THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Eagle Test Systems, Inc. (EGLT)

2/21/2006 S-1/A Information

Leonard Foxman is the father of Theodore Foxman.

Arrangements with TA Associates

General. In September 2003, TA Associates purchased 3,436 shares of our series A convertible preferred stock for a total purchase price of $65.0 million. TA Associates also purchased $30.0 million in principal amount of 12% senior subordinated convertible notes due September 30, 2009. Michael C. Child, one of our directors, is a Managing Director of TA Associates, Inc.

In 2003, our founding family and then controlling stockholders, Leonard and Theodore Foxman, determined that it would be prudent to diversify a portion of the stockholders’ net worth represented by their ownership interest in Eagle Test. Leonard and Theodore Foxman sought a financial partner that would facilitate the achievement of these objectives, as well as provide additional industry knowledge and expertise to help Eagle Test execute its business plan. After meeting with several potential purchasers and selecting TA Associates, an unaffiliated private equity firm, Leonard and Theodore Foxman, on behalf themselves and the minority stockholders, and representatives of TA Associates negotiated the acquisition by TA Associates of a 62.8% interest in our equity. At that time, we had no debt and only one class of common stock outstanding. As a result of these negotiations, Leonard and Theodore Foxman and several minority stockholders agreed to sell 8,993,752 shares of common stock back to us, representing the 62.8% stake, for $95.0 million. We obtained the $95.0 million needed to pay for the shares of common stock sold by Leonard and Theodore Foxman and others by borrowing $30.0 million of senior subordinated convertible debt from TA Associates and issuing shares of series A convertible preferred stock (convertible into 8,590,248 shares of common stock and redeemable preferred stock having a liquidation preference of $32.5 million) to TA Associates for $65.0 million, as negotiated by Leonard and Theodore Foxman and TA Associates.

Our recapitalization created a priority of $30.0 million for the senior subordinated convertible notes. In addition, the shares of series A convertible preferred stock issued to TA Associates in the recapitalization have a number of rights superior to those of our common stock, including, among others, a $65.0 million preference on certain liquidity events, a $32.5 million priority payment on an initial public offering or sale event, and a right to convert into common stock on a one-for-one basis.

Series A Convertible Preferred Stock. Our certificate of incorporation contains customary provisions relating to the series A convertible preferred stock regarding liquidation and sale preference, voting rights and required approvals of certain transactions, among others. Upon the completion of this offering, all of the shares of series A convertible preferred stock will convert into an aggregate of 8,590,248 shares of our common stock and 3,436 shares of our redeemable preferred stock. All of the shares of redeemable preferred stock will then be immediately redeemed for an aggregate of $32.5 million.

As discussed above, in our recapitalization in September 2003, TA Associates agreed to provide equity capital with a value of $65.0 million in the form of series A convertible preferred stock. The terms of the series A convertible preferred stock entitle TA Associates to a preferential payment of $32.5 million through the redemption of the redeemable preferred stock, plus 8,590,248 shares of common stock, in connection with an initial public offering. We believe that TA Associates specified that this security be structured as convertible preferred stock that converts into redeemable preferred stock and common stock in connection with an initial public offering in order to avoid treatment of the $32.5 million payment as dividend rather than a return of capital.

Convertible Notes; Warrants. The note purchase agreement executed in connection with the issuance of the senior subordinated convertible notes to TA Associates contains covenants, events of default and other customary provisions. Upon the completion of this offering, the senior subordinated convertible notes held by TA Associates will be converted into senior subordinated notes in the principal amount of $29.995 million and warrants to purchase 525,040 shares of our common stock. The senior subordinated notes will then be repurchased for approximately $31.3 million, representing $29.995 million of principal, a 2% redemption premium in accordance with the note purchase agreement and an estimate of $0.7 million in accrued and unpaid interest. The warrants to be issued will have an exercise price of $0.01 per share and will expire on September 30, 2013. The holders of the warrants will have a right to sell the warrants to us any time after September 30, 2008, at their election, for the fair market value of the warrants. TA Associates has agreed to exercise the warrants for common stock in connection with the completion of this offering, and upon such exercise, the right to sell the warrants to us terminates. TA Associates agreed to exercise the warrants because we and the underwriters requested that they do so in order to simplify our capital structure as a public company. See “Description of Capital Stock — Warrants.”

As discussed above, in our recapitalization in September 2003, TA Associates agreed to loan us $30.0 million in the form of senior subordinated convertible notes. The terms of the senior subordinated convertible notes required us to grant to TA Associates warrants to purchase 525,040 shares of common stock for nominal consideration, and we agreed to these terms. We believe that TA Associates specified that the instruments evidencing this arrangement would be senior subordinated convertible notes having a principal amount of $30.0 million convertible into senior subordinated notes having a principal amount of $29.995 million and the warrants to purchase 525,040 shares of common stock because a separate note and warrant arrangement would have given rise to original issue discount on the separate note, while convertible notes are not subject to the original issue discount rules.

Stockholders Agreement

In connection with the investment in us by TA Associates, we entered into a stockholders agreement, dated as of September 30, 2003, with TA Associates, and Leonard and Theodore Foxman, both of whom are directors, executive officers and significant stockholders, and Jack E. Weimer and Steven R. Dollens, both of whom are executive officers. The purpose of the stockholders agreement is to govern the relationship among the parties to the agreement. The stockholders agreement provides, among other things, the terms on which our securities held by these stockholders are to be transferred and voted. The stockholders agreement contains customary transfer restrictions, rights of first refusal and co-sale, preemptive rights and voting obligations. For example, our common stockholders that are a party to this agreement are restricted from making certain transfers of their shares without the prior consent of TA Associates, and TA Associates is restricted from transferring its shares to any of our competitors. The stockholders agreement also enables TA Associates to require all of the other stockholders to participate in a sale event in which it elects to participate. A “sale event” is defined as a negotiated transaction whereby at least a majority of the shares of our stock held by TA Associates vote to sell substantially all of our assets, sell a sufficient amount of our common stock to trigger a change of control of us or cause us to merge with any non-affiliate. These provisions, as well as most other provisions, of the stockholders agreement terminate upon the closing of this offering. However, there are three material provisions of the stockholders agreement that survive the closing of this offering. In particular, the surviving provisions include our covenant to indemnify TA Associates, including its associated investment funds, subject to exceptions, for damages, expenses or losses arising out of, based upon or by reason of any third party or governmental claims relating to their status as a security holder, creditor, director, agent, representative or controlling person of us, or otherwise relating to their involvement with us. This covenant continues until the expiration of the applicable statute of limitations. In addition, we have covenanted to reimburse TA Associates up to an annual limit of $40,000 for costs and expenses incurred in connection with its ongoing investment in us, which covenant also survives the closing of this offering. Pursuant to this obligation, in fiscal year 2004 and 2005 we paid TA Associates $5,057 and $11,329, respectively. Lastly, we have covenanted to obtain and maintain directors and officers’ liability insurance coverage of at least $10.0 million per occurrence, covering, among other things, violations of federal or state securities laws. We are required to increase the coverage to at least $15.0 million per occurrence in connection with this offering, and this covenant survives the closing of this offering.

Management Rights Agreement

In connection with TA Associates’ investment in us, we entered into a management rights agreement, dated as of September 30, 2003, with TA Associates. Under the terms of this agreement, TA Associates is entitled to consult with and advise us on significant business issues, submit business proposals or suggestions to our senior management and to call a meeting with senior management to discuss such proposals or suggestions, and to inspect our facilities and examine our books and records, subject to customary confidentiality restrictions on the use of such information. We do not pay any fees to, or receive any fees from, TA Associates in connection with these arrangements. The agreement will terminate upon the closing of this offering.

Registration Rights Agreement

In connection with the investment in us by TA Associates, we entered into a registration rights agreement, dated as of September 30, 2003, with TA Associates, Leonard and Theodore Foxman, Jack E. Weimer and Steven R. Dollens. Pursuant to this agreement, under certain circumstances these stockholders are entitled to require us to register their shares of common stock under the securities laws for resale. See “Description of Capital Stock — Registration Rights.”

Redemption of Common Stock; Special Dividend

We used the $95 million of aggregate proceeds from the sale of our series A convertible preferred stock and 12% senior subordinated convertible notes to TA Associates to redeem shares of common stock, at a price of $10.56 per share, from Leonard Foxman, Foxman Family LLC, Eagle Test Systems, Inc. Employee Stock Ownership Plan, Jack E. Weimer and Steven R. Dollens as set forth below. The members of Foxman Family LLC are twelve trusts for the benefit of Theodore Foxman and his descendants, of which Theodore Foxman is trustee and which trusts collectively have an 86.7% economic interest in Foxman Family LLC, and four trusts for the benefit of Mrs. Robin Cleek and her descendants, of which Mrs. Cleek is trustee, and which trusts collectively have a 13.3% economic interest in Foxman Family LLC. Leonard Foxman is the manager of Foxman Family LLC, and is the father of both Theodore Foxman and Robin Cleek. The price paid in the redemption of our existing stockholders’ shares was determined by arms-length negotiations with TA Associates, and reflects our pre-transaction capital structure, which did not include any indebtedness. Also, in connection with TA Associates’ investment in us, we paid special dividends to such individuals and entities as set forth below. (See page 79 of S-1/A for table).

Loans to Officers and Directors

Leonard Foxman borrowed an aggregate principal amount of $58,500 pursuant to two loans from us in 1999 to partially fund the purchase of an automobile. These loans bore interest at a rate of 5.0% per annum. On September 29, 2003, Mr. Foxman satisfied these loans in full by repaying an aggregate of $71,130, representing the total principal and interest outstanding under these loans on such date, which amount was the largest amount outstanding under the loans. Mr. Foxman currently has no loans outstanding from us.

Transactions with Pacific Support Group, Partners

We entered into an Amended and Restated Contract Services Agreement with Pacific Support Group, Partners on April 1, 2003, whereby Pacific Support Group, Partners agreed to provide us with consulting, management and support services. Pacific Support Group, Partners is controlled by Leonard Foxman and Theodore Foxman, and owned by Leonard Foxman and Theodore Foxman and other immediate family members. All of these services were provided by Leonard Foxman and Theodore Foxman. We paid $476,000 to Pacific Support Group, Partners in fiscal 2003. This agreement was terminated during fiscal 2003. In fiscal 2003, Leonard Foxman received payments from Pacific Support Group, Partners in the aggregate of $1.5 million, and Theodore Foxman and his immediate family members living in his household received payments from Pacific Support Group, Partners in the aggregate of $1.0 million. The source of the funds used for payments made by Pacific Support Group to Leonard Foxman and to Theodore Foxman and his immediate family members in fiscal 2003, was payments we made to Pacific Support Group in fiscal 2003 and payments we made to the predecessor of Pacific Support Group in prior fiscal years.

We currently have no agreements or arrangements with Pacific Support Group, Partners. The services formerly provided by this entity are generally no longer required and to the limited extent they may be needed, they will be performed by our employees.