FLIR Systems, Inc.
FLIR SYSTEMS INC (Form: 10-Q, Received: 05/08/2013 14:02:48)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________  
FORM 10-Q
______________________________________
(Mark one)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2013
OR
¨
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 0-21918
______________________________________  
FLIR Systems, Inc.
(Exact name of Registrant as specified in its charter)
______________________________________
Oregon
 
93-0708501
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
27700 SW Parkway Avenue,
Wilsonville, Oregon
 
97070
(Address of principal executive offices)
 
(Zip Code)
(503) 498-3547
(Registrant’s telephone number, including area code)
______________________________________  
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer
   x
 
Accelerated filer
   ¨
Non-accelerated filer
   ¨
 
Smaller reporting company
   ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
At April 30, 2013 , there were 141,883,843 shares of the Registrant’s common stock, $0.01 par value, outstanding.






INDEX
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 




PART 1. FINANCIAL INFORMATION  
Item 1.
Financial Statements

FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
March 31,
 
2013
 
2012
 
 
 
 
Revenue
$
348,583

 
$
348,452

Cost of goods sold
164,596

 
165,725

Gross profit
183,987

 
182,727

Operating expenses:
 
 
 
Research and development
36,684

 
36,571

Selling, general and administrative
78,173

 
77,860

Total operating expenses
114,857

 
114,431

 
 
 
 
Earnings from operations
69,130

 
68,296

 
 
 
 
Interest expense
2,897

 
3,066

Interest income
(191
)
 
(428
)
Other income, net
(764
)
 
(1,225
)
Earnings from continuing operations before income taxes
67,188

 
66,883

Income tax provision
15,552

 
18,058

Earnings from continuing operations
51,636

 
48,825

Loss from discontinued operations, net of tax

 
(686
)
Net earnings
$
51,636

 
$
48,139

 
 
 
 
Basic earnings per share:
 
 
 
Continuing operations
$
0.36

 
$
0.32

Discontinued operations

 
(0.00
)
Basic earnings per share
$
0.36

 
$
0.31

 
 
 
 
Diluted earnings per share:
 
 
 
Continuing operations
$
0.35

 
$
0.31

Discontinued operations

 
(0.00
)
Diluted earnings per share
$
0.35

 
$
0.31

 
 
 
 
Weighted average shares outstanding:
 
 
 
Basic
144,629

 
154,485

Diluted
146,291

 
156,972





The accompanying notes are an integral part of these consolidated financial statements.
1



FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 
Three Months Ended
March 31,
 
2013
 
2012
 
 
 
 
Net earnings
$
51,636

 
$
48,139

Other comprehensive (loss) income, net of tax:
 
 
 
Foreign currency translation adjustments
(12,498
)
 
17,139

Comprehensive income
$
39,138

 
$
65,278


























The accompanying notes are an integral part of these consolidated financial statements.
2



FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
 
 
March 31,
2013
 
December 31,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
246,007

 
$
321,739

Accounts receivable, net
306,081

 
335,163

Inventories
389,995

 
381,378

Prepaid expenses and other current assets
100,455

 
96,006

Deferred income taxes, net
30,950

 
30,960

Total current assets
1,073,488

 
1,165,246

Property and equipment, net
215,412

 
211,615

Deferred income taxes, net
32,211

 
32,223

Goodwill
545,042

 
503,078

Intangible assets, net
167,870

 
140,621

Other assets
44,352

 
124,722

 
$
2,078,375

 
$
2,177,505

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
84,040

 
$
94,156

Deferred revenue
29,107

 
29,465

Accrued payroll and related liabilities
41,287

 
41,506

Accrued product warranties
13,557

 
13,169

Advance payments from customers
15,367

 
12,150

Accrued expenses
27,714

 
32,772

Accrued income taxes

 
11,943

Other current liabilities
3,937

 
4,331

Total current liabilities
215,009

 
239,492

Long-term debt
248,434

 
248,319

Deferred income taxes
8,325

 
7,996

Accrued income taxes
22,119

 
22,812

Pension and other long-term liabilities
59,857

 
58,985

Commitments and contingencies

 

Shareholders’ equity:
 
 
 
Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at March 31, 2013, and December 31, 2012

 

Common stock, $0.01 par value, 500,000 shares authorized, 142,056 and 145,814 shares issued at March 31, 2013, and December 31, 2012, respectively, and additional paid-in capital
70,244

 
171,546

Retained earnings
1,457,344

 
1,418,814

Accumulated other comprehensive (loss) earnings
(2,957
)
 
9,541

Total shareholders’ equity
1,524,631

 
1,599,901

 
$
2,078,375

 
$
2,177,505



The accompanying notes are an integral part of these consolidated financial statements.
3



FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Three Months Ended
March 31,
 
2013
 
2012
CASH PROVIDED BY OPERATING ACTIVITIES:
 
 
 
Net earnings
$
51,636

 
$
48,139

Income items not affecting cash:
 
 
 
Depreciation and amortization
14,871

 
15,207

Deferred income taxes
44

 
10

Stock-based compensation arrangements
5,696

 
5,535

Other non-cash items, net
2,374

 
(5,406
)
Changes in operating assets and liabilities:
 
 
 
Decrease in accounts receivable
27,310

 
28,918

Increase in inventories
(9,704
)
 
(11,450
)
Increase in prepaid expenses and other current assets
(1,234
)
 
(505
)
Increase in other assets
(2,988
)
 
(167
)
Decrease in accounts payable
(9,636
)
 
(7,912
)
(Decrease) increase in deferred revenue
(169
)
 
2,095

Decrease in accrued payroll and other liabilities
(1,029
)
 
(18,534
)
Decrease in accrued income taxes
(16,130
)
 
(10,350
)
Increase in pension and other long-term liabilities
918

 
3,415

Cash provided by operating activities
61,959

 
48,995

CASH USED BY INVESTING ACTIVITIES:
 
 
 
Additions to property and equipment, net
(12,648
)
 
(12,935
)
Cash used by investing activities
(12,648
)
 
(12,935
)
CASH USED BY FINANCING ACTIVITIES:
 
 
 
Repurchase of common stock
(108,361
)
 
(25,389
)
Dividends paid
(13,106
)
 
(10,784
)
Proceeds from shares issued pursuant to stock-based compensation plans
1,179

 
876

Excess tax benefit of stock options exercised
234

 
338

Other financing activities
(22
)
 
(44
)
Cash used by financing activities
(120,076
)
 
(35,003
)
Effect of exchange rate changes on cash
(4,967
)
 
6,263

Net (decrease) increase in cash and cash equivalents
(75,732
)
 
7,320

Cash and cash equivalents, beginning of period
321,739

 
440,846

Cash and cash equivalents, end of period
$
246,007

 
$
448,166











The accompanying notes are an integral part of these consolidated financial statements.
4


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



Note 1.
Basis of Presentation
The accompanying consolidated financial statements of FLIR Systems, Inc. and its consolidated subsidiaries (the “Company”) are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial position and results of operations for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 .
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the year ending December 31, 2013 .

Reclassification
The Company made certain reclassifications to the prior year's financial statements to conform them to the presentation as of March 31, 2013 . These reclassifications had no effect on consolidated financial position, shareholders' equity or net cash flows for any of the periods presented.


Note 2.
Stock-based Compensation
Stock-based compensation expense and related tax benefit recognized in the Consolidated Statements of Income are as follows (in thousands):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Cost of goods sold
$
652

 
$
704

Research and development
1,081

 
1,177

Selling, general and administrative
3,963

 
3,654

Stock-based compensation expense before income taxes
5,696

 
5,535

Income tax benefit
(1,858
)
 
(1,674
)
Total stock-based compensation expense after income taxes
$
3,838

 
$
3,861

Stock-based compensation costs capitalized in inventory are as follows (in thousands):
 
 
March 31,
 
2013
 
2012
Capitalized in inventory
$
452

 
$
932

As of March 31, 2013 , the Company had $31.6 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of 1.8 years.  

5


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 2.
Stock-based Compensation - (Continued)

The fair value of the market-based restricted stock units granted in the three months ended March 31, 2013 was estimated with the following weighted-average assumptions:
 
Three Months Ended
March 31, 2013
 
2013
 
Market-based restricted stock awards:
 
 
Risk-free interest rate
0.3
%
 
Expected dividend yield
%
 
Expected term
3.0 years

 
Expected volatility
28.8
%
 
Expected volatility of S&P 500
18.1
%
 

The fair value of stock-based compensation awards granted and vested, and the intrinsic value of options exercised during the period were (in thousands, except per share amounts):  
 
Three Months Ended
March 31,
 
2013
 
2012
Stock Option Awards:
 
 
 
Total fair value of awards vested
$
13

 
$
15

Total intrinsic value of options exercised
$
1,187

 
$
1,420

Restricted Stock Unit Awards:
 
 
 
Weighted average grant date fair value per share
$
17.30

 
$
24.10

Total fair value of awards granted
$
142

 
$
51

Total fair value of awards vested
$
184

 
$
340


The total amount of cash received from the exercise of stock options in the three months ended March 31, 2013 and 2012 was $1.2 million and $0.9 million , respectively, and the related tax impact realized from the exercise of the stock options was a benefit of $0.3 million and $0.4 million , respectively.

 Information with respect to stock option activity is as follows:
 
Shares
(in  thousands)
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2012
6,642

 
$
21.64

 
4.7

 
 
Granted

 

 
 
 
 
Exercised
(92
)
 
12.93

 
 
 
 
Forfeited
(8
)
 
21.40

 
 
 
 
Outstanding at March 31, 2013
6,542

 
$
21.77

 
4.5

 
$
38,402

Exercisable at March 31, 2013
5,640

 
$
20.94

 
3.9

 
$
36,535

Vested and expected to vest at March 31, 2013
6,497

 
$
21.73

 
4.5

 
$
38,308


6


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 2.
Stock-based Compensation - (Continued)
Information with respect to restricted stock unit activity is as follows:
 
 
Shares
(in  thousands)
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2012
2,372

 
$
24.59

Granted
8

 
17.30

Vested and distributed
(7
)
 
25.90

Forfeited
(87
)
 
25.24

Outstanding at March 31, 2013
2,286

 
$
21.54

Restricted stock units granted during the three months ended March 31, 2013 included market-based restricted stock units for which the fair value is determined on the date of grant using a lattice-based option pricing valuation model that incorporates a Monte-Carlo simulation.
There were no shares issued under the 2011 Employee Stock Purchase Plan ("ESPP") during the three months ended March 31, 2013 .


Note 3.
Net Earnings Per Share
The following table sets forth the reconciliation of the numerator and denominator utilized in the computation of basic and diluted earnings per share (in thousands):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Numerator for earnings per share:
 
 
 
Earnings from continuing operations
$
51,636

 
$
48,825

Loss from discontinued operations

 
(686
)
Net earnings for basic and diluted earnings per share
$
51,636

 
$
48,139

 
 
 
 
Denominator for earnings per share:
 
 
 
Weighted average number of common shares outstanding
144,629

 
154,485

Assumed exercises of stock options and vesting of restricted stock awards, net of shares assumed reacquired under the treasury stock method
1,662

 
2,487

Weighted average diluted shares outstanding
146,291

 
156,972


The effect of stock-based compensation awards for the three months ended March 31, 2013 and 2012 , which aggregated 877,000 shares and 470,000 shares, respectively, has been excluded for purposes of calculating diluted earnings per share since including such stock-based compensation awards would have been anti-dilutive.


Note 4.
Fair Value of Financial Instruments
The Company had $5.5 million and $5.9 million of cash equivalents at March 31, 2013 and December 31, 2012 , respectively, which were primarily investments in money market funds. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets. The fair value of the Company’s forward currency contracts as of March 31, 2013 and December 31, 2012 are disclosed in Note 5 below and are based on Level 2 inputs. The fair value of the Company’s long-term debt is approximately $254.0 million based upon Level 2 inputs at March 31, 2013 . The Company does not have any other significant financial assets or liabilities that are measured at fair value.



7


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 5.
Foreign Currency Exchange Rate Risk
The gains and losses related to outstanding derivative instruments recorded in other income are offset, in general, by the reciprocal gains and losses from the underlying assets or liabilities which originally gave rise to the exposure. The net amount of these realized and unrealized gains and losses for the three months ended March 31, 2013 and 2012 were gain s of $1.5 million and $1.2 million , respectively.
 

The net notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency gains or losses. The table below presents the net notional amounts of the Company’s outstanding foreign currency forward contracts by currency (in thousands):
 
March 31,
2013
 
December 31,
2012
Swedish kronor
$
103,462

 
$
98,385

British pound sterling
5,478

 
15,619

Australian dollar
6,094

 
7,022

Japanese yen
6,296

 
5,157

Euro
5,393

 
2,232

Other
170

 
622

 
$
126,893

 
$
129,037


At March 31, 2013 , the Company’s foreign currency forward contracts, in general, had maturities of 3 months or less.
The fair value carrying amount of our derivative instruments included in the Consolidated Balance Sheets are as follows (in thousands):
 
March 31, 2013
 
December 31, 2012
 
Other Current Assets
 
Other Current Liabilities
 
Other Current Assets
 
Other Current Liabilities
Foreign exchange contracts
$
4,002

 
$

 
$
2,106

 
$
229


Note 6.
Accounts Receivable
Accounts receivable are net of an allowance for doubtful accounts of $7.1 million and $6.6 million at March 31, 2013 and December 31, 2012 , respectively.


Note 7.
Inventories
Inventories consist of the following (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Raw material and subassemblies
$
228,121

 
$
231,273

Work-in-progress
67,919

 
50,644

Finished goods
93,955

 
99,461

 
$
389,995

 
$
381,378




8


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 8.
Property and Equipment
Property and equipment are net of accumulated depreciation of $196.9 million and $190.5 million at March 31, 2013 and December 31, 2012 , respectively.


Note 9.
Goodwill
During the three months ended March 31, 2013, the Company has determined that there have been no triggering events that would require an updated impairment review. The carrying value of goodwill by reporting segment and the activity for the three months ended March 31, 2013 are as follows (in thousands):
 
 
Thermal Vision and Measurement
 
Raymarine
 
Surveillance
 
Detection
 
Integrated Systems
 
Total
Balance, December 31, 2012
$
253,226

 
$
100,744

 
$
90,817

 
$
38,162

 
$
20,129

 
$
503,078

Goodwill from 2012 acquisitions
48,342

 

 

 

 

 
48,342

Currency translation adjustments
(3,010
)
 
(3,361
)
 
(7
)
 

 

 
(6,378
)
Balance, March 31, 2013
$
298,558

 
$
97,383

 
$
90,810

 
$
38,162

 
$
20,129

 
$
545,042



Note 10.
Intangible Assets
Intangible assets are net of accumulated amortization of $97.0 million and $90.3 million at March 31, 2013 and December 31, 2012 , respectively.


Note 11.
Credit Agreements
At March 31, 2013 , the Company had no borrowings outstanding under its Credit Agreement, dated February 8, 2011, with Bank of America, N.A., U.S. Bank National Association, JPMorgan Chase Bank N.A. and other Lenders, and $12.0 million of letters of credit outstanding, which reduces the total available credit under the Credit Agreement to $188.0 million .

On April 5, 2013, the Credit Agreement was amended to extend the maturity of the revolving credit facility from February 8, 2016 to April 5, 2018. The amendment also incorporated a revised rate schedule.
  

Note 12.
Accrued Product Warranties
The following table summarizes the Company’s warranty liability and activity (in thousands):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Accrued product warranties, beginning of period
$
16,152

 
$
16,046

Amounts paid for warranty services
(2,392
)
 
(2,167
)
Warranty provisions for products sold
2,706

 
1,835

Currency translation adjustments and other
186

 
280

Accrued product warranties, end of period
$
16,652

 
$
15,994

Current accrued product warranties, end of period
$
13,557

 
$
13,592

Long-term accrued product warranties, end of period
$
3,095

 
$
2,402




9


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 13.
Long-Term Debt
Long-term debt consists of the following (in thousands):
 
March 31,
2013
 
December 31,
2012
Unsecured notes
$
250,000

 
$
250,000

Unamortized issuance costs
(1,566
)
 
(1,681
)
 
$
248,434

 
$
248,319


In August 2011, the Company issued $250 million aggregate principal amount of its 3.750% senior unsecured notes due September 1, 2016 (the “Notes”). The net proceeds from the issuance of the Notes were approximately $247.7 million , after deducting underwriting discounts and offering expenses, which are being amortized over a period of five years. Interest is payable on the Notes semiannually in arrears on March 1 and September 1 . The proceeds from the Notes are being used for general corporate purposes, which may include working capital and capital expenditure needs, business acquisitions and repurchases of the Company’s common stock.
The Credit Agreement amendment of April 5, 2013, discussed in Note 11 above, incorporated a $150 million term loan facility that matures on April 5, 2019 .


Note 14.
Shareholders’ Equity
The following table summarizes the common stock and additional paid-in capital activity during the three months ended March 31, 2013 (in thousands):
 
Common stock and additional paid-in capital, December 31, 2012
$
171,546

Income tax benefit of common stock options exercised
259

Common stock issued pursuant to stock-based compensation plans, net
1,123

Stock-based compensation expense
5,677

Repurchase of common stock
(108,361
)
Common stock and additional paid-in capital, March 31, 2013
$
70,244

During the three months ended March 31, 2013 , the Company repurchased 1.2 million shares of the Company's common stock through open market transactions and entered into an accelerated share repurchase program at a notional amount of $75.0 million under which the Company received 2.6 million shares in March 2013 and an additional 0.3 million shares in April 2013. The repurchases were under the February 2013 authorization by the Company’s Board of Directors pursuant to which the Company is authorized to repurchase up to 25.0 million shares of the Company’s outstanding common stock. This authorization expires in February 2015 .
On February 9, 2011, the Company’s Board of Directors adopted a dividend policy under which the Company intends to pay quarterly cash dividends on its common stock. Accordingly, a dividend of $0.09 per share of outstanding common stock was paid on March 8, 2013 to shareholders of record as of the close of business on February 19, 2013 . The total cash payments for dividends in the three months ended March 31, 2013 was $13.1 million .



10


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 15.
Contingencies
The Company and its subsidiary, Indigo Systems Corporation (now known as FLIR Commercial Systems, Inc.) (together, the “FLIR Parties”), were named in a lawsuit filed by Raytheon Company (“Raytheon”) on March 2, 2007, in the United States District Court for the Eastern District of Texas. Raytheon's complaint, as amended, asserted claims for tortious interference, patent infringement, trade secret misappropriation, unfair competition, breach of contract and fraudulent concealment. The FLIR Parties filed an answer to the complaint on September 2, 2008, in which they denied all material allegations. On August 31, 2009, the court entered an order granting the FLIR Parties' motion for summary judgment on Raytheon's trade secret misappropriation claim based on the FLIR Parties' statute of limitations defense. Raytheon abandoned all of its other claims except its claims relating to four patents (the “Patent Claims”). On August 11, 2010, the FLIR Parties and Raytheon entered into an agreement in principle to resolve the remaining Patent Claims, which resulted in a payment of $3 million by the FLIR Parties to Raytheon and entitles the FLIR Parties to certain license rights in the patents that were the subject of the Patent Claims. The parties appealed certain rulings of the District Court to the United States Court of Appeals for the Federal Circuit which on August 1, 2012, reversed the judgment of the District Court and remanded the case for further proceedings consistent with the appellate court's opinion.  The Company intends to vigorously defend itself in this matter and is unable to estimate the amount or range of potential loss, if any, which might result if the outcome in this matter is unfavorable.


Note 16.
Income Taxes
As of March 31, 2013 , the Company had approximately $34.0 million of net unrecognized tax benefits of which $22.1 million would affect the Company’s effective tax rate if recognized. The Company anticipates a portion of its net unrecognized tax benefits will be recognized within 12 months as the result of settlements or effective settlements with various tax authorities, the closure of certain audits and the lapse of the applicable statute of limitations.
The Company classifies interest and penalties related to uncertain tax positions as income tax expense. As of March 31, 2013 , the Company had approximately $2.6 million of net accrued interest and penalties related to uncertain tax positions.
The Company currently has the following tax years open to examination by major taxing jurisdictions:
 
 
Tax Years:
US Federal
2009 – 2012
State of Oregon
2008 – 2012
State of Massachusetts
2008 – 2012
State of California
2007 – 2012
Sweden
2007 – 2012
United Kingdom
2006 – 2012
Belgium
2011 - 2012


Note 17.
Operating Segments and Related Information
Operating Segments
The Company has two business divisions: Commercial Systems and Government Systems.
Commercial Systems Division
The Commercial Systems division is focused on the design, manufacture, and marketing of instrument, sensor, and electronics solutions that facilitate improved situational awareness and environmental analytics for commercial customers. The division is comprised of two operating segments: Thermal Vision and Measurement and Raymarine. The Thermal Vision and Measurement segment provides advanced thermal imaging solutions for emerging commercial and industrial markets that enable people to see at night or through adverse weather conditions and to capture, measure, and analyze temperature data. The Raymarine segment provides electronics for the maritime market and is a leading global provider of fully integrated “stem to stern” networked electronic systems for boats of all sizes.

11


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 17.    Operating Segments and Related Information - (Continued)
Government Systems Division
The Government Systems division designs, manufactures, and markets advanced imaging and detection systems for government markets where high performance is required. The division is comprised of three operating segments: Surveillance, Detection, and Integrated Systems. The Surveillance segment provides enhanced imaging and recognition solutions to a wide variety of military, law enforcement, public safety, and other government customers around the world for the protection of borders, troops, and public welfare. The Detection segment produces sensor instruments that detect and identify chemical, biological, radiological, nuclear, and explosives (“CBRNE”) threats for military force protection, homeland security, and commercial applications. The Integrated Systems segment develops platform solutions for combating sophisticated security threats and incorporates multiple sensor systems in order to deliver actionable intelligence for wide area surveillance, intrusion detection, and facility security.

Operating Segments - (Continued)
Operating segment information is as follows (in thousands):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Revenue – External Customers:
 
 
 
Thermal Vision and Measurement
$
167,388

 
$
155,741

Raymarine
44,401

 
46,604

Surveillance
110,241

 
114,597

Detection
12,547

 
19,352

Integrated Systems
14,006

 
12,158

 
$
348,583

 
$
348,452

Revenue – Intersegments:
 
 
 
Thermal Vision and Measurement
$
2,963

 
$
5,048

Raymarine

 
4

Surveillance
5,790

 
4,903

Detection
2,441

 
451

Integrated Systems
308

 
574

Eliminations
(11,502
)
 
(10,980
)
 
$

 
$

Earnings (loss) from operations:
 
 
 
Thermal Vision and Measurement
$
39,949

 
$
39,341

Raymarine
5,977

 
3,841

Surveillance
34,954

 
34,901

Detection
592

 
1,437

Integrated Systems
179

 
(398
)
Other
(12,521
)
 
(10,826
)
 
$
69,130

 
$
68,296



12


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

  Note 17.    Operating Segments and Related Information - (Continued)

 
March 31,
2013
 
December 31,
2012
Segment assets (accounts receivable, net and inventories):
 
 
 
Thermal Vision and Measurement
$
246,157

 
$
265,197

Raymarine
80,404

 
74,980

Surveillance
308,484

 
317,944

Detection
23,059

 
31,861

Integrated Systems
37,972

 
26,559

 
$
696,076

 
$
716,541


Revenue and Long-Lived Assets by Geographic Area
Information related to revenue by significant geographical location, determined by the end customer, is as follows (in thousands):
 
 
Three Months Ended
March 31,
 
2013
 
2012
United States
$
171,016

 
$
198,897

Europe
91,154

 
80,714

Other international
86,413

 
68,841

 
$
348,583

 
$
348,452

Long-lived assets by significant geographic locations are as follows (in thousands):
 
 
March 31,
2013
 
December 31,
2012
United States
$
584,512

 
$
582,387

Europe
336,654

 
386,871

Other international
51,510

 
10,778

 
$
972,676

 
$
980,036



Major Customers
Revenue derived from major customers is as follows (in thousands):
 
 
Three Months Ended
March 31,
 
2013
 
2012
US Government
$
77,759

 
$
98,504



13


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 18.
Business Acquisitions
In December 2012, the Company acquired Lorex Technology Inc. ("Lorex"), a provider of consumer oriented and professional grade video surveillance systems, for approximately $61.2 million in cash. At December 31, 2012, the Company reported the net tangible assets of $19.1 million in the respective balance sheet accounts and the excess purchase price of $42.0 million in other long-term assets.
During the three months ended March 31, 2013, the Company performed a preliminary purchase price allocation which resulted in an allocation of $15.1 million of identifiable intangible assets and $26.9 million of goodwill in conjunction with the Lorex acquisition, which has been recorded in the Company’s Thermal Vision and Measurement business segment. Goodwill consists largely of the ability of Lorex to provide the Company domain knowledge and distribution channels in adjacent security markets.
The preliminary allocation of the purchase price is as follows (in thousands):
Cash acquired
$
1,170

Accounts receivable, net
10,183

Inventories
13,967

Property and equipment
1,049

Other assets
3,004

Liabilities
(10,252
)
Net tangible assets
19,121

Identifiable intangible assets
15,100

Goodwill
26,949

Purchase price
$
61,170

Certain tax attributes and the related impact on goodwill are pending final valuation and are expected to be finalized by September 30, 2013. None of the goodwill recognized is deductible for income tax purposes.
The identifiable intangible assets and the estimated useful life of each are as follows (in thousands):
 
Estimated
Useful Life
 
Amount
Lorex Trade Name
indefinite
 
$
6,800

Customer Relationships
7 years
 
8,300

 
 
 
$
15,100

Also in December 2012, the Company acquired Traficon International NV ("Traficon"), a provider of video image processing software and hardware for traffic analysis applications, for approximately $46.3 million in cash. At December 31, 2012, the Company reported the net tangible assets of $5.1 million in the respective balance sheet accounts and the excess purchase price of $41.2 million in other long-term assets.
During the three months ended March 31, 2013, the Company performed a preliminary purchase price allocation which resulted in an allocation of $19.8 million of identifiable intangible assets and $21.4 million of goodwill in conjunction with the Traficon acquisition, which has been recorded in the Company’s Thermal Vision and Measurement business segment. Goodwill consists largely of the ability of Traficon to expand the Company's presence in the global traffic monitoring market through the provision of domain expertise and distribution channels.

14


FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Note 18.
Business Acquisitions - (Continued)
The preliminary allocation of the purchase price is as follows (in thousands):
Cash acquired
$
181

Accounts receivable, net
6,435

Inventories
2,853

Property and equipment
179

Other assets
657

Liabilities
(5,248
)
Net tangible assets
5,057

Identifiable intangible assets
19,838

Goodwill
21,393

Purchase price
$
46,288

Certain tax attributes and the related impact on goodwill are pending final valuation and are expected to be finalized by September 30, 2013. None of the goodwill recognized is deductible for income tax purposes.
The identifiable intangible assets and the estimated useful life of each are as follows (in thousands):
 
Estimated
Useful Life
 
Amount
Patented/Proprietary Technology
10 years
 
$
5,951

Backlog
1.5 years
 
1,587

Customer Relationships
12 years
 
12,300

 
 
 
$
19,838

The operating results for these acquisitions are included in the Company's 2013 results of operations.
These acquisitions are not significant, either individually or in the aggregate, as defined in Regulation S-X of the Securities and Exchange Commission, compared to the Company’s overall financial position.


Note 19.
Subsequent Events
On April 25, 2013 , the Company’s Board of Directors declared a quarterly dividend of $0.09 per share on its common stock, payable on June 7, 2013 , to shareholders of record as of the close of business on May 20, 2013 . The total cash payment of this dividend will be approximately $12.8 million .


15



Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements
This Quarterly Report on Form 10-Q (the “Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of FLIR Systems, Inc. and its consolidated subsidiaries (“FLIR” or the “Company”) that are based on management’s current expectations, estimates, projections, and assumptions about the Company’s business. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors including, but not limited to, those discussed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2012 , “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, and elsewhere in this Report as well as those discussed from time to time in the Company’s other Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions. Such forward-looking statements speak only as of the date of this Report or, in the case of any document incorporated by reference, the date of that document, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report, or for changes made to this document by wire services or Internet service providers. If we update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect to other forward-looking statements.

Results of Operations
The following discussion of operating results provides an overview of our operations by addressing key elements in our Consolidated Statements of Income. The “Segment Operating Results” section that follows describes the contributions of each of our business segments to our consolidated revenue and earnings from operations. Given the nature of our business, we believe revenue and earnings from operations (including operating margin percentage) are most relevant to an understanding of our performance at a segment level as revenue levels are the most significant indicators of business conditions for each of the respective segments and earnings from operations reflect our ability to manage each of our segments as revenue levels change. Additionally, at the segment level we disclose backlog, which represents orders received for products or services for which a sales agreement is in place and delivery is expected within twelve months.
Revenue. Consolidated revenue for the three months ended March 31, 2013 was $348.6 million in the first quarter of 2013 , essentially unchanged compared to $348.5 million in the first quarter of 2012 . Our Thermal Vision and Measurement and Integrated Systems segments reported slight increases in revenue year over year, while our other three segments reported decreases in year over year revenues primarily due to continued reductions in demand for our products from US Government agencies.
The timing of orders, scheduling of backlog and fluctuations in demand in various regions of the world can give rise to quarter-to-quarter and year-over-year fluctuations in the mix of revenue. Consequently, year-over-year comparisons for any given quarter may not be indicative of comparisons using longer time periods. While we currently expect total annual revenue for 2013 to be approximately 10 percent higher than 2012 revenue, unexpected changes in economic conditions from key customer markets or other major unanticipated events may cause total revenue, and the mix of revenue between our segments, to vary from quarter to quarter during the year.
International sales accounted for 50.9 percent and 42.9 percent of total revenue for the quarters ended March 31, 2013 and 2012 , respectively. The increase in the percentage of international sales is primarily due to increased sales to Middle East and other international government customers and the decrease in sales to US Government customers. The proportion of our international revenue compared to total revenue will fluctuate from quarter to quarter due to normal variation in order activity across various regions as well as specific factors that may affect one region and not another, but overall we anticipate that revenue from international sales will continue to comprise a significant percentage of total revenue.
Cost of goods sold. Cost of goods sold for the three months ended March 31, 2013 was $164.6 million compared to cost of goods sold for the three months ended March 31, 2012 of $165.7 million . The slight year over year decrease in cost of goods sold primarily relates to the change in product mix.
Gross profit. Gross profit for the quarter ended March 31, 2013 was $184.0 million compared to $182.7 million for the same quarter last year. The slight increase in gross profit was primarily due to change in product mix. Gross margin, defined as gross profit divided by revenue, increased from 52.4 percent in the first quarter of 2012 to 52.8 percent in the first quarter of 2013 .

16



Research and development expenses. Research and development expenses for the first quarter of 2013 totaled $36.7 million , compared to $36.6 million in the first quarter of 2012 . Research and development expenses as a percentage of revenue was 10.5 percent for the three months ended March 31, 2013 and 2012 . Research and development expenses are expected to remain at the upper end of our anticipated long-term research and development spending relative to sales due to the current sluggish revenue environment. Over the five annual periods through December 31, 2012 , our annual research and development expenses have varied between 8.0 percent and 9.8 percent of revenue.
Selling, general and administrative expenses. Selling, general and administrative expenses were $78.2 million for the quarter ended March 31, 2013 , compared to $77.9 million for the quarter ended March 31, 2012 . The slight increase in selling, general and administrative expenses for the first quarter year over year was attributable to the addition of operating expenses of businesses acquired in December of 2012, offset by cost containment efforts taken across the Company in 2012 in response to the lower revenues during the year. Selling, general and administrative expenses as a percentage of revenue were 22.4 percent and 22.3 percent for the quarters ended March 31, 2013 and 2012 , respectively. Over the past five years, our annual selling, general and administrative expenses have varied between 19.2 percent and 23.8 percent of revenue.
Interest expense. Interest expense for the first quarter of 2013 was $2.9 million compared to $3.1 million for the same period of 2012 . Interest expense is primarily associated with the $250 million aggregate principal amount of 3.750% senior unsecured notes due September 1, 2016 issued in August 2011.
Income taxes. The income tax provision of $15.6 million for the three months ended March 31, 2013 represents a quarterly effective tax rate of 23.1 percent which included a $1.6 million discrete credit for the recognition of the 2012 US federal research and development credit. We expect the annual effective tax rate for the full year of 2013 to be approximately 25 percent, excluding discrete items. The effective tax rate is lower than the US Federal tax rate of 35 percent because of the mix of lower foreign jurisdiction tax rates, the effect of federal, foreign and state tax credits and discrete adjustments.

Segment Operating Results
Thermal Vision and Measurement
Thermal Vision and Measurement operating results are as follows (in millions):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Revenue
$
167.4

 
$
155.7

Earnings from operations
39.9

 
39.3

Operating margin
23.9
%
 
25.3
%
Backlog, end of period
165

 
138

Revenue for the three months ended March 31, 2013 increased by 7.5 percent compared to the same period of 2012 . The increase is due to the combined revenue of $21.8 million reported by Lorex and Traficon, which were acquired in December 2012, partially offset by lower revenues from most of our other product lines. The revenue declines were due to world-wide economic weaknesses and lower demand from cores and components customers, including US Government funded customers. The rise in backlog at March 31, 2013 compared to March 31, 2012 was a result of the addition of orders reported by Lorex and Traficon, as well as slight increases in all sales regions.

17



Raymarine
Raymarine operating results are as follows (in millions):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Revenue
$
44.4

 
$
46.6

Earnings from operations
6.0

 
3.8

Operating margin
13.5
%
 
8.2
%
Backlog, end of period
7

 
8

Revenue for the three months ended March 31, 2013 decreased by 4.7 percent compared to the same period of 2012 , primarily due to weak market conditions in Europe, partially offset by increase in revenue from the Asia Pacific region. The increase in earnings from operations for the three months ended March 31, 2013 compared to the same period of 2012 was primarily due to cost containment efforts taken during the second quarter of 2012 offsetting the decline in year over year revenue.
Surveillance
Surveillance operating results are as follows (in millions):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Revenue
$
110.2

 
$
114.6

Earnings from operations
35.0

 
34.9

Operating margin
31.7
%
 
30.5
%
Backlog, end of period
245

 
242

Revenue for the three months ended March 31, 2013 decreased by 3.8 percent compared to the same period of 2012 , primarily due to decreases in revenue from US Government customers. The decline in revenues and the change in product mix of the segment, partially offset by a decrease in operating expenses, resulted in the rise in earnings from operations for the three month period ended March 31, 2013 , compared to the same period in 2012 .

Detection
Detection operating results are as follows (in millions):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Revenue
$
12.5

 
$
19.4

Earnings from operations
0.6

 
1.4

Operating margin
4.7
%
 
7.4
%
Backlog, end of period
24

 
25


Revenue for three months ended March 31, 2013 decreased by 35.2 percent compared to the same period of 2012 , primarily due to the absence of several large product orders and lower research and development contract revenues due to the timing of programs. Earnings from operations decreased for the three month period year over year due to the decline in revenues partially offset by reductions in operating expenses.

18



Integrated Systems
Integrated Systems operating results are as follows (in millions):
 
 
Three Months Ended
March 31,
 
2013
 
2012
Revenue
$
14.0

 
$
12.2

Earnings from operations
0.2

 
(0.4
)
Operating margin
1.3
%
 
(3.3
)%
Backlog, end of period
65

 
45


Revenue for the three months ended March 31, 2013 increased by 15.2 percent compared to the same period of 2012 , primarily due to the timing of program deliveries. Backlog at March 31, 2013 reflects an increase of approximately $20 million compared to March 31, 2012 due to several large program contracts booked in the second and third quarters of 2012.


Liquidity and Capital Resources
At March 31, 2013 , we had a total of $246.0 million in cash and cash equivalents, $65.1 million of which was in the United States and $180.9 million at our foreign subsidiaries, compared to cash and cash equivalents at December 31, 2012 of $321.7 million , of which $150.3 million was in the United States and $171.4 million at our foreign subsidiaries at December 31, 2012 . The decrease in cash and cash equivalents was primarily due to $108.4 million spent for the repurchase of shares of our common stock, capital expenditures of $12.6 million , and dividends paid of $13.1 million during the period, partially offset by cash provided from operations and cash proceeds from our stock-based compensation programs.
Cash provided by operating activities totaled $62.0 million for the three months ended March 31, 2013 is primarily due to net earnings, adjusted for non-cash charges for depreciation and amortization and stock-based compensation, and net collections of our accounts receivable, partially offset by net increases in other working capital components.
Cash used by financing activities totaled $120.1 million for the three months ended March 31, 2013 , which primarily consists of cash used for the repurchase of shares of our common stock and the payment of dividends, partially offset by cash provided from our stock-based compensation plans.
On February 8, 2011, we signed a Credit Agreement (“Credit Agreement”) with Bank of America, N.A., U.S. Bank National Association, JPMorgan Chase Bank N.A. and other Lenders. The Credit Agreement provides for a $200 million, five-year revolving line of credit. On April 5, 2013, the Credit Agreement was amended to extend the maturity of the revolving credit facility from February 8, 2016 to April 5, 2018 in addition to incorporating a $150 million term loan facility maturing April 5, 2019. We have the right, subject to certain conditions including approval of additional commitments by qualified lenders, to increase the line of credit by an additional $150 million until April 5, 2018. The Credit Agreement allows us and certain designated subsidiaries to borrow in US dollars, euro, Swedish Kronor, pound sterling and other agreed upon currencies. The Credit Agreement requires us to pay a commitment fee on the amount of unused credit at a rate, based on the Company’s leverage ratio, which ranges from 0.25 percent to 0.40 percent. The Credit Agreement contains two financial covenants that require the maintenance of certain leverage ratios with which we were in compliance at March 31, 2013 . The five-year revolving line of credit available under the Credit Agreement and the term loan facility are not secured by any of our assets.
At March 31, 2013 , we had no amounts outstanding under the Credit Agreement and the commitment fee on the amount of unused credit was 0.25 percent . We had $12.0 million of letters of credit outstanding at March 31, 2013 , which reduced the total available credit under the Credit Agreement.
On August 19, 2011, we issued $250 million aggregate principal amount of our 3.750% senior unsecured notes due September 1, 2016 (the "Notes"). The net proceeds from the issuance of the Notes were approximately $247.7 million, after deducting underwriting discounts and offering expenses, which are being amortized over a period of five years. Interest is payable on the Notes semiannually in arrears on March 1 and September 1. The proceeds from the Notes are being used for general corporate purposes, which may include working capital and capital expenditure needs, business acquisitions and repurchases of our common stock.

19



On February 6, 2013 , our Board of Directors authorized the repurchase of up to 25.0 million shares of our outstanding common stock. As of March 31, 2013 , there were approximately 21.2 million shares still remaining for repurchase under this authorization, which expires on February 6, 2015 .
We believe that our existing cash combined with the cash we expect to generate from operating activities and our available credit facilities and financing available from other sources will be sufficient to meet our cash requirements for the foreseeable future. We do not have any significant capital commitments for the current year nor are we aware of any significant events or conditions that are likely to have a material impact on our liquidity.

Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02") which establishes new requirements for disclosing reclassifications of items out of accumulated other comprehensive income and includes identification of the line items in net earnings affected by the reclassifications. ASU 2013-02 is effective for annual and interim periods for fiscal years beginning after December 15, 2012. Accordingly, the Company adopted ASU 2013-02 on January 1, 2013. The Company did not have any reclassifications during the first three months of 2013 that would require additional disclosure under this pronouncement.
In March 2013, the FASB issued Accounting Standards Update No. 2013-05, "Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity" ("ASU 2013-05") which addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. ASU 2013-05 is effective for annual and interim periods beginning after December 15, 2014. Accordingly, the Company currently intends to adopt ASU 2013-05 on January 1, 2015.

Critical Accounting Policies and Estimates
The Company reaffirms the critical accounting policies and our use of estimates as reported in our Form 10-K for the year ended December 31, 2012 . As described in Note 1 to the Consolidated Financial Statements included in the Form 10-K, the determination of fair value for stock-based compensation awards requires the use of management’s estimates and judgments.
Contractual Obligations
As of March 31, 2013 , there have been no material changes to our contractual obligations outside the ordinary course of our business since December 31, 2012 .

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

As of March 31, 2013 , the Company has not experienced any changes in market risk exposure that would materially affect the quantitative and qualitative disclosures about market risk presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 .

Item 4.
Controls and Procedures

Evaluation of Disclosure Controls and Procedures
As of March 31, 2013 , the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e). Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective such that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.

20



PART II. OTHER INFORMATION

Item 1.
Legal Proceedings

The Company is subject to legal proceedings, claims and litigation arising in the ordinary course of its business. See Note 15, “Contingencies,” of the Notes to the Consolidated Financial Statements for additional information on the Company’s legal proceedings.


Item 1A.
Risk Factors

There has been no material change in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 , which was filed with the Securities and Exchange Commission on March 1, 2013.


Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended March 31, 2013 , the Company repurchased the following shares:
 
Period
Total Number
of Shares
Purchased (1)
 
Average
Price Paid
per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
 
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs (2)
February 1 to February 28, 2013
1,250,000

 
$
26.69

 
1,250,000

 
 
March 1 to March 31, 2013
2,599,780

 
$
25.99

 
2,599,780

 
 
Total
3,849,780

 
$
26.22

 
3,849,780

 
21,150,220

(1) The share repurchases in February 2013 were through open market transactions. On February 25, 2013, we entered into an accelerated share repurchase program (“ASR”) at a notional amount of $75.0 million under which we were to receive a number of shares based on the daily volume weighted average price of common stock, less a discount, over a period beginning on the effective date of the ASR and ending on a date no later than May1, 2013. Under the ASR, we received the minimum number of shares of 2,599,780 on March 6, 2013 which resulted in an immediate reduction of the shares used to calculate our weighted-average common shares outstanding for basic and diluted earnings per share. The ASR was settled on April 12, 2013 with an additional 285,741 shares delivered on April 17, 2013.
(2) All share repurchases are subject to applicable securities law, and are at times and in amounts as management deems appropriate. On February 6, 2013 , our Board of Directors authorized the repurchase of up to 25.0 million shares of our outstanding common stock. This authorization will expire on February 6, 2015 . During the three months ended March 31, 2013, the Company repurchased 3.8 million shares of the Company's common stock under the February 2013 repurchase authorization by the Company's Board of Directors. The Company's prior share repurchase plan which authorized the repurchase of up to 20 million shares of the Company's common stock expired on February 9, 2013.


Item 3.
Defaults Upon Senior Securities
None.


Item 4.
Mine Safety Disclosures
Not Applicable.


Item 5.
Other Information
None.

21



Item 6.
Exhibits

Number
  
Description
 
 
 
10.1
 
Third Amendment to Credit Agreement by and among FLIR Systems, Inc. and certain subsidiaries of FLIR Systems, Inc., as borrowers, Bank of America, N.A., U.S. Bank National Association, JPMorgan Chase Bank N.A. and other Lenders dated April 5, 2013.
 
 
 
10.2
 
Annex I to Third Amendment to Credit Agreement dated as of April 5, 2013.
 
 
 
10.3
 
Letter Agreement, dated as of April 26, 2013, by and between FLIR Systems, Inc. and Earl R. Lewis (incorporated by reference to the Current Report on Form 8-K filed on May 1, 2013). (1)
 
 
 
10.4
 
Executive Employment Agreement between FLIR Systems, Inc. and Andrew C. Teich dated as of May 2, 2013 (incorporated by reference to the Current Report on Form 8-K/A filed on May 3, 2013). (1)
 
 
 
10.5
 
Executive Employment Agreement between FLIR Systems, Inc. and Anthony L. Trunzo dated as of May 6, 2013 (incorporated by reference to the Current Report on Form 8-K filed on May 7, 2013). (1)
 
 
 
10.6
 
Executive Employment Agreement between FLIR Systems, Inc. and William A. Sundermeier dated as of May 6, 2013 (incorporated by reference to the Current Report on Form 8-K filed on May 7, 2013). (1)
 
 
 
31.1
  
Principal Executive Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.
 
 
 
31.2
  
Principal Financial Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.
 
 
 
32.1
  
Principal Executive Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 906.
 
 
 
32.2
  
Principal Financial Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 906.
 
 
 
101.INS
  
XBRL Instance Document
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document
(1) This exhibit constitutes a management contract.

22



SIGNATURE
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 thereunto duly authorized.
 
 
 
FLIR SYSTEMS, INC.
 
 
 
Date May 8, 2013
 
    /s/ A NTHONY  L. T RUNZO
 
 
Anthony L. Trunzo
 
 
Sr. Vice President, Finance and Chief Financial Officer
 
 
(Duly Authorized and Principal Financial Officer)

23

Exhibit 10.1
THIRD AMENDMENT TO CREDIT AGREEMENT

This THIRD AMENDMENT TO CREDIT AGREEMENT (this " Amendment ") is entered into as of April 5, 2013 among FLIR SYSTEMS, INC., an Oregon corporation (the " Company "), certain Subsidiaries of the Company party hereto as Designated Borrowers (together with the Company, the " Borrowers " and, each a " Borrower "), the Lenders party hereto and BANK OF AMERICA, N.A., as Administrative Agent. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Amended Credit Agreement (as defined below).

RECITALS

WHEREAS, the Borrowers, the Lenders party thereto and the Administrative Agent are currently party to the Credit Agreement dated as of February 8, 2011 (as amended by that certain First Amendment to Credit Agreement, dated as of August 9, 2011, that certain Second Amendment to Credit Agreement, dated as of September 7, 2012 and as otherwise modified prior to the Third Amendment Effective Date (as hereinafter defined), the “ Existing Credit Agreement ”),

WHEREAS, the Borrowers, the Lenders and the Administrative Agent have entered into this Amendment in order to (i) amend the Existing Credit Agreement in its entirety; (ii) extend the applicable maturity date for the Revolving Lenders in respect of the existing revolving credit facility under the Existing Credit Agreement; (iii) establish a new term loan A facility; (iv) re-evidence the obligations under, and as defined in, the Existing Credit Agreement, which shall be repayable in accordance with the terms of the Amended Credit Agreement; and (v) set forth the terms and conditions under which the Lenders will, from time to time, make loans and extend other financial accommodations to or for the benefit of the Company and the other Borrowers, and

WHEREAS, it is the intent of the parties hereto that this Amendment not be deemed to evidence or constitute full repayment of the obligations and liabilities under the Existing Credit Agreement, but that this Amendment amend the Existing Credit Agreement and re-evidence the obligations of the Borrowers thereunder, which shall be payable in accordance with the terms hereof.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1




AGREEMENT

1.     Amendment . Effective upon satisfaction of the conditions precedent set forth in Section 2 below, the Existing Credit Agreement (including the Schedules and Exhibits thereto) is hereby amended as set forth in the marked terms on Annex I attached hereto including the amended Schedules and Exhibits thereto (the “ Amended Credit Agreement ”). In Annex I hereto, deletions of text in the Amended Credit Agreement are indicated by struck-through text, and insertions of text are indicated by bold, double-underlined text. Annex II attached hereto sets forth a clean copy of the Amended Credit Agreement, after giving effect to such amendments. As so amended, the Existing Credit Agreement shall continue in full force and effect.

2.     Effectiveness; Conditions Precedent . This Amendment shall be and become effective as of date hereof (the “ Third Amendment Effective Date ”) when all of the conditions set forth in this Section 2 shall have been satisfied.

(a)     Execution of Counterparts of Amendment . The Administrative Agent shall have received counterparts of this Amendment, which collectively shall have been duly executed on behalf of each of the Borrowers, the Guarantors, the Administrative Agent and the Lenders.

(b)     Legal Opinions . Receipt by the Administrative Agent of favorable opinions of U.S. legal counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, dated as of the Third Amendment Effective Date, and in form and substance reasonably satisfactory to the Administrative Agent.

(c)     No Material Adverse Change . There shall not have occurred a material adverse change since December 31, 2012 in the operations, business, properties, liabilities (actual or contingent), or financial condition of the Company and its Subsidiaries, taken as a whole.

(d)     Organization Documents, Resolutions, Etc. Receipt by the Administrative Agent of the following, in form and substance reasonably satisfactory to the Administrative Agent:


2



(i)    copies of the Organization Documents of each Loan Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, where applicable, and certified by a secretary or assistant secretary (or other Responsible Officer) of such Loan Party to be true and correct as of the Third Amendment Effective Date;

(ii)    such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; and

(iii)    such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in its state of organization or formation.

(e)     Closing Certificate . Receipt by the Administrative Agent of a certificate signed by a Responsible Officer of the Company certifying that the conditions specified in Section 2(c) and Sections 5.02(a) and (b) of the Amended Credit Agreement have been satisfied.

(f)     Fees . Receipt by the Administrative Agent, the Arranger and the Lenders of any fees required to be paid on or before the Third Amendment Effective Date.

Without limiting the generality of the provisions of the last paragraph of Section 10.03 of the Amended Credit Agreement, for purposes of determining compliance with the conditions specified in this Section 2, each Lender that has signed this Amendment shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Third Amendment Effective Date specifying its objection thereto.

3.     Expenses . The Loan Parties agree to reimburse the Administrative Agent for all reasonable documented out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation,

3



execution and delivery of this Amendment, including without limitation the reasonable documented fees and expenses of Moore & Van Allen PLLC.

4.     Ratification of Credit Agreement . From and after the Third Amendment Effective Date, the terms “Agreement”, “this Agreement”, “herein”, “hereinafter”, “hereto”, “hereof” and words of similar import, as used in the Amended Credit Agreement (including all exhibits and schedules thereto), shall, unless the context requires otherwise refer to the Amended Credit Agreement. The term “Credit Agreement” as used in each of the Loan Documents shall hereafter mean the Amended Credit Agreement. Except as herein specifically agreed, the Amended Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms. The Loan Parties acknowledge and consent to the modifications set forth herein and agree that this Amendment does not impair, reduce or limit any of their obligations under the Loan Documents (including, without limitation, the indemnity obligations set forth therein) and that, after the date hereof, this Amendment shall constitute a Loan Document. Notwithstanding anything herein to the contrary and without limiting the foregoing, the Company and each Subsidiary Guarantor reaffirms its guaranty obligations set forth in the Amended Credit Agreement.

5.     Authority/Enforceability . Each of the Loan Parties represents and warrants as follows:

(a)    It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.

(b)    This Amendment has been duly executed and delivered by such Person and constitutes such Person's legal, valid and binding obligation, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be subject to (i) the effect of applicable Debtor Relief Laws and (ii) to the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

(c)    No consent, approval, authorization or order of, or filing, registration or qualification with, any court or Governmental Authority or third party is required in connection with the execution, delivery or performance by such Person of this Amendment, other than those that have already been obtained and are in full force and effect.

(d)    The execution and delivery of this Amendment does not (i) contravene any provision of its Organization Documents or (ii) materially violate any Laws applicable to it.

4




6.     Representations . The Loan Parties represent and warrant to the Lenders that the representations and warranties of the Loan Parties set forth in Article VI of the Amended Credit Agreement are true and correct in all material respects as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date.

7.     Counterparts/Telecopy . This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of executed counterparts of this Amendment by telecopy or other secure electronic means shall be effective as an original.

8.     GOVERNING LAW . THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.


[remainder of page intentionally left blank]


5



IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered and this Amendment shall be effective as of the date first above written.

BORROWERS:
FLIR SYSTEMS, INC.,
an Oregon corporation

By: /s/ Anthony L. Trunzo    
Name: Anthony L. Trunzo
Title:     Senior Vice President, Finance and Chief Financial Officer

FLIR SYSTEMS B.V.,
a Netherlands company

By: /s/ Andrew C. Teich    
Name: Andrew C. Teich
Title:    Managing Director

By: /s/ T.M.R.M. Shyamnarain        
Name: T.M.R.M. Shyamnarain
Title:    Director, Intertrust (Netherlands) B.V.

By: /s/ L.M.F. Heine    
Name: L.M.F. Heine
Title:    Director, Intertrust (Netherlands) B.V.

FLIR SYSTEMS HOLDING AB,
a Swedish corporation

By: /s/ Andrew C. Teich    
Name: Andrew C. Teich
Title:     Chairman of the board

By: /s/ Thomas A. Surran    
Name: Thomas A. Surran
Title:    Director

FLIR SYSTEMS AKTIEBOLAG,
a Swedish corporation

By: /s/ Andrew C. Teich    
Name: Andrew C. Teich
Title:    Managing Director

By: /s/ Thomas A. Surran    
Name: Thomas A. Surran




Title:    Director

FLIR SYSTEMS LIMITED,
a company incorporated in England and Wales


By: /s/ William A. Sundermeier    
Name: William A. Sundermeier
Title:    Director




SUBSIDIARY
GUARANTORS:         FLIR COMMERCIAL SYSTEMS, INC.,
a California corporation

By: /s/ Andrew C. Teich    
Name: Andrew C. Teich
Title:    President

FLIR GOVERNMENT SYSTEMS, INC.,
a Delaware corporation

By: /s/ Anthony L. Trunzo    
Name: Anthony L. Trunzo
Title:    Chief Financial Officer




ADMINISTRATIVE
AGENT:             BANK OF AMERICA, N.A.,
as Administrative Agent

By: _ /s/ Anthea Del Bianco _________
Name: Anthea Del Bianco
Title:     Vice President
    
LENDERS:             BANK OF AMERICA, N.A.,
as a Lender, L/C Issuer and Swing Line Lender

By: _ /s/ Daryl K. Hogge __________
Name: Daryl K. Hogge
Title:    Senior Vice President

U.S. BANK NATIONAL ASSOCIATION,
as a Lender

By: _ /s/ Kurban H. Merchant ______
Name: Kurban H. Merchant
Title:    Vice President

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as a Lender

By: _ /s/ Keith Winzenried ________
Name: Keith Winzenried
Title:    Credit Executive

UNION BANK, N.A.,
as a Lender

By: _ /s/ John Wharton __________
Name:     John Wharton
Title:    Vice President

SVENSKA HANDELSBANKEN AB,
as a Lender

By: _ /s/ Anders Abelson ________
Name:     Anders Abelson
Title:    Senior Vice President

By: _/s/ Nancy D’Albert ________
Name:     Nancy D’Albert
Title:    Vice President






LENDERS:            THE NORTHERN TRUST COMPANY,
as a Lender

By: _ /s/ Brandon Rolek ___________
Name:     Brandon Rolek
Title:    Senior Vice President

HSBC BANK USA, NATIONAL ASSOCIATION,
as a Lender

By: _ /s/ Paul Ip ____________________
Name:     Paul Ip
Title:    Vice President






Exhibit 10.2


CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
ANNEX I TO
THIRD AMENDMENT TO CREDIT AGREEMENT
DATED AS OF APRIL 5, 2013

Published CUSIP Number 339718AE8

CREDIT AGREEMENT

dated as of February 8, 2011

among

FLIR SYSTEMS, INC.

and

CERTAIN SUBSIDIARIES OF FLIR SYSTEMS, INC. IDENTIFIED HEREIN,
as the Borrowers,

CERTAIN SUBSIDIARIES OF FLIR SYSTEMS, INC. IDENTIFIED HEREIN,
as the Subsidiary Guarantors,

BANK OF AMERICA, N.A.,
as Administrative Agent, Swing Line Lender and L/C Issuer,

U.S. BANK, NATIONAL ASSOCIATION,
as Syndication Agent,

JPMORGAN CHASE BANK, N.A.,
as Documentation Agent

and

THE OTHER LENDERS PARTY HERETO


Arranged By:

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Sole Lead Arranger and Book Manager






TABLE OF CONTENTS


ARTICLE I DEFINITIONS AND ACCOUNTING TERMS    1
1.01     Defined Terms .    1
1.02     Other Interpretive Provisions .    24
1.03     Accounting Terms .    24
1.04     Rounding .    25
1.05     Exchange Rates; Currency Equivalents .    25
1.06     Additional Alternative Currencies .    25
1.07     Change of Currency .    26
1.08     Times of Day .    27
1.09     Letter of Credit Amounts .    27
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS    27
2.01     Revolving Loans and Term Loan .    27
2.02     Borrowings, Conversions and Continuations of Loans .    28
2.03     Letters of Credit .    30
2.04     Swing Line Loans .    38
2.05     Prepayments.     40
2.06     Termination or Reduction of Aggregate Revolving Commitments .    42
2.07     Repayment of Loans .    42
2.08     Interest .    43
2.09     Fees .    44
2.10     Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate .    44
2.11     Evidence of Debt .    45
2.12     Payments Generally; Administrative Agent’s Clawback .    45
2.13     Sharing of Payments by Lenders .    47
2.14     Designated Borrowers .    48
2.15     Concerning Joint and Several Liability of the Domestic Borrowers .    49
2.16     Cash Collateral .    51
2.17     Defaulting Lenders .    52
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY    54
3.01     Taxes .    54
3.02     Illegality .    58
3.03     Inability to Determine Rates .    58
3.04     Increased Cost and Reduced Return; Capital Adequacy .    59
3.05     Funding Losses .    59
3.06     Matters Applicable to Requests for Compensation.     60
3.07     Mitigation Obligations; Replacement of Lenders .    61
3.08     Survival .    61
ARTICLE IV GUARANTY     61
4.01     The Guaranty .    61
4.02     Obligations Unconditional .    62
4.03     Reinstatement .    63
4.04     Certain Additional Waivers .    63
4.05     Remedies .    63
4.06     Rights of Contribution .    63
4.07     Guarantee of Payment; Continuing Guarantee .    64
ARTICLE V CONDITIONS PRECEDENT TO CREDIT EXTENSIONS    64



5.01     Conditions of Initial Credit Extension .    64
5.02     Conditions to all Credit Extensions .    65
ARTICLE VI REPRESENTATIONS AND WARRANTIES    66
6.01     Existence, Qualification and Power .    66
6.02     Authorization; No Contravention .    66
6.03     Governmental Authorization; Other Consents .    67
6.04     Binding Effect .    67
6.05     Financial Statements; No Material Adverse Effect .    67
6.06     Litigation .    68
6.07     Ownership of Property .    68
6.08     Environmental Compliance .    68
6.09     Insurance .    68
6.10     Taxes .    68
6.11     ERISA Compliance .    69
6.12     Subsidiaries .    69
6.13     Margin Regulations; Investment Company Act .    69
6.14     Disclosure .    70
6.15     Compliance with Laws .    70
6.16     Intellectual Property; Licenses, Etc .    70
6.17     Solvency .    70
6.18     Labor Matters .    70
6.19     Taxpayer Identification Number .    70
6.20     Foreign Loan Parties .    71
ARTICLE VII AFFIRMATIVE COVENANTS    72
7.01     Financial Statements .    72
7.02     Certificates; Other Information .    73
7.03     Notices .    74
7.04     Payment of Taxes .    75
7.05     Preservation of Existence, Etc.     75
7.06     Maintenance of Properties .    75
7.07     Maintenance of Insurance .    76
7.08     Compliance with Laws .    76
7.09     Books and Records .    76
7.10     Inspection Rights .    76
7.11     Use of Proceeds .    76
7.12     Additional Guarantors.     77
7.13     Compliance with Dutch Financial Supervision Act .    77
ARTICLE VIII NEGATIVE COVENANTS    77
8.01     Liens .    77
8.02     Indebtedness .    79
8.03     Fundamental Changes and Dispositions .    79
8.04     Change in Nature of Business .    79
8.05     Transactions with Affiliates .    79
8.06     Burdensome Agreements .    79
8.07     Use of Proceeds .    80
8.08     Financial Covenants .    80
8.09     Organization Documents; Fiscal Year .    80
ARTICLE IX EVENTS OF DEFAULT AND REMEDIES    80
9.01     Events of Defaul t.    80
9.02     Remedies Upon Event of Default .    82



9.03     Application of Funds .    83
ARTICLE X ADMINISTRATIVE AGENT    84
10.01     Appointment and Authority .    84
10.02     Rights as a Lender .    84
10.03     Exculpatory Provisions .    84
10.04     Reliance by Administrative Agent .    85
10.05     Delegation of Duties .    85
10.06     Resignation of Administrative Agent .    86
10.07     Non-Reliance on Administrative Agent and Other Lenders .    87
10.08     No Other Duties; Etc .    87
10.09     Administrative Agent May File Proofs of Claim .    87
10.10     Guaranty Matters .    88
ARTICLE XI MISCELLANEOUS    88
11.01     Amendments, Etc .    88
11.02     Notices; Effectiveness; Electronic Communications .    90
11.03     No Waiver; Cumulative Remedies; Enforcement .    92
11.04     Expenses; Indemnity; and Damage Waiver .    92
11.05     Payments Set Aside .    95
11.06     Successors and Assigns.     95
11.07     Treatment of Certain Information; Confidentiality .    99
11.08     Set-off .    100
11.09     Interest Rate Limitation.     100
11.10     Counterparts; Integration; Effectiveness .    101
11.11     Survival of Representations and Warranties .    101
11.12     Severability .    101
11.13     Replacement of Lenders .    101
11.14     Governing Law; Jurisdiction; Etc .    102
11.15     Waiver of Right to Trial by Jury .    103
11.16     No Advisory or Fiduciary Responsibility .    103
11.17     USA PATRIOT Act Notice .    104
11.18     Judgment Currency .    104
11.19     Electronic Execution of Assignments and Certain Other Documents .    104
    



SCHEDULES

1.01A        Existing Letters of Credit
1.01B        Mandatory Cost Formulae
2.01        Commitments and Applicable Percentages
6.12        Subsidiaries
6.19        Taxpayer Identification Number
11.02        Certain Addresses for Notices

EXHIBITS

2.02        Form of Loan Notice    
2.04        Form of Swing Line Loan Notice
2.11(a)        Form of Note
2.14(a)        Form of Designated Borrower Request
2.14(b)        Form of Designated Borrower Joinder Agreement
7.02        Form of Compliance Certificate
7.12        Form of Joinder Agreement
11.06(b)    Form of Assignment and Assumption
11.06(b)(iv)    Form of Administrative Questionnaire




CREDIT AGREEMENT


This CREDIT AGREEMENT is entered into as of February 8, 2011 among FLIR SYSTEMS, INC. an Oregon corporation (the “ Company ”), certain Subsidiaries of the Company party hereto pursuant to Section 2.14 (each a “ Designated Borrower ” and, together with the Company, the “ Borrowers ” and, each a “ Borrower ”), the Subsidiary Guarantors (defined herein), the Lenders (defined herein) and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The Company has requested that the Lenders provide credit facilities for the purposes set forth herein, and the Lenders are willing to do so on the terms and conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

1.01     Defined Terms .

As used in this Agreement, the following terms shall have the meanings set forth below:

Acquisition ”, by any Person, means the acquisition by such Person, in a single transaction or in a series of related transactions, of either (a) all or any substantial portion of the property of, or a line of business or division of, another Person or (b) at least a majority of the Voting Stock of another Person, in each case whether or not involving a merger or consolidation with such other Person.

Administrative Agent ” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

Administrative Agent’s Office ” means, with respect to any currency, the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 11.02 with respect to such currency, or such other address or account with respect to such currency as the Administrative Agent may from time to time notify to the Company and the Lenders.

Administrative Questionnaire ” means an Administrative Questionnaire in substantially the form of Exhibit 11.06(b)(iv) or any other form approved by the Administrative Agent.

Affiliate ” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

Aggregate Revolving Commitments ” means the Revolving Commitments of all the Lenders. The initial amount of the Aggregate Revolving Commitments in effect on the Third Amendment Effective Date is TWO HUNDRED MILLION DOLLARS ($200,000,000).

Agreement ” means this Credit Agreement.





Alternative Currency ” means each of Euro, Sterling, Kronor, Japanese yen, Canadian dollars, Australian dollars and each other currency (other than Dollars) that is approved in accordance with Section 1.06 .

Alternative Currency Equivalent ” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as determined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of such Alternative Currency with Dollars.

Applicable Percentage ” means with respect to any Lender at any time, (a) with respect to such Lender’s Revolving Commitment at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Revolving Commitments represented by such Lender’s Revolving Commitment at such time; provided that if the commitment of each Lender to make Revolving Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 9.02 or if the Aggregate Revolving Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments, such percentage under clause (a) being such Lender’s “Revolving Applicable Percentage” and (b) with respect to such Lender’s portion of the outstanding Term Loan at any time, the percentage (carried out to the ninth decimal place) of the outstanding principal amount of the Term Loan held by such Lender at such time, such percentage under clause (b) being such Lender’s “Term Loan Applicable Percentage”. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable. The Applicable Percentages shall be subject to adjustment as provided in Section 2.17 .

Applicable Rate ” means the following percentages per annum, based upon the Consolidated Total Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 7.02(a) :



Pricing Tier

Consolidated
Total Leverage Ratio


Commitment Fee


Letters of Credit (Standby)

Letters of Credit (Commercial)


Eurocurrency Rate Loans


Base Rate Loans
1
>  2.25 to 1.0
0.40%
2.25%
1.125%
2.25%
1.25%
2
>  1.50 to 1.0 but < 2.25 to 1.0
0.35%
1.75%
0.875%
1.75%
0.75%
3
>  0.75 to 1.0 but < 1.50 to 1.0
0.30%
1.50%
0.750%
1.50%
0.50%
4
< 0.75 to 1.0
0.25%
1.25%
0.625%
1.25%
0.25%

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Total Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 7.02(a) ; provided , however , that if a Compliance Certificate is not delivered when due in accordance with such Section, then, upon the request of the Required Lenders, Pricing Tier 1 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall continue to apply until the first Business Day immediately




following the date a Compliance Certificate is delivered in accordance with Section 7.02(a) , whereupon the Applicable Rate shall be adjusted based upon the calculation of the Consolidated Total Leverage Ratio contained in such Compliance Certificate. The Applicable Rate in effect from the Third Amendment Effective Date through the first Business Day immediately following the date a Compliance Certificate is required to be delivered pursuant to Section 7.02(a) for the fiscal quarter ending March 31, 2013 shall be determined based upon Pricing Tier 3.

Applicable Time ” means, with respect to any borrowings and payments in any Alternative Currency, the local time in the place of settlement for such Alternative Currency as may be determined by the Administrative Agent or the L/C Issuer, as the case may be, to be necessary for timely settlement on the relevant date in accordance with normal banking procedures in the place of payment.

Applicant Borrower ” has the meaning specified in Section 2.14 .

Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

Arranger ” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its capacity as sole lead arranger and book manager.

Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 11.06(b) ), and accepted by the Administrative Agent, in substantially the form of Exhibit 11.06(b) or any other form approved by the Administrative Agent.

Attributable Indebtedness ” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease of any Person, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease, and (c) in respect of any Securitization Transaction of any Person, the outstanding principal amount of such financing, after taking into account reserve accounts and making appropriate adjustments, determined by the Administrative Agent in its reasonable judgment.

Audited Financial Statements ” means the audited consolidated balance sheet of the Company and its Subsidiaries for the fiscal year ended December 31, 2012 and the related consolidated statements of income or operations, shareholders’ equity and cash flows of the Company and its Subsidiaries for such fiscal year, including the notes thereto.

Availability Period ” means, with respect to the Revolving Commitments, the period from and including the Closing Date to the earliest of (a) the Revolving Loan Maturity Date, (b) the date of termination of the Aggregate Revolving Commitments pursuant to Section 2.06 , and (c) the date of termination of the commitment of each Lender to make Revolving Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 9.02 .

Bank of America ” means Bank of America, N.A. and its successors.

Base Rate ” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to




time by Bank of America as its “prime rate” and (c) the Eurocurrency Base Rate plus 1.0%. The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the “prime rate” announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

Base Rate Loan ” means a Loan that bears interest based on the Base Rate. Base Rate Loans shall be made only to the Company and shall be denominated in Dollars.

Borrower ” and “ Borrowers ” each has the meaning specified in the introductory paragraph hereto.

Borrower Materials ” has the meaning specified in Section 7.02 .

Borrowing ” means a borrowing consisting of simultaneous Loans of the same Type, in the same currency and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01 .

Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, New York, New York or the state where the Administrative Agent’s Office with respect to Obligations denominated in Dollars is located and: (a) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in Dollars, any fundings, disbursements, settlements and payments in Dollars in respect of any such Eurocurrency Rate Loan, or any other dealings in Dollars to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means any such day that is also a London Banking Day; (b) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in Euro, any fundings, disbursements, settlements and payments in Euro in respect of any such Eurocurrency Rate Loan, or any other dealings in Euro to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means a TARGET Day; (c) if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in a currency other than Dollars or Euro, means any such day on which dealings in deposits in the relevant currency are conducted by and between banks in the London or other applicable offshore interbank market for such currency; and (d) if such day relates to any fundings, disbursements, settlements and payments in a currency other than Dollars or Euro in respect of a Eurocurrency Rate Loan denominated in a currency other than Dollars or Euro, or any other dealings in any currency other than Dollars or Euro to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan (other than any interest rate settings), means any such day on which banks are open for foreign exchange business in the principal financial center of the country of such currency.

Cash Collateralize ” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the L/C Issuer or the Lenders, as collateral for L/C Obligations or obligations of the Lenders to fund participations in respect of L/C Obligations, cash or deposit account balances or, if the Administrative Agent and the L/C Issuer shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the L/C Issuer. “ Cash Collateral ” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c)




the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided , however , for purposes of this Agreement, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines or directives in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III shall in each case be deemed to have gone into effect and adopted after the Closing Date.

Change of Control ” means an event or series of events by which:

(a)    any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, directly or indirectly, of fifty percent (50%) or more of the Equity Interests of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully diluted basis;

(b)    during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Company cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or

(c)    the Company fails to own and control, directly or indirectly, 100% of the outstanding Equity Interests (other than (i) directors’ qualifying shares and (ii) shares issued to foreign nationals to the extent required by applicable Law) of the Designated Borrowers.

Closing Date ” means February 8, 2011.

Commitment ” means, as to each Lender, the Revolving Commitment of such Lender and/or the Term Loan Commitment of such Lender.

Company ” has the meaning specified in the introductory paragraph hereto.

Compliance Certificate ” means a certificate substantially in the form of Exhibit 7.02 .

Consolidated EBITDA ” means, for any period, for the Company and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for federal, state, local and foreign income taxes payable for such period, (iii) foreign




exchange losses for such period, (iv) depreciation and amortization expense for such period, and (v) other expenses reducing Consolidated Net Income for such period which did not or will not require a cash settlement in such period or any future period (including but not limited to impairment charges, costs associated with exit or disposal activities, in-process research and development charges, and stock based compensation), minus (b) the following to the extent added in calculating such Consolidated Net Income: (i) foreign exchange gains for such period and (ii) all items increasing net income for such period which did not or will not result in a cash settlement in such period or any future period. Consolidated EBITDA shall not include any gain resulting from the sale of all or a portion of an ongoing business.

Consolidated Funded Indebtedness ” means, as of any date of determination with respect to the Company and its Subsidiaries on a consolidated basis, without duplication, the sum of: (a) all obligations for borrowed money, whether current or long-term (including the Obligations) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments; (c) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business); (d) all Attributable Indebtedness; (e) all Guarantees with respect to Indebtedness of the types specified in clauses (a) through (d) above of another Person; and (f) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Company or a Subsidiary is a general partner or joint venturer, except to the extent that Indebtedness is expressly made non-recourse to such Person. To the extent that the rights and remedies of the obligee of any Consolidated Funded Indebtedness are limited to specific property and are otherwise non-recourse to the Company or any Subsidiary, the amount of such Consolidated Funded Indebtedness shall be limited to the lesser of (i) the fair market value of such Person’s interest in such property and (ii) such Person’s obligations in respect of such Consolidated Funded Indebtedness.

Consolidated Interest Charges ” means, for any period, for the Company and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, plus (b) the portion of rent expense with respect to such period under capital leases that is treated as interest in accordance with GAAP plus (c) the implied interest component of Synthetic Leases with respect to such period.

Consolidated Interest Coverage Ratio ” means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four fiscal quarters most recently ended to (b) Consolidated Interest Charges for the period of the four fiscal quarters most recently ended.

Consolidated Net Income ” means, for any period, for the Company and its Subsidiaries on a consolidated basis, the net income (excluding extraordinary gains and losses) for that period.

Consolidated Total Leverage Ratio ” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended.

Contractual Obligation ” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.





Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

Credit Extension ” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

Debtor Relief Laws ” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

Default ” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

Default Rate ” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided , however , that with respect to a Eurocurrency Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate and any Mandatory Cost) otherwise applicable to such Loan plus 2% per annum, in each case to the fullest extent permitted by applicable Laws and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2% per annum.

Defaulting Lender ” means, subject to Section 2.17(d) , any Lender that, as determined by the Administrative Agent, (a) has failed to perform any of its funding obligations hereunder, including in respect of its Loans or participations in respect of Letters of Credit or Swing Line Loans, within three Business Days of the date required to be funded by it hereunder, (b) has notified the Company or the Administrative Agent that it does not intend to comply with its funding obligations under this Agreement or has made a public statement to that effect with respect to its funding obligations hereunder or under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after written request by the Administrative Agent or the Company, to confirm in a manner reasonably satisfactory to the Administrative Agent and the Company that it will comply with its funding obligations, or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or a custodian appointed for it, or (iii) taken any action in furtherance of, or indicated its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.17(d) ) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Company, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.





Designated Borrower ” has the meaning specified in the introductory paragraph hereto.

Designated Borrower Notice ” has the meaning specified in Section 2.14 .

Designated Borrower Request and Assumption Agreement ” has the meaning specified in Section 2.14 .

Designated Borrower Sublimit ” means an amount equal to the lesser of (a) the Aggregate Revolving Commitments and (b) $50,000,000. The Designated Borrower Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.

Disposition ” or “ Dispose ” means the sale, transfer, license, lease or other disposition of any property by the Company or any Subsidiary (including the Equity Interests of any Subsidiary), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, but excluding any Involuntary Disposition.

Dollar ” and “ $ ” mean lawful money of the United States.

Dollar Equivalent ” means, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in any Alternative Currency, the equivalent amount thereof in Dollars as determined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of Dollars with such Alternative Currency.

Domestic Borrower ” means, collectively, the Company and each Designated Borrower that is a Domestic Subsidiary.

Domestic Loan Parties ” means, collectively, the Domestic Borrowers and the Subsidiary Guarantors.

Domestic Subsidiary ” means any Subsidiary that is organized under the laws of any state of the United States or the District of Columbia.

Dutch Financial Supervision Act ” means the Dutch Financial Supervision Act ( Wet op het financieel toezicht ) dated 28 September 2006 published in the Dutch government gazette nr. 475 on 31 October 2006.

Dutch Borrower ” means each Designated Borrower and each Applicant Borrower incorporated in the Netherlands.

Eligible Assignee ” means any Person that meets the requirements to be an assignee under Sections 11.06(b)(iii) , (v) and (vi) (subject to such consents, if any, as may be required under Section 11.06(b)(iii) ).

EMU ” means the economic and monetary union in accordance with the Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998.

EMU Legislation ” means the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.





Environmental Laws ” means all Laws relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

Equity Interests ” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

ERISA ” means the Employee Retirement Income Security Act of 1974 and any regulations issued pursuant thereto.

ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating to Section 412 of the Internal Revenue Code).

ERISA Event ” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate.

Euro ” and “ EUR ” mean the lawful currency of the Participating Member States introduced in accordance with the EMU Legislation.  

Eurocurrency Base Rate means:

(a)    for any Interest Period with respect to a Eurocurrency Rate Loan, the rate per annum equal to (i) the British Bankers Association LIBOR Rate or the successor thereto if the British Bankers Association




is no longer making a LIBOR rate available (“ LIBOR ”), as published by Reuters (or such other commercially available source providing quotations of LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for deposits in the relevant currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or (ii) if such published rate is not available at such time for any reason, the rate determined by the Administrative Agent to be the rate at which deposits in the relevant currency for delivery on the first day of such Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch (or other Bank of America branch or Affiliate) to major banks in the London or other offshore interbank market for such currency at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period; and

(b)    for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) LIBOR, at approximately 11:00 a.m., London time determined two London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by Bank of America’s London Branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination.

Eurocurrency Rate ” means, for any Interest Period with respect to any Eurocurrency Rate Loan, a rate per annum determined by the Administrative Agent to be equal to the quotient obtained by dividing (a) the Eurocurrency Base Rate for such Eurocurrency Rate Loan for such Interest Period by (b) one minus the Eurocurrency Reserve Percentage for such Eurocurrency Rate Loan for such Interest Period.

Eurocurrency Rate Loan ” means a Loan that bears interest at a rate based on clause (a) of the definition of “Eurocurrency Rate.” Eurocurrency Rate Loans may be denominated in Dollars or in an Alternative Currency. All Loans denominated in an Alternative Currency must be Eurocurrency Rate Loans.

Eurocurrency Reserve Percentage ” means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”). The Eurocurrency Rate for each outstanding Eurocurrency Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurocurrency Reserve Percentage.

Event of Default ” has the meaning specified in Section 9.01 .

Excluded Taxes ” means, with respect to the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, or as a result of a present or former connection between such recipient and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than such connection arising from the Administrative




Agent, any Lender or the L/C Issuer having executed, delivered or performed its obligations or received a payment under, or enforced, any Loan Document), (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which such Borrower is located, (c) any backup withholding tax that is required by the Internal Revenue Code to be withheld from amounts payable to a Lender other than a Foreign Lender, (d) except as provided in the following sentence, in the case of a Foreign Lender (other than an assignee pursuant to a request by the Company under Section 11.13 ), any withholding tax that (i) is required to be imposed on amounts payable to such Foreign Lender pursuant to laws in force at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or (ii) is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e) , except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from such Borrower with respect to such withholding tax pursuant to Section 3.01(a) and (e) any U.S. federal withholding Taxes imposed under FATCA. Notwithstanding anything to the contrary contained in this definition, “Excluded Taxes” shall not include any withholding tax imposed at any time on payments made by or on behalf of a Foreign Loan Party to any Lender hereunder or under any other Loan Document, provided that

(i)    such Lender shall have complied with the last paragraph of Section 3.01(e)(iii) , and

(ii)    if the relevant Foreign Loan Party is FLIR Systems, Ltd. (x) the relevant Lender is a Qualifying Lender; (y) the relevant Lender is not or has ceased to be a Qualifying Lender and at the time the relevant payment falls due, the payment could not have been made to the relevant Lender without any withholding tax being imposed if the Lender had been a Qualifying Lender; or (z) the relevant Lender is not or has ceased to be a Qualifying Lender at the time the relevant payment falls due as a result of a Change in Law or a change in (or the interpretation, administration or application of) any double taxation agreement or any published practice or published concession of any relevant tax authority, in each case after the date on which it became a Lender under this Agreement.

Existing Letters of Credit ” means those letters of credit listed on Schedule 1.01A .

FATCA ” means Sections 1471 through 1474 of the Internal Revenue Code, as of the Third Amendment Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code.

Federal Funds Rate ” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

Fee Letter ” means the letter agreement, dated as of the Third Amendment Effective Date, among the Company and the Administrative Agent.





Foreign Lender ” means, with respect to any Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which such Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

Foreign Loan Parties ” means, collectively, the Foreign Subsidiaries of the Company that are Designated Borrowers.

Foreign Subsidiary ” means any Subsidiary that is not a Domestic Subsidiary.

FRB ” means the Board of Governors of the Federal Reserve System of the United States.

Fronting Exposure ” means, at any time there is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Revolving Applicable Percentage of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Revolving Applicable Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.

Fund ” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

GAAP ” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied.

Governmental Authority ” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

Guarantee ” means, as to any Person, (a) any payment obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness payable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness of the payment of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness of any other Person, whether or not such Indebtedness is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided , however , that the term Guarantee shall not include




endorsements of instruments for deposit or collection in the ordinary course of business or customary and reasonable indemnity obligations in effect as of the Closing Date or entered into in connection with any Acquisition or Disposition permitted under the terms of this Agreement (other than any such obligation with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary payment obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

Guaranty ” means the Guaranty made by the Guarantors in favor of the Administrative Agent and the holders of the Obligations pursuant to Article IV .

Guarantors ” means the Subsidiary Guarantors and, with respect to the Obligations owing by the Designated Borrowers that are Foreign Subsidiaries, the Domestic Borrowers.

Hazardous Materials ” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

HMRC DT Treaty Passport Scheme ” means the HM Revenue & Customs Double Taxation Treaty Passport Scheme for overseas corporate lenders which commenced on 1 September 2010.

Honor Date ” has the meaning set forth in Section 2.03(c) .

Immaterial Subsidiary ” means (a) FSI Holdings Inc. and (b) as of any date of determination, any other Subsidiary of the Company (i) that, together with its Subsidiaries, does not have assets as of such date that exceed 15% of total assets of the Company and its Subsidiaries, on a consolidated basis, as of such date or (ii) whose, together with its Subsidiaries’, contribution to Consolidated EBITDA, for the four quarter period ending immediately prior to such date, does not exceed 15% of Consolidated EBITDA for such period. Notwithstanding the forgoing, no Subsidiary that Guarantees obligations under any indenture of the Company in respect of aggregate outstanding Indebtedness in excess of the Threshold Amount shall be an Immaterial Subsidiary.

Indebtedness ” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments; (c) net obligations of such Person under any Swap Contract; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) all Attributable Indebtedness of such Person; (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person or any warrant, right or option to acquire such Equity Interest, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and (h) all Guarantees of such Person




in respect of any of the foregoing. For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.

Indemnified Taxes ” means Taxes other than Excluded Taxes.

Indemnitees ” has the meaning specified in Section 11.04(b) .

Information ” has the meaning specified in Section 11.07 .

Interest Payment Date ” means (a) as to any Eurocurrency Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided , however , that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date.

Interest Period ” means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Company in its Loan Notice; provided that:

(a)    any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(b)    any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(c)    no Interest Period shall extend beyond the Maturity Date.

Internal Revenue Code ” means the Internal Revenue Code of 1986.

Involuntary Disposition ” means any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any property of the Company or any of its Subsidiaries.

IP Rights ” has the meaning specified in Section 6.16 .

IRS ” means the United States Internal Revenue Service.

ISP ” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).





Issuer Documents ” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Company (or any Subsidiary) or in favor of the L/C Issuer and relating to such Letter of Credit.

Joinder Agreement ” means a joinder agreement substantially in the form of Exhibit 7.12 executed and delivered by a Domestic Subsidiary in accordance with the provisions of Section 7.12 .

Kronor ” means the lawful currency of Sweden.

Laws ” means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

L/C Advance ” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Revolving Applicable Percentage. All L/C Advances shall be denominated in Dollars.

L/C Borrowing ” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing of Revolving Loans. All L/C Borrowings shall be denominated in Dollars.

L/C Credit Extension ” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

L/C Issuer ” means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.

L/C Obligations ” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.09 . For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
    
Lenders ” means each of the Persons identified as a “Lender” on the signature pages hereto and each other Person that becomes a “Lender” in accordance with this Agreement and their successors and assigns and, unless the context requires otherwise, includes the Swing Line Lender.

Lending Office ” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Company and the Administrative Agent.

Letter of Credit ” means any letter of credit issued hereunder providing for the payment of cash upon the honoring of a presentation thereunder and shall include the Existing Letters of Credit. A Letter of




Credit may be a commercial letter of credit or a standby letter of credit. Letters of Credit may be denominated in Dollars or in an Alternative Currency.

Letter of Credit Application ” means an application and agreement for the issuance or amendment of a letter of credit in the form from time to time in use by the L/C Issuer.

Letter of Credit Expiration Date ” means the day that is seven days prior to the Revolving Loan Maturity Date (or, if such day is not a Business Day, the next preceding Business Day).

Letter of Credit Fee ” has the meaning specified in Section 2.03(h) .

Letter of Credit Sublimit ” means an amount equal to the lesser of (a) the Aggregate Revolving Commitments and (b) $100,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.

Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement (in the nature of compensating balances, cash collateral accounts or security interests), encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

Loan ” means an extension of credit by a Lender to a Borrower under Article II in the form of a Revolving Loan, Swing Line Loan or the Term Loan.

Loan Documents ” means this Agreement, each Note, each Issuer Document, each Designated Borrower Request and Assumption Agreement, each Joinder Agreement, any agreement entered into by a Loan Party creating or perfecting rights in Cash Collateral pursuant to the provisions of Section 2.16 and the Fee Letter.

Loan Notice ” means a notice of (a) a Borrowing of Revolving Loans or the Term Loan, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans, in each case pursuant to Section 2.02(a) , which, if in writing, shall be substantially in the form of Exhibit 2.02 .

Loan Parties ” means, collectively, each Domestic Loan Party and each Foreign Loan Party.

London Banking Day ” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

Mandatory Cost ” means, with respect to any period, the percentage rate per annum determined in accordance with Schedule 1.01B .

Material Adverse Effect ” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or financial condition of the Company and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its payment or other material obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party. Failure of the Company to achieve the results forecasted pursuant to Section 7.02(b) shall not, in and of itself, constitute a Material Adverse Effect.





Maturity Date ” means (a) as to the Revolving Loans, Swing Line Loans and Letters of Credit (and the related L/C Obligations), April 5, 2018 (the “ Revolving Loan Maturity Date ”) and (b) as to the Term Loan, April 5, 2019 (the “ Term Loan Maturity Date ”); provided , however , that, in each case, if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.

Minimum Collateral Amount ” means, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances provided to reduce or eliminate Fronting Exposure during the existence of a Defaulting Lender, an amount equal to 105% of the Fronting Exposure of the L/C Issuer with respect to Letters of Credit issued and outstanding at such time, (b) with respect to Cash Collateral consisting of cash or deposit account balances provided in accordance with the provisions of Section 2.16(a)(i) , (a)(ii) or (a)(iii) , an amount equal to 105% of the Outstanding Amount of all L/C Obligations, and (c) otherwise, an amount determined by the Administrative Agent and the L/C Issuer in their sole discretion.

Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.

Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

Non-Consenting Lender ” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 11.01 and (b) has been approved by the Required Lenders or the Required Revolving Lenders, as applicable.

Non-Defaulting Lender ” means, at any time, each Revolving Lender that is not a Defaulting Lender at such time.

Note ” has the meaning specified in Section 2.11(a) .

Obligations ” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising (x) under any Loan Document or (y) otherwise with respect to any Loan or Letter of Credit, in each case, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming a Loan Party as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

Organization Documents ” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

Original Lender ” means each of the Persons identified as a “Lender” on the signature pages hereto.