ESTERLINE TECHNOLOGIES CORP (Form: 10-Q, Received: 06/06/2006 16:34:24)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 28, 2006

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number 1-6357

ESTERLINE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		13-2595091
(State or other Jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


500 108 ^th Avenue N.E., Bellevue, Washington 98004
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code 425/453-9400

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of June 2, 2006, 25,426,170 shares of the issuer’s common stock were outstanding.

PART 1 – FINANCIAL INFORMATION

Item 1.

Financial Statements

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEET

As of April 28, 2006 and October 28, 2005

(In thousands, except share amounts)


	April 28, 2006		October 28, 2005
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	46,256	$	118,304
Cash in escrow		4,315		11,918
Short-term investments		—		62,656
Accounts receivable, net of allowances of $4,435 and $4,462		171,236		149,751
Inventories
Raw materials and purchased parts		80,500		64,377
Work in process		62,740		45,798
Finished goods		25,439		20,294

		168,679		130,469

Deferred income tax benefits		26,672		26,868
Prepaid expenses		10,469		7,533

Total Current Assets		427,627		507,499

Property, Plant and Equipment		322,490		282,110
Accumulated depreciation		155,811		143,896

		166,679		138,214
Other Non-Current Assets
Goodwill		360,784		261,167
Intangibles, net		245,845		166,118
Debt issuance costs, net of accumulated amortization of $1,939 and $1,602		4,806		5,144
Deferred income tax benefits		17,773		13,320
Other assets		26,573		23,786

	$	1,250,087	$	1,115,248

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEET

As of April 28, 2006 and October 28, 2005

(In thousands, except share amounts)


	April 28, 2006		October 28, 2005
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	59,975	$	41,453
Accrued liabilities		108,790		119,115
Credit facilities		18,413		2,031
Current maturities of long-term debt		3,077		70,934
Federal and foreign income taxes		5,751		8,798

Total Current Liabilities		196,006		242,331

Long-Term Liabilities
Long-term debt, net of current maturities		279,756		175,682
Deferred income taxes		74,806		46,421
Other liabilities		34,527		27,237

Commitments and Contingencies		—		—
Minority Interest		3,158		2,713

Shareholders’ Equity
Common stock, par value $.20 per share, authorized 60,000,000 shares, issued and outstanding 25,419,920 and 25,319,892 shares		5,084		5,064
Additional paid-in capital		265,434		260,095
Retained earnings		371,393		345,370
Accumulated other comprehensive income		19,923		10,335

Total Shareholders’ Equity		661,834		620,864

	$	1,250,087	$	1,115,248

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

For the Three and Six Month Periods Ended April 28, 2006 and April 29, 2005

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended						Six Months Ended
	April 28, 2006			April 29, 2005			April 28, 2006			April 29, 2005
Net Sales	$	247,939		$	211,592		$	453,604		$	401,384
Cost of Sales		167,200			143,054			310,006			274,746

		80,739			68,538			143,598			126,638
Expenses
Selling, general & administrative		40,973			35,837			76,863			66,445
Research, development & engineering		12,939			9,866			23,272			19,113

Total Expenses		53,912			45,703			100,135			85,558


Operating Earnings From Continuing Operations		26,827			22,835			43,463			41,080

Other (income) expense		(263	)		28			(462	)		66
Interest income		(998	)		(1,025	)		(1,857	)		(1,560	)
Interest expense		5,790			4,097			10,295			8,779
Loss on extinguishment of debt		—			—			2,156			—

Other Expense, Net		4,529			3,100			10,132			7,285


Income From Continuing Operations Before Income Taxes		22,298			19,735			33,331			33,795
Income Tax Expense		4,307			5,974			6,863			9,938

Income From Continuing Operations Before Minority Interest		17,991			13,761			26,468			23,857

Minority Interest		(332	)		(35	)		(445	)		(48	)

Income From Continuing Operations		17,659			13,726			26,023			23,809

Income (Loss) From Discontinued Operations, Net of Tax		—			(562	)		—			6,965

Net Earnings	$	17,659		$	13,164		$	26,023		$	30,774

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

For the Three and Six Month Periods Ended April 28, 2006 and April 29, 2005

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended					Six Months Ended
	April 28, 2006		April 29, 2005			April 28, 2006		April 29, 2005
Earnings (Loss) Per Share – Basic:
Continuing operations	$	.70	$	.55		$	1.03	$	.97
Discontinued operations		—		(.03	)		—		.28

Earnings per share – basic	$	.70	$	.52		$	1.03	$	1.25


Earnings (Loss) Per Share – Diluted:
Continuing operations	$	.68	$	.54		$	1.01	$	.95
Discontinued operations		—		(.02	)		—		.28

Earnings per share – diluted	$	.68	$	.52		$	1.01	$	1.23

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Month Periods Ended April 28, 2006 and April 29, 2005

(Unaudited)

(In thousands)


	Six Months Ended
	April 28, 2006			April 29, 2005
Cash Flows Provided (Used) by Operating Activities
Net earnings	$	26,023		$	30,774
Minority interest		445			49
Depreciation and amortization		19,838			18,508
Deferred income taxes		585			1,830
Stock-based compensation		2,649			680
Gain on sale of discontinued operations		—			(9,456	)
Gain on sale of short-term investments		(610	)		—
Loss on sale of building		—			59
Working capital changes, net of effect of acquisitions
Accounts receivable		919			3,040
Inventories		(22,089	)		(14,535	)
Prepaid expenses		(2,108	)		773
Accounts payable		6,354			4,214
Accrued liabilities		(9,692	)		754
Federal and foreign income taxes		(5,224	)		472
Other liabilities		1,115			1,300
Other, net		(735	)		(682	)

		17,470			37,780

Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(12,392	)		(9,342	)
Proceeds from sale of discontinued operations		—			21,421
Proceeds from sale of building		—			2,319
Proceeds from sale of capital assets		458			146
Proceeds from sale of short-term investments		63,266			—
Purchase of short-term investments		—			(45,486	)
Acquisitions of businesses, net of cash acquired		(189,667	)		(3,346	)

		(138,335	)		(34,288	)

ESTERLINE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Month Periods Ended April 28, 2006 and April 29, 2005

(Unaudited)

(In thousands)


	Six Months Ended
	April 28, 2006			April 29, 2005
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans	$	2,351		$	2,435
Excess tax benefits from stock option exercises		359			—
Proceeds provided by sale of common stock		—			108,490
Net change in credit facilities		16,188			(4,424	)
Proceeds from issuance of long-term debt		100,000			—
Repayment of long-term obligations		(70,556	)		(1,474	)

		48,342			105,027

Effect of Foreign Exchange Rates on Cash		475			(294	)

Net Increase (Decrease) in Cash and Cash Equivalents		(72,048	)		108,225

Cash and Cash Equivalents – Beginning of Period		118,304			29,479

Cash and Cash Equivalents – End of Period	$	46,256		$	137,704


Supplemental Cash Flow Information
Cash Paid for Interest	$	11,635		$	7,966
Cash Paid for Taxes		3,655			8,446

ESTERLINE TECHNOLOGIES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Month Periods Ended April 28, 2006 and April 29, 2005

The consolidated balance sheet as of April 28, 2006, the consolidated statement of operations for the three and six month periods ended April 28, 2006 and April 29, 2005, and the consolidated statement of cash flows for the six month periods ended April 28, 2006 and April 29, 2005 are unaudited, but in the opinion of management, all of the necessary adjustments, consisting of normal recurring accruals, have been made to present fairly the financial statements referred to above in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the above statements do not include all of the footnotes required for complete financial statements. The results of operations and cash flows for the interim periods presented are not necessarily indicative of results that can be expected for the full year.

2.	The notes to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2005 provide a summary of significant accounting policies and additional financial information that should be read in conjunction with this Form 10-Q.

The timing of the Company’s revenues is impacted by the purchasing patterns of customers and, as a result, revenues are not generated evenly throughout the year. Moreover, the Company’s first fiscal quarter, November through January, includes significant holiday vacation periods in both Europe and North America.

Basic earnings per share is computed on the basis of the weighted average number of shares outstanding during the period. Diluted earnings per share includes the dilutive effect of stock options. The weighted average number of shares outstanding used to compute basic earnings per share was 25,385,000 and 25,120,000 for the three month periods ended April 28, 2006 and April 29, 2005, respectively. The weighted average number of shares outstanding used to compute diluted earnings per share was 25,817,000 and 25,484,000 for the three month periods ended April 28, 2006 and April 29, 2005, respectively. The weighted average number of shares outstanding used to compute basic earnings per share was 25,361,000 and 24,577,000 for the six month periods ended April 28, 2006, and April 29, 2005, respectively. The weighted average number of shares outstanding used to compute diluted earnings per share was 25,780,000 and 24,953,000 for the six month periods ended April 28, 2006 and April 29, 2005, respectively.

5.	New Accounting Standard

Prior to October 29, 2005, the Company accounted for its stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” The variable method of accounting was used to account for stock option plans where the option holders were permitted to exercise options by surrendering the option

subject to the grant in payment of exercise price of the option and the related statutory taxes. No compensation expense was recognized at the date of grant because the exercise price of all stock option grants is equal to the market price of the Company’s common stock as of the date of grant. However, subsequent changes in the market price of the Company’s stock to the date of exercise or forfeiture resulted in a change in the measurement of compensation costs. Effective October 29, 2005, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (Statement No. 123R), which requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The Company adopted Statement 123R using the modified prospective method effective October 29, 2005. The cumulative effect of the change in accounting principle upon adoption of Statement 123R was included in selling, general and administrative expense as the amount was not significant.

6.	The Company’s comprehensive income is as follows:


(In thousands)	Three Months Ended						Six Months Ended
	April 28, 2006			April 29, 2005			April 28, 2006			April 29, 2005

Net Earnings	$	17,659		$	13,164		$	26,023		$	30,774
Change in Fair Value of Derivative Financial Instruments, Net of Tax		1,255			612			831			1,435
Minimum Pension Liability, Net of Tax		(3,682	)		—			(3,682	)		—
Foreign Currency Translation Adj.		12,113			(738	)		12,439			3,453

Comprehensive Income	$	27,345		$	13,038		$	35,611		$	35,662

On March 24, 2006, the Company acquired all of the outstanding capital stock of Wallop Defence Systems Limited (Wallop), a manufacturer of military pyrotechnic countermeasure devices for U.K. £33.2 million in cash (approximately $57.9 million including acquisition costs and an adjustment based on the amount of indebtedness and net working capital of Wallop as of closing). In addition, the Company may pay an additional purchase price up to U.K. £10.0 million, or approximately $18.2 million, depending on the future financial performance of Wallop. The acquisition strengthens the Company’s international position in countermeasure devices. Wallop is included in the Advanced Materials segment and the results of its operations were included from the effective date of the acquisition. A preliminary estimate of the fair value of assets acquired and liabilities assumed was made at April 28, 2006, which will be revised during the third quarter of fiscal 2006 when the independent valuation is completed.

8.	On December 16, 2005, the Company acquired all of the outstanding capital stock of Darchem Holdings Limited (Darchem), a manufacturer of thermally engineered components for critical aerospace applications for U.K. £68.6 million in cash (approximately

$121.6 million including acquisition costs and an adjustment based on the amount of cash and net working capital of Darchem as of closing). Darchem holds a leading position in its niche market and fits the Company’s engineered-to-order model. Darchem is included in the Advanced Materials segment and the results of its operations were included from the effective date of the acquisition.

The following summarizes the estimated fair market value of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price was based upon a preliminary independent valuation report. The amount allocated to goodwill is not expected to be deductible for income tax purposes.


(In thousands)
As of December 16, 2005

Current Assets	$	22,361
Property, plant and equipment		8,499
Intangible assets subject to amortization
Programs (20 year weighted average useful life)		45,691
Customer relationships (8 year weighted average useful life)		2,215
Patents (11 year weighted average useful life)		3,083
Other (1 year useful life)		284

		51,273

Trade name		6,219
Other		171
Goodwill		60,689

Total assets acquired		149,212

Current liabilities assumed		8,523
Deferred tax liabilities		19,083

Net assets acquired	$	121,606

On January 28, 2005, the Company completed the sale of the outstanding stock of its wholly owned subsidiary Fluid Regulators Corporation (Fluid Regulators), which was included in the Company’s Sensors & Systems segment, for approximately $21.4 million. As a result of the sale, the Company recorded a gain of $7.0 million, net of tax of $2.4 million, in the first fiscal quarter of 2005. Sales and net earnings were $3.4 million and $0.3 million during the six-month period ended April 29, 2005. Fluid Regulators is reported as discontinued operations and the consolidated financial statements for all prior periods have been adjusted to reflect this presentation.

10.

The effective income tax rate for the first six months of fiscal 2006 was 29.3% (before a $2.9 million reduction of previously estimated tax liabilities) compared with 29.4% for the first six months of fiscal 2005. The effective tax rate differed from the statutory rate, as both years benefited from various tax credits and certain foreign interest expense deductions. On April 25, 2006, the Company received a Notice of Proposed Adjustment (NOPA) from the

State of California Franchise Tax Board covering, among other items, the examination of research and development tax credits for fiscal years 1997 through 2002. As a result of receiving the NOPA the Company reduced previously estimated tax liabilities by $2.0 million. Additionally, as a result of a favorable tax audit which was concluded on December 23, 2005, the Company also reduced previously estimated tax liabilities by $0.9 million. While the effective tax rate in the first six months of fiscal 2006 was impacted by the expiration of the U.S. Research and Experimentation Credit at December 31, 2005, the impact was partially offset by increased benefits from various tax credits and foreign interest deductions.

11.

As of April 28, 2006, the Company has two share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans for the first six months of fiscal 2006 was $2.6 million. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $0.8 million.

In March 2002, the Company’s shareholders approved the establishment of an Employee Stock Purchase Plan (ESPP) under which 300,000 shares of the Company’s common stock are reserved for issuance to employees. On March 1, 2006, the Company’s shareholders authorized an additional 150,000 shares of the Company’s stock under the ESPP. The plan qualifies as a noncompensatory employee stock purchase plan under Section 423 of the Internal Revenue Code. Employees are eligible to participate through payroll deduction subject to certain limitations. At the end of each offering period, usually six months, shares are purchased by the participants at 85% of the lower of the fair market value on the first day of the offering period or the purchase date. During the first six months of fiscal 2006, employees purchased 34,452 shares at a fair market value price of $36.55 per share, leaving a balance of 238,526 shares available for issuance in the future. As of April 28, 2006, deductions aggregating $815,520 were accrued for the purchase of shares on June 15, 2006.

The Company also has an equity incentive plan for officers and key employees. On March 1, 2006, the Company’s shareholders authorized the issuance of an additional 1,000,000 shares of the Company’s common stock under the equity incentive plan. At April 28, 2006, the Company had 2,620,450 shares reserved for issuance to officers and key employees, of which 1,121,950 shares were available to be granted in the future. The Board of Directors authorized the Compensation Committee to administer awards granted under the equity incentive plan, including option grants, and to establish the terms of such awards. Awards under the equity incentive plan may be granted to eligible employees of the Company over the 10-year period ending March 3, 2014. Options granted become exercisable ratably over a period of four years following the date of grant and expire on the tenth anniversary of the grant. Option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The weighted-average grant date fair value of options granted during the six-month periods ended April 28, 2006 and April 29, 2005, was $22.10 per share and $18.10 per share, respectively.

The fair value of each option granted by the Company was estimated using a Black-Scholes pricing model which uses the assumptions noted in the following table. The Company uses historical data to estimate volatility of the Company’s common stock and option exercise and employee termination assumptions. The range of the expected term reflects the results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of the grant.


	Six Months Ended
	April 28, 2006		April 29, 2005
Risk-free interest rate (U.S. Treasury zero coupon issues)	4.53 – 4.72	%	4.48 – 4.71	%
Expected dividend yield	—		—
Expected volatility	45.0	%	45.3	%
Expected life (years)	6.5 – 9.5		5.6 – 8.6

The following table summarizes the changes in outstanding options granted under the Company’s stock option plans for the six-month period ended April 28, 2006:


			Weighted Average
	Shares Subject to Option		Remaining Contractual Term (years)	Exercise Price
Outstanding, beginning of period	1,401,100			$	23.56
Granted	166,400				38.98
Exercised	(57,000	)			16.28
Canceled or expired	(12,000	)			25.85

Outstanding, end of period	1,498,500		6.7	$	25.53

Exercisable, end of period	807,200		5.0	$	19.27

The aggregate intrinsic value of option shares outstanding and exercisable at April 28, 2006 was $29.2 million and $20.8 million, respectively.

The table below presents stock activity related to stock options exercised in the periods ended April 28, 2006 and April 29, 2005:


(In thousands)	Six Months Ended
	April 28, 2006		April 29, 2005
Proceeds from stock options exercised	$	928	$	1,345
Tax benefits related to stock options exercised		564		977
Intrinsic value of stock options exercised		1,511		3,055

Total unrecognized compensation expense for options that have not vested as of April 28, 2006, is $6.6 million, which will be recognized over a weighted average period of 1.52 years.

The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value method for the prior-year three and six month periods:


(In thousands)	Three and Six Months Ended April 29, 2005
Net earnings, as reported	$	13,164		$	30,774
Stock-based compensation expense reversal, net of income tax benefit included in net earnings as reported		911			457
Stock-based compensation costs net of income tax under the fair value method of accounting		(476	)		(917	)

Pro forma net earnings	$	13,599		$	30,314


Basic earnings per share:
As reported	$	.52		$	1.25
Pro forma		.54			1.23

Diluted earnings per share:
As reported	$	.52		$	1.23
Pro forma		.53			1.21

12.	The Company’s pension plans principally include a U.S. pension plan maintained by Esterline and U.S. and non-U.S. plans maintained by Leach Holding Corporation, a wholly-owned subsidiary of the Company. Components of net periodic pension cost consisted of the following:


(In thousands)	Three Months Ended						Six Months Ended
	April 28, 2006			April 29, 2005			April 28, 2006			April 29, 2005
Components of Net Periodic Pension Cost
Service cost	$	880		$	1,065		$	1,760		$	2,133
Interest cost		2,494			2,352			4,988			5,720
Expected return on plan assets		(3,180	)		(2,955	)		(6,359	)		(6,753	)
Amortization of prior service cost		5			5			9			9
Amortization of actuarial loss		406			165			812			335

Net Periodic Cost	$	605		$	632		$	1,210		$	1,444

13.	Segment information:

Business segment information for continuing operations includes the segments of Avionics & Controls, Sensors & Systems and Advanced Materials.


(In thousands)	Three Months Ended						Six Months Ended
	April 28, 2006			April 29, 2005			April 28, 2006			April 29, 2005
Sales
Avionics & Controls	$	71,864		$	64,990		$	134,306		$	125,845
Sensors & Systems		83,177			84,541			156,647			158,915
Advanced Materials		92,898			62,061			162,651			116,624

Total Sales	$	247,939		$	211,592		$	453,604		$	401,384


Income from Continuing Operations
Avionics & Controls	$	11,296		$	9,204		$	20,671		$	18,603
Sensors & Systems		7,300			11,166			13,083			17,563
Advanced Materials		15,696			8,747			23,816			15,228

Segment Earnings		34,292			29,117			57,570			51,394

Corporate expense		(7,465	)		(6,282	)		(14,107	)		(10,314	)
Other income (expense)		263			(28	)		462			(66	)
Interest income		998			1,025			1,857			1,560
Interest expense		(5,790	)		(4,097	)		(10,295	)		(8,779	)
Loss on extinguishment of debt		—			—			(2,156	)		—

	$	22,298		$	19,735		$	33,331		$	33,795

14.

On November 24, 2004, the Company completed a public offering of 3.7 million shares of common stock, including shares sold under the underwriters’ over-allotment option, priced at $31.25 per share, generating net proceeds of approximately $108.5 million, of which $5.0 million was used to pay off existing credit facilities. The funds provide additional financial resources for acquisitions and general corporate purposes. The Company issued 100,028 and 154,411 shares under its employee stock plans during the six month periods ended April 28, 2006 and April 29, 2005, respectively.

15.

On November 15, 2005, the $30.0 million 6.4% Senior Notes matured and were paid. Additionally, on November 15, 2005, the Company prepaid the outstanding principal amount of the $40.0 million 6.77% Senior Notes due November 15, 2008. Under the terms of the Note Purchase Agreement, the Company paid an additional $2.2 million make-whole payment, which was recorded as a loss on extinguishment of debt in the first fiscal quarter of 2006. On February 10, 2006, the Company amended its credit agreement to provide a $100.0 million term loan facility, which may be drawn in U.S. dollars, U.K. pounds or euros. In addition, the amendment provides that up to $25.0 million of the credit facility and up to $50.0 million of the letter of credit may be drawn in U.K. pounds or euros in addition to U.S. dollars. On February 10, 2006, the Company borrowed U.K. £57.0 million, or approximately $100.0 million, under the term loan facility. The Company used the proceeds from the loan as working capital for its U.K. operations and to repay a portion of its outstanding borrowings under the revolving credit facility. The principal amount of the loan is payable quarterly commencing on March 31, 2007 through the termination date of November 14, 2010, according to a payment schedule by which 1.25% of the principal amount is paid in each quarter of 2007, 2.50% in each quarter of 2008, 5.00% in each quarter of 2009 and 16.25% in each quarter of 2010. The loan accrues interest at a variable rate based on the British Bankers Association Interest Settlement Rate for deposits in U.K. pounds plus an additional margin amount that ranges from 1.125% to 0.500% depending upon the Company’s leverage ratio. As of February 10, 2006, the initial interest rate on the term loan was 5.33%. The Company entered into an interest rate swap agreement on the full principal amount by which the variable interest rate was exchanged for a fixed interest rate of 4.755% plus an additional margin amount determined by reference to the Company’s leverage ratio. In addition, in November 2005, the Company collateralized a $9.9 million letter of credit with an equivalent amount of cash and cash equivalents.

16.

The following schedules set forth condensed consolidating financial information as required by Rule 3-10 of Securities and Exchange Commission Regulation S-X as of April 28, 2006, and October 28, 2005, and for the applicable periods ended April 28, 2006, and April 29, 2005, for (a) Esterline Technologies Corporation (the Parent); (b) on a combined basis, the subsidiary guarantors (Guarantor Subsidiaries) of the Senior Subordinated Notes which include Advanced Input Devices, Inc., Amtech Automated Manufacturing Technology, Angus Electronics Co., Armtec Countermeasures Co., Armtec Countermeasures TNO Co., Armtec Defense Products Co., AVISTA, Incorporated, BVR Technologies Co., Equipment Sales Co., EA Technologies Corporation, Esterline Sensors Services Americas, Inc., Esterline Technologies Holdings Limited, H.A. Sales Co., Hauser Inc., Hytek Finishes Co., Janco

Corporation, Kirkhill-TA Co., Korry Electronics Co., Leach Holding Corporation, Leach International Corporation, Leach Technology Group, Inc., Mason Electric Co., MC Tech Co., Memtron Technologies Co., Norwich Aero Products, Inc., Palomar Products, Inc., Pressure Systems, Inc., Pressure Systems International, Inc., Surftech Finishes Co., UMM Electronics Inc., and (c) on a combined basis, the subsidiary non-guarantors (Non-Guarantor Subsidiaries), which include Auxitrol S.A., Auxitrol Technologies S.A., Darchem Holdings Ltd., Esterline Sensors Services Asia PTD, Ltd., Esterline Technologies Denmark Aps (Denmark), Esterline Technologies Ltd. (England), Esterline Technologies Ltd. (Hong Kong), Guizhou Leach-Tianyi Aviation Electrical Company Ltd. (China), Leach International Asia-Pacific Ltd. (Hong Kong), Leach International Europe S.A. (France), Leach International Germany GmbH (Germany), Leach International Mexico S. de R.L. de C.V. (Mexico), Leach International U.K. (England), LRE Medical GmbH (Germany), Muirhead Aerospace Ltd., Norcroft Dynamics Ltd., Pressure Systems International Ltd., Wallop Defence Systems Limited, Weston Aero Ltd. (England), and Weston Aerospace Ltd. (England). The guarantor subsidiaries are direct and indirect wholly-owned subsidiaries of Esterline Technologies and have fully and unconditionally, jointly and severally, guaranteed the Senior Subordinated Notes.

Condensed Consolidating Balance Sheet as of April 28, 2006.


(In thousands)	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	19,951	$	6,089	$	20,216	$	—		$	46,256
Cash in escrow		4,315		—		—		—			4,315
Accounts receivable, net		1,068		89,891		80,277		—			171,236
Inventories		—		100,500		68,179		—			168,679
Deferred income tax benefits		23,084		4		3,584		—			26,672
Prepaid expenses		195		5,376		4,898		—			10,469

Total Current Assets		48,613		201,860		177,154		—			427,627

Property, Plant & Equipment, Net		2,557		102,307		61,815		—			166,679
Goodwill		—		195,474		165,310		—			360,784
Intangibles, Net		107		79,082		166,656		—			245,845
Debt Issuance Costs, Net		4,806		—		—		—			4,806
Deferred Income Tax Benefits		13,900		1,637		2,236		—			17,773
Other Assets		3,531		16,794		6,248		—			26,573
Amounts Due (To) From Subsidiaries		235,371		73,061		—		(308,432	)		—
Investment in Subsidiaries		719,030		—		—		(719,030	)		—

Total Assets	$	1,027,915	$	670,215	$	579,419	$	(1,027,462	)	$	1,250,087


(In thousands)	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Total
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	2,299	$	20,928		$	36,748	$	—		$	59,975
Accrued liabilities		27,459		51,030			30,301		—			108,790
Credit facilities		14,000		—			4,413		—			18,413
Current maturities of long-term debt		1,300		1,026			751		—			3,077
Federal and foreign income taxes		3,925		70			1,756		—			5,751

Total Current Liabilities		48,983		73,054			73,969		—			196,006

Long-Term Debt, Net		275,314		2,862			1,580		—			279,756
Deferred Income Taxes		31,346		(13	)		43,473		—			74,806
Other Liabilities		10,438		17,139			6,950		—			34,527
Amounts Due To (From) Subsidiaries		—		—			291,939		(291,939	)		—
Minority Interest		—		—			3,158		—			3,158
Shareholders’ Equity		661,834		577,173			158,350		(735,523	)		661,834

Total Liabilities and Shareholders’ Equity	$	1,027,915	$	670,215		$	579,419	$	(1,027,462	)	$	1,250,087

Condensed Consolidating Statement of Operations for the three month period ended April 28, 2006.


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	161,486		$	88,604		$	(2,151	)	$	247,939
Cost of Sales		—			107,985			61,366			(2,151	)		167,200

		—			53,501			27,238			—			80,739
Expenses
Selling, general and administrative		—			23,984			16,989			—			40,973
Research, development and engineering		—			5,488			7,451			—			12,939

Total Expenses		—			29,472			24,440			—			53,912


Operating Earnings From Continuing Operations		—			24,029			2,798			—			26,827

Other (income) expense		—			—			(263	)		—			(263	)
Interest income		(4,957	)		(631	)		(977	)		5,567			(998	)
Interest expense		5,581			1,067			4,709			(5,567	)		5,790
Loss on extinguishment of debt		—			—			—			—			—

Other Expense, Net		624			436			3,469			—			4,529

Income (Loss) From Continuing Operations Before Taxes		(624	)		23,593			(671	)		—			22,298
Income Tax Expense (Benefit)		(153	)		4,500			(40	)		—			4,307

Income (Loss) From Continuing Operations Before Minority Interest		(471	)		19,093			(631	)		—			17,991

Minority Interest		—			—			(332	)		—			(332	)

Income (Loss) From Continuing Operations		(471	)		19,093			(963	)		—			17,659

Equity in Net Income of Consolidated Subsidiaries		18,130			—			—			(18,130	)		—

Net Income (Loss)	$	17,659		$	19,093		$	(963	)	$	(18,130	)	$	17,659

Condensed Consolidating Statement of Operations for the six month period ended April 28, 2006.


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	304,882		$	155,872		$	(7,150	)	$	453,604
Cost of Sales		—			207,459			109,697			(7,150	)		310,006

		—			97,423			46,175			—			143,598
Expenses
Selling, general and administrative		—			47,880			28,983			—			76,863
Research, development and engineering		—			10,590			12,682			—			23,272

Total Expenses		—			58,470			41,665			—			100,135

Operating Earnings From Continuing Operations		—			38,953			4,510			—			43,463

Other (income) expense		—			—			(462	)		—			(462	)
Interest income		(9,157	)		(1,265	)		(1,880	)		10,445			(1,857	)
Interest expense		9,989			2,093			8,658			(10,445	)		10,295
Loss on extinguishment of debt		2,156			—			—			—			2,156

Other Expense, Net		2,988			828			6,316			—			10,132

Income (Loss) From Continuing Operations Before Taxes		(2,988	)		38,125			(1,806	)		—			33,331
Income Tax Expense (Benefit)		(817	)		8,925			(1,245	)		—			6,863

Income (Loss) From Continuing Operations Before Minority Interest		(2,171	)		29,200			(561	)		—			26,468

Minority Interest		—			—			(445	)		—			(445	)

Income (Loss) From Continuing Operations		(2,171	)		29,200			(1,006	)		—			26,023

Equity in Net Income of Consolidated Subsidiaries		28,194			—			—			(28,194	)		—

Net Income (Loss)	$	26,023		$	29,200		$	(1,006	)	$	(28,194	)	$	26,023

Condensed Consolidating Statement of Cash Flows for the six month period ended April 28, 2006.


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss)	$	26,023		$	29,200		$	(1,006	)	$	(28,194	)	$	26,023
Minority interest		—			—			445			—			445
Depreciation & amortization		—			11,937			7,901			—			19,838
Deferred income taxes		(1,488	)		95			1,978			—			585
Stock-based compensation		—			1,775			874			—			2,649
Gain on sale of short-term investments		(610	)		—			—			—			(610	)
Working capital changes, net of effect of acquisitions
Accounts receivable		(397	)		7,156			(5,840	)		—			919
Inventories		—			(15,043	)		(7,046	)		—			(22,089	)
Prepaid expenses		(16	)		(883	)		(1,209	)		—			(2,108	)
Accounts payable		1,309			669			4,376			—			6,354
Accrued liabilities		(4,895	)		(2,617	)		(2,180	)		—			(9,692	)
Federal & foreign income taxes		291			(6	)		(5,509	)		—			(5,224	)
Other liabilities		1,115			58			(58	)		—			1,115
Other, net		123			(434	)		(424	)		—			(735	)

		21,455			31,907			(7,698	)		(28,194	)		17,470

Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(126	)		(7,115	)		(5,151	)		—			(12,392	)
Proceeds from sale of capital assets		5			379			74			—			458
Proceeds from sale of short-term investments		63,266			—			—			—			63,266
Acquisitions of businesses, net		—			(9,889	)		(179,778	)		—			(189,667	)

		63,145			(16,625	)		(184,855	)		—			(138,335	)


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Total
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		2,351			—			—			—		2,351
Excess tax benefits from stock option exercises		359			—			—			—		359
Net change in credit facilities		14,000			—			2,188			—		16,188
Proceeds from issuance of long-term debt		100,000			—			—			—		100,000
Repayment of long-term debt		(66,037	)		(324	)		(4,195	)		—		(70,556	)
Net change in intercompany financing		(190,686	)		(10,945	)		173,437			28,194		—

		(140,013	)		(11,269	)		171,430			28,194		48,342

Effect of Foreign Exchange Rates on Cash		—			(78	)		553			—		475


Net Increase (Decrease) in Cash and Cash Equivalents		(55,413	)		3,935			(20,570	)		—		(72,048	)
Cash and Cash Equivalents – Beginning of Period		75,364			2,154			40,786			—		118,304

Cash and Cash Equivalents – End of Period	$	19,951		$	6,089		$	20,216		$	—	$	46,256

Condensed Consolidating Balance Sheet as of October 28, 2005.


(In thousands)	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Total
Assets
Current Assets
Cash and cash equivalents	$	75,364	$	2,154	$	40,786		$	—		$	118,304
Cash in escrow		11,918		—		—			—			11,918
Short-term investments		62,656		—		—			—			62,656
Accounts receivable, net		671		96,931		52,149			—			149,751
Inventories		—		84,351		46,118			—			130,469
Deferred income tax benefits		25,115		102		1,651			—			26,868
Prepaid expenses		179		4,481		2,873			—			7,533
Other current assets		—		—		—			—			—

Total Current Assets		175,903		188,019		143,577			—			507,499

Property, Plant & Equipment, Net		2,687		95,001		40,526			—			138,214
Goodwill		—		191,919		69,248			—			261,167
Intangibles, Net		107		82,196		83,815			—			166,118
Debt Issuance Costs, Net		5,144		—		—			—			5,144
Deferred Income Tax Benefits		11,257		—		2,063			—			13,320
Other Assets		2,638		16,266		4,882			—			23,786
Amounts Due (To) From Subsidiaries		134,964		64,835		—			(199,799	)		—
Investment in Subsidiaries		615,599		129		(128	)		(615,600	)		—

Total Assets	$	948,299	$	638,365	$	343,983		$	(815,399	)	$	1,115,248


(In thousands)	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Total
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	990	$	19,877		$	20,586	$	—		$	41,453
Accrued liabilities		38,620		53,246			27,249		—			119,115
Credit facilities		—		—			2,031		—			2,031
Current maturities of long-term debt		70,000		—			934		—			70,934
Federal and foreign income taxes		3,634		76			5,088		—			8,798

Total Current Liabilities		113,244		73,199			55,888		—			242,331

Long-Term Debt, Net		173,988		—			1,694		—			175,682
Deferred Income Taxes		30,880		(10	)		15,551		—			46,421
Other Liabilities		9,323		11,209			6,705		—			27,237
Amounts Due To (From) Subsidiaries		—		—			195,829		(195,829	)		—
Minority Interest		—		—			2,713		—			2,713
Shareholders’ Equity		620,864		553,967			65,603		(619,570	)		620,864

Total Liabilities and Shareholders’ Equity	$	948,299	$	638,365		$	343,983	$	(815,399	)	$	1,115,248

Condensed Consolidating Statement of Operations for the three month period ended April 29, 2005.


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	141,165		$	75,528		$	(5,101	)	$	211,592
Cost of Sales		—			97,380			50,775			(5,101	)		143,054

		—			43,785			24,753			—			68,538
Expenses
Selling, general and administrative		—			24,143			11,694			—			35,837
Research, development and engineering		—			4,191			5,675			—			9,866

Total Expenses		—			28,334			17,369			—			45,703


Operating Earnings From Continuing Operations		—			15,451			7,384			—			22,835

Other (income) expense		50			16			(38	)		—			28
Interest income		(4,027	)		(571	)		(666	)		4,239			(1,025	)
Interest expense		4,492			1,033			2,811			(4,239	)		4,097

Other Expense, Net		515			478			2,107			—			3,100

Income (Loss) From Continuing Operations Before Taxes		(515	)		14,973			5,277			—			19,735
Income Tax Expense (Benefit)		(165	)		4,470			1,669			—			5,974

Income (Loss) From Continuing Operations Before Minority Interest		(350	)		10,503			3,608			—			13,761

Minority Interest		—			—			(35	)		—			(35	)

Income (Loss) From Continuing Operations		(350	)		10,503			3,573			—			13,726

Loss From Discontinued Operations, Net of Tax		—			(562	)		—			—			(562	)
Equity in Net Income of Consolidated Subsidiaries		13,514			—			—			(13,514	)		—

Net Income (Loss)	$	13,164		$	9,941		$	3,573		$	(13,514	)	$	13,164

Condensed Consolidating Statement of Operations for the six month period ended April 29, 2005.


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	266,494		$	143,846		$	(8,956	)	$	401,384
Cost of Sales		—			187,164			96,538			(8,956	)		274,746

		—			79,330			47,308			—			126,638
Expenses
Selling, general and administrative		—			42,422			24,023			—			66,445
Research, development and engineering		—			7,722			11,391			—			19,113

Total Expenses		—			50,144			35,414			—			85,558

Operating Earnings From Continuing Operations		—			29,186			11,894			—			41,080

Other expense		50			16			—			—			66
Interest income		(7,580	)		(1,696	)		(1,274	)		8,990			(1,560	)
Interest expense		8,981			2,565			6,223			(8,990	)		8,779

Other Expense, Net		1,451			885			4,949			—			7,285

Income (Loss) From Continuing Operations Before Taxes		(1,451	)		28,301			6,945			—			33,795
Income Tax Expense (Benefit)		(426	)		8,278			2,086			—			9,938

Income (Loss) From Continuing Operations Before Minority Interest		(1,025	)		20,023			4,859			—			23,857

Minority Interest		—			—			(48	)		—			(48	)

Income (Loss) From Continuing Operations		(1,025	)		20,023			4,811			—			23,809

Income From Discontinued Operations, Net of Tax		—			6,965			—			—			6,965
Equity in Net Income of Consolidated Subsidiaries		31,799			—			—			(31,799	)		—

Net Income (Loss)	$	30,774		$	26,988		$	4,811		$	(31,799	)	$	30,774

Condensed Consolidating Statement of Cash Flows for the six month period ended April 29, 2005.


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total
Cash Flows Provided (Used) by Operating Activities
Net earnings (loss)	$	30,774		$	26,988		$	4,811		$	(31,799	)	$	30,774
Minority interest		—			—			49			—			49
Depreciation & amortization		—			11,059			7,449			—			18,508
Deferred income taxes		4,294			—			(2,464	)		—			1,830
Stock-based compensation		—			519			161			—			680
Gain on sale of discontinued operation		—			(9,456	)		—			—			(9,456	)
Loss on sale of building		—			59			—			—			59
Working capital changes, net of effect of acquisitions
Accounts receivable		1,549			8,019			(6,528	)		—			3,040
Inventories		—			(11,112	)		(3,423	)		—			(14,535	)
Prepaid expenses		107			(1,895	)		2,561			—			773
Accounts payable		(285	)		144			4,355			—			4,214
Accrued liabilities		442			1,226			(914	)		—			754
Federal & foreign income taxes		(4,837	)		5			5,304			—			472
Other liabilities		1,109			44			147			—			1,300
Other, net		665			(651	)		(696	)		—			(682	)

		33,818			24,949			10,812			(31,799	)		37,780

Cash Flows Provided (Used) by Investing Activities
Purchases of capital assets		(208	)		(6,669	)		(2,465	)		—			(9,342	)
Proceeds from sale of discontinued operation		—			21,421			—			—			21,421
Proceeds from sale of building		—			2,319			—			—			2,319
Proceeds from sale of capital assets		5			74			67			—			146
Purchase of short-term investments		(45,486	)		—			—			—			(45,486	)
Acquisitions of businesses, net		—			(3,346	)		—			—			(3,346	)

		(45,689	)		13,799			(2,398	)		—			(34,288	)


(In thousands)	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Total
Cash Flows Provided (Used) by Financing Activities
Proceeds provided by stock issuance under employee stock plans		2,435			—			—			—		2,435
Proceeds provided by sale of common stock		108,490			—			—			—		108,490
Net change in credit facilities		(5,000	)		—			576			—		(4,424	)
Repayment of long-term debt		(1,002	)		(57	)		(415	)		—		(1,474	)
Net change in intercompany financing		86			(39,445	)		7,560			31,799		—

		105,009			(39,502	)		7,721			31,799		105,027

Effect of Foreign Exchange Rates on Cash		211			(7	)		(498	)		—		(294	)


Net Increase (Decrease) in Cash and Cash Equivalents		93,349			(761	)		15,637			—		108,225
Cash and Cash Equivalents – Beginning of Period		6,859			2,353			20,267			—		29,479

Cash and Cash Equivalents – End of Period	$	100,208		$	1,592		$	35,904		$	—	$	137,704

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We view and operate our businesses in three segments: Avionics & Controls, Sensors & Systems and Advanced Materials. The Avionics & Controls segment designs and manufactures technology interface systems for military and commercial aircraft and land- and sea-based military vehicles, secure communications systems, specialized medical equipment, and other industrial applications. The Sensors & Systems segment produces high-precision temperature and pressure sensors, electrical power switching, control and data communication devices, micro-motors, motion control sensors, and other related systems, principally for aerospace and defense customers. The Advanced Materials segment develops and manufactures high-performance elastomer products used in a wide range of commercial aerospace and military applications and combustible ordnance components and electronic warfare countermeasure devices for military customers. Sales in all segments include domestic, international, defense and commercial customers.

Our current business and strategic plan focuses on the continued development of our products in three key technology segments: avionics and controls, sensors and systems and specialized high-performance elastomers and other complex materials, principally for the aerospace and defense markets. We are concentrating our efforts to expand our capabilities in these markets and to anticipate the global needs of our customers and respond to such needs with comprehensive solutions. These efforts focus on continuous research and new product development, acquisitions and establishing strategic realignments of operations to expand our capabilities as a more comprehensive supplier to our customers across our entire product offering. On March 24, 2006, we acquired all of the outstanding capital stock of Wallop Defence Systems Limited (Wallop), a manufacturer of military pyrotechnic countermeasure devices for U.K. £33.2 million in cash (approximately $57.9 million including acquisition costs and an adjustment based on the amount of indebtedness and net working capital as of closing). In addition, we may pay an additional purchase price up to U.K. £10.0 million or approximately $18.2 million, depending on the future financial performance of Wallop. The acquisition strengthens our international position in countermeasure devices. Wallop is included in our Advanced Materials segment. On December 16, 2005, we acquired all of the outstanding capital stock of Darchem Holdings Limited (Darchem), a manufacturer of thermally engineered components for critical aerospace applications for U.K. £68.6 million in cash (approximately $121.6 million including acquisition costs and an adjustment based on the amount of cash and net working capital of Darchem as of closing). Darchem holds a leading position in its niche market and fits our engineered-to-order model and is included in our Advanced Materials segment.

On January 28, 2005, we completed the sale of the outstanding stock of our wholly owned subsidiary Fluid Regulators Corporation (Fluid Regulators), which was included in our Sensors & Systems segment, for approximately $21.4 million. As a result of the sale, we

recorded a gain of approximately $7.0 million, net of tax of $2.4 million, in the first fiscal quarter of 2005.

On May 13, 2005, we closed a small unit in our Other segment and incurred $0.4 million in severance, net of $0.2 million in tax, in the second quarter of fiscal 2005.

The dispositions and closure described above are reported as discontinued operations and the consolidated financial statements for all prior periods have been adjusted to reflect this presentation.

Results of Continuing Operations

Three Month Period Ended April 28, 2006 Compared to Three Month Period Ended April 29, 2005

Sales for the second fiscal quarter increased 17.2% compared with the prior-year period. Sales by segment were as follows:


(In thousands)	Incr./(Decr.) from prior year period	Three Months Ended
	Incr./(Decr.) from prior year period	April 28, 2006		April 29, 2005
Avionics & Controls	10.6%	$	71,864	$	64,990
Sensors & Systems	(1.6)%		83,177		84,541
Advanced Materials	49.7%		92,898		62,061

Total Net Sales		$	247,939	$	211,592

The 10.6% increase in Avionics & Controls principally reflected incremental sales from the Palomar acquisition in the third fiscal quarter of 2005 and increased sales volumes of cockpit controls due to new OEM programs. These sales increases were partially offset by a decrease in sales of medical devices due to one customer’s decision to source its requirements from a low-cost country. We expect to replace this business with new or existing customers who meet our targeted profile of requiring highly engineered solutions, generally lower production volumes and higher product mix.

The 1.6% decrease in sales of Sensors & Systems principally reflected lower motion control distribution sales to the British Ministry of Defence (British MoD). In addition, pressure sensor sales in the second fiscal quarter of 2005 were enhanced by a retrofit program. Sensors & Systems sales also reflected a weaker U.K. pound and euro relative to the U.S. dollar, as the average exchange rate from the U.K. pound and euro to the U.S. dollar decreased from 1.89 and 1.31 in the second quarter of fiscal 2005 to 1.76 and 1.21 in the second quarter of fiscal 2006. These decreases in sensors sales were partially offset by increased sales of electrical power switching devices from new OEM programs.

The 49.7% increase in Advanced Materials reflected $20.1 million in incremental sales from the acquisitions of Darchem and Wallop and higher sales of combustible ordnance, countermeasure devices and elastomer material to aerospace and defense customers.

Overall, for the second quarter of fiscal 2006, gross margin as a percentage of sales was 32.6% compared with 32.4% for the second quarter of fiscal 2005. Avionics & Controls segment gross margin was 35.1% and 33.7% for the second fiscal quarter of 2006 and 2005, respectively. Avionics & Controls gross margin increased from the prior-year period due to a higher mix of cockpit control sales and stronger medical equipment gross margins due to improved cost control and higher unit prices. Sensors & Systems segment gross margin was 34.0% and 35.3% for the second fiscal quarter of 2006 and 2005, respectively. The decrease in gross margin reflected

lower after-market spares sales, production inefficiencies and increased rent, maintenance and energy expenses at our pressure and temperature sensor operations. Gross margin was also impacted by the effect of our hedging activities related to U.S. dollar denominated sales. Advanced Materials segment gross margin was 29.3% and 27.0% for the second fiscal quarter of 2006 and 2005, respectively. Gross margin was favorably impacted by increased sales of our higher gross margin combustible ordnance and elastomer clamping devices as well as improved operating efficiencies at our flare countermeasure operations. The prior-year period gross margin was negatively impacted by lower sales volumes of combustible ordnance and incremental start-up costs on certain flare countermeasure devices.

Selling, general and administrative expenses (which include corporate expenses) totaled $41.0 million and $35.8 million for the second fiscal quarter of 2006 and 2005, respectively, or 16.5% of sales for the second fiscal quarter of 2006 compared with 16.9% for the prior-year period. Selling, general and administrative expenses include stock option expense of $1.3 million in the second fiscal quarter of 2006, resulting from accounting for stock option expense under Financial Accounting Standards No. 123(R), “Share-Based Payment,” (Statement 123(R)). For information on our adoption of Statement 123(R), see Note 11 of the condensed consolidated financial statements. In the second fiscal quarter of 2005, we recorded $1.4 million of stock option expense under the variable method of accounting. The overall increase in the amount of selling, general and administrative expenses primarily reflected incremental selling, general and administrative expenses as a result of the Darchem and Palomar acquisitions. The decrease in selling, general and administrative expenses as a percentage of sales principally reflected higher sales volumes without a proportional increase in the expense during the current fiscal quarter. Our selling, general and administrative expenses are typically fixed.

Research, development and engineering spending was $12.9 million, or 5.2% of sales, for the second fiscal quarter of 2006 compared with $9.9 million, or 4.7% of sales, for the second fiscal quarter of 2005. Darchem’s research, development and engineering spending is relatively low as a percentage of sales compared to our other operating units. If research, development and engineering spending as a percentage of sales is calculated excluding Darchem, the percentage is 5.6%, which is considered by management to be a better comparison to the prior year. The increase in research, development and engineering principally reflected spending on new programs including the A400 primary power distribution assembly, TP400 engine sensors, 787 overhead panel control and 787 environmental control programs. Research, development and engineering is net of a $0.5 million government subsidy due from France in the second quarter of fiscal 2006. Research, development and engineering spending is expected to increase for the balance of the year before returning to historical levels.

Segment earnings (operating earnings excluding corporate expenses) for the second fiscal quarter of 2006 totaled $34.3 million, compared with $29.1 million for the second fiscal quarter in 2005. Avionics & Controls segment earnings were $11.3 million for the second fiscal quarter of 2006 compared with $9.2 million for the second fiscal quarter of 2005, principally reflecting strong results from our cockpit control and medical equipment operations. We believe that the earnings growth acceleration we experienced from our medical equipment operations during the second

fiscal quarter of 2006 may moderate in the second half of the fiscal year. Stock option expense was $0.2 million in the second fiscal quarter of 2006 compared with $0.4 million in the second fiscal quarter of 2005.

Sensors & Systems segment earnings were $7.3 million for the second quarter of fiscal 2006 compared with $11.2 million for the second quarter of fiscal 2005. The decrease in earnings reflects a production ramp up of industrial sensors for a relatively new program and manufacturing inefficiencies and delayed shipments due to employee turnover. Management expects these matters to be resolved by the fourth quarter of fiscal 2006. Sensors & Systems earnings were also impacted by an estimated $1.0 million charge as a result of a customer contract termination. Stock option expense was $0.1 million in the second fiscal quarter of 2006 compared with $0.2 million in the second fiscal quarter of 2005.

Advanced Materials segment earnings were $15.7 million for the second fiscal quarter of 2006 compared with $8.7 million for the second fiscal quarter of 2005. Advanced Materials earnings were principally enhanced by increased earnings at our combustible ordnance operations due to strong demand and improved recovery of fixed overhead expenses. Additionally, Advanced Materials earnings reflected incremental earnings from the Darchem acquisition and improved results at our elastomer clamping devices’ operations. In the second quarter of fiscal 2005, earnings at our combustible ordnance and countermeasure operations were impacted by production inefficiencies on new countermeasure flare products and higher operating expenses. Stock option expense was $0.1 million in the second fiscal quarter of 2006 compared with $0.5 million in the second fiscal quarter of 2005.

Interest expense for the second fiscal quarter of 2006 was $5.8 million compared with $4.1 million for the second fiscal quarter of 2005, reflecting increased borrowings to finance acquisitions.

The effective income tax rate for the second fiscal quarter of 2006 was 28.3% (before a $2.0 million reduction of previously estimated tax liabilities) compared with 30.3% for the second fiscal quarter of 2005. On April 25, 2006 we received a Notice of Proposed Adjustment (NOPA) from the State of California Franchise Tax Board covering, among other items, the examination of research and development tax credits for fiscal years 1997 through 2002. As a result of receiving the NOPA we reduced previously estimated tax liabilities by $2.0 million. The effective tax rate differed from the statutory rate, as both years benefited from various tax credits and benefits and certain foreign interest expense deductions. While the second fiscal quarter of 2006 effective tax rate was impacted by the expiration of the U.S. Research and Experimentation Credit at December 31, 2005, the impact was partially offset by increased benefits from various tax credits and foreign interest deductions.

New orders for the second fiscal quarter of 2006 were $335.1 million compared with $263.4 million for the same period in 2005, an increase of 27.2%. The increase in orders principally reflects increased orders for Avionics & Controls and the Darchem and Wallop acquisitions.

Six Month Period Ended April 28, 2006 Compared to Six Month Period Ended April 29, 2005

Year-to-date sales increased 13.0% compared with the prior-year period. Sales by segment were as follows:


(In thousands)	Incr./(Decr.) from prior year period	Six Months Ended
	Incr./(Decr.) from prior year period	April 28, 2006		April 29, 2005
Avionics & Controls	6.7%	$	134,306	$	125,845
Sensors & Systems	(1.4)%		156,647		158,915
Advanced Materials	39.5%		162,651		116,624

Total Net Sales		$	453,604	$	401,384

The 6.7% increase in sales of Avionics & Controls principally reflected incremental sales from the Palomar acquisition and increased sales of cockpit control devices. These sales increases were partially offset by a decrease in sales of medical devices due to one customer’s decision to source its requirements from a low-cost country. We expect to replace this business with new or existing customers who meet our targeted profile of requiring highly engineered solutions, generally lower production volumes, and higher product mix.

The 1.4% decrease in sales of Sensors & Systems principally reflected lower motion control distribution sales to the British Ministry of Defence (British MoD). In addition, pressure sensor sales in the first six months of fiscal 2005 were enhanced by a retrofit program. Sensors & Systems sales also reflected a weaker U.K. pound and euro relative to the U.S. dollar, as the average exchange rate from the U.K. pound and euro to the U.S. dollar decreased from 1.89 and 1.31 in the six month period ended April 29, 2005 to 1.75 and 1.20 in the six month period ended April 28, 2006. These decreases in sensors sales were partially offset by increased sales of electrical power switching devices from new OEM programs.

The 39.5% increase in Advanced Materials reflected $27.4 million in incremental sales from the acquisitions of Darchem and Wallop and higher sales of combustible ordnance, countermeasure devices and elastomer material to aerospace and defense customers.

Overall, gross margin as a percentage of sales was 31.7% and 31.6% for the first six months of fiscal 2006 and 2005, respectively. Avionics & Controls segment gross margin was 35.4% and 32.6% for the first six months of fiscal 2006 and 2005, respectively, reflecting a higher mix of cockpit control sales, increased pricing and an improved recovery of fixed expenses. Sensors & Systems segment gross margin was 33.2% and 35.0% for the first six months of fiscal 2006 and 2005, respectively. The decrease in gross margin reflected lower after-market spares sales, production inefficiencies and increased rent, maintenance and energy expenses at our pressure and temperature sensor operations. Gross margin was also impacted by the effect of our hedging activities related to U.S. dollar-denominated sales. Advanced Materials segment gross margin was 27.0% and 25.7% for the first six months of fiscal 2006 and 2005, respectively. Gross

margin was favorably impacted by higher sales of combustible ordnance and elastomer clamping devices as well as improved operating efficiencies at our flare countermeasure operations.

Selling, general and administrative expenses (which include corporate expenses) totaled $76.9 million and $66.4 million for the first six months of fiscal 2006 and 2005, respectively, or 16.9% of sales, for the first six months of fiscal 2006 compared with 16.6% for the prior-year period. Selling, general and administrative expenses include stock option expense of $2.6 million in the first six months of fiscal 2006, resulting from accounting for stock option expense under Statement 123(R). For information on our adoption of Statement 123(R), see Note 11 of the condensed consolidated financial statements. In the first six months of fiscal 2005, we recorded $0.7 million in stock option expense under the variable method of accounting. The overall increase in the amount of selling, general and administrative expenses primarily reflected incremental selling, general and administrative expenses as a result of the Darchem and Palomar acquisitions. Our selling, general and administrative expenses are typically fixed.

Research, development and engineering expenses were $23.3 million, or 5.1% of sales for the first six months of fiscal 2006 compared with $19.1 million, or 4.8% of sales, for the first six months of fiscal 2005. Darchem’s research, development and engineering spending is relatively low as a percentage of sales compared to other operating units. If research, development and engineering spending as a percentage of sales is calculated excluding Darchem, the percentage is 5.4%, which is considered by management to be a better comparison to the prior year. The increase in research, development and engineering principally reflected spending on new programs including the A400 primary power distribution assembly, TP400 engine sensors, 787 overhead panel control and 787 environmental control programs. Research, development and engineering is net of a $2.3 million government subsidy due from France in the first six months of fiscal 2006. Research, development and engineering spending is expected to increase for the balance of the year before returning to historical levels.

Segment earnings (operating earnings excluding corporate expenses) for the first six months of fiscal 2006 totaled $57.6 million, compared with $51.4 million for the prior-year period. Avionics & Controls segment earnings were $20.7 million for the first six months of fiscal 2006 compared with $18.6 million in the prior-year period and reflected strong earnings from our cockpit control operations and lower earnings from our medical device operations due to decreased sales volumes as described above. Stock option expense was $0.4 million and $0.2 million in the first six months of fiscal 2006 and 2005, respectively.

Sensors & Systems segment earnings were $13.1 million for the first six months of fiscal 2006 compared with $17.6 million in the prior-year period. The decrease in earnings reflects a production ramp up of industrial sensors for a relatively new program and manufacturing inefficiencies and delayed shipments due to employee turnover. Sensors & Systems earnings were also impacted by an estimated $1.0 million charge as a result of a customer contract termination. Additionally, fiscal 2005 results benefited from a retrofit program. Stock option expense was $0.3 million and $0.1 million in the first six months of fiscal 2006 and 2005, respectively.

Advanced Materials segment earnings were $23.8 million for the first six months of fiscal 2006 compared with $15.2 million for the prior-year period. Advanced Materials earnings were principally enhanced by increased earnings at our combustible ordnance operations due to strong demand and improved recovery of fixed overhead expenses. Additionally, Advanced Materials earnings reflected incremental earnings from the Darchem acquisition and improved results at our elastomer clamping devices’ operations. Stock option expense was $0.3 million in the first six months of fiscal 2006 and 2005.

Interest expense for the first six months of fiscal 2006 was $10.3 million compared with $8.8 million for the prior-year period, reflecting increased borrowings to finance acquisitions.

The effective income tax rate for the first six months of fiscal 2006 was 29.3%, (before a $2.9 million reduction of previously estimated tax liabilities) compared with 29.4% for the first six months of fiscal 2005. The effective tax rate differed from the statutory rate, as both years benefited from various tax credits and certain foreign interest expense deductions. On April 25, 2006 we received a Notice of Proposed Adjustment (NOPA) from the State of California Franchise Tax Board covering, among other items, the examination of research and development tax credits for fiscal years 1997 through 2002. As a result of receiving the NOPA we reduced $2.0 million of previously estimated tax liabilities. Additionally, as a result of a favorable tax audit which was concluded on December 23, 2005, we reduced previously estimated tax liabilities by $0.9 million. While the effective tax rate in the first six months of fiscal 2006 was impacted by the expiration of the U.S. Research and Experimentation Credit at December 31, 2005, the impact was partially offset by increased benefits from various tax credits and foreign interest deductions.

New orders for the first six months of fiscal 2006 were $604.2 million compared with $467.2 million for the same period in fiscal 2005. Backlog at April 28, 2006, was $633.4 million compared with $489.6 million at April 29, 2005. The increase in backlog principally reflected the Darchem, Wallop and Palomar acquisitions. Approximately $270.1 million in backlog is scheduled for delivery after fiscal 2006. Most orders in backlog are subject to cancellation until delivery.

Liquidity and Capital Resources

Cash and cash equivalents and short-term investments at April 28, 2006 totaled $46.3 million, a decrease of $134.7 million from October 28, 2005. Net working capital decreased to $231.6 million at April 28, 2006 from $265.2 million at October 28, 2005. Sources of cash flows from operating activities principally consist of cash received from the sale of products offset by cash payments for material, labor and operating expenses. Cash flows from operating activities were $17.5 million and $37.8 million in the first six months of fiscal 2006 and 2005, respectively. The decrease principally reflected lower cash flows from operating activities of our non-U.S. units, the $2.3 million research and development subsidy from France not yet received in cash and lower cash collections related to our recent U.K.-based acquisitions. Repayment terms on U.K. trade accounts receivable are generally longer than U.S.-based companies. Additionally, the decrease in cash received from customers reflected slower cash receipts from a China-based customer. The decrease in cash flows from operating activities also reflects increased purchases of inventory, higher payments of interest, the $2.2 million make-whole payment, and increased cash payments for incentive compensation, which is paid annually in December. The increase in cash for investing activities mainly reflected cash paid for acquisitions of businesses. Additionally, the prior-year period included $21.4 million in proceeds from the sale of our discontinued operations. The decrease in cash provided by financing activities principally reflected the net proceeds of $108.5 million from our public offering of 3.7 million shares of common stock completed in the prior-year period. Additionally, the decrease reflected the repayment of our $30.0 million 6.40% Senior Notes in accordance with terms and the $40.0 million prepayment of our 6.77% Senior Notes in the first fiscal quarter of 2006.

Capital expenditures, consisting of machinery, equipment and computers, are anticipated to be approximately $22.0 million during fiscal 2006, compared with $23.8 million expended in fiscal 2005. Capital expenditures for the first six months of fiscal 2006 totaled $12.4 million, primarily for machinery and equipment and enhancements to information systems.

Total debt at April 28, 2006 was $301.2 million and consisted of $175.0 million of Senior Subordinated Notes, $104.0 million term loan facility, $14.0 million under our U.S. credit facility, and $8.2 million of various foreign currency debt agreements, including capital lease obligations. The Senior Subordinated Notes mature June 15, 2013, bear interest at 7.75% and contain customary covenants, including restrictions on incurrence of additional debt in certain circumstances, repurchase of our common stock, declaration of dividends, retirement or redemption of subordinated debt, creation of liens and certain asset dispositions. We are in compliance with these covenants and do not view the restrictions as limiting our planned activities. In September 2003 we entered into an interest rate swap agreement on $75 million of our Senior Subordinated Notes due in 2013. The swap agreement exchanged the fixed rate for a variable interest rate on $75 million of the $175 million principal amount outstanding. On November 15, 2005, the $30.0 million 6.4% Senior Notes matured and were paid. Additionally, on November 15, 2005, we prepaid the outstanding principal amount of $40.0 million of our 6.77% Senior Notes due November 15, 2008. Under the terms of the Note Purchase Agreement, we paid an additional $2.2 million make-whole payment, which was recorded as a loss on

extinguishment of debt in the first quarter of fiscal 2006. On February 10, 2006, we amended our credit agreement to provide a $100.0 million term loan facility, which may be drawn in U.S. dollars, U.K. pounds or euros. In addition, the amendment provides that up to $25.0 million of the credit facility and up to $50.0 million of the letter of credit may be drawn in U.K. pounds or euros in addition to U.S. dollars. On February 10, 2006 we borrowed U.K. £57.0 million, or approximately $100 million, under the term loan facility. We used the proceeds from the loan as working capital for our U.K. operations and to repay a portion of our outstanding borrowings under our revolving credit facility. The principal amount of the loan is payable quarterly commencing on March 31, 2007 through the termination date of November 14, 2010 according to a payment schedule by which 1.25% of the principal amount is paid in each quarter of 2007, 2.50% in each quarter of 2008, 5.00% in each quarter of 2009 and 16.25% in each quarter of 2010. The loan accrues interest at a variable rate based on the British Bankers Association Interest Settlement Rate for deposits in U.K. pounds plus an additional margin amount that ranges from 1.125% to 0.500% depending upon our leverage ratio. At February 10, 2006, the initial interest rate on the term loan was 5.33%. We also entered into an interest rate swap agreement on the full principal amount of the term loan, exchanging the variable interest rate for a fixed interest rate of 4.755% plus an additional margin amount determined by reference to the Company’s leverage ratio. In addition, in November 2005, we collateralized a $9.9 million letter of credit with an equivalent amount of cash and cash equivalents.

We believe cash on hand and funds generated from operations are adequate to service operating cash requirements and capital expenditures through April 2007. In addition, we believe that we have adequate access to capital markets to fund future acquisitions.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will” or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risk factors set forth in “Forward-Looking Statements and Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 28, 2005, that may cause our or the industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance or achievements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included or incorporated by reference into this report are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

To the extent that sales are transacted in a foreign currency, we are subject to foreign currency fluctuation risk. Furthermore, we have assets denominated in foreign currencies that are not offset by liabilities in such foreign currencies. Although we own significant operations in France, Germany and the United Kingdom, historically we have not experienced material gains or losses due to interest rate or foreign exchange fluctuations. As more fully described in the Liquidity and Capital Resources section set forth in Part I, Item 2 “Management Discussion and Analysis of Financial Condition and Results of Operations” of this report, on February 10, 2006 we borrowed U.K. £57.0 million, or approximately $100.0 million, under the term loan facility. In addition, we designated the obligation as a derivative instrument to hedge our net investment in Darchem, a U.K. operation. Darchem has $17.3 million in firmly committed sales contracts denominated in U.S. dollars, with maturities of $7.3 million and $10.0 million in fiscal years ended 2006 and 2007, respectively. Darchem also uses forward foreign currency exchange agreements to hedge these U.S. dollar-denominated sales. The notional amount for contracts maturing in fiscal 2006 and 2007 aggregated $4.6 million and $5.0 million, respectively, at April 28, 2006. The average contract rate for contracts maturing in fiscal 2006 and 2007 was 1.79 and 1.80, respectively.

Item 4.

Controls and Procedures

Our principal executive and financial officers evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of April 28, 2006. Based upon that evaluation, they concluded as of April 28, 2006 that our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within time periods specified in Securities and Exchange Commission rules and forms. In addition, our principal executive and financial officers concluded as of April 28, 2006 that our disclosure controls and procedures are also effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During the time period covered by this report, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

From time to time we are involved in legal proceedings arising in the ordinary course of business. We believe that adequate reserves for these liabilities have been made and that there is no litigation pending that could have a material adverse effect on our results of operations and financial condition.

Item 4.

Submission of Matters to a Vote of Security Holders

At our annual meeting of shareholders held on March 1, 2006, the shareholders acted on the following proposals:

a)	The election of the following directors for three-year terms expiring at the 2009 annual meeting:


	Votes Cast
Name	For	Withheld
Ross J. Centanni	19,972,891	2,031,020
Robert S. Cline	19,301,611	2,702,300
James L. Pierce	19,917,994	2,085,917

Current directors whose terms are continuing after the 2006 annual meeting are Lewis E. Burns, John F. Clearman, Robert W. Cremin, Anthony P. Franceschini, Charles R. Larson, and Jerry D. Leitman.

b)	The approval of amendments to the Company’s 2004 Equity Incentive Plan to, among other things, authorize the issuance of an additional 1,000,000 shares of the Company’s Common Stock:

There were 5,389,929 broker non-votes on the above proposal.

c)	The approval of amendments to the Company’s 2002 Employee Stock Purchase Plan (the ESPP) to authorize the issuance of an additional 150,000 shares of the Company’s Common Stock:

There were 5,389,929 broker non-votes on the above proposal.

Item 6.

Exhibits


		10.2		Amendment No. 4 to Credit Agreement dated as of February 10, 2006 by and among Esterline Technologies Corporation, the financial institutions identified therein and Wachovia Bank, National Association, as Administrative Agent. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 10, 2006 [Commission File Number 1-6357].)

		10.33		Esterline Technologies Corporation 2002 Stock Purchase Plan. (Incorporated by reference to Annex D in the definitive form of the Company’s Proxy Statement relating to its 2006 Annual Meeting of Shareholders held on March 1, 2006 filed on January 24, 2006 [Commission File Number 1-6357].)

		10.36		Esterline Technologies Corporation 2004 Equity Incentive Plan. (Incorporated by reference to Annex C in the definitive form of the Company’s Proxy Statement relating to its 2006 Annual Meeting of Shareholders held on March 1, 2006 filed on January 24, 2006 [Commission File Number 1-6357].)

		10.38		Lease Agreement, dated November 29, 2005 between Lordbay Investments Limited, Darchem Engineering Limited and Darchem Holdings Limited relating to premises located at Units 4 and 5 Eastbrook Road, London Borough of Gloucestershire Gloucester.

		10.41		Amendment No. 1 dated as of November 23, 2005 to Lease Agreement dated as of March 1, 1994 between Highland Industrial Park, Inc. and Armtec Countermeasures Company.

		11		Schedule setting forth computation of basic and diluted earnings per common share for the three and six month periods ended April 28, 2006 and April 29, 2005.

		31.1		Certification of Chief Executive Officer.

		31.2		Certification of Chief Financial Officer.

		32.1		Certification (of Robert W. Cremin) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

		32.2		Certification (of Robert D. George) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	ESTERLINE TECHNOLOGIES CORPORATION
	(Registrant)

Dated: June 6, 2006	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer,
		Secretary and Treasurer
		(Principal Financial Officer)

EXHIBIT 10.38

OFFICIAL COPY OF REGISTER ENTRIES

This official copy shows the entries subsisting on the register on 5 January 2006 at 13:59:47 . This date must be quoted as the ‘search from date’ in any official search application based on this copy .

Under s.67 of the Land Registration Act 2002, this copy is admissible in evidence to the same extent as the original.

Issued on 5 January 2006.

This title is dealt with by Land Registry Gloucester Office .

Land Registry

Title Number: GR288900

Edition Date: 5 January 2006

A: Property Register

This register describes the land and estate comprised in the title. Except as mentioned below, the title includes any legal easements granted by the registered lease but is subject to any rights that it reserves, so far as those easements and rights exist and benefit or affect the registered land.

GLOUCESTERSHIRE: GLOUCESTER

1.	(05.01.2006) The Leasehold land shown edged with red on the plan of the above Title filed at the Registry and being Units 4 and 5, Eastbrook Road, Gloucester (GL4 3DB).

2.	(05.01.2006) Short particulars of the lease(s) (or under-lease(s)) under which the land is held:


Date	:	29 November 2005
Term	:	10 years from 1 March 2007
Parties	:	(1) Lordbay Investments Limited
		(2) Darchem Engineering Limited
		(3) Darchem Holdings Limited

3.	(05.01.2006) There are excepted from the effect of registration all estates, rights, interests, powers and remedies arising upon, or by reason of, any dealing made in breach of the prohibition or restriction against dealings therewith inter vivos contained in the Lease.

(05.01.2006) There are excluded from this registration the mines and minerals and the ancillary rights excepted and reserved by a Deed dated 29 April 1937 made between (1) The Ecclesiastical Commissioners for England (Commissioners) and (2) Gloucester Corporation (Purchasers) supplemental to a Conveyance of the freehold estate in the land in this title and other land dated 15 August 1932 made between (1) The Right Reverend Father in God Arthur Cayley Lord Bishop of Gloucester (2) The Ecclesiastical Commissioners for England and (3) Gloucester Corporation in the following terms:-

Except and reserved unto the Commissioners their successors and assigns all mines quarries and minerals whatsoever whether opened or unopened within and under the Scheduled lands and hereditaments or any of them and lying below a depth of 200 feet together with full powers for the

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A: Property Register continued

Commissioners their successors and assigns and their lessees and agents and all persons authorised by them or any of them with workmen and others from time to time and at all times thereafter by means of underground workings or operations only to win work get and carry away the said mines quarries and minerals and any mines quarries and minerals in upon or under any adjacent or other lands and with full powers for those purposes to withdraw vertical and lateral support from the surface of the Scheduled lands and hereditaments and from any buildings or works then erected or thereafter to be erected thereon notwithstanding any subsidence or other injury or damage that may thereby be or occasioned to the scheduled lands and hereditaments or any buildings or works as aforesaid or any other injury or damage or loss whatsoever arising whether directly or indirectly from any such workings or operations as aforesaid which might be sustained by the Purchasers or their successors in title so nevertheless that the person or persons actually working under or by virtue of any of the powers aforesaid should pay to the Purchaser or other the owner or occupier for the time being of the scheduled lands and hereditaments reasonable compensation for or in respect of any injury or damage to be thereby occasioned to any buildings or works then erected on the scheduled lands and hereditaments such compensation to be fixed if the parties cannot agree by an Arbitrator to be agreed upon between them or in case of their not being able to agree upon such Arbitrator then by two disinterested persons as Arbitrators one to be chosen by each party or their umpire and any such arbitrator should so far as applicable be governed by the provisions of the Arbitration Acts 1889 to 1934 or any statutory modification thereof.

5.	(05.01.2006) The lessor’s title is registered.

B: Proprietorship Register

This register specifies the class of title and identifies the owner. It contains any entries that affect the right of disposal.

Title Absolute

1.	(05.01.2006) PROPRIETOR: DARCHEM ENGINEERING LIMITED (Co. Regn. No. 144767) of P.O. Box 31, 42 St. Andrews Square, Edinburgh EH2 2YE.

C: Charges Register

This register contains any charges and other matters that affect the land.

(05.01.2006) A Conveyance of the freehold estate in the land tinted blue on the title plan dated 9 November 1962 made between (1) Gloucester Corporation (Vendors) and (2) Molyneux Engineering Company Limited (Company) contains covenants details of which are set out in the schedule of restrictive covenants hereto.

2.	(05.01.2006) The land tinted blue on the title plan is subject to the following rights reserved by the Conveyance dated 9 November 1962 referred to above:-

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C: Charges Register continued

“EXCEPT AND RESERVING unto the vendors their agents and servants the right at all reasonable times to enter upon the land hereby conveyed if they shall require for the purpose of (a) inspecting dredging clearing or carrying out any other operation in or to the aforesaid Wotton Brook which Brook constitutes an open storm water sewer (b) repairing maintaining renewing altering or enlarging the foul sewer passing through the said piece or parcel or land hereby conveyed as shown marked with a broken black line on the Plan aforesaid the Vendors in such event carrying out any necessary work with all due speed and causing the minimum amount of disturbance to the Company and doing no unnecessary damage and forthwith restoring the surface of any land disturbed and making good any damage thereto or to anything standing thereon caused by or in consequence of the exercise of such right.”

NOTE:-Copy plan filed under GR73474.

(05.01.2006) A Conveyance of the freehold estate in the land tinted pink on the title plan dated 1 November 1963 made between (1) Gloucester Corporation (Corporation) and (2) Co-operative Wholesale Society Limited (Purchaser) contains covenants details of which are set out in the schedule of restrictive covenants hereto.

By a Deed dated 16 February 1971 made between (1) Gloucester Corporation (Corporation) and (2) Co-operative Wholesale Society Limited (Society) the covenant contained in Clause (e) of the First Schedule to the said Conveyance was expressed to be released. Details of the terms of the release are set out in the schedule of restrictive covenants hereto.

4.	(05.01.2006) An Agreement dated 8 April 1982 made between (1) The Council of the City of Gloucester and (2) Molyneux Rail Clips Limited relates to the erection of buildings over a public sewer and matters ancillary thereto.

NOTE:- Copy filed under GR34794.

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Schedule of Restrictive Covenants

1.	The following are details of the covenants contained in the Conveyance dated 1 November 1963 referred to in the Charges Register:-

“The Purchaser hereby covenants with the Corporation for the benefit of the Corporation’s said Eastbrook Road Industrial Estate that it the Purchaser and its successors in title will observe and perform the stipulations and conditions contained in the First Schedule hereto

THE FIRST SCHEDULE before referred to

(a) Within a period of six months from the date hereof to make application if necessary for a Board of Trade Certificate pursuant to the Town and Country Planning Acts and in the event of such certificate not being obtained when required to inform the Corporation accordingly and at the request in writing of the Corporation to reconvey the said piece or parcel of land to the Corporation for the consideration herein mentioned each party hereto in that event bearing its own legal and other costs

(b) To carry out building operations only in accordance with the deposited plans pursuant to which planning and by-laws permission shall have been granted and to use as a means of access to and egress from the

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Schedule of Restrictive Covenants continued

said piece of land only the access road shown on the said plan annexed hereto and known as Eastbrook Road

(c) At all times to park vehicles only within the boundaries of the site hereby conveyed and not to obstruct with vehicles or otherwise the passage of vehicular and other traffic along Eastbrook Road aforesaid

(d) Within a period of one year from the date hereof and subject to sub-clauses (a) and (b) and (c) hereof to commence and within a period of two years from the date hereof to complete the construction upon the said piece or parcel of land of industrial premises in accordance with planning and bye-laws permission and in the event of the said premises not having been completed within such period at the request in writing of the Corporation to reconvey the said piece or parcel of land to the Corporation for the consideration herein mentioned with an additional payment to be made for any uncompleted premises erected thereon at that date at a price to be agreed between the Purchaser and the Corporation or failing agreement at a price representing the then current open market value to be fixed by the District Valuer each party hereto in that event bearing its own legal and other costs

(e) That if after the expiry of the period provided for the completion of the premises referred to in sub-clause (d) hereof the Purchaser shall within the period of ten years from the date hereof desire to sell the said piece or parcel of land or lease the same for a period exceeding twenty-one years the Purchaser shall first make an offer in writing to sell the said piece or parcel of land together with any buildings then standing thereon to the Corporation at a price to be agreed between the Purchaser and the Corporation or failing agreement at a price representing the been current open market value to be fixed by the District valuer and that such offer shall remain open for the period of four months from the date thereof

(f) Not to work any minerals lying under the surface of the said piece or parcel of land

(g) Not to cause or permit any noxious or offensive effluvia ash soot or grit to be emitted from any furnace or fireplace on the said piece or parcel of land and for that purpose to use the best practicable means and to the reasonable satisfaction of the Corporation for preventing or counteracting such effluvia ash soot or grit and to erect any chimney in connection with any furnace or fireplace to the satisfaction in all respects of the Corporation

(h) That every furnace or fireplace used for industrial purposes shall be of a type to be approved in writing by the corporation and shall be so constructed as to consume as far as possible the smoke arising from the combustibles used therein

(i) To obtain before the erection of such furnace or fireplace the written approval of the Corporation to the plans and specifications which shall contain a statement indicating the type of installation the method of firing and kind of fuel to be used the arrangement for providing adequate draught and any other provisions made for securing as far as possible the complete combustion of the fuel

(j) Not to erect any furnace or fireplace unit the same has received the written approval of the Corporation nor to use the same in any manner other than that provided by the said plans

(k) Forthwith to erect and thereafter maintain a suitable fence to the satisfaction of the city Architect for the time being of the Corporation


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Schedule of Restrictive Covenants continued

along the whole of the south eastern boundary and such part of the north western boundary as is not used for access and egress.”

2.	The following are details of the terms of the Release contained in the Deed dated 16 February 1971 referred to in the Charges Register:-

“The Corporation hereby releases to the Society the right of pre-emotion contained in the Conveyance and hereby discharges the Society from all obligations arising by virtue of Clause (e) of the First Schedule to the Conveyance

IT IS HEREBY AGREED AND DECLARED that all other the covenants conditions and provisions contained in the Conveyance (so far as the same are subsisting and enforceable at the date of this Deed) shall continue to have full force and effect.”

END OF REGISTER

NOTE: The date at the beginning of an entry is the date on which the entry was made in the Register.

Page 5

LOGO

4-5 Eastbrook Road-LSE

DATED 29th November 2005

LORDAY INVESTMENTS LIMITED

-and-

DARCHEM ENGINEERING LIMITED

-and-

DARCHEM HOLDINGS LIMITED

LEASE

Units 4 and 5

Eastbrook Road

Gloucester

PARTICULARS


DATE	:	29th November 2005

LANDLORD	:	LORDBAY INVESTMENTS LIMITED (Co. Regn No. 3523532)

Registered Office	:	Victoria House, 64 Paul Street, London, EC2A 4TT

TENANT	:	DARCHEM ENGINEERING LIMITED (Co Regn No. 144767)

Registered Office	:	PO Box 31, 42 St Andrews Square, Edinburgh, EH2 2YE

GUARANTOR	:	DARCHEM HOLDINGS LIMITED (Co Regn No. 3966333)

Registered Office	:	Ironmasters Way, Stillington, Stockton-on-Tees, TF21 1LB

TERM GRANTED	:	10 years commencing on 1 March 2007

RENT	:	TWO HUNDRED AND THIRTY ONE THOUSAND ONE HUNDRED AND FIFTY SIX POUNDS (£231,156) per annum subject to review

RENT COMMENCEMENT DATE	:	1 March 2007

RENT REVIEW DATES	:	1 March 2012

INTEREST RATE	:	4% over the Barclays Bank Plc Base Rate

PERMITTED USE	:	Use Class B1 of the Town and Country Planning (Use Classes) Order 1987

LEASE

THE LAND REGISTRY

LAND REGISTRATION ACT 2002


County and District/

London Borough		Gloucestershire Gloucester

Title Numbers		GR73474 and GR34794

Property		Units 4 and 5 Eastbrook Road


DATE		29th November 2005

PARTIES



(1)		LORDBAY INVESTMENTS LIMITED (incorporated and registered in England and Wales under company number 3523532) the registered office of which is at Victoria House 64 Paul Street London EC2A 4TT (the Landlord);

(2)		DARCHEM ENGINEERING LIMITED (incorporated and registered in England and Wales under company number 144767), the registered office of which is at PO Box 31, 42 St Andrews Square Edinburgh EH2 2YE (the Tenant); and

(3)		DARCHEM HOLDINGS LIMITED (incorporated and registered in Scotland under company number 3966333), the registered office of which is at Ironmasters Way Stillington Stockton on Tees TF21 1LB (the Guarantor).

IT IS AGREED AS FOLLOWS

1.	DEFINITIONS

In this Lease the following definitions apply:


Base Rate		the base rate from time to time of Barclays Bank plc or if that rate is no longer published then the rate of interest which the Landlord reasonably considers to be most closely comparable to minimum lending rates generally applicable in the UK from time to time;

Excluded Risks		any risk against which the Landlord does not insure because insurance cover for that risk is either not ordinarily available in the London insurance market, or is available there only at a premium or subject to conditions which in the Landlords reasonable opinion are unacceptable;

Group		a group of companies within the meaning of section 42 of the Landlord and Tenant Act 1954;

Guarantor		the third named party to this deed, and/or any person who has entered into a guarantee or an authorised guarantee agreement pursuant to this Lease and their respective successors in title;

Insurance Rent		the cost to the Landlord (before any commission) of insuring;


		1. the Premises against the Insured Risks for their full reinstatement cost, including the costs of demolition and site clearance, temporary works compliance with local authority requirements in connection with any works of repair or reinstatement, architects’, surveyors’ and other professional fees and other incidental expenses and in each case with due allowance for inflation and VAT;

		2. against loss of the Rent (having regard to the provisions for the review of the Rent) for a period of three years; and

		3. against public liability of the Landlord in correction with any matter relating to the Premises or the occupation or use of the Premises by the Tenant or anyone at the Premises with the express or implied authority of the Tenant;

Insured Risks		1 . fire, explosion, lightning and earthquake; 2. flood, storm, bursting or overflowing of water tanks, pipes, or other water or heating apparatus; 3. impact aircraft (other than hostile aircraft) and things dropped from such aircraft;


		4. riot civil commotion and malicious damage; and

		5. such other risks as the Landlord may from time to time insure against,

		but to the extent that any risk is for the time being an Excluded Risk, it will not to that extent and for that time be an Insured Risk;

Interest Rate		4% over the Base Rate;

Landlord		the first named party to this deed and its successors in title and persons entitled to the reversion immediately expectant on the termination of this Lease;

Landlord’s surveyor		a chartered surveyor appointed by the Landlord, who may be an individual, or a firm or company of chartered surveyors, or an employee of the Landlord or a company which is in the same Group as the Landlord;

this Lease		this deed as varied or supplemented by any Supplemental Document;

New Roof Cover		the new over-roofing cover laid over the Old Roof

Old Roof		the existing roof structure and its coverings as at 2 August 2002

Permitted Use		A use within Use Class B1 of the Town and Country (Use Classes) Order 1987 (as at the date that Order first came into force);


Plan		the plan annexed to this deed;

Planning Acts		the Town and Country Planning Act 1990 the Planning (Listed Building and Conservation Areas) Act 1990 the Planning (Hazardous Substances) Act 1990 and the Planning and Compensation Act 1991;

Premises		Units 4 and 5 Eastbrook Road Gloucester as shown for identification only edged red on the Plan and including:

		1. all Landlords fixtures from time to time at those premises but if those fixtures are Service Media, then only if they fail within paragraph 2 below;

		2. Service Media within and from time to time exclusively serving those premises and which are owned by the Landlord; but excluding;

		3. any Service Media within such premises but which do not serve such premises exclusively, or which are not owned by the Landlord;

Quarter Days		25 March, 24 June, 29 September and 25 December in each year;

Rent		TWO HUNDRED AND THIRTY ONE THOUSAND ONE HUNDRED AND FIFTY SIX POUNDS (£231,156) per annum as reviewed under this Lease;

Rent Commencement Date		1 March 2007;



Review Date		1 March 2012;

Service Media		conduits and equipment used for the reception, generation, passage and/or storage of Utilities; Supplemental Document any deed, agreement, licence, memorandum or other document which is supplemental to this deed;

Surveyor		an independent chartered surveyor appointed jointly by the Landlord and the Tenant or, if they do not agree on the identity of such surveyor, by the President of the Royal Institution of Chartered Surveyors (or any other officer authorised to carry out that function) on the application of either the Landlord or the Tenant in accordance with this Lease;

Tenant		the second named party to this deed and its successors in title;

Term		10 years commencing on 1 March 2007

Utilities		electricity, gas, water, foul water and surface drainage, heating, ventilation and air conditioning, smoke and fumes, signals, telecommunications, satellite and data communications and all other utilities;

VAT		value added tax payable by virtue of the Value Added Tax Act 1994;


Working Day		any day (other than Saturday) on which banks are usually open for business in England and Wales.

2.	INTERPRETATION

2.1	In this Lease:

2.1.1

the table of contents and clause headings are for reference only and do not affect its construction;

2.1.2

the words include and including are deemed to be followed by the words without limitation;

2.1.3

general words introduced by the word other do not have a restrictive meaning by reason of being preceded by words indicating a particular class of acts, things or matters; and

2.1.4

obligations owed by or to more than one person are owed by or to them jointly and severally.

2.2	In this Lease, unless otherwise specified:

2.2.1

a reference to legislation is a reference to all legislation having effect in the United Kingdom at any time during the Term, including directives, decisions and regulations of the Council or Commission of the European Union, Acts of Parliament, orders, regulations, consents, licenses, notices and bye laws made or granted under any Act of Parliament or directive, decision or regulation of the Council or Commission of the European Union or made or granted by a local authority or by a court of competent jurisdiction and any approved Codes of Practice issued by a statutory body;

2.2.2

a reference to particular legislation is a reference to that legislation as amended, consolidated or re-enacted from time to time;

2.2.3

a reference to a person includes an individual, corporation, company, firm, partnership or government body or agency whether or not legally capable of holding land; and

2.2.4

a reference to a clause is a reference to a clause or sub-clause of this Lease.

2.3	In this Lease:

2.3.1

an obligation of the Tenant not to do something includes an obligation not knowingly to cause or allow that thing to be done;

2.3.2

a reference to any act or to any act or omission of the Tenant includes any act or any act or omission of any other person at the Premises with the Tenants express or implied authority;

2.3.3

the rights of the Landlord under any clause are without prejudice to the rights of the Landlord under any other clause or Supplemental Document or other instrument entered into in connection with this Lease;

2.3.4

the obligations of or restrictions on the Tenant or a Guarantor under any clause, Supplemental Document or other instrument entered into in connection with this Lease, are without prejudice to the obligations of or restrictions on the Tenant or Guarantor, or to the rights of the Landlord under any other clause Supplemental Document or other instrument entered into in connection with this Lease;

2.3.5

a reference to the consent or approval of the Landlord means the prior consent in writing of the Landlord, signed by or on behalf of the Landlord;

2.3.6

where a matter in this Lease is subject to the consent or approval of the Landlord, it is also, where required subject to the written consent of any superior landlord or mortgagee of the Landlord;

2.3.7

references to any adjoining property of the Landlord include any property adjoining or near the Premises owned, leased or occupied by the Landlord from time to time;

2.3.8

references to the end of the Term are to the end of the Term whether before or at the end of the term of years granted by this Lease;

2.3.9

references to a fair proportion of any sum are to the whole or a proportion of that sum which is fair and reasonable in the circumstances as determined by the Landlord’s Surveyor, whose decision shall be final and binding;

2.3.10

the perpetuity period is eighty years from the date of this deed;

2.3.11

where a sum is expressed to be payable on demand it will become payable, unless otherwise specified, 5 Working Days after the demand has been made; and

2.3.12

unless otherwise specified, references to the Premises include any part of the Premises.

3.	GRANT AND TERM

At the request of the Guarantor and in consideration of the sum of ONE HUNDRED AND FIFTEEN THOUSAND FIVE HUNDRED AND SEVENTY EIGHT POUNDS (£115,578) now paid by the Landlord to the Tenant (receipt of which sum the Tenant hereby acknowledges) the Landlord leases the Premises to the Tenant for the Term, the Tenant paying the following sums

which are reserved as rent; the Rent, the Insurance Rent and any VAT payable on those sums and any interest due under this Lease.

4.	RIGHTS

Section 62 of the Law of Properly Act 1925 will not apply to this Lease.

5.	RIGHTS RESERVED AND REGRANTED

5.1	The following rights are reserved from this Lease and regranted to the Landlord by the Tenant:

5.1.1

the right to build, or carry out works, on any adjoining or nearby property, even if such building or works lessen the access of light or air to the Premises or cause any nuisance. damage or inconvenience to the Tenant or other occupier of the Premises, provided that it does not materially affect the Tenant’s or other permitted occupier’s use of the Premises for the Permitted Use;

5.1.2

the right to:

(a)

inspect, connect into, repair and replace any Service Media on, under or over the Premises, but which do not form part of the Premises;

(b)

construct Service Media within the perpetuity period on over or under the Premises;

(c)

connect into and use any Service Media which within that time form part of the Premises; and

(d)

cut into any walls or other parts of the Premises for these purposes;

5.1.3

the right to build into any of the boundary walls, foundations or roofs of the Premises;

5.1.4

the right to attach scaffolding to or place it on the Premises and the right to operate cranes oversailing the Premises in the exercise of any of the rights excepted and reserved by this clause 5.1;

5.1.5

the right of support and protection from the Premises for any buildings standing on adjoining property at the date of this deed or constructed there during the perpetuity period;

5.1.6

the right to attach a sign to the exterior of the Premises advertising that the Landlord’s interest (or any superior interest) is for sale provided that such sign does not materially restrict the access of light or air to the Premises; and

5.1.7

the right to enter the Premises:

(a)

to exercise any other right reserved and regranted to the Landlord by this Lease;

(b)

to view the state and condition of the Premises to measure and undertake surveys of the Premises and to prepare schedules of condition or of dilapidations at the Premises;

(c)

to determine whether the Tenant is complying with its obligations in this Lease and to remedy any breach of those obligations;

(d)

to show prospective purchasers of any interest in the Landlords reversion or, in the last six months of the Term, to show prospective tenants over the Premises;

(e)

in connection with any requirements of the insurers of the Premises;

(f)

to comply with a superior lease or mortgage; and

(g)

for any other reasonable purpose connected with this Lease or with the Landlords interest in the Premises or any adjoining property of the Landlord.

5.2	The rights reserved and regranted by this Lease are reserved and regranted to the Landlord and any superior landlord or mortgagee and may be exercised by anyone authorised by the Landlord or a superior landlord.

5.3	The person exercising any right of entry reserved and regranted by this Lease shall make good any damage caused to the Premises (subject to clause 5.4) but shall not be under any obligation to make any other compensation to the Tenant or other occupier of the Premises.

5.4

The Tenant shall allow any person who has a right to enter the Premises to enter the Premises at all reasonable times, during usual business hours provided that reasonable notice has been given, in writing. In cases of emergency no notice need be given and the Landlord or another person on behalf of the Landlord may break into the Premises if entry cannot be effected in any other way.

6.	THIRD PARTY RIGHTS OVER THE PREMISES

6.1	There are excepted from this deed and this Lease is granted subject to:

6.1.1

all existing rights which belong to other property, or are enjoyed by other property over the Premises or any land or Service Media over which rights are granted by the Landlord to the Tenant by this Lease; and

6.1.2

The matters contained or refined to in the property and charges registers of title numbers GR73474 and GR34794 as at the date of this deed.

6.2	The Tenant shall comply with the matters contained or referred to in the registers referred to in clause 6.1 so far as they relate to the Premises and the rights granted by this Lease.

6.3	The Tenant shall:

6.3.1

not permit any third party to acquire any right over the Premises or to encroach upon the Premises;

6.3.2

give the Landlord immediate written notice of any attempt to do;

6.3.3

take any steps which the Landlord may reasonably require to prevent the acquisition of any right over or encroachment on the Premises; and

6.3.4

preserve for the benefit of the Premises and the Landlords interest in them all existing rights which belong to the Premises and are enjoyed over adjoining or neighbouring property.

6.4	The Tenant shall not block or obstruct any window or ventilator at the Premises.

6.5	The Tenant shall not grant any right or licence to a third party relating to the airspace at the Premises.

7.	PAYMENT OF RENTS

7.1	Tenant’s obligation to pay rent

The Tenant agrees with the Landlord to pay:

7.1.1

the Rent and any VAT payable on the Rent in four equal installments in advance on the Quarter Days;

7.1.2

the Insurance Rent on demand; and

7.1.3

interest in accordance with clause 9.6.

7.2

Rent Commencement Date

The first payment of the Rent and any VAT due on it is to be made on 1 March 2007, being the Rent for the period from and including the Rent Commencement Date until the next Quarter Day.

7.3

Payment of rents

If required by the Landlord, the Tenant shall pay the Rent and any VAT on it, by bankers standing order, direct debit or credit transfer to a bank account in the United Kingdom which the Landlord has notified in writing to the Tenant.

7.4

No right of set-off

The Tenant waives any legal or equitable right of set-off deduction abatement or counterclaim which it may have in respect of the Rent or any other sums due under this Lease and agrees to make all payments of Rent and other such sums in full on their due dates.

8.	RENT REVIEW

In this Clause 8:

8.1

“the Open Market Rent” means the best rent at which the Premises might be expected to be let at the Review Date after the expiry of a rent free period of such length as would be negotiated in the open market between a willing landlord and a willing tenant upon a letting of the Premises as a whole by a willing landlord to a willing tenant in the open market with vacant possession without a fine or premium for a term commencing on and from the relevant Review Date subject to provisions to the same effect (other than the amount of the rent) as those contained in this Lease on the following assumptions on that date (whether or not facts):-

8.1.1

that the Premises are fit for and fitted out and equipped for immediate occupation and use and are used for such purposes (being the Permitted Use or by any licence given hereunder or by law) as are likely to produce the highest yearly rent

8.1.2

that the Tenant has complied with all its covenants and obligations under this Lease

8.1.3

that if the Premises shall have been damaged or destroyed the same had before the Review Date been fully repaired and reinstated

8.1.4

that no works have been carried out to the Premises by the Tenant or its predecessors in title which would diminish the rental value of the Premises

but disregarding (if applicable)

8.1.5

the fact (if a fact) that the Tenant or its sub-tenants (if any) and

assignees may not be able to recover and obtain a full credit for the whole of any VAT chargeable by the Landlord at any time during the Term

8.1.6

any goodwill attributable to the Premises by reason of any trade or business carried on therein by the Tenant its predecessors in title or any undertenant

8.1.7

any effect on rent of any improvements to the Premises carried out by the Tenant its undertenants or their respective predecessors in title during the term with the consent of the Landlord otherwise than in pursuance of an obligation to the Landlord or its predecessors in title by the Tenant its undertenants or their respective predecessors in title during the Term

8.1.8

any effect on rent of an obligation on the part of the Tenant to reinstate alterations to the Premises

8.1.9

any depreciatory effect on the rent of sub-clause 1.6 of this clause; and

8.1.10

any effect on rent of the fact that the Tenant its predecessors in title or any undertenant may have been in occupation of the Premises

8.2.	The Reviewed Rent payable during the period commencing on the Review Date and ending on the termination of this Lease shall be the greater of:-

8.2.1

the Rent payable under this Lease immediately prior to the Review Date upon which the period commences or if payment of Rent has been suspended the Rent which would have been payable had there been no suspension; and

8.2.2

the Open Market Rent at the Review Date;

8.3.

If the Landlord and the Tenant have not agreed on the Open Market Rent by the Review Date then the determination of the Open Market Rent may at any time after that Review Date be referred by either party to an independent chartered surveyor of not less than ten years qualification having practical experience and knowledge of commercial rents in the area in which the Premises is situated (“the valuer”) who shall act as an arbitrator in accordance with the Arbitration Act 1996 the valuer to be appointed (in the event of the Landlord and the Tenant failing to agree on the appointee) on the application of either party by or on behalf of the President (or failing him his deputy) for the time being of the Royal Institution of Chartered Surveyors

8.4.	The fees and expenses of the valuer including the cost of his nomination shall be borne by the Landlord and/or the Tenant as determined by the valuer. The Landlord and Tenant shall otherwise bear their own costs

8.5.	The valuer shall afford the Landlord and the Tenant an opportunity to make representations to him and to comment on representations received by the valuer from the other party

8.6.	If the valuer shall die delay or become unwilling unfit to incapable of acting or if for any other reason the President for the time being of the Royal Institution of chartered surveyors (or failing him his deputy) shall in his absolute discretion

think fit he may on the application of either party by writing discharge the valuer and appoint another in his place on the same terms as this Schedule

8.7.

If the Reviewed Rent payable on and from the Review Date has not been agreed by that Review Date Rent shall continue to be payable at the rate previously payable and within three weeks of the Reviewed Rent being ascertained the Tenant shall pay to the Landlord any shortfall between the Rent and the Reviewed Rent payable up to and on the preceding Rent Payment Date together with interest at the base rate from time to time of Barclays Bank plc on the shortfall between the amount that would have been paid if the Reviewed Rent had been ascertained by the Review Date and the payments made on account for the period beginning on the day upon which each installment was due and ending on the day on which payment of the shortfall is made. For the purposes of this clause the Reviewed Rent shall be deemed to have been ascertained on the date when it is agreed between the parties or (as the case may be) the date of notification of the termination by the valuer

8.8.

If either the Landlord or the Tenant shall fail to pay the appropriate amount of the fees and expenses of the valuer as determined by him within fourteen days of the same being demanded by the valuer the other shall be entitled to pay the same and the amount so paid shall be repaid by the party chargeable on demand

8.9.

If at the Review Date there shall be in force any enactment which shall restrict curtail or modify the effect or operation of the provisions of this Schedule then the Landlord shall in addition to the reviews herein provided for on each occasion such enactment or any part of it is removed relaxed or modified be entitled on

giving not less than one month’s notice in writing expiring after such removal relaxation or modification to introduce a special review date which shall be the date of expiration of such notice and the rent from such special review date if any shall be determined in accordance with the provisions of this Clause 8 mutatis mutandis

8.10.

Immediately after agreement or determination of the Reviewed Rent a memorandum as to its amount shall forthwith be signed by the Landlord and the Tenant and the parties will bear their own costs of doing this

9.	OTHER FINANCIAL MATTERS

9.1

Utilities

The Tenant shall pay all charges, including connection and hire charges relating to the supply of Utilities to the Premises and will comply with all present or future requirements and recommendations of the suppliers of Utilities to the Premises.

9.2	Common facilities

The Tenant shall pay on demand a fair proportion of any costs incurred or payable by the Landlord in respect of any land or Service Media not forming part of, but used in connection with, the Premises.

9.3	Rates and taxes

9.3.1

The Tenant shall pay and indemnify the Landlord against all present and future rates, duties and assessments of an annual or recurring nature charged on or payable in respect of the Premises except any income or corporation tax imposed on the Landlord (or any superior landlord) in respect of:

(a)

the grant of this deed; or

(b)

the receipt of the rents reserved by this Lease; or

(c)

any dealing or disposition by the Landlord with its interest in the Premises;

9.3.2

The Tenant shall not make any claim for relief from any of the charges refined to above which could result in the Landlord not being entitled (during or after the end of the Term) to that relief in respect of the Premises.

9.4	Landlord’s costs

The Tenant shall pay to the Landlord on demand , and on an indemnity basis, the fees, costs and expenses properly and reasonably charged incurred or payable by the Landlord, and its advisors or bailiffs in connection with:

9.4.1

any steps taken in contemplation of or in relation to any proceedings under section 146 or 147 of the Law of Property Act 1925 or the Leasehold Property (Repairs) Act 1938 including the preparation and service of all notices, and even if forfeiture is avoided (unless it is avoided by relief granted by the court);

9.4.2

preparing and serving schedules of dilapidations at any time during the Term (or in the three months after the Term in respect of dilapidations arising during the Term) and supervising any works undertaken to remedy such dilapidations;

9.4.3

recovering (or attempting to recover) any arrears of Rent or other sums due to the Landlord under this Lease, including any costs associated with the Landlord’s remedies of distress or execution;

9.4.4

any investigations or reports carried out to determine the nature and extent of any breach by the Tenant of its obligations in this Lease;

9.4.5

any steps taken to procure that a breach by the Tenant of its obligations under this Lease is remedied;

9.4.6

any application for a consent of the Landlord (including the preparation of any document) which is needed by virtue of this Lease, (whether or not such consent is granted); and

9.4.7

any consents needed for grant of this deed.

9.5

VAT

9.5.1

Where the Tenant is to pay the Landlord for any supply made to the Tenant by the Landlord, the Tenant shall also pay any VAT which may be payable in connection with that supply.

9.5.2

Where the Tenant is to pay to the Landlord the costs of any supplies made to the Landlord, the Tenant shall also pay the Landlord any VAT payable by the Landlord in connection with that supply except to the extent that the Landlord is able to obtain a credit for the VAT from HM Revenue and Customs.

9.6

Interest

9.6.1

If the Rent is not paid to the Landlord on the due date or if any other sums payable under this Lease to the Landlord are not paid

within 5 Working Days of the due date for payment the Tenant shall pay interest to the Landlord at the Interest Rate for the period from and including the due date until payment (both before and after any judgment).

9.6.2

If the Landlord refuses to accept any Rent or other sums due under this Lease, when the Tenant is or may be in breach of any of its obligations in this Lease so as not to prejudice the Landlord’s rights to reenter the Premises and forfeit this Lease. the Tenant shall pay Interest on such sum to the Landlord at the Interest Rate for the period from and Including the date such sum became due until the date the payment is accepted by the Landlord.

9.6.3

Interest under this Lease will accrue on a daily basis compounded with quarterly rests on the Quarter Days and will be payable immediately on demand

9.7	Exclusion of statutory compensation

Any statutory right of the Tenant, or any undertenant to claim compensation from the Landlord or any superior landlord on leaving the Premises is excluded to the extent that the law allows.

10.

INSURANCE

10.1	Landlord’s obligations relating to insurance

10.1.1

The Landlord shall insure the Premises, against the Insured Risks in the amounts referred to in the definition of Insurance Rent contained in Clause 1.

10.1.2

The insurance taken out by the Landlord shall be through an agency chosen by the Landlord and subject to any exclusions, excesses and conditions as may be usual in the insurance market at the time or required by the insurers, or reasonably required by the Landlord.

10.1.3

The Landlord shall, at the request of the Tenant (but not more than once in any insurance period), produce details of the terms of the current insurance policy and evidence of the payment of the current premium.

10.1.4

Tenants Interest

The Landlord shall:

(a)

procure that the interest of the Tenant is noted or endorsed on the Policy.

(b)

notify the Tenant of any Material change in the risks covered by the policy from time to time.

10.2	Reinstatement

10.2.1

If the Premises are damaged or destroyed by an Insured Risk, then:

(a)

unless payment of any insurance monies is refused because of any act or omission of the Tenant and the Tenant has failed to comply with clause 10.3.8;

(b)

subject to the Landlord being able to obtain any necessary consents; and

(c)

subject to the necessary labour and materials being and remaining available,

the Landlord shall use the insurance monies received by the Landlord, except monies received for loss of rent, in repairing and reinstating the Premises or in building a comparable building as soon as reasonably possible. A comparable building is a building of premises generally similar to the Premises in design function size and location but may differ in these aspects from the Premises having regard to the principles of good estate management and building design.

10.2.2

The Landlord shall use reasonable endeavours to obtain the necessary labour materials and consents to repair or reinstate the Premises, but will not be obliged to appeal against any refusal of a consent.

10.3	Tenant’s obligations relating to insurance

The Tenant shall:

10.3.1

pay the Insurance Rent in accordance with this Lease;

10.3.2

pay on demand any increase in the insurance premium for any adjoining property of the Landlord which is attributable to the use of the Premises, or anything done or omitted to be done on the Premises by the Tenant or any other occupier of the Premises;

10.3.3

comply with the lawful requirements of the insurers relating to the Premises;

10.3.4

not do or omit to do anything which may make the insurance of the Premises or of any adjoining property of the Landlord, taken out by the Landlord or any superior landlord, void or voidable, or which would result in an increase in the premiums for such insurance;

10.3.5

give the Landlord immediate written notice of any damage to or destruction of the Premises by an Insured Risk;

10.3.6

pay the Landlord on demand the amount of any excess required by the insurers in connection with that damage or destruction provided that such excess shall not exceed £1,000 in respect of any one claim;

10.3.7

pay the Landlord on demand an amount equal to any amount which the insurers refuse to pay, following damage or destruction by an Insured Risk, because of any act or omission of the Tenant;

10.3.8

if requested by the Landlord, remove its fixtures and effects from the Premises to allow the Landlord to repair or reinstate the Premises; and

10.3.9

not take out any insurance of the Premises against the Insured Risks in its own name, and if the Tenant has the benefit of any such insurance the Tenant shall hold all money receivable under that insurance upon trust for the Landlord.

10.4

Plate glass insurance and replacement

10.4.1

The Tenant shall insure all plate glass at the premises against breakage and damage in the joint names of the Landlord and the Tenant for its full reinstatement cost and all incidental expenses with underwriters or an insurance company approved by the Landlord.

10.4.2

At the Landlord’s request the Tenant shall produce details of the current insurance of plate glass and evidence of payment of the last premium.

10.4.3

In the event of any plate glass at the Premises being broken or damaged, the Tenant shall replace it.

10.5

Suspension of rent

10.5.1

If the whole of the Premises or any part thereof are damaged or destroyed by an Insured Risk so as to make the Premises or any part thereof, unfit for occupation or use, the Rent (or a due proportion of it according to the nature and extent of the damage) will be suspended from the date of damage or destruction for a period of three years, or, if sooner until the Premises, or such part have been made fit for occupation and use.

10.5.2

The Rent will not be suspended to the extent that any loss of rent insurance has been made ineffective, or payment of it has been refused by the insurers because of any act or omission by the Tenant.

10.5.3

The Rent will not be suspended unless and until any arrears of Rent or other sums due under this Lease have been paid by the Tenant in full.

10.5.4

Any dispute relating to this clause 10.5 will be referred to arbitration.

10.6

Insurance monies

All insurance monies payable will belong to the Landlord.

11.

STATE AND CONDITION OF THE PREMISES

11.1

Repair

11.1.1

subject to the provisions of clause 15.2 the Tenant shall repair the Premises (including for the avoidance of doubt the new Roof Cover) and keep them in good and substantial repair and condition.

11.1.2

The Tenant shall keep all plant and machinery at and forming part of the Premises in good condition and working order, and replace any items of plant or machinery which become beyond repair with new ones of a type and quality reasonably satisfactory to the Landlord. Provided That such repairing obligations shall be limited to the extent evidenced by the Schedule of Condition agreed between the parties and annexed to this Lease.

11.1.3

The Tenant shall carry out all works and treatments to the Premises as are necessary to ensure the health and safely of people working at or visiting the Premises.

11.1.4

The Tenant shall keep any outside parts of the Premises clean and tidy.

11.1.5

The Tenant shall regularly clean the inside and outside of the windows at the Premises.

11.2

Redecoration

11.2.1

Subject to the provisions of clause 15.2 the Tenant shall redecorate the inside of the Premises in the fifth year and the last six months of the term and on the last occasion in colours and materials approved by the Landlord.

11.2.2

The Tenant shall redecorate the exterior of the Premises in colours and materials approved by the Landlord every three years and in the last six months of the Term.

11.2.3

All redecoration is to be carried out to a high standard and in accordance with good modern practice and to the reasonable satisfaction of the Landlord.

Provided That such obligation shall be limited to the extent endorsed by the said Schedule of Condition.

11.3

Alterations

11.3.1

The Tenant shall not:

(a)

construct any new building or structure or install any additional Service Media on the Premises;

(b)

make any structural alterations or additions to the Premises; or

(c)

make any all alterations or additions to the outside parts or exterior of the Premises, including any alterations to their appearance;

11.3.2

The Tenant shall not without the consent of the Landlord, such consent not to be unreasonably withheld:

(a)

make any alterations to the Service Media which form part of the Premises; or

(b)

make any internal, non-structural alterations or additions to the Premises.

11.3.3

On any application for consent to make alterations or additions the Tenant shall give the Landlord 4 copies of a specification and detailed drawings identifying the proposed works, and any further copies required by a superior landlord.

11.3.4

Unless otherwise required by the Landlord, the Tenant shall at the end of the Term, remove any alterations or additions made to the Premises and remove any Plant and Machinery installed at the Premises by the Tenant or other occupier of the Premises (and make good any damage caused by that removal to the reasonable satisfaction of the Landlord) and shall reinstate the Premises to their original layout and condition.

11.4

Signs and reletting notices

11.4.1

The Tenant shall not display any signs or notices at the Premises which can be seen from outside the Premises except one external sign giving the name and business of the Tenant (or other authorised occupier) the size, style and position of which have been approved by the Landlord.

11.4.2

At the end of the Term the Tenant shall remove any signs at the Premises and will make good any damage caused by that removal to the reasonable satisfaction of the Landlord.

11.4.3

The Tenant shall permit the Landlord to place a sign on the Premises:

(a)

at any time advertising the sale of the Landlords interest (or any superior interest) in the Premises; and

(b)

during the last six months of the Term for the reletting of the Premises.

as long as such signs do not unreasonably restrict the access of light or air to the Premises.

12	USE OF THE PREMISES

12.1

The Permitted Use

The Tenant shall not use the Premises except for the Permitted Use or, with the consent of the Landlord, such consent not to be unreasonably withheld for any other use within Use Class B8 of the Town and Country Planning (Use Classes) Order 1987 (as at the date that Order first came into force).

12.2

Trading at the Premises

The Tenant shall keep the Premises open for business and actively carry on trade from substantially the whole of the Premises during the usual business hours of the locality for the type of industry carried out by the Tenant except:

12.2.1

following damage or destruction to the Premises and during the carrying out of any reinstatement works by the Landlord;

12.2.2

while the Tenant is carrying out repairs, fitting out works or other alterations permitted under this Lease;

12.2.3

for a reasonable period before a permitted assignment of this Lease or permitted underletting of the Premises or before the end of the Term; or

12.2.4

when to do so would be unlawful.

The Landlord agrees that in the event of any breach of this clause 12.2. the Tenant shall be liable only in damages and the Landlord waives any right it may have to any other remedy.

12.3

Obstructions

The Tenant shall not display any goods for sale outside the Premises or obstruct any pavement, footpath or roadway adjoining or serving the Premises.

12.4

Restrictions on use

The Tenant shall not:

12.4.1

leave the Premises unoccupied for a period of more than one month without first notifying the Landlord in writing, nor for more than three months without the consent of the Landlord but the Tenant will not by virtue of this clause be required to trade from the Premises;

12.4.2

do anything on the Premises which is illegal or immoral;

12.4.3

do anything on the Premises which would cause a nuisance or inconvenience or any damage or disturbance to the Landlord or any owner or occupier of any other property adjoining or near the Premises;

12.4.4

carry out any acts at the Premises which arc noisy, noxious, dangerous or offensive;

12.4.5

store dangerous or inflammable materials at the Premises unless the Tenant has given the Landlord reasonable prior written notice of such materials and the quantities of them to be kept by the Tenant at the Premises and then only to store such materials:

(a)

in quantities not materially exceeding those notified to the Landlord; and

(b)

safely and in accordance with the requirements and recommendations of the insurers of the Premises and manufacturers of any such materials;

12.4.6

allow waste to accumulate at the Premises;

12.4.7

allow any material which is deleterious, polluting or dangerous (to persons or property) to enter any Service Media or any adjoining property; nor

12.4.8

overload or obstruct any Service Media which serve the Premises.

12.5

Use of machinery

The Tenant shall not use any machinery on the Premises in a manner which causes or may cause:

12.5.1

any damage to the fabric of the Premises or any strain on the structure of the Premises beyond that which it is designed to bear;

12.5.2

any undue noise, vibration or other inconvenience to the Landlord or the owners or occupiers of any properly adjoining or near to the Premises.

12.6

Fire and security precautions

The Tenant shall comply with the requirements and recommendations of the fire authority and with any reasonable requirements of the Landlord relating to fire prevention and the provision of fire fighting equipment at the Premises and the reasonable requirements of the Landlord in relation to the security of the Premises while they are vacant.

12.7

Exclusion of warranty

The Landlord does not warrant or represent that the Premises may be used for the Permitted Use or for any other purpose.

13.

DEALINGS

13.1

General restrictions

The Tenant shall not part with nor agree to part with possession of the whole or part of the Premises or this Lease, nor allow any other person to occupy the whole or any part of the Premises, except as permitted by the remainder of this clause 13.

13.2

Assignments

13.2.1

In this clause the following definitions apply:

Assignee the proposed assignee;

Assignment the proposed assignment.

13.2.2

The Tenant shall not assign any part (as opposed to the whole) of this Lease.

13.2.3

The Tenant shall not assign the whole of this Lease without the consent of the Landlord such consent not to be unreasonably withheld or delayed.

13.2.4

The Landlord and the Tenant agree that for the purposes of section 19(1A) of The Landlord and Tenant Act 1927, the Landlord may refuse its consent to an assignment in any of the following circumstances:

(a)

if the Tenant has not paid all Rent and other sums due under this Lease;

(b)

if in the reasonable opinion of the Landlord the Assignee is not of sufficient financial standing to pay the Rent and other sums payable under this Lease and to comply with the tenants obligations in this Lease (except where the Landlord has determined that acceptable security for such payments and such obligations is provided);

(c)

if, where the obligations of the Tenant have been guaranteed by a member of the same Group as the Tenant, the Assignee is another member of that Group; and

(d)

if the Assignee (being a body corporate) is not incorporated within the UK unless its proposed guarantor (and if more than one then all of them) (being a body corporate) is (or are) incorporated within the UK.

13.2.5

The Landlord and the Tenant agree that, for the purposes of section 19(1A) of the Landlord and Tenant Act 1927, the Landlord may give its consent to an assignment subject to all or any of the following conditions:

(a)

that the Tenant enters into an authorised guarantee agreement no later than the date of the Assignment which agreement is to be by deed, is to provide for a guarantee of all the obligations of the Assignee under this Lease from the date of the Assignment until the Assignee is released by virtue of the Landlord and Tenant (Covenants) Act 1995. and which provides for all the matters permitted by section 16(5) of that Act and which is otherwise in accordance with section 16 of that Act and in a form reasonably required by the Landlord;

(b)

that the Assignee shall procure a guarantor or guarantors, which if a body corporate is to be incorporated within the UK acceptable to the Landlord, to enter into a full guarantee and indemnity of the Assignee’s obligations under this Lease, such guarantee and indemnity to be by deed and to be in the form of clause 20 (Guarantee and indemnity) with such additions and amendments as are necessary to reflect the fact that the guarantee and indemnity is being entered into by a separate instrument and after the date of this deed or as are reasonably required by the Landlord;

(c)

that, if at any time before the Assignment the circumstances set out in clause 13.2.4 apply the Landlord may revoke its consent to the Assignment by written notice to the Tenant;

(d)

that the Assignment is completed within such time as may reasonably be specified by the Landlord .

13.2.6

The Landlord and the Tenant agree that where any provision of clause 13.2.4 or 13.2.5 is framed by reference to any matter falling to be determined by the Landlord, the Tenant may at any time after the Landlord has determined the matter, refer the determination to a Surveyor for review, and

(a)

the Surveyor will act as an expert and determine the matter as at the date of tire Landlord’s determination;

(b)

the Landlord and the Tenant shall jointly instruct the Surveyor to make the determination within a reasonable time and to make a direction as to the payment of the Surveyor’s costs (including the costs of appointment);

(c)

the Surveyor shall be instructed to give the Landlord and the Tenant reasonable opportunity to make written representations and counter-representations as to any matter referred for review, but will not be fettered by any such representation or counter-representation made;

(d)

any representation or counter-representation supplied to the Surveyor shall be copied to the other party at the same time;

(e)

the decision of the Surveyor will be final and binding;

(f)

the costs of the Surveyor (including the costs of appointment) shall be paid as the Surveyor directs;

(g)

if the Tenant has not paid any costs required to be paid under this clause within 10 Working Days of having been required to pay them, the Landlord may pay such costs which will be deemed due as additional rent and recoverable as rent in arrears; and

(h)

the Landlord will not be liable to the Tenant for any failure of the Surveyor to determine the matter in accordance with this clause.

13.2.7

Clauses 13.2.4 and 13.2.5 do not limit the right of the Landlord to refuse consent to an assignment on any other reasonable ground or to impose any other reasonable condition to its consent.

13.3

Underlettings

13.3.1

The Tenant shall not underlet or agree to underlet any part of the Premises (as distinct from the whole).

13.3.2

The Tenant shall not underlet the whole of the Premises, except in accordance with the remainder of this clause 13.3 and with clause 13.4

(Terms to be contained in any underlease) and then only with the consent of the Landlord, such consent not to unreasonably witheld or delayed.

13.3.3

The Tenant shall not underlet the Premises without first obtaining from the undertenant a covenant by the undertenant with the Landlord to comply with the terms of this Lease on the part of the tenant, other than as to the payment of any Rent or other sums reserved as rent by this Lease, and to comply with the obligations on the undertenant in the underlease throughout the term of the underlease or until the undertenant is released by virtue of the Landlord and Tenant (Covenants) Act 1995 if sooner.

13.3.4

Any underlease shall be granted at a rent which is not less than the then Open Market Rent and without a fine or premium and with the underlease rent payable not more than one quarter in advance.

13.3.5

The Tenant shall not grant an underlease until the Landlord has given its approval of an agreement excluding sections 24 to 28 (inclusive) of the Landlord and Tenant Act 1954 from the tenancy to be created by the underlease. The Tenant shall supply the Landlord with a copy of the relevant notices under the Landlord and Tenant Act 1954 part II (Notices) Regulations 2004 certified by solicitors as a true copy of the original for this purpose.

13.4

Terms to be contained in any underlease

Any underlease shall contain the following terms:

13.4.1

an agreement excluding sections 24 to 28 (inclusive) of the Landlord and Tenant Act 1954 from the tenancy created by the underlease;

13.4.2

(where the term of the underlease extends beyond a Review Date) a provision for the review of the rent to the best annual rent at which the Premises underlet could be expected in the open market on the same dates as the review of the Rent in this Lease;

13.4.3

a provision for re-entry in the same terms as clause 17 (Forfeiture);

13.4.4

an obligation on the undertenant not to deal with or dispose of its interest in the underlease, or part with possession of the whole or part of that interest or permit any other person to occupy the Premises except by way of an assignment or charge of the whole of its interest in the Premises, which may only be made with the Landlords consent such consent not to be unreasonably withheld or delayed;

13.4.5

agreements between the Tenant and the undertenant in the same terms as clause 13.2.4 13.2.5 and ,13.2.6;

13.4.6

an agreement between the Tenant and the undertenant expressed to be for the purposes of section 19(1A) of the Landlord and Tenant Act 1927 that the Tenant may give its consent to an assignment of the underlease subject to a condition that the proposed assignee of the underlease enters into a covenant with the Landlord to comply

with the terms of this Lease on the part of the tenant, other than as to the payment of any Rent or other sums reserved as rent by this Lease, and to comply with the obligations on the undertenant in the underlease from the date the assignment of the underlease is completed throughout the term of the underlease;

13.4.7

an acknowledgement in the terms of clause 13.2.7;

13.4.8

a provision that any document to be entered into by an assignee of the undertenant in fulfillment of a condition of consent to the assignment shall be in a form reasonably required by the Landlord; and

and shall otherwise be consistent with the terms of this Lease

13.5

Rent review in an underlease

13.5.1

The Tenant shall not agree the level of any reviewed rent with an undertenant without the consent of the Landlord, such consent not to be unreasonably withheld.

13.5.2

If the rent review in an underlease is referred to a third party for determination, the Tenant shall:

(a)

ensure that the decision as to whether that third party is to act as arbitrator or expert is made with the Landlords consent;

(b)

ensure that the Landlord is given a reasonable opportunity to supply evidence to the Tenant to enable the Tenant to make representations and counter-representations and the

Tenant shall make such representations and counter-representations on behalf of the Landlord and that any representations and counter-representations made by the Tenant or undertenant are immediately copied to the Landlord; and

(c)

keep the Landlord informed as to the progress of that third party determination.

13.6

Futher provisions relating to underleases

13.6.1

The Tenant shall enforce the obligations of the undertenant in any underlease.

13.6.2

Where the Tenant has the right to refuse consent to an assignment of an undertenant’s interest in the Premises it shall exercise that right and where the Tenant has the right to grant such consent subject to conditions, the Tenant shall impose those conditions unless the Landlord consents to a waiver of that right in respect of one or more of those conditions, such consent, except consent to waive the right to require an authorised guarantee agreement in accordance with the underlease not to be unreasonably withheld.

13.6.3

The Tenant shall not vary the terms of nor without the consent of the Landlord, such consent not to be unreasonably withheld, accept or agree to accept a surrender of, or forfeit any underlease.

13.7

Charging

13.7.1

The Tenant shall not charge or agree to charge any part of the Premises (as distinct from the whole).

13.7.2

The Tenant shall not charge or agree to charge the whole of the Premises without the consent of the Landlord, such consent not to be unreasonably withheld or delayed.

13.8

Declarations of trust

The Tenant shall not execute any declaration of trust of the whole or any part of its interest in the Premises or this Lease.

13.9

Group sharing of occupation

If the Tenant is a company, it may share occupation of the Premises with one other company which are in the same Group as the Tenant on the following conditions:

13.9.1

the Tenant promptly notifies the Landlord in writing of the beginning and the end of the arrangement;

13.9.2

no relationship of landlord and tenant is created by the arrangement; and

13.9.3

the other company vacate the Premises immediately if it ceases to be a member of the same Group as the Tenant.

13.10

Registration of dealings and provision of information

13.10.1

Within one month of any dealing with, or devolution of the Premises or this Lease or of any interest created out of them or it, the Tenant shall:

(a)

notify the Landlord in writing of that dealing or devolution;

(b)

give the Landlord a copy of any document effecting or evidencing the dealing or devolution. together with a copy for any superior landlord and the copies will each be certified by solicitors as a true copy of the original; and

(c)

pay the Landlord a reasonable registration fee of not less than £50 and the registration fee of any superior landlord.

13.10.2

Registration of any dealing with or devolution of the Premises or this Lease or any interest created out of them or it, will not imply that the Landlord has considered or approved the terms of that dealing or devolution.

13.10.3

The Tenant shall give the Landlord written details of persons occupying the Premises and the basis upon which they occupy on request by the Landlord.

14.

LEGAL REQUIREMENTS

14.1

Legislation

The Tenant shall:

14.1.1

comply with all legislation affecting the Premises their use and occupation and the health and safety of persons working at or visiting the Premises, whether the legislation requires the owner, landlord tenant or occupier to comply;

14.1.2

carry out any works to the Premises which are required by legislation;

14.1.3

obtain all licences and consents which are required under any legislation to use the Premises or carry out any works or other activity at the Premises;

14.1.4

at the end of the Term pay the Landlord a fair proportion of any compensation which the Tenant has received or which is receivable by the Tenant because of any restriction placed on the use of the Premises under any legislation.

14.1.5

not knowingly do or omit to do anything at the Premises which would result in:

(a)

any other property owned or occupied by the Landlord failing to comply with any legislation; or

(b)

the Landlord incurring any cost, penalty or liability under any legislation.

14.2

Notices relating to the Premises

The Tenant shall:

14.2.1

give the Landlord a copy of any notice received by the Tenant, relating to the Premises or any occupier of them or to the Landlord’s interest in them, within 5 Working Days of having received it (or immediately if there are shorter time limits in the notice);

14.2.2

whether the notice requires compliance by the owner or occupier of the Premises, but subject to clause 14.2.3. comply with the terms of any such notice in a manner approved by the Landlord, but the Landlord’s approval of any particular manner will not imply that the Tenant has discharged its obligation to comply with the terms of the notice; and

14.2.3

at joint cost of the parties make or join the Landlord in making any objection or appeal against such notice, which the Landlord may reasonably require, unless the Tenant elects to comply with the notice.

14.3

Planning

14.3.1

The Tenant shall comply with the Planning Acts.

14.3.2

The Tenant shall pay any charge imposed under the Planning Acts in respect of the use of the Premises, or any works carried out at the Premises.

14.3.3

The Tenant shall not apply for planning permission or make any other application under the Planning Acts nor implement any planning permission affecting the Premises without the consent of the Landlord.

14.3.4

The Landlord may withhold consent to implementation if the Tenant has applied for the planning permission in breach of an obligation in this Lease, or if any time limit in the permission or the inclusion or omission of any condition in or from the permission would, or would be likely to, prejudice the Landlord’s interest in the Premises or any adjoining property of the Landlord.

14.3.5

In giving its consent to the Tenant implementing a planning permission, the Landlord may, as a condition of that consent, require the Tenant to comply with all the conditions contained in the

permission before the end of the term of years granted by this Lease, whether or not the permission imposes such time limits and, where reasonable, require the Tenant to provide security satisfactory to the Landlord for its compliance with the conditions in the permission (as modified by the above condition). The Tenant shall not implement the permission until that security is supplied.

14.4

Environmental requirements

14.4.1

In this clause the following definitions apply:



Dangerous Substances		any substance (whether in the form of a solid liquid, gas or vapour) the generation, keeping transportation, storage treatment, use or disposal of which gives rise to a risk of causing harm to humans or to any other living organism, or causing damage to the Environment and includes any controlled, special hazardous, toxic, radioactive or dangerous waste;

Environment		the environment as defined in Section 1(2) of the Environmental Protection Act 1990;

Environmental Law		any legal rule, regulation or obligation, whether or not having effect at the date of this Lease and whether or not having retrospective effect, concerning the protection of human health or the Environment or Dangerous Substances.

14.4.2

The Tenant shall ensure that all Environmental Laws relating to:

(a)

the Premises;

(b)

the storage or disposal of any Dangerous Substances at or from the Premises;

(c)

the carrying out of any operations oil the Premises; or

(d)

the use of the Premises

are complied with and shall not knowingly do anything on the Premises or cause to be present on the Premises any matter or thing which may cause loss to the Landlord by reason of any Environmental Law.

14.5

The Construction (Design and Management) Regulations 1994

14.5.1

In this clause the following definitions apply:



Regulations		the Construction (Design and Management) Regulations 1994;

File		the Health and Safety file for the Premises and works carried out to it required by the Regulations.

14.5.2

In respect of any works carried out by or on behalf of the Tenant or any undertenant or other occupier of the Premises (including any works of reinstatement to which may be carried out after the end of the Term) to which the Regulations apply, the Tenant shall:

(a)

comply in all respects with the Regulations and procure that any person involved in carrying out such works complies with the Regulations; and

(b)

act as the only client in respect of those works and where required by the Landlord serve a declaration to that effect on the Health and Safety Executive pursuant to Regulation 4 of the Regulations and give a copy of it to the Landlord.

14.5.3

The Tenant shall:

(a)

maintain and make the File available to the Landlord for inspection at all times;

(b)

on request provide copies of the whole or any part of the File to the Landlord; and

(c)

hand the File to the Landlord at the end of the Term.

14.5.4

The Tenant shall obtain all copyright licences which are needed for the Tenant to comply lawfully with this clause 14.5.

14.5.5

The copyright licences obtained by the Tenant shall:

(a)

be granted with full title guarantee;

(b)

allow the Landlord and any superior landlord and anyone deriving title through or under them to take, further copies of the File or any part of it;

(c)

be obtained without cost to any such person;

(d)

allow any such person to grant sublicences on similar terms; and

(e)

be irrevocable.

14.6

Local Authority requirements

The Tenant shall comply with all local authority requirements and recommendations relating to the loading and unloading of goods at the Premises and collection of refuse from the Premises.

14.7

Defective Premises Act 1972

14.7.1

The Tenant shall give the Landlord written notice of any defect in the Premises of which the Tenant becomes aware or ought to have been aware, which may make the Landlord liable to do, or not to do any act to comply with the duty of care imposed by the Defective Premises Act 1972,

14.7.2

The Tenant shall display any notices at the Premises needed to enable the Landlord to comply with the Defective Premises Act 1972.

14.8

No additional rights

The Landlord will not be obliged to grant any additional rights to the Tenant or waive any of the Landlord’s rights under this Lease in connection with the obligations of the Tenant in this clause 14.

15.

LANDLORD’S COVENANTS

15.1

Quiet Enjoyment

The Landlord agrees with the Tenant that, for so long as the Tenant complies with the terms of this Lease the Tenant may hold and use the Premises during the Term without any interruption (except as authorised by this Lease) by the Landlord or by any person lawfully claiming through under or in trust for the Landlord or by title paramount.

15.2

Roof

15.2.1

Subject to Clause 15.2.2 the Landlord shall indemnify the Tenant and hold the Tenant indemnified at all times against all charges claims proceedings liabilities damages losses costs and expenses incurred suffered or sustained in consequence of or in relation to any liability arising pursuant to statute regulation or the requirement of any relevant body or authority to remove protect or take any other remedial measures in respect of any asbestos cement covering or asbestos containing material on or within the roof or any roof supporting structures of the Premises.

15.2.2

The Landlord’s indemnity under clause 15.2.1 shall not apply to any charge claim proceeding liability damage loss cost or expense to the extent that it arises from the Tenant’s willful act or negligence.

15.2.3

The Landlord shall remedy and repair any inherent defects in the structure and structural components of the Old Roof which have or are likely to have a material adverse effect on the Tenant’s use occupation or enjoyment of the Premises.

16.

LIMITS ON LANDLORD’S LIABILITY

If the Landlord makes a request under section 6 or 7 of the Landlord and Tenant (Covenants) Act 1995 (Release from covenants on assignment of the reversion) the Tenant agrees not to unreasonably withhold or delay the release requested.

17.

FORFEITURE

17.1

Landlord’s right of re-entry

If any event set out in clause 17.2 occurs, the Landlord may forfeit this Lease and re-enter the Premises. The Term will then end, but without prejudice to any claim which the Landlord may have against the Tenant or a Guarantor for any failure to comply with the terms of this Lease.

17.2

Events giving rise to the Landlord’s right of re-entry

17.2.1

The Rent or any other sum payable under this Lease has not been paid 14 days after it became due, whether formally demanded or not.

17.2.2

The Tenant or any Guarantor has failed to comply with the terms of this Lease.

17.2.3

The Tenant or any Guarantor, if an individual (or if more than one individual then any one of them):

(a)

is the subject of a bankruptcy petition;

(b)

is the subject of an application for an interim order under Part VIII of time Insolvency Act 1986; or

(c)

enters into any composition moratorium or other arrangement with its creditors, whether or not in connection with any proceeding under the Insolvency Act 1986; or a receiver of the income of the Premises is appointed under section 101 of the Law of Property Act 1925.

17.2.4

In relation to a Tenant or any Guarantor which is a body corporate (or if more than one body corporate then any one of them):

(a)

a proposal for a voluntary arrangement is made under Part I of the Insolvency Act 1986 or the directors of the Tenant or Guarantor resolve to make such a proposal;

(b)

a petition for an administration order is presented under Part II of the Insolvency Act 1986 or the directors of the Tenant or Guarantor resolve to present such a petition;

(c)

a receiver (including a receiver under section 101 of the Law of Property Act 1925) or manager or administrative receiver of its property (or part of it) is appointed;

(d)

a resolution for its voluntary winding up is passed under Part IV of the Insolvency Act 1986 or a meeting of its creditors is called for the purpose of considering that it be wound up voluntarily (in either case, other than a voluntary winding up whilst solvent for the purposes of and followed by a solvent reconstruction or amalgamation);

(e)

a petition for its winding up is presented to the court under Part IV or by virtue of Part V of the Insolvency Act 1986 or a resolution is passed that it be wound up by the court; or

(f)

an application is made under section 425 of the Companies Act 1985 or a proposal is made which could result in such an application.

17.2.5

The Tenant or any Guarantor which is a body corporate (or if more than one body corporate then any of them):

(a)

enters or proposes to enter into any arrangement moratorium or composition (other than any referred to above) with its creditors; or

(b)

is dissolved, or is removed from the Register of Companies or ceases to exist (whether or not capable of reinstatement or reconstitution).

18.

NOTICES IN CONNECTION WITH THIS LEASE

18.1	Where a notice is to be given in connection with this Lease, it must be given in writing and signed by or on behalf of the party giving it unless it is stated that it need not be given in writing.

18.2	Any notice to be given in connection with this Lease will be validly served if sent by first class post or registered post or recorded delivery and addressed to or personally delivered to:

18.2.1

the Landlord at the address given in this deed or such other address which the Landlord has notified to the Tenant in writing;

18.2.2

the Tenant at the Premises or its registered office or its last known address;

18.2.3

a Guarantor at the Premises or its registered office or its last known address.

18.3	Any notice or demand sent by post from within the UK and properly stamped and correctly addressed will be conclusively treated as having been delivered 2 Working Days after posting.

LOGO

18.4	The Tenant shall give the Landlord verbal notice of any matter affecting the Premises where emergency action is needed as well as written notice.

19.

MISCELLANEOUS

19.1

Landlord’s rights to remedy default by the Tenant

19.1 .1

If the Tenant fails to comply with any of its obligations in this Lease the Landlord may give the Tenant written notice of that failure, and the Tenant shall:

(a)

immediately in the case of an emergency; and

(b)

otherwise as soon as practicable, but in any event within one month of such notice

begin and then, within a reasonable time, complete remedying that failure.

19.1.2

If the Tenant does not comply with clause 19.1.1, the Landlord may enter the Premises and carry out any works or do anything else which may be needed to remedy the Tenant’s failure to comply with its obligations under this Lease.

19.1.3

Any costs incurred by the Landlord by reason of clause 19.1.2 will be a debt due from the Tenant payable on demand and may be recovered by the Landlord as if it were additional rent.

19.2

No charging of stock

The Tenant shall not charge or give any bill of sale in respect of the Tenant’s stock at the Premises from time to time.

19.3

Superior interests

If at any time this Lease is an underlease:

19.3.1

the Tenant shall comply with the terms of any superior lease to the extent that they relate to the Premises, other than any obligation to pay any rent; and

19.3.2

the Landlord shall pay any rent due under the immediate superior lease,

19.4

Tenant to provide information

19.4.1

The Tenant shall give the Landlord any information or documents which the Landlord reasonably requests to show that the Tenant is complying with its obligations in this Lease.

19.4.2

The Tenant shall give the Landlord immediate written notice of any defect or default which may make the Landlord liable to the Tenant or any third party.

19.5

Tenant’s indemnity

The Tenant agrees to indemnify the Landlord at all times (both during and after the Term) against all charges, claims, proceedings, liabilities, damages, losses, costs and expenses arising directly or indirectly from:

19.5.1 state of repair or use of the Premises;

19.5.2 any works carried out at the Premises;

19.5.3 any breach of any of the Tenant’s obligations in this Lease;

19.5.4 any act or omission of the Tenant; or

19.5.5 the use or storage of any dangerous or inflammable materials at the Premises.

19.6

Guarantor

19.6.1

If at any time during the Term a Guarantor (or where a Guarantor comprises more than one person, any one of them) dies or any of the events referred to in clause 17 (Forfeiture) occurs in relation to a Guarantor, then the Tenant shall give immediate written notice to the Landlord of that event and within one month of being so required by the Landlord, procure that another person acceptable to the Landlord enters into a deed of guarantee and indemnity in the form of clause 20 (Guarantee and indemnity) with such additions and amendments as are necessary to reflect the fact that the guarantee and indemnity is being entered into by a separate instrument and after the date of this deed.

19.6.2

The Tenant shall procure that a Guarantor enters into any deed or document which is supplemental to this deed and which is entered into before that Guarantor is released by virtue of the Landlord and Tenant (Covenants) Act 1995.

19.7

Qualification of Landlord’s liability

The Landlord will not be liable to the Tenant or any other person for:

19.7.1

any damage to person or property arising from the state and condition of the Premises or any adjoining property of the Landlord;

19.7.2

any accidental damage to the Premises or to any property of the Tenant or any other occupier of the Premises or their employees, agents or independent contractors;

19.7.3

any accidental damage to any person occurring during the performance by or on behalf of the Landlord Of any service which the Tenant or other authorised occupier of the Premises has requested the Landlord to carry out; or

19.7.4

for any failure to perform any obligation in this Lease, unless the Tenant has given the Landlord written notice of the facts giving rise to that failure and allowed the Landlord a reasonable time to remedy the matter unless due to the act omission or misfeasance of the Landlord or its employees agents or independent contractors.

19.8

Sale of goods after end of Term

19.8.1

The Tenant irrevocably appoints the Landlord as its agent to store or dispose of any items left by the Tenant at the Premises more than 10 Working Days after the end of the Term.

19.8.2

The Landlord may store or dispose of such items after that time as it thinks fit and without any liability to the Tenant other than to account to the Tenant for the proceeds of sale, after deducting any reasonable and proper costs of sale or storage incurred by the Landlord.

19.8.3

The Tenant agrees to indemnify the Landlord against any liability incurred by the Landlord by reason of the Landlord disposing of any items left at the Premises which do not belong to the Tenant but which the Landlord believed in good faith did belong to the Tenant which will be presumed unless the contrary is proved.

19.9

Arbitration

Where this Lease refers to a dispute being referred to arbitration, it will be referred to a single arbitrator who will act in accordance with the Arbitration Act 1996 and the referral will be a submission to arbitration in accordance with that Act.

20.

GUARANTEE AND INDEMNITY

20.1

Guarantee

20.1.1

In consideration of the grant of this deed to the Tenant, the Guarantor irrevocably and unconditionally guarantees to the Landlord that the Rent and other sums due under this Lease will be duly and punctually paid, and that all the other obligations of the Tenant in this Lease will be duly performed and complied with, in either case whether during or after the end of the Term.

20.1.2

The Guarantor agrees that if at any time the Rent or other sums due under this Lease are not paid on their due date, or any of the other obligations of the Tenant in this Lease are not duly performed and complied with it shall, on demand, pay such sum or perform or comply with such obligation.

20.2

Principal Debtor

As a separate and independent obligation the Guarantor agrees that if any sum or obligation expressed to be guaranteed under this clause is not recoverable from or enforceable against the Guarantor on the basis of a guarantee (for whatever reason), the Guarantor shall be liable as sole or principal debtor in respect of such sum or obligation and which shall be paid, performed or complied with by the Guarantor on demand.

20.3

Indemnity

As a separate and independent obligation the Guarantor agrees to indemnify the Landlord and keep the Landlord indemnified against any loss expense or liability resulting from:

20.3.1

the failure of the Tenant duly and punctually to pay the Rent and other sums due under this Lease or to perform and comply with its obligations in this Lease;

20.3.2

any of the obligations on the Tenant in this Lease being or becoming void, voidable or unenforceable by the Landlord against the Tenant or any other person who is liable;

20.3.3

this Lease (or the Tenant’s obligations under it) being disclaimed;

20.3.4

this Lease being surrendered by a liquidator or trustee in bankruptcy of the Tenant, or becoming forfeited;

20.3.5

the Tenant entering into any arrangement or composition with any of its creditors (whether or not such arrangement or composition binds or is expressed to bind the Landlord); or

20.3.6

the Tenant (being a body corporate) ceasing to exist (whether or not capable of reconstitution or reinstatement), and

to pay on demand to the Landlord the amount of such cost, loss, expense or liability, whether or not the Landlord has sought to enforce any rights against the Tenant or any other person who is liable.

20.4

No discharge of Guarantor

Subject to section 18(3) of the Landlord and Tenant (Covenants) Act 1995 (Effect of variations on guarantors) the Guarantors liability under this clause will remain in full force and effect and will not be released, nor will the rights of the Landlord be prejudiced or affected by any of the following:

20.4.1

any time, indulgence or concession granted by the Landlord to the Tenant or to any other person who is liable;

20.4.2

the Landlord dealing with, exchanging, varying or failing to perfect or enforce any of its rights or remedies against the Tenant or ally other person who is liable;

20.4.3

the existence of or dealing with, varying or failing to perfect or enforce any other rights or security which the Landlord may have or acquire against the Tenant or any other person who is liable in respect of its obligations under this Lease;

20.4.4

any variation of, addition to or reduction from the terms of this Lease whether or not the same is substantial or is prejudicial to the Guarantor or confers only a personal right or obligation;

20.4.5

any non-acceptance of the Rent or other sums due from the Tenant under this Lease, in circumstances where the Landlord has reason to suspect a breach of its obligations in this Lease;

20.4.6

the occurrence of any of the events set out in clause 17 (Forfeiture);

20.4.7

a surrender of part of the Premises, except that the Guarantor will have no liability in relation to the surrendered part in respect of any period after the date of the surrender;

20.4.8

any incapacity, disability or change in the constitution, status or name of the Tenant or the Landlord;

20.4.9

any amalgamation, merger or reconstruction by the Landlord with any other person or the acquisition of the whole o any part of its assets or undertaking by any other person;

20.4.10

any voluntary arrangement entered into by the Tenant or any other person who is liable with all or any of its creditors (whether or not such arrangement binds or is expressed to bind the Landlord);

20.4.11

any other act or thing by virtue of which, but for this provision, the Guarantor would have been released or discharged from its obligations under this clause, or the rights of the Landlord would have been prejudiced or affected, other than a release by deed, entered into by the Landlord, in accordance with the terms of such deed and the parties acknowledge that each of the matters listed above is separate and independent and is not to be interpreted in the light of any other.

20.5

Waiver by Guarantor of its rights

20.5.1

Until all the liabilities expressed to be guaranteed by the Guarantor under this clause have been paid, discharged or satisfied inevocably and in full, the Guarantor agrees not, without the consent of the Landlord, to:

(a)

exercise any of its rights in respect of the liabilities expressed to be guaranteed under this clause against the Tenant or any other person who is liable;

(b)

demand or accept any security from the Tenant or any other person who is liable in respect of the obligations of the Guarantor under this clause or in respect of any indebtedness due to the Guarantor from the Tenant or any other person who is liable, and any security received by the Guarantor in breach of the above or any such security held by the Guarantor at the date of this deed shall be held by the Guarantor on trust for the Landlord and delivered to the Landlord on demand;

(c)

claim any legal or equitable set-off or counterclaim against the Tenant or any other person who is liable; or

(d)

claim or prove in competition with the Landlord in the liquidation or bankruptcy or in any administration or receivership of the Tenant or any other person who is liable, or have the benefit of or share in any payment or

distribution from or composition or arrangement with the Tenant or any other person who is liable, and any money or other property received by the Guarantor in breach of this provision shall be held by the Guarantor on trust for the Landlord and delivered to the Landlord on demand.

20.5.2

The obligations of the Guarantor may be enforced by the Landlord against the guarantor:

(a)

at its discretion and without first enforcing or seeking to enforce its rights against the Tenant or any other person who is liable or exercising its rights under any other security or resorting to any other means of payment; and

(b)

as primary obligations and not merely as obligations of a surety.

20.6

Payments in gross

All dividends, compositions and moneys received by the Landlord from the Tenant or any other person which are capable of being applied by the Landlord in satisfaction of the liabilities expressed to be guaranteed under this clause, will be regarded for all purposes as payments in gross and will not prejudice the right of the Landlord to recover from the Guarantor the ultimate balance which after receipt of such dividends, compositions and moneys may remain owing or expressed to be owing to the Landlord.

20.7

Guarantor to take a new lease

20.7.1

In this clause a Relevant Event is:

(a)

the surrender or disclaimer of this Lease or the Tenants obligations under it by a liquidator or trustee in bankruptcy of the Tenant;

(b)

the disclaimer of this Lease after it has become bona vacantia;

(c)

the forfeiture of this Lease; or

(d)

the Tenant (being a body corporate) ceasing to exist (whether or not capable of being reconstituted or reinstated).

20.7.2

If a Relevant Event occurs the Guarantor agrees at the request of the Landlord made within 6 months following the Landlord having notice of the Relevant Event, to take a new lease of the Premises from the Landlord.

20.7.3

Such new lease shall:

(a)

be for a term commencing on the date of the Relevant Event and be equal to the unexpired residue of the term of years granted by this Lease (or the residue which would be unexpired but for the Relevant Event) as at the date of the Relevant Event;

(b)

reserve a rent equal to the Rent reserved by this Lease immediately before the Relevant Event and otherwise be on the same terms as this Lease (other than this clause); and

(c)

take effect from the date of the Relevant Event.

20.7.4

The new lease will take effect subject to this Lease if and to the extent that it is still subsisting and subject to any underlease or other interest created or permitted by the Tenant.

20.7.5

The Guarantor shall pay the Landlord’s costs (on an indemnity basis) in connection with the grant of such new lease and shall execute deliver it to the Landlord.

20.7.6

The new lease shall include an agreement between the Landlord and the Guarantor to exclude the provisions of Sections 24 to 28 of the Landlord and Tenant Act 1954 from the tenancy to be created by the new lease and all relevant notices under the Landlord and Tenant Act 1954 part II (Notices) Regulations 2004 shall be given.

20.7.7

If the Landlord does not require the Guarantor to take a new lease of the Premises, the Guarantor shall nevertheless pay on demand to the Landlord a sum equal to the Rent and other sums due under this Lease which would have been payable but for the Relevant Event in respect of the period from the date of the Relevant Event until 12 months after it or, if sooner the date the Premises are re-let.

20.8

Supplementary provisions

20.8.1

In this clause 20 a reference to this clause is a reference to the whole of this clause 20.

20.8.2

This guarantee and indemnity is in addition to any other security or any other right or remedy held by or available to the Landlord from time to time.

20.8.3

As and when called upon to do so by either the Landlord or the Tenant, the Guarantor shall enter into any Supplemental Document (by deed if required) for the purpose of consenting to the Tenant entering into such Supplemental Document and confirming that subject only to section 18(3) of the Landlord and Tenant (Covenants) Act 1995 (Effect of variations on guarantors) all the obligations of the Guarantor will remain in full force and effect in respect of this Lease.

20.8.4

The Guarantor agrees to pay to the Landlord on demand, and on an indemnity basis, all legal and other costs and charges which may be payable by the Landlord in relation to the enforcement of the Guarantor’s obligations in this clause.

20.8.5

The Guarantor agrees to pay interest on each amount demanded of it under this clause, at the Interest Rate until payment (both before and after any judgment), except that where the sum demanded from the Guarantor is interest due from the Tenant at that rate and is paid by the Guarantor immediately on demand, the Guarantor will not be liable to pay further interest on that sum.

20.8.6

Each of the provisions of this clause is distinct and severable from the others, and if at any time one or more such provisions is or becomes illegal, invalid or unenforceable (either wholly or to any

extent), the validity, legality and enforceability of the remaining provisions (or the same provision to any other extent) will not be affected or impaired.

20.8.7

The rights of the Landlord under this clause will ensure for the benefit of the Landlord and its successors in title without any need for any express assignment of them.

21.

TENANT’S OPTION TO BREAK

If the Tenant wishes to determine this Lease on 1 March 2010 or 1 March 2012 and shall give to the Landlord not less than six (6) months ’ prior written notice and shall up to the time of such determination pay the rents reserved by this Lease then, upon expiry of such notice, the Term shall immediately cease and determine but without prejudice to the respective rights of either party in respect of any antecedent claim or breach.

IN WITNESS of which this deed has been duly executed and is delivered on the date written at the beginning of this deed.


Executed as a Deed by LORDBAY		)
INVESTMENTS LIMITED acting		)
by:-		)



Director		/s/ Illegible

Director/Secretary		/s/ Illegible

EXHIBIT 10.41

LEASE AMENDMENT NUMBER ONE


THE STATE OF ARKANSAS		}

COUNTY OF CALHOUN		}

THIS AGREEMENT, made and entered into this 23 ^rd day of November, 2005, by and between HIGHLAND INDUSTRIAL PARK, INC., an Arkansas corporation, whose address is Post Office Box 3108, East Camden, Arkansas 71701, hereinafter called “Lessor,” and ARMTEC COUUNTERMEASURES COMPANY (Formerly TRACOR AEROSPACE, INC.), a Delaware corporation, duly authorized to do business in the State of Arkansas, whose address is Post Office Box 3297, East Camden, Arkansas 71701, hereinafter called “Lessee,”

W I T N E S S E T H :

WHEREAS, effective as of March 1, 1994, a certain lease agreement was executed by Lessor and Lessee covering M7 Complex, M25 Complex, M75 Complex and R1 Complex therein described, situated in Calhoun County, Arkansas. Said parties now desire that said lease agreement shall be amended and modified as hereinafter set out.

NOW, THEREFORE, for and in consideration of the premises, and of the mutual covenants and agreements herein contained, Lessor and Lessee do hereby mutually agree that said lease agreement shall be and the same hereby is modified and amended as follows, effective as of the 1 ^st day of January, 2006.

Article 1, DEMISED PREMISES , is deleted in its entirety and shall have substituted and inserted in its place the following:

1. DEMISED PREMISES . Subject to the terms and provisions hereinafter set forth, and in consideration of the rent to be paid by Lessee, and in consideration of the covenants and agreements herein contained to be kept and performed by Lessee, Lessor does hereby lease, demise and let unto Lessee, and Lessee does hereby hire and take from Lessor, for the uses and purposes hereinafter set out, the following described land and premises, to-wit:

- 1 -

M7 COMPLEX

A certain tract or parcel of land in Section 1, Township 13 South, Range 16 West, Fifth Principal Meridian, and Section 6, Township 13 South, Range 15 West, Fifth Principal Meridian, containing 8.38 acres, more or less, and having situated thereon Buildings known as Numbers M7 and M71, said tract being described by metes and bounds as follows, to-wit:

BEGINNING at a point that is 25 feet West of the centerline of the paved road which runs immediately West of Building M7, and that is 50 feet South of the centerline of the paved road which runs immediately South of Building M7;

THENCE Northwesterly parallel to and 25 feet West of the centerline of the paved road which runs immediately West of Building M7, a distance of 635 feet to a point that is 25 feet North of the centerline of the paved road which runs North of Building M7;

THENCE Northeasterly parallel to and 25 feet North of the centerline of said road a distance of 575 feet to a point for the Northeast corner of this tract;

THENCE Southeasterly perpendicular to the centerline of the road last above mentioned, a distance a 635 feet to a point for the Southeast corner of this tract;

THENCE Southwesterly parallel to the South wall of Building M7, a distance of 575 feet to the point of beginning, containing 8.38 acres, more or less.

M25 COMPLEX

A certain tract or parcel of land located in Section 1, Township 13 South, Range 16 West, and Section 6, Township 13 South, Range 15 West, Fifth Principal Meridian, Calhoun County, Arkansas, containing 38.96 acres, more or less, and having situated thereon buildings known as M22, M23A, M24, M25A, M25B, M25C, M25D, M25E, M25F, M25G, and M25H, said tract being described by metes and bounds as follows, to-wit:

BEGINNING at a point that is 40 feet East of the centerline of Byrnes Road and is 25 feet North of the road running immediately North of Building Number M7 extended;

THENCE Southwesterly along said road, 25 feet North of the centerline thereof, a distance of 1060 feet, more or less, to a point;

THENCE Northwesterly at a right angle parallel to the conveyor ramp connecting Buildings M23A and M25A, a distance of 1034 feet to a point that is 111.3 feet North of the North edge of said conveyor ramp;

THENCE is a Northeasterly direction 299 feet, more or less, to a point that is 110 feet North of the dock of Building M23A;

THENCE North 158 feet, more or less, to a point that is the South edge of the paved road which runs immediately North of Building M23A;

THENCE East along the South edge of said paved road a distance of 1086 feet, crossing Byrnes Road to a point that is 260 feet, more or less, East of the centerline of Byrnes Road;

THENCE South parallel to and 260 feet East of the centerline of Byrnes Road a distance of 427’ 6”, more or less, to a point;

THENCE West perpendicular to Byrnes Road 220 feet, more or less, to a point that is 40 feet East of the centerline of Byrnes Road;

- 2 -

THENCE Southeasterly parallel to and 40 feet East of the centerline of Byrnes Road, a distance of 932 feet to the point of beginning, said tract containing 36.09 acres, more or less.

In addition thereto, this lease also covers Building Number M148, said being a boiler house, which is included in and covered by this lease to the same extent and in the same manner as though located on the above described land.

M75 COMPLEX

A certain tract or parcel of land located in Section 1, Township 13 South, Range 16 West, and Section 6, Township 13 South, Range 15 West, Fifth Principal Meridian, Calhoun County, Arkansas, containing 22.59 acres, more or less, and having situated thereof buildings known as M73, M74, M75A, M75B, M75C, M75D, M75E, and M75F, said tract being described by metes and bounds as follows, to-wit:

BEGINNING at a point that is 40 feet East of the centerline of Byrnes Road and is on the centerline of the road running immediately North of Building Number M84;

THENCE Southwesterly and Westerly parallel to and on the centerline of said road a distance of 970 feet, more or less, to a point for corner;

THENCE Northwesterly parallel to the conveyor ramp connecting Buildings M73A and M75A, a distance of approximately 993 feet to a point that is 25 feet North of the centerline of the road that runs Northeasterly and runs immediately North of Building M7;

THENCE Northeasterly along said road, 25 feet North of the centerline thereof, a distance of approximately 1060 feet to a point that is 40 feet East of the centerline of Byrnes Road;

THENCE Southerly and Southeasterly along a line parallel to and 40 feet East of the centerline of Byrnes Road, a distance of approximately 1016 feet to the place of beginning, containing 22.59 acres, more or less.

R1 COMPLEX

A certain tract or parcel of land located in Sections 27, 28, 33, and 34, Township 12 South, Range 15 West, Fifth Principal Meridian, Calhoun County, Arkansas, containing 118.045 acres, more or less, and having situated thereon buildings known as R1, R15, 5FC1, 5FC2, 5FC3, and 5FC4, said tract being described by metes and bounds as follows, to-wit:

BEGINNING at a point from whence the Northwest corner of Section 34, Township 12 South, Range 15 West, Fifth Principal Meridian, bears South 15 degrees 46 minutes East a distance of 147.85 feet and East a distance of 260.0 feet;

THENCE South 15 degrees 46 minutes East a distance of 60.8 feet to a point for corner;

THENCE South 23 degrees 30 minutes West a distance of 155.0 feet to a point for corner;

THENCE South 15 degrees 46 minutes East a distance of 556.0 feet to a point that is 40 feet South of the centerline of Zoller Road;

THENCE North 74 degrees 30 minutes East parallel to and 40 feet South of the centerline of Zoller Road a distance of 165.0 feet to a point for an interior corner;

THENCE South 16 degrees 30 minutes East a distance of 262.3 feet to a point for the most Southerly corner of the tract herein described;

THENCE North 74 degrees 14 minutes East a distance of 1370.0 feet to a point in the West Half of the West Quarter of Section 34, for the more Easterly corner of the tract herein described;

- 3 -

THENCE North on the East line of the West Half of the West Half of Section 34 a distance of 3130 feet to a point for the most Northerly corner of the tract herein described;

THENCE South 74 degrees 14 minutes West a distance of 1737.50 feet to a point for corner;

THENCE South 15 degrees 46 minutes East a distance of 1180.0 feet to a point for an interior corner;

THENCE South 74 degrees 14 minutes West a distance of 570 feet to a point for the most Westerly corner of the tract herein described;

THENCE South 15 degrees 46 minutes East a distance of 910.8 feet of the point of beginning, containing 118.045 acres, more or less.

Additionally , Buildings 2SH1, 2SH18, 2SH26, 1LC33, 1LC35 and 2AT14 are included effective January 1, 2006.

Lessee is hereby granted the right of ingress and egress, to the extent of Lessor’s rights, over all roads, streets and ways, whether public or private, bounding, or serving said demised premises.

Article 3, RENTAL , is deleted in its entirety and shall have substituted and inserted in its place the following:

3. RENTAL . As rental for said demised premises during the term, January 1, 2006 through February 28, 2009, Lessee convenants and agrees to pay Lessor on or before the first day of each month in advance rental in the amount of T WENTY N INE T HOUSAND O NE H UNDRED S IXTY -S IX AND 62/100 D OLLARS ($29,166.62) for the following: M7 Complex, M25 Complex, M75 Complex, R1 Complex, 2SH1, 2SH18, 2SH26, 7LC33, 1LC35 and 2AT14.

Article 30, OPTION TO RENEW , is deleted in its entirety and shall have substituted and inserted in its place the following:

30. OPTION TO RENEW . (a) Inasmuch as the Lessee has, since originally novating the lease to their name, envisioned arranging a longer term lease than the March 1, 1994 agreement, Highland Industrial Park offers the following option renewals. Subject to the provisions hereof, Lessor expressly gives and grants to Lessee the right, option and privilege of extending the leasehold term of this lease one (1) time for an additional period of ten (10) years and then four (4) times for an additional period of five (5) years each time (that is, one (1) ten (10) year extension and four (4) five (5) year extensions in addition to the original leasehold term herein granted), upon the same terms and conditions as herein set out (except as hereinafter provided), all of which shall apply to such extended term to

- 4 -

the same extent and as fully as if this lease had been written for the period of time covering both the original term and the extended term or terms provided in this option of extension, and in such event the word “term” in this agreement shall mean and refer to the original term as so extended. The option herewith granted by Lessor to Lessee to extend the term of this lease one (1) time for an additional period of ten (10) years and four (4) times for an additional five (5) years each time shall expire, and be of no further force and effect, unless exercised by Lessee by written notice to Lessor on or before the date which is ninety (90) days prior to the expiration of the term then in effect. In the event Lessee elects to exercise any such option of extension, then the giving of the above described notice by Lessee so notifying Lessor in writing, if given within the time hereinabove provided, shall operate to automatically extend this lease for an additional term without further action on the part of either of the parties hereto; provided that failure on the part of Lessee to give such written notice to Lessor within such time shall conclusively be deemed to be an election by Lessee to waive such option of renewal and such option shall then be null and void.

(b) Notwithstanding any of the above provisions, it is agreed that:

(1) Such option may be exercised only if at the time of such exercise this lease is in full force and effect and Lessee is not in default in the performance of any of the terms or provisions of this lease.

(2) If such option is exercised to extend this lease one or more times for successive ten (10) year and five (5) year periods, this lease shall continue in effect in accordance with the terms and provisions hereof except that during the ten (10) year extension and each successive five (5) year option, the monthly rental therefore, payable monthly in advance during said extended term, shall be escalated by 3% year over year per the attached schedule.

(3) Rental Payment Schedule:


Start Date	End Date	Monthly Rental
March 1, 2008	February 28, 2009	$	29,166.62	Current Lease Amount
March 1, 2009	February 28, 2010	$	30,041.62
March 1, 2010	February 28, 2011	$	30,942.87
March 1, 2011	February 29, 2012	$	31,871.15
March 1, 2012	February 28, 2013	$	32,827.29
March 1, 2013	February 28, 2014	$	33,812.11
March 1, 2014	February 28, 2015	$	34,826.47
March 1, 2015	February 29, 2016	$	35,871.26
March 1, 2016	February 28, 2017	$	36,947.40
March 1, 2017	February 28, 2018	$	38,055.82
March 1, 2018	February 28, 2019	$	39,197.50

- 5 -

Each year of the five (5) year renewal options will be escalated 3% year over year in the same manner as the Rental Payment Schedule.

Said original lease agreement and amendment is hereby ratified and confirmed, and shall continue in full force and effect in accordance with all terms, provisions and conditions therein contained.

IN WITNESS WHEREOF, this instrument is executed in duplicate originals as of the day and year first above written.


ATTEST:				HIGHLAND INDUSTRIAL PARK, INC.

/s/ W.K. Gibbs				/s/ G.Hill
Assistant Secretary				“LESSOR”

ATTEST:				Armtec Countermeasures Company

/s/ Maria Montez				/s/ Robert R. Harris
				“LESSEE”

- 6 -

ACKNOWLEDGMENT


STATE OF ARKANSAS		}

COUNTY OF CALHOUN		}

On this day personally appeared before the undersigned, a Notary Public within and for the County and State aforesaid, duly qualified, commissioned and acting, the within named Gene Hill and W. K. Gibbs, being the President and Assistant Secretary, respectively, of HIGHLAND INDUSTRIAL PARK, INC., a corporation, and who had been designated by said corporation to execute the above instrument, to me personally well known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for the consideration, uses, and purposes therein mentioned and set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and seal as such Notary Public on this 21st day of December, 2005.

/s/ Illegible

Notary Public

My Commission Expires:

May 2, 2015

ACKNOWLEDGMENT


STATE OF CALIFORNIA		}

COUNTY OF RIVERSIDE		}

On this day personally appeared before the undersigned, a Notary Public within and for the County and State aforesaid, duly qualified, commissioned and acting, the within named Robert R. Harris and Maria Montez, being the President and HR Assistant, respectively, of Armtec Countermeasures Company, a corporation, and who had been designated by said corporation to execute the above instrument, to me personally well known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for the consideration, uses, and purposes therein mentioned and set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and seal as such Notary Public on this 03 day of January, 2006.

/s/ Cheryl Buffington

Notary Public


My Commission Expires:

14 September 2006

EXHIBIT 11

ESTERLINE TECHNOLOGIES CORPORATION

Computation of Basic and Diluted Earnings Per Common Share

For the Three and Six Month Periods Ended April 28, 2006 and April 29, 2005

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended					Six Months Ended
	April 28, 2006		April 29, 2005			April 28, 2006		April 29, 2005
Net Sales	$	247,939	$	211,592		$	453,604	$	401,384
Gross Margin		80,739		68,538			143,598		126,638

Income From Continuing Operations		17,659		13,726			26,023		23,809
Income (Loss) From Discontinued Operations, Net of Tax		—		(562	)		—		6,965

Net Earnings	$	17,659	$	13,164		$	26,023	$	30,774


Basic
Weighted Average Number of Shares Outstanding		25,385		25,120			25,361		24,577

Earnings (Loss) Per Share – Basic
Continuing operations	$	.70	$	.55		$	1.03	$	.97
Discontinued operations		—		(.03	)		—		.28

Earnings per share – basic	$	.70	$	.52		$	1.03	$	1.25

ESTERLINE TECHNOLOGIES CORPORATION

Computation of Basic and Diluted Earnings Per Common Share

For the Three and Six Month Periods Ended April 28, 2006 and April 29, 2005

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended					Six Months Ended
	April 28, 2006		April 29, 2005			April 28, 2006		April 29, 2005
Diluted
Weighted Average Number of Shares Outstanding		25,385		25,120			25,361		24,577
Net Shares Assumed to be Issued for Stock Options		432		364			419		376

Weighted Average Number of Shares and Equivalent Shares Outstanding – Diluted		25,817		25,484			25,780		24,953


Earnings (Loss) Per Share – Diluted
Continuing operations	$	.68	$	.54		$	1.01	$	.95
Discontinued operations		—		(.02	)		—		.28

Earnings per share – diluted	$	.68	$	.52		$	1.01	$	1.23

EXHIBIT 31.1

CERTIFICATIONS

I, Robert W. Cremin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Esterline Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Dated: June 6, 2006	By:	/s/ Robert W. Cremin
		Robert W. Cremin
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATIONS

I, Robert D. George, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Esterline Technologies Corporation;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Dated: June 6, 2006	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer,
		Secretary and Treasurer
		(Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Esterline Technologies Corporation (the “ Company ”) on Form 10-Q for the period ended April 28, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “ Form 10-Q ”), I, Robert W. Cremin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated: June 6, 2006	By:	/s/ Robert W. Cremin
		Robert W. Cremin
		Chairman, President and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Esterline Technologies Corporation (the “ Company ”) on Form 10-Q for the period ended April 28, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “ Form 10-Q ”), I, Robert D. George, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated: June 6, 2006	By:	/s/ Robert D. George
		Robert D. George
		Vice President, Chief Financial Officer,
		Secretary and Treasurer