect or (ii)
constitute a breach by Seller of any of its agreements, representations or
warranties contained in any Acquisition Agreement (including, without
limitation, Sections 3.14 and 5.2 hereof).

     (e) Buyer and Seller acknowledge and agree that the terms of this Agreement
and the other Acquisition Agreements are intended to convey, license or
otherwise make available, as applicable, to Buyer the assets of the "TCAS
Business", as described in the Consent Decree. Nothing herein or in any other
Acquisition Agreement shall be deemed to convey, license or otherwise make
available to Buyer the assets of any other "Divested Business" described in the
Consent Decree.

     (f) Pursuant to Section IV.G of the Consent Decree, Seller hereby
represents and warrants to Buyer (such representation and warranty to be deemed
incorporated in Article III hereof) that the Business will be operational as of
the time of transfer.

     (g) From and after the Closing Date, for a period not to exceed 18 months,
Buyer shall have the right to reasonable access to the technical, sales,
production and administrative employees of the "TCAS Business" (as defined in
the Consent Decree), to the extent they are still employed by Seller. Such
services shall be provided free of charge for the first six months


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following the Closing Date. Thereafter, the charges for such services shall be
set by Seller at a rate sufficient to cover its reasonable estimate of its
actual costs for providing such services and, if applicable, consistent with
(but not greater than) the prices it would charge to an Affiliate.

                                   ARTICLE XIV
                                    GUARANTY

     SECTION 14.1. Guaranty. Parent hereby guarantees absolutely,
unconditionally, and irrevocably to Buyer the following:

     (a) the full and prompt performance of all terms, covenants, conditions and
agreements to be performed and observed by Seller and all other Seller Entities
(as defined in the Services Agreement) under the Acquisition Agreements, as
amended from time to time; and

     (b) the prompt payment of all amounts, including, without limitation any
damages, costs and expenses which shall at any time be payable by Seller to
Buyer (including any Buyer Indemnitee) pursuant to the Acquisition Agreements or
any default by Seller or any Seller Entity thereunder.

     SECTION 14.2. No Modification. The liability of Parent hereunder shall in
no way be affected, modified or diminished by reason that (a) any one or more of
the obligations guaranteed hereby is changed, altered, renewed, extended,
continued, surrendered, compromised, waived or released in whole or in part, (b)
any default is waived, whether or not notice thereof is given to Parent or (c)
Buyer delays in exercising its rights. Parent agrees that (i) the terms of any
of the obligations guaranteed hereby may be amended by Seller and Buyer without
the consent of Parent; (ii) Buyer may review or extend the payment date of any
of such obligations without the consent of Parent; (iii) Buyer may refrain from
acting or defer action following a default by Seller in performing any such
obligation and, generally, may deal with Seller as Buyer may see fit; and Parent
shall remain bound under this Article XIV notwithstanding any such change,
alteration, renewal, extension, continuance, surrender, compromise, waiver or
release.

     SECTION 14.3. Absolute Guaranty. This is an absolute, unconditional,
present and continuing guaranty. Parent waives any right to require that any
action be brought against Seller or any other Person; provided, that if
performance of an obligation other than an obligation to make payment is sought
to be enforced hereunder, demand for performance shall first have been made on
Seller. Parent hereby expressly waives (a) notice of acceptance; (b) demand for
payment; (c) notice of default and (d) all suretyship defenses.

     SECTION 14.4. No Effect of Assignment. This guaranty shall not be affected
by any assignment of this Agreement by Seller or by Buyer.

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         IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Purchase Agreement the day and year first above written.

                                        HONEYWELL INC.



                                        By
                                           -------------------------------------
                                        Name:   Daniel K. Clift
                                        Title:  Director, Corporate Development



                                        L-3 COMMUNICATIONS CORPORATION



                                        By
                                           -------------------------------------
                                        Name:   Christopher C. Cambria
                                        Title:  Vice President, Secretary
                                                & General Counsel

Solely in respect of the Guaranty in Article XIV

HONEYWELL INTERNATIONAL INC.

By
   --------------------------------------
Name:    Daniel K. Clift
Title:   Director, Corporate Development