SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 29, 2000
(Date of earliest event reported)
The Eastern Company
(Exact name of Registrant as specified in its charter)
Connecticut 0-599 06-0330020
----------- ----- ----------
(State of (Commission File Number) (IRS Employer
incorporation) Identification No.)
112 Bridge Street, Naugatuck, Connecticut 06770
----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(203) 729-2255
--------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On June 29, 2000, pursuant to an Asset Purchase Agreement dated
June 20, 2000 between the Registrant and Greenwald Industries, Inc., a Delaware
corporation ("Industries"), Greenwald Intellicard, Inc., a Delaware corporation
("Intellicard" and collectively with Industries, "Sellers"), PubliCARD, Inc.,
a Pennsylvania corporation ("Shareholder"), the Registrant acquired
certain assets of the Sellers.
The purchase price for the assets acquired was approximately
$22,500,000, plus the assumption of certain liabilities of approximately
$1,017,000 consisting of trade accounts payable, accrued liabilities and
operating lease obligation. At the closing $20,750,000 was paid to the Sellers
and $1,750,000 was paid to an escrow account. The purchase price is subject to a
dollar for dollar adjustment, upward or downward, based upon an increase or
decrease in the final closing net book value of assets acquired as compared to
the opening balance sheet net book value. The adjustment in the purchase price
is scheduled to occur approximately 90 days from the closing date.
The assets acquired from the Sellers included personal property leases,
real property leases and all leasehold improvements and structures on the real
property leases, contracts, real property, prepaid expenses and deposits,
accounts receivable, inventories, machinery, equipment, tools and dies, computer
hardware and software, goodwill, Know-How, and Intellectual Property Rights as
more fully set forth in Section 2 of the Asset Purchase Agreement, a copy of
which is filed as an Exhibit to this report.
The business in which the acquired assets are used is in the design and
manufacturing of coin meter systems primarily in the commercial laundry industry
providing smart cards, smart card readers, value transfer stations, card
management software and interface boards primarily for the commercial laundry
industry. The Registrant intends to continue these businesses and the assets
acquired will remain in use in the facility acquired from Industries and located
in Chester, Connecticut.
The Registrant utilized the funds available under its Loan Agreement,
Term Note and Revolving Credit Note with Fleet National Bank f/k/a BankBoston
N.A. in order to satisfy the purchase price. Copies of those loan documents,
which were entered into on June 28, 2000, are filed as an Exhibit to this
report.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Business Acquired.
The Registrant will file the Financial Statements required by this
item on or about September 12, 2000.
(b) Pro Forma Financial Information.
The Registrant will file the Financial Statements required by this
item on or about September 12, 2000.
(c) Exhibits.
(2) Form of Asset Purchase Agreement dated as of June 20, 2000
between the Registrant and Greenwald Industries, Inc.,
Greenwald Intellicard, Inc., and PubliCARD, Inc.
(10) Forms of Loan Agreement, Term Note, Revolving Credit Note,
and related documents between the Registrant and Fleet National
Bank dated as of June 28, 2000.
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.
THE EASTERN COMPANY
By: /s/ John L. Sullivan III
Vice President, Secretary and Treasurer
Dated: July 14, 2000
<PAGE>
Exhibit 2
ASSET PURCHASE AGREEMENT
AMONG
GREENWALD INDUSTRIES, INC.
GREENWALD INTELLICARD, INC.
PUBLICARD, INC.
AND
THE EASTERN COMPANY
JUNE 20, 2000
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made this 20th day of June,
2000 among Greenwald Industries, Inc., a Delaware corporation ("Industries"),
Greenwald Intellicard, Inc., a Delaware corporation ("Intellicard" and
collectively with Industries, "Sellers"), PubliCARD, Inc., a Pennsylvania
corporation ("Shareholder"), and The Eastern Company, a Connecticut corporation
("Buyer").
RECITALS:
WHEREAS, Sellers are engaged in the "Business" (as hereinafter defined);
WHEREAS, Industries is an indirect wholly-owned subsidiary of Shareholder;
WHEREAS, Intellicard is a wholly-owned subsidiary of Industries; and
WHEREAS, Sellers desire to sell, transfer and assign to Buyer, and
Buyer desires to purchase and acquire from Sellers, on the terms and subject to
the conditions set forth in this Agreement, substantially all of the assets used
in the conduct of the Business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties hereto
agree as follows:
1. Interpretation.
--------------
1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
-----------
"Business" shall mean the following business in which the Sellers are
engaged on the date hereof and on the Closing Date: (a) designing and
manufacturing coin meter systems used primarily in the commercial laundry
appliance industry and (b) providing smart cards, smart card readers, value
transfer stations, card management software and machine interface boards
primarily for the commercial laundry appliance industry; provided, that the
"Business" shall not include smart card manufacturing and related activities.
"Know-How" shall mean all know-how and information (not necessarily
proprietary) used by Sellers in the Business on the Closing Date including,
without limitation, (1) design drawings, (2) specifications and performance
criteria, (3) operating instructions and maintenance manuals, (4) manufacturing
information including production documentation, methods, layouts and supplier
and cost information, (5) copies of on-site computer software and related
documentation, including, without limitation, source and object code to the
extent available, (6) prototypes, models or samples, (7) files relating to
applications for Intellectual Property Rights, and (8) all files relating to
customers and other tangible materials that are used in the Business on the
Closing Date.
-1-
<PAGE>
"Copy Rights" shall mean all published and unpublished rights in works
of authorship including, without limitation, (1) literary works, including
books, periodicals, catalogs, directories, textual advertising such as
brochures, pamphlets and other literature, tabular lists, lectures, manuals and
computer programs and data bases; (2) pictorial, graphic and sculptural works,
including maps, architectural plans and renderings, blueprints, photographs,
prints and pictorial illustrations such as labels and pictorial advertising,
posters, brochures and pamphlets, and pattern designs; (3) audiovisual works;
(4) sound/recordings; and (5) mask works, and all U.S. pending and issued
copyright or mask work registrations thereon.
"Patent Rights" shall mean all (1) rights to inventions/conceived on or
before the Closing Date by employees of Sellers who are engaged solely in the
operation of the Business; (2) pending U.S. applications owned by either Seller
(including those set forth on Schedule 1.1); and (3) U.S. patents owned by
either Seller, or for which either Seller has the right to apply for as of the
Closing Date (including those set forth on Schedule 1.1).
"Trademarks" shall mean trade names, trademarks, service marks, trade
dress and product configurations that are used by the Sellers to identify the
Business or any part thereof and all (1) goodwill and associated common law
rights; (2) registration applications pending thereon in any province, state or
country (including those set forth on Schedule 1.1); and (3) registrations
issued thereon (including those set forth on Schedule 1.1).
"Trade Secrets" shall mean all proprietary information that is used by
the Sellers in the Business and that (1) derives independent economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by, third parties who can obtain economic value from its
disclosure or use and (2) is the subject of efforts by the Sellers that were
reasonable under the circumstances to maintain its secrecy, such as, without
limitation, proprietary specifications, formulas, drawings, models, blueprints,
software, production techniques and processes, retail and wholesale customer
lists, vendor lists, compilations, merchandising information, cost and pricing
information, business systems and methods.
"Intellectual Property Rights" shall mean the Patent Rights, Copy
Rights, Trademarks and Trade Secrets as more fully described herein and other
similar rights in technology that are used by the Sellers in the Business,
including, without limitation, those items set forth in Schedule 1.1 hereto.
"Knowledge of Sellers," "to the best knowledge of Sellers" and words of
like import shall mean the actual knowledge of Jan-Erik Rottinghuis, Antonio L.
DeLise and Leonard V. Samela after review of the applicable representations and
warranties herein and the taking of reasonable actions by such persons to
confirm the accuracy thereof.
"Lien" means any security agreement, mortgage, pledge, license,
conditional sales agreement, charge, claim, lien, liability and/or other
encumbrance.
-2-
<PAGE>
2. Sale of Assets and Assumption of Liabilities
--------------------------------------------
2.1 Assets Sold and Retained.
------------------------
(a) Assets Purchased. At the Closing, Sellers agree to sell, transfer,
convey, assign and deliver to Buyer and Buyer agrees to purchase and acquire,
according to the terms and conditions of this Agreement, free and clear of all
Liens (except Permitted Encumbrances), all of the Business and all of the
assets, goodwill and properties, whether real or personal, tangible or
intangible, owned by the Sellers and used by the Sellers in the Business on the
Closing Date, other than the Excluded Assets (collectively, the "Purchased
Assets"), including, without limitation, the following:
(i) all personal property leases (and the leasehold interests created
thereby) listed on Schedule 2.1(a)(i) hereto (the "Personal Property Leases")
and the real property lease (and the leasehold interest created thereby) listed
on Schedule 2.1(a)(i) hereto (the "Real Property Lease") and all leasehold
improvements and structures on the real property leased thereby, except, in each
case, to the extent such leases do not constitute Transferred Rights,
Obligations and Agreements (as defined below);
(ii) all contracts of the Business, including, without limitation,
customer contracts, customer orders and backlog relating to the Business,
royalty and license agreements and rights, purchase agreements, rights to use
technology owned by others, any non-competition, non-solicitation or
non-interference or similar agreements in favor of either of the Sellers, and
certain other agreements listed on Schedule 2.1(a)(ii) (collectively, the
"Contracts"), except to the extent any such Contracts do not constitute
Transferred Rights, Obligations and Agreements;
(iii) all prepaid expenses and deposits of the Business;
(iv) all accounts receivable or trade receivables of the Business or other
rights to receive payment for goods or services provided by the Business as of
the Closing Date (the "Closing Date Receivables");
(v) all inventory of supplies, raw materials, component parts, work-in-
progress and finished goods of the Business on hand (the "Inventory");
(vi) all machinery, equipment, spare parts, fittings, supplies,
transportation equipment, vehicles, motor vehicles, tools, tooling, dies, molds,
furniture, fixtures and other tangible personal property owned by Sellers and
used in the Business.
(vii) all computer hardware and software owned by the Sellers and used
in the Business (the "Computer Hardware and Software");
(viii) all goodwill of the Business;
(ix) the Know-How;
-3-
<PAGE>
(x) the Intellectual Property Rights and all business names, including
all of Sellers' right to use the names "Greenwald Industries, Inc.", "Greenwald
Intellicard, Inc." or derivations thereof in the conduct of the Business, and
other intangible assets owned by Sellers and used in or relating to the
Business, including, without limitation: all choses in action, claims, rights,
benefits and defenses of either of the Sellers; all rights of either of the
Sellers in telephone listings and numbers, post office boxes and cable, website,
telex and similar agreements; all of either Seller's website addresses and
e-mail addresses; and the benefit of all warranties and guaranties of
manufacturers, contractors, suppliers, sellers and others which relate to any of
Sellers' assets;
(xi) all operating data, books and records of Sellers with respect to the
Business, including customer lists and information relating to past, present and
prospective customers of either of the Sellers and all related sales and credit
records, and all lists of past and present suppliers to the Business;
(xii) all rights, licenses, permits, and other operating agreements with
respect to the Sellers' right to provide services of the Business or for which
either Seller is the licensee, including those set forth on Schedule 2.1(a)(xii)
attached hereto (the "Licenses and Permits") to the extent assignment to the
Buyer is permitted by law or contract;
(xiii) the real property owned by Industries located in Chester,
Connecticut, together with the buildings, improvements and fixtures thereon and
easements, licenses, rights of way and appurtenant rights thereto, as more
particularly described on Schedule 2.1(a)(xiii) (the "Property"); and
(xiv) all other assets (other than Excluded Assets), whether tangible or
intangible that are owned by Sellers and used in the Business (the "Other
Assets").
(b) Assets Excluded. Notwithstanding the provisions of Section 2.1(a), the
---------------
Sellers is not selling, assigning, transferring or conveying to Buyer the
following assets of Sellers or any affiliate of Sellers, which shall be excluded
from the transactions contemplated by this Agreement (the "Excluded Assets"):
(i) all receivables from Shareholder or any of its subsidiaries or
affiliates;
(ii) all cash, cash equivalents and investment securities;
(iii) all prepaid expenses and deposits of the Business to the extent not
included in the Closing Date Balance Sheet;
(iv) insurance policies;
(v) all Federal, state, local or other tax refunds, including, without
limitation, refunds of income, sales, use, franchise, property, payroll or other
taxes and refunds of any penalties or interest with respect to any of the
foregoing, relating to periods prior to the Closing Date;
-4-
<PAGE>
(vi) the outstanding common stock of Intellicard;
(vi) the minute books, stock records and other corporate books and
corporate records of the Sellers; and
(vii) the assets identified on Schedule 2.1(b)(viii).
(c) Transfers of Personal Property Leases, Real Property Lease
and Contracts To facilitate the assignment or transfer of Personal Property
Leases, the Real Property Lease and Contracts, the Sellers shall execute such
documents of assignment or transfer as may be prepared by Buyer and reasonably
acceptable to Sellers (and which shall not contain any representation or
warranty or impose any liability or obligation on Shareholder or any Seller
except as expressly provided in this Agreement) that are necessary or
appropriate for evidencing or recording the assignments or transfers to Buyer.
(d) Transfer of Know-How. The communication of transferred Know
--------------------
-How from Sellers to Buyer shall occur, in part, through
Buyer's acquisition of the Purchased Assets and engagement of Sellers'
personnel. Sellers shall have no responsibility to insure that any of their
employees become the employees of Buyer; provided, however, that Sellers and
Shareholder shall not interfere with Buyer's efforts to engage any of Sellers'
employees, and, to the extent reasonably requested by Buyer, Sellers shall
release any employee of Sellers from any contracts or contractual or employment
restriction relating exclusively to the Know-How of Sellers. In addition, in
order to facilitate the transfer of such Know-How, Sellers and Shareholder shall
make available at the Property or deliver to Buyer at the Closing copies of any
documents or other information in Sellers' or, to the extent reasonably
identifiable, Shareholder's possession defining or specifying the subject
matter, nature and extent of the Know-How of Sellers and shall use reasonable
efforts, for a period of two (2) years from the Closing Date, to take such other
action as Buyer shall reasonably request to effectuate the transfer of such
Know-How.
2.2 Assignment of Intellectual Property Rights. On the Closing Date,
--------------------------------------------
Sellers shall execute and deliver assignments in form and substance reasonably
satisfactory to Buyer with respect to the Intellectual Property Rights set forth
on Schedule 1.1, including all goodwill associated therewith.
2.3 Risk of Loss. The risk of loss and all obligations to insure the
------------
tangible assets of the Business shall remain with Sellers until the Closing,
and shall transfer from Sellers to Buyer at the time of Closing.
2.4 "As Is" Condition. EXCEPT AS EXPRESSLY SET FORTH IN THIS
-----------------
AGREEMENT, THE PURCHASED ASSETS ARE BEING SOLD "AS IS" AND " WHERE IS" AND "WITH
ALL DEFECTS" WITHOUT ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED.
2.5 Assumption of Contractual Rights and Obligations Related Thereto. At
----------------------------------------------------------------
the time of Closing, the Buyer shall assume, and hereby agrees to perform, the
rights and obligations, and any other contractual obligations which arise or are
to be performed following the Closing Date or which are contemplated by Section
2.6(b) or (c) pursuant to the Personal Property Leases, the Real Property Lease,
the Contracts, bids, quotations, proposals and similar agreements which (i) are
disclosed in Schedules 2.1(a)(i) and 2.1(a)(ii) to this Agreement or (ii) were
made in the ordinary course of business and not in violation of the provisions
of Article 11 of this Agreement and do not individually involve a commitment of
more than $50,000 (collectively, the "Transferred Rights, Obligations and
Agreements").
-5-
<PAGE>
To the extent that the assignment hereunder of any of the Transferred
Rights, Obligations and Agreements or Intellectual Property Rights or the
assignment under Section 2.2 above shall require the consent of any other party
(or in the event that any of the same shall be non-assignable), neither this
Agreement nor any actions taken hereunder shall constitute an assignment or an
agreement to assign if such assignment or attempted assignment would constitute
a breach thereof or result in the loss or diminution thereof; provided, however,
that in each such case, the Sellers and the Buyer shall use commercially
reasonable efforts to obtain the consent of such other party to an assignment to
the Buyer.
If such consent is not obtained, the Sellers shall cooperate with the
Buyer in a reasonable arrangement designed to provide the Buyer with the
benefits and burdens of any such Transferred Rights, Obligations and Agreements
and Intellectual Property Rights, including appointing the Buyer to act as its
agent or subcontractor to perform all of the Sellers' obligations under such
Transferred Rights, Obligations and Agreements and Intellectual Property Rights
and to collect and promptly remit to the Buyer all compensation received by
Sellers pursuant to those Transferred Rights, Obligations and Agreements and
Intellectual Property Rights and to enforce, for the account and benefit of the
Buyer, any and all rights of the Sellers against any other person arising out of
the breach or cancellation of such Transferred Rights, Obligations and
Agreements and Intellectual Property Rights by such other person or otherwise
(any and all of which arrangements shall constitute, as between the parties
hereto, a deemed assignment or transfer).
2.6 Assumption of Certain Liabilities by Buyer. From and after the Closing,
------------------------------------------
Buyer shall, without any further responsibility or liability of or recourse to
Sellers, Shareholder or any of their respective affiliates or their respective
directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees or assignees, assume and be solely
liable and responsible for the following liabilities and obligations (the
"Assumed Liabilities"):
(a) all liabilities and obligations of Sellers under all Personal Property
Leases, the Real Property Lease, Contracts and all other of the Transferred
Rights, Obligations and Agreements assigned or transferred to Buyer pursuant to
Section 2.1 hereof (or deemed assigned or transferred pursuant to Section 2.5
hereof) which arise or are to be performed following the Closing Date;
(b) all accounts payable and accrued liabilities of the Sellers reflected
on the unaudited February 29, 2000 (the "Balance Sheet Date") balance sheet of
the Sellers attached hereto as Exhibit A (the "Opening Balance Sheet") to the
extent that such accounts payable and accrued liabilities remain outstanding at
the Closing;
(c) all accounts payable and accrued liabilities of the type set forth on
the Opening Balance Sheet which (x) have been incurred by the Sellers in
connection with the Business in the ordinary course of business subsequent to
the Balance Sheet Date and through the Closing Date, (y) have not been incurred
in violation of the provisions of Article 11 of this Agreement and (z) only to
the extent accrued in accordance with generally accepted accounting principals
("GAAP") in a manner consistent with the preparation of the Opening Balance
Sheet and reflected on the Closing Balance Sheet (as defined below);
-6-
<PAGE>
(d) the liabilities and obligations assumed by Buyer under Sections 6.8(d)
and 6.8(e); and
(e) all liabilities of Industries for any contractual product warranty
claim with respect to any product sold or manufactured by Industries prior
to the Closing Date.
The assumption by Buyer of the Assumed Liabilities and the transfer
thereof by Sellers shall in no way expand the rights or remedies of any third
party against Sellers or Buyer as compared to the rights and remedies which such
third party would otherwise have had.
2.7 All Other Liabilities Excluded. Notwithstanding the foregoing, Sellers
agree that Buyer is not assuming any other liability of Sellers or any affiliate
of Sellers, whether known, unknown, matured or contingent, including, without
limitation, the following liabilities and obligations of Sellers (collectively,
the "Excluded Liabilities"):
(a) any liability or obligation of the Sellers to Shareholder or any of its
subsidiaries or affiliates;
(b) any current or long-term liability or obligation of the Sellers with
respect to indebtedness for borrowed monies, including any bank debt or notes
payable;
(c) any liability or obligation of the Sellers for any Federal, state,
local or other taxes, including, without limitation, income, sales, use,
franchise, property, payroll or other taxes or for any penalties or interest
with respect to any of the foregoing, relating to periods prior to the Closing
Date, except to the extent of any payments required to extinguish the remaining
open liabilities as properly accrued on the Closing Balance Sheet;
(d) except to the extent of any payments required to extinguish the
remaining open liabilities as properly accrued on the Closing Balance Sheet, any
liabilities or obligations with respect to any pension, profit sharing, health
and welfare, medical insurance or other employee benefit plan or fringe benefit
arrangement ("Benefit Plans") established, participated in, or maintained by
Sellers or any affiliate of Sellers for Sellers' current or former employees,
including without limitation any "frozen" pension plan, whether or not any such
Benefit Plans relate to employees who may be employed by Buyer following
consummation of the transactions contemplated hereby, provided, that in no event
shall any Benefit Plan that Buyer elects to continue constitute an Excluded
Liability;
(e) all debts, liabilities and obligations of Sellers for or with respect
to any labor contract (union or otherwise) to which a Seller is a party or by
which a Seller is bound;
(f) any liabilities of Intellicard for any contractual product warranty
claim with respect to any product sold or manufactured by Intellicard prior
to the Closing Date ("Intellicard Warranty Claims"), subject to Section 6.9;
-7-
<PAGE>
(g) any liabilities for personal injury or property damage of third parties
arising from events occurring prior to the Closing;
(h) any liabilities for product liability claims (other than contractual
warranties) with respect to products sold by Sellers prior to the Closing Date;
(i) COBRA and severance obligations relating to former employees of Sellers
(solely to the extent the employment of such persons with Sellers terminated
prior to the Closing Date and not in connection with the transactions
contemplated by this Agreement); and
(j) The Contracts identified on the Schedules as not assumed.
3. Purchase Price; Payment; Adjustment.
-----------------------------------
3.1 Purchase Price.
--------------
(a) Price. The purchase price for the sale and transfer of the Purchased
-----
Assets shall be Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000)
(the "Unadjusted Purchase Price"), subject to adjustment as provided in Section
3.3 (the "Purchase Price"), plus the assumption of the Assumed Liabilities set
forth in Section 2.6 hereof.
(b) Allocation. Buyer and Sellers shall allocate the Purchase Price plus
----------
the book value of the Assumed Liabilities among the Purchased Assets as provided
on Schedule 3.1(b) (or in such other manner as agreed between Buyer and Sellers
after the Closing). The Buyer and the Sellers respectively agree to file all
income, franchise and other tax returns, and execute such other documents as may
be required by any governmental authority, in a manner consistent with the
allocation as finally determined in accordance with this Section 3.1(b) (the
"Final Allocation"). The Buyer and the Sellers respectively agree to prepare
Form 8594 under Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"), in accordance with the Final Allocation and to file such Form with
each relevant taxing authority, and to refrain from taking any position
inconsistent with such Form or Final Allocation with any taxing authority unless
otherwise required by applicable law. The parties shall agree to adjust
consistent with this Section 3.1(b) a revised Final Allocation, if necessary,
based upon the final Purchase Price, as adjusted in accordance herewith.
3.2 Payment of Purchase Price. At the Closing, the Unadjusted Purchase
-------------------------
Price shall be paid by Buyer to Sellers as follows: (a) $20,750,000 shall be
paid by Buyer to Sellers at Closing in cash by means of wire transfer of
immediately available funds, and (b) $1,750,000 (the "Escrow Amount") shall be
paid by Buyer to Citizens Bank (the "Escrow Agent") at Closing in cash by means
of wire transfer of immediately available funds, to be held, administered and
distributed for the respective benefits of the parties hereto in accordance with
the terms of an indemnity escrow agreement to be entered into by the parties
hereto and the Escrow Agent, substantially in the form and on the terms of
Exhibit B hereto (the "Indemnity Escrow Agreement").
3.3 Adjustment to and Payment of the Balance of the Purchase Price. The
--------------------------------------------------------------
Unadjusted Purchase Price has been derived by and agreed upon by the parties
based on the Net Book Value (as defined below) of Sellers, as shown on the
Opening Balance Sheet ($8,036,286) (the "Opening Net Book Value"). The
Unadjusted Purchase Price is subject to a dollar for dollar adjustment, upward
or downward, based upon the increase (in which case the adjustment shall be
upward) or decrease (in which case the adjustment shall be downward) in the Net
Book Value of the Sellers from the Opening Net Book Value to the Final Net Book
Value (as defined below) reflected on the Closing Balance Sheet (as defined
below). Such adjustment shall be the "Differential."
-8-
<PAGE>
The Differential shall be determined as follows:
(a) Within forty-five (45) days after the Closing Date, Sellers shall
prepare and deliver to Buyer a balance sheet (the "Closing Balance Sheet")
computed in accordance with GAAP applied consistently with the manner in which
GAAP was applied in the preparation of the Opening Balance Sheet showing the Net
Book Value (as defined below) of the Sellers as of the close of business on the
Closing Date (the "Final Net Book Value"). Along with the submission of the
Closing Balance Sheet, Sellers shall deliver a statement to Buyer which contains
Sellers' calculation of the Final Net Book Value and the Differential.
(b) The Buyer shall then have forty-five (45) days after the receipt
thereof to satisfy itself that the Closing Balance Sheet fairly presents, as of
the Closing, in accordance with GAAP applied consistently with the manner in
which GAAP was applied in the preparation of the Opening Balance Sheet, Sellers'
financial position, and to contest in writing the Closing Balance Sheet and
Sellers' calculation of the Final Net Book Value and the Differential, by notice
to the Sellers (with a statement as to the nature of the Buyer's objections in
reasonable detail and the proposed amount of the Differential) and the
corresponding impact on the Unadjusted Purchase Price.
(c) If Buyer does not provide such notice within that 45-day period, the
Closing Balance Sheet and Sellers' calculation of the Final Net Book Value and
Differential shall be final and binding for purposes of this Agreement.
(d) If Buyer does deliver such notice, the parties shall engage in good
faith efforts for at least fifteen (15) days to resolve any such disputes and
agree upon the definitive calculation of the Final Net Book Value and
Differential. If, after such good faith efforts, the parties are unable to so
agree, the determination of the Final Net Book Value and the Differential shall
be submitted for arbitration to an independent "Big 5" audit firm satisfactory
to Buyer and Sellers (the "Arbiter"). The Arbiter shall consider the respective
positions of the parties and render its opinion as to the Closing Balance Sheet,
the Final Net Book Value and Differential consistent with the terms of this
Agreement. Buyer and Sellers agree to make available to the Arbiter all
information and documentation possessed by them as the Arbiter shall reasonably
request for purposes of making its decision. The determination of the Arbiter
shall be conclusive and binding upon the parties. The fees and expenses of the
Arbiter shall be shared equally by Buyer, on one hand, and Sellers, on the
other.
(e) If the Differential results in an upward adjustment in the Unadjusted
Purchase Price, the Unadjusted Purchase Price will be adjusted upward, and the
amount of such adjustment (together with interest at the Prime Rate (as defined
below) plus 2% per annum on the amount of such adjustment from the Closing Date)
shall be paid by Buyer to Sellers within ten (10) days of the conclusive
-9-
<PAGE>
determination thereof, by wire transfer of immediately available funds to a bank
account designated by Sellers in writing. If the Differential results in a
downward adjustment in the Unadjusted Purchase Price, the Unadjusted Purchase
Price will be adjusted downward, and the amount of such adjustment (together
with interest at the Prime Rate plus 2% per annum on the amount of such
adjustment from the Closing Date) shall be paid by Sellers to Buyer within ten
(10) days of the conclusive determination thereof by wire transfer of
immediately available funds to a bank account designated by Buyer in writing.
"Prime Rate" shall mean a rate equal to the rate per annum announced publicly by
Citibank, N.A. in New York, New York as Citibank, N.A.'s base rate in effect
from time to time during the applicable period.
(f) "Net Book Value" with respect to the Opening Balance Sheet or the
Closing Balance Sheet of the Sellers shall mean the book value of the Purchased
Assets less the book value of the Assumed Liabilities, determined as set forth
on Exhibit A under the heading "Net Assets to be Sold" in the case of the
Opening Balance Sheet and in conformity with the requirements for the Closing
Balance Sheet set forth in this Agreement in the case of the Closing Balance
Sheet, except that there shall be no reserve or accrual for Intellicard Warranty
Claims on the Closing Balance Sheet.
3.4 Closing Date. The closing of this transaction (the "Closing") shall
------------
take place at 10:00 a.m. local time on July 6, 2000 or at an earlier date and
time to be mutually agreed upon between the parties or, if later, the third
business day following satisfaction or waiver of the conditions to Closing set
forth in Article 9 hereof (the "Closing Date"). At the Closing, each of the
parties hereto shall execute and deliver all consideration, instruments and
documents reasonably required to carry out the terms and provisions of this
Agreement. Possession of all of the Purchased Assets shall be delivered to Buyer
by Sellers immediately upon the Closing. The Closing shall take place in the
offices of Sellers' counsel, Kaye, Scholer, Fierman, Hays & Handler, LLP, 425
Park Avenue, New York, New York 10022 or at such other place as the parties
shall agree.
3.5 Waiver of Bulk Transfer Provisions. Buyer hereby waives compliance
----------------------------------
with all provisions of applicable Bulk Sales Laws, and in consideration of such
waiver Sellers and Shareholder agree to indemnify Buyer against and hold it
harmless from any and all loss, cost, damage, liability, deficiency or expense
resulting from or arising out of such noncompliance to the extent not involving
an Assumed Liability, provided that the provisions of Article 8 hereof shall
apply to this indemnity as if it were set forth therein.
4. Representations and Warranties of Sellers and Shareholder. In order to
---------------------------------------------------------
induce Buyer to enter into this Agreement and to consummate the transactions
contemplated hereunder, each of the Sellers and Shareholder, jointly and
severally, represent and warrant to Buyer, as follows:
4.1 Title to and Condition of Assets. Except as set forth on Schedule 4.1,
--------------------------------
Sellers have, and will have on the Closing Date, good and marketable title to
and legal right and power to convey all of the Purchased Assets being
transferred hereby, free and clear of any Lien except for Permitted
Encumbrances. Except as set forth on Schedule 4.1, upon the consummation of the
transactions contemplated hereby, Buyer will acquire (i) good and marketable
title to the Purchased Assets, free and clear of any Lien and (ii) the right to
-10-
<PAGE>
use, and valid leasehold interest in, any of the Purchased Assets consisting of
leasehold interests, in each case subject to Permitted Encumbrances. "Permitted
Encumbrances" shall mean, collectively, (i) any liens for taxes (and
assessments) not delinquent or which are being contested in good faith, (ii) any
immaterial workmen's, repairmen's, warehousemen's and carriers' liens arising in
the ordinary course of business, (iii) those Liens listed on Schedule 4.1(a)
attached hereto and (iv) the "Permitted Real Estate Encumbrances" listed on
Schedule 12 attached hereto. All of the tangible personal property used in the
Business is in good operating condition and repair (subject to ordinary wear and
tear), other than machinery and equipment temporarily out of repair or out of
service in the ordinary course of business.
4.2 Organization and Qualification. Each of Sellers is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware with corporate power to own its properties and to carry on its business
as it is now being conducted and each of Sellers is duly qualified to transact
business and is in good standing as a foreign corporation in the states listed
on Schedule 4.2.
4.3 Power and Authority. Each of Sellers and Shareholder has the corporate
-------------------
power to execute and deliver this Agreement and to incur and perform its
obligations hereunder. The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Sellers and Shareholder (subject to
the approval of Shareholder's shareholders), and this Agreement is, and any
agreement to which the parties are to become a party at the Closing pursuant to
this Agreement (the "Ancillary Agreements") will be, the legal, valid and
binding obligation of each of Sellers and Shareholder, enforceable in accordance
with their respective terms.
4.4 Approvals and Consents; Noncontravention. The execution, delivery, and
----------------------------------------
performance of this Agreement and the Ancillary Agreements by Sellers and
Shareholder and the consummation of the transactions contemplated hereby by
Sellers and Shareholder, will not (i) violate any material statute, regulation
or ordinance of any governmental authority or require any material filing with
or material authorization, consent or approval of any government or governmental
agency, except as set forth on Schedule 4.4, (ii) conflict with, result in the
breach of, or constitute a violation or default under any of the provisions of
the respective Articles of Incorporation or By Laws of Sellers and Shareholder,
(iii) except as set forth on Schedule 4.4, conflict with or result in a breach
of any material agreement, deed, contract, mortgage, indenture, writ, order,
decree, contractual obligation or instrument to which Sellers or Shareholder is
a party or by which either of them or any of the Purchased Assets are or may be
bound, or constitute a material default (or an event which with the lapse of
time or the giving of notice, or both, would constitute a material default)
thereunder, or (iv) result in the creation or imposition of any Lien on or with
respect to the Purchased Assets.
4.5 Tax Returns; Withholdings. Each of the Sellers has filed all federal
-------------------------
tax returns and all material state, foreign or local tax returns which are
required to have been filed, and has paid all taxes and governmental charges
shown thereon as due. All amounts required to be withheld by any Seller from
employees for income tax, social security contributions, unemployment tax and
workers' compensation have been withheld and paid to the appropriate
governmental agencies.
-11-
<PAGE>
4.6 Compliance with Laws. Since January 1, 1997, the Sellers have each
--------------------
substantially complied with all material applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof that
affect the Business or the Purchased Assets. Since January 1, 1997, no claims
have been received in writing by any Seller from any governmental authority
alleging a violation by any Seller of any such law or regulation. The Sellers
hold all of the material permits, licenses, certificates and other
authorizations of foreign, federal, state and local governmental agencies
necessary to conduct the Business as it is presently being conducted, including
those permits, licenses, certificates and other authorizations listed on
Schedule 4.6. All such permits, licenses and certificates are in full force and
effect, and no Seller has since January 1, 1997 received any notice of intent to
revoke or not to renew any of such permits, licenses and certificates. This
Section 4.6 does not apply to any Environmental Matters, which are addressed
exclusively in Section 4.15.
4.7 Litigation. There are (i) no legal actions, suits, arbitrations or
----------
other legal, administrative or other governmental proceedings, or, to Sellers'
knowledge, governmental investigations, pending against any Seller, the Business
or the Purchased Assets, (ii) to Sellers' knowledge, no legal actions, suits,
arbitrations or other legal, administrative or other governmental investigations
or proceedings are threatened in writing against any Seller, the Business or the
Purchased Assets, in each case at law or in equity or by or before any
governmental department, commission, board, agency, bureau, tribunal or
instrumentality and (iii) no outstanding judgments, orders, writs, injunctions,
decrees or subpoenas of any court, grand jury, agency, board of arbitration or
arbitrator against any Seller or any of the Purchased Assets (collectively,
"Litigation"), except in each case as shown on Schedule 4.7 attached hereto.
4.8 Financial Statements.
--------------------
(a) Sellers have delivered to Buyer copies of the following financial
statements of Sellers (collectively, the "Financial Statements"):
(i) an audited consolidated balance sheet as of December 31, 1999
and an audited balance sheet as of December 31, 1998, and the related audited
statements of income or loss, changes in shareholders' equity and cash flows for
each of the years then ended, together with the report thereon of Sellers'
certified public accountants (the "Audited Financial Statements"); and
(ii) the unaudited Opening Balance Sheet.
(b) The Audited Financial Statements fairly present, in all material
respects, the financial condition and the results of operations, changes in
shareholders' equity and cash flow of the Sellers for the respective dates of
and for the periods referred to in such Audited Financial Statements, all in
accordance with GAAP consistently applied, and have been prepared based on the
books and records of Sellers. The Opening Balance Sheet fairly presents, in all
material respects, the financial condition of Sellers as of the date thereof,
subject to normal recurring year-end adjustments and the absence of notes; the
Financial Statements reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such Financial Statements.
-12-
<PAGE>
(c) Sellers' receivables reflected on the Financial Statements (the
"Receivables") are the result of merchandise actually shipped or services
actually performed and, to Sellers' knowledge, are subject to no claims,
counterclaims or set-offs.
(d) Sellers' inventory on the Financial Statements is stated at the lower
of cost (determined by the FIFO method) or market. The value of obsolete
materials and materials of below standard quality has been written down to
realizable market value or reserves have been provided therefor, as required by
GAAP.
4.9 Absence of Undisclosed Liabilities. Except for the obligations or
----------------------------------
liabilities (i) disclosed or referred to in the Opening Balance Sheet, or (ii)
incurred by the Sellers with respect to the Business in the ordinary course of
business since the date of the Opening Balance Sheet, there are no material
obligations or liabilities arising out of or relating to transactions or events
with respect to the Business entered into or occurring prior to the date hereof
that would be required to be reserved against or disclosed in a balance sheet of
Sellers prepared in a manner consistent with the preparation of the Opening
Balance Sheet except as set forth in Schedule 4.9.
4.10 Personnel.
(a) Compensation Increases. Since January 1, 1999, there has not been any
----------------------
increase in the base compensation payable to or to become payable to any
employees of the Business, except (i) increases granted in the ordinary course
of business consistent with past practice and (ii) as indicated on Schedule
4.10(a) hereto.
(b) Compensation and Benefit Plans. (i) Set forth on Schedule 4.10(b)
------------------------------
hereto is a list and description of compensation and benefit plans, programs or
arrangements (whether funded or unfunded) generally applicable to the employees,
former employees or retirees of the Business which are currently in effect or
which, with respect to the Business, Sellers have committed to implement in the
future (the "Compensation and Benefit Plans"). Except as listed in Schedule
4.10(b), Sellers do not maintain or sponsor, nor are Sellers required to make
contributions to, or incur the expense of, any compensation or benefit plans,
programs or arrangements (whether funded or unfunded) with respect to the
Business's employees, former employees or retirees.
(ii) Sellers shall retain all liability with respect to the Compensation and
Benefit Plans, and Buyer expressly does not assume any liability with respect
thereto as a result of its acquisition of the Business.
(iii) At all times after the Closing, Sellers will provide "COBRA
Continuation Coverage" (as that term is defined in Section 4980B of the Code and
the regulations promulgated pursuant thereto) to all individuals who were
eligible for such coverage through Sellers immediately prior to the Closing.
4.11 Contracts and Other Agreements.
------------------------------
(a) All Material Agreements (as defined below) of the Business are set
forth on Schedule 4.11(a). All of the Material Agreements are in full force and
effect, and no breach or default by any Seller or, to the best of Sellers'
knowledge, by any other party has occurred with respect thereto.
-13-
<PAGE>
(b) Except as identified on Schedule 4.11(b), no approval or consent of any
person is needed in order that the Material Agreements continue in full force
and effect following the assignment of such Material Agreements to the Buyer
pursuant to this Agreement.
(c) As used herein, a "Material Agreement" is an agreement, or series of
related agreements, that (i) involves an aggregate commitment or potential
aggregate commitment on the part of any party of more than $50,000, (ii)
involves sale, distribution, commission, marketing, or similar arrangements of
the Sellers relating to the Business providing for the marketing and/or sale of
the products or services of the Business, (iii) involves the lease of real
property for the Business or (iv) is with the Shareholder, an employee, officer
or director of either Seller or an employee, officer or director of the
Shareholder.
(d) Schedule 4.11(d) sets forth a list as of May 23, 2000 of each of
Sellers' sales commitments exceeding $50,000.
(e) Sellers have not made any express warranties or guarantees with respect
to their products or services, except (i) for standard product warranties, forms
of which are set forth or disclosed on Schedule 4.11(e) or (ii) as otherwise set
forth on Schedule 4.11(e) attached hereto.
4.12 Employment. Except as listed in Schedule 4.12 hereto, the Sellers have
----------
complied in all material respects with all applicable laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity and collective bargaining (including the WARN Act), with
respect to any employees of the Business. In the last two (2) years, the Sellers
have experienced no strikes or, to Sellers' knowledge, any organized slowdown,
picketing or work stoppage. No Seller is a party to any collective bargaining or
similar agreement with any employee union.
4.13 Intellectual Property Rights. To the knowledge of the Sellers, except
----------------------------
as set forth on Schedule 4.13, Sellers own or have the right to use all of the
material Intellectual Property Rights which are necessary for the conduct of, or
are used in, the Business as the Business is presently being conducted. Except
as set forth on Schedule 4.13, the Sellers have no knowledge and have received
no written notice to the effect that any service or products that they provide
or sell, or any process, method, part or material they employ in the Business,
infringes on any trademark, trade name, copyright or patent or is in conflict
with any asserted right of another. There is no pending or, to the knowledge of
Sellers, threatened, claim or litigation against any Seller contesting its right
to use any of the Intellectual Property Rights being transferred or licensed to
Buyer, or asserting its misuse of any thereof, which would deprive Buyer of its
right to assert its rights thereunder or which would prevent the sale of any
service or product produced, provided or sold by Buyer utilizing the
Intellectual Property Rights to be transferred to Buyer.
4.14 Insurance Policies. Sellers have delivered to Buyer a list of all
------------------
insurance policies or binders of insurance or programs of self-insurance which
relate to the Business or the Purchased Assets. Since January 1, 1999, there has
been no cancellation or nonrenewal with respect to, or disallowance of any
material claim under any such policy.
-14-
<PAGE>
4.15 Environmental Matters.
---------------------
(a) Definitions. As used in this Agreement:
------------
(i) "Hazardous Materials" means (a) any and all hazardous
substances, pollutants, and contaminants (as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA")), hazardous wastes (as defined by the Resource Conservation and
Recovery Act ("RCRA")); hazardous materials (as defined by the Hazardous
Materials Transportation Act); toxic substances (as defined by the Toxic
Substances Control Act ("TSCA")); toxic chemicals or extremely hazardous
substances (as defined by the Emergency Planning and Community Right-To-Know
Act); hazardous air pollutants (as defined by the Clean Air Act); hazardous
substances (as defined by the Clean Water Act); (b) petroleum or petroleum
products; polychlorinated biphenyls ("PCBs"); asbestos-containing materials; and
(c) any other toxics, chemicals, wastes, substances or materials which are
regulated under any of the Environmental Laws (as defined herein);
(ii) "Environmental Laws" means all applicable federal, state, local
and foreign laws, rules, regulations, codes, ordinances, orders, decrees,
permits, licenses and judgments in effect as of the Closing Date and relating to
the environment and/or the use, generation, storage, disposal, treatment,
transportation, recycling, sale or release of Hazardous Materials, including,
without limitation, CERCLA, RCRA, the Clean Water Act, the Clean Air Act, TSCA,
the Hazardous Materials Transportation Act, the Emergency Planning and Community
Right to Know Act and the Connecticut equivalents of the foregoing, including
Title 22a of the Connecticut General Statutes;
(iii) "Environmental Matters" means matters relating to pollution,
contamination or protection of the environment, release or disposal of Hazardous
Materials, compliance with Environmental Laws (including, without limitation,
matters relating to any "Environmental Costs" (as defined herein)) or to any
releases or threatened releases of Hazardous Materials into the air, surface
water, groundwater or soil, or resulting from the generation, use, storage,
treatment, recycling, transportation, disposal or sale of Hazardous Materials);
and
(b) Environmental Representations and Warranties of Sellers and Shareholder
-----------------------------------------------------------------------
(i) Except as set forth on Schedule 4.15, all permits, approvals,
authorizations, licenses, certificates of authorization, registrations or other
consents required under all applicable Environmental Laws for the operation of
the Business and the occupancy of the Property (the "Environmental Permits")
have been obtained or applied for, and there are no pending or threatened
actions to modify, restrict, rescind or challenge any Environmental Permit;
(ii) To the best of the knowledge of Sellers and Shareholder, after
reasonable inquiry, there are no material violations of any Environmental Permit
at the Property;
-15-
<PAGE>
(iii) Except as set forth in Schedule 4.15, neither of the Sellers, nor the
Shareholder, nor any affiliate of either Seller or Shareholder has received from
any governmental authority any notice in writing of the violation of any
Environmental Laws by any of them in connection with the operation of the
Business at the Property or of any pending or threatened legal action against
any of them in connection with the operation of the Business at the Property
under the authority of any Environmental Law or related to the release of or
exposure to any Hazardous Material;
(iv) except as disclosed in Schedule 4.15 hereto, no amounts of
Hazardous Materials were disposed of by either Seller prior to the Closing Date
in, on, under, above, around or from the Property, and neither Seller is aware
of any new source of Contamination (as defined in the 1995 Contract) not
identified in the Phase I Environmental Site Assessment Report, Susan Bates,
Inc. by HRP Associates, Inc., issued on December 20, 1995;
(v) the processes, policies and activities of the Sellers with respect to
the Property are in substantial compliance with all applicable Environmental
Laws and regulations;
(vi) except as set forth on Schedule 4.15 hereto, there are no
underground storage tanks on, at or below the Property.
4.16 Absence of Certain Changes. Except as set forth in Schedule 4.16,
--------------------------
since the Balance Sheet Date, the Business has been conducted in the ordinary
course consistent with past practice, and there has not been:
(i) any event, occurrence, development or change in the Business that
has had a material adverse effect on the business, financial condition or
prospects of the Business (a "Material Adverse Effect"), other than those
resulting from changes, whether actual or prospective, in general conditions
applicable to the industries in which the Business is involved or in general
economic conditions;
(ii) any material damage, destruction or other casualty loss affecting
the Business; or
(iii) any material change by the Sellers in the manner the Business
keeps its books and records.
4.17 Purchased Assets Complete. The Purchased Assets, together with the
-------------------------
Excluded Assets and the assets relating to the services provided by Shareholder
set forth on Schedule 4.17 constitute substantially all of the assets used by
the Sellers in the conduct of the Business as currently conducted by Sellers.
4.18 Real Property. No lease or sublease to any other person is in effect
-------------
with respect to the Property. The Property and the operation thereof conforms to
the requirements of all restrictive covenants or other encumbrances affecting
all or any part of the Property. Neither Seller nor Shareholder is a party to
any option to purchase, or contract of sale, with respect to the Property, other
than this Agreement. There are no actual, pending or, to Sellers' knowledge,
threatened condemnation proceedings which could result in a lis pendens or other
-16-
<PAGE>
Lien on the Property. All utilities required to operate the Property have been
connected and are currently serving such Property. The Property is not located
in a flood hazard zone. The Sellers have no knowledge of any public improvement
that may result in special assessments against or otherwise affect any of the
Property.
5. Representations and Warranties of Buyer. In order to induce Sellers
---------------------------------------
and Shareholder to enter into this Agreement and to consummate the transactions
contemplated hereunder, Buyer represents and warrants to Sellers and Shareholder
as follows:
5.1 Organization and Qualification. Buyer is a corporation duly organized,
------------------------------
validly existing and in good standing under the laws of the State of Connecticut
with corporate power to own its properties and to carry on its business as
presently conducted.
5.2 Power and Authority. Buyer has the corporate power to execute and
-------------------
deliver this Agreement and to incur and perform its obligations hereunder. The
execution, delivery and performance of this Agreement and the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer, and this Agreement is, and the Ancillary Agreements will
be, the legal, valid and binding obligation of Buyer, enforceable in accordance
with their respective terms.
5.3 Approvals and Consents; Noncontravention. The execution, delivery, and
----------------------------------------
performance of this Agreement and the Ancillary Agreements by Buyer and the
consummation of the transactions contemplated hereby by Buyer, will not (i)
violate any material statute, regulation or ordinance of any governmental
authority or require any material filing with or material authorization, consent
or approval of any government or governmental agency, except as set forth on
Schedule 5.3, (ii) conflict with, result in the breach of, or constitute a
violation or default under any of the provisions of the Articles of
Incorporation or By Laws of Buyer or (iii) except as set forth on Schedule 5.3,
conflict with or result in a breach of any material agreement, deed, contract,
mortgage, indenture, writ, order, decree, contractual obligation or instrument
to which Buyer is a party or by which it or any of its assets are or may be
bound, or constitute a material default (or an event which with the lapse of
time or the giving of notice, or both, would constitute a material default)
thereunder.
5.4 Financial Capacity to Close. Buyer has the financial ability to pay
---------------------------
the Purchase Price at the Closing. Buyer acknowledges that upon execution
hereof, the sale of the Business will be "taken off the market." Buyer also
acknowledges that there are no financing or other contingencies herein.
5. Covenants.
---------
6.1 Publicity. Buyer, Sellers and Shareholder shall consult with each
---------
other before issuing any press release or other public announcement concerning
the transactions contemplated by this Agreement and, except as may be required
by applicable law or any listing agreement with or regulation or rule of any
stock exchange on which securities of Sellers, Buyer or Shareholder are listed
or traded, will not issue any such press release or announcement prior to such
consultation. If Buyer, Sellers or Shareholder is so required to issue such
press release or announcement it shall use its best efforts to inform the other
party hereto prior to issuing such press release.
-17-
<PAGE>
6.2 Retention of and Access to Books and Records. For a period of seven
--------------------------------------------
(7) years after the Closing Date, the parties shall retain books or records
relating to the Business, and any party, wishing to dispose or destroy books or
records, shall provide not less than thirty (30) days prior written notice to
the other party of such proposed action, specifying the books or records
proposed to be disposed or destroyed. If the recipient of such notice desires to
obtain any of such documents, it may do so by notifying the other party in
writing at any time prior to the scheduled date for such destruction or
disposal. Such notice must specify the documents which the requesting party
wishes to obtain. The parties shall then promptly arrange for the delivery of
such documents. All out-of-pocket costs associated with the delivery of the
requested documents shall be paid by the requesting party. Buyer shall, at
Sellers' and Shareholder's expense, on reasonable prior notice to Buyer, (a)
afford Shareholder and Sellers, and their counsel, accountants, consultants and
other representatives reasonable access during normal business hours at the
business locations of the Purchased Assets to examine and copy the books, tax
returns, records and files of the Business which relate to periods prior to the
Closing Date, and (b) cooperate with reasonable requests of Shareholder and
Sellers with respect to gathering information contained therein which may be
necessary to respond to inquiries or requests made by any governmental authority
or courts which relate to any tax returns or other documents filed by or on
behalf of Shareholder and Sellers prior to or relating to the periods prior to
the Closing Date. Sellers shall, at Buyer's sole expense, during normal business
hours, afford Buyer and its agents reasonable access to and the opportunity to
review and make copies of, all documents retained by Sellers relating to the
Business in connection with any reasonable request of Buyer.
6.3 HSR Act. Within three (3) business days after the date of this
-------
Agreement, Buyer shall and Shareholder shall each file a notification of the
acquisition contemplated hereby with the Antitrust Division of the Department of
Justice and the Bureau of Competition of the Federal Trade Commission pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). Each party filing such notification shall advise the other promptly
upon receiving any request for additional information or other communication
with respect to such filing from the Antitrust Division of the Department of
Justice or the Bureau of Competition of the Federal Trade Commission and shall
use its reasonable best efforts to provide the information requested and
otherwise respond to such request or communication.
6.4 Covenants of Sellers and Shareholder.
------------------------------------
(a) Sellers' 401(k) Plan. Industries has been a participating employer in
--------------------
the Publicker Industries Inc. 401(k) Employee Savings H Plan (the "Sellers'
401(k) Plan") for the benefit of the employees of the Business (the
"Employees"). Effective as of the Closing Date, Sellers' obligation to make
contributions to the Sellers' 401(k) Plan with respect to the Employees (other
than contributions attributable to the period ending on the Closing Date but
payable thereafter) shall cease, and the participation of the Employees in the
Sellers' 401(k) Plan shall cease. Sellers shall be liable for making all
contributions to the Sellers' 401(k) Plan for the Employees that are
attributable to the period of time prior to the Closing Date, and Buyer shall
have no obligation or liability of any nature with respect to the Sellers'
401(k) Plan. As of the Closing Date, Sellers shall cause the trustee of the
Sellers' 401(k) Plan to fully vest each of the Employees in his or her account
balances under the Sellers' 401(k) Plan. As soon as practicable following the
Closing Date, Sellers shall offer to each of the Employees the opportunity to
-18-
<PAGE>
receive a distribution of his or her entire account balances under the Sellers'
401(k) Plan as a result of the occurrence of an event described in Section
401(k)(10)(A)(ii) of the Code. Each Employee shall have the right to elect to
receive such distribution, or to elect to have his or her distribution rolled
over directly to his or her individual retirement account or to another
employer's qualified plan (including The Eastern Company Savings and Investment
Plan (the "Buyer's 401(k) Plan") maintained by Buyer). In all events, Sellers
shall make such distributions in accordance with the requirements of the Code
and the Employee Retirement Income Security Act of 1974, as amended.
(b) Name. As of the Closing, each Seller shall amend its certificate of
----
incorporation to change its name to a name not similar to "Greenwald Industries"
or "Greenwald Intellicard."
(c) Cooperation with Respect to Accounts. Sellers and Shareholder shall
------------------------------------
promptly forward to Buyer (endorsed for transfer) any payments received by
Sellers or the Shareholder on account of any of the Receivables.
6.5 Covenants of Buyer.
------------------
(a) Employment. Buyer shall employ all employees of the Sellers as of the
----------
Closing Date; provided, however, that nothing contained in this Section 6.5(a)
shall require that Buyer continue to employ any employee after the Closing Date
or continue in effect any terms of employment thereof. Any obligations under the
Worker Adjustment and Retraining Notification Act ("WARN"), COBRA or for
severance pay attributable to the consummation of the transactions contemplated
by this Agreement or the failure of Buyer to employ or continue to employ all
such persons are hereby assumed by Buyer.
(b) Buyer's 401(k) Plan. Buyer maintains the Buyer's 401(k) Plan for the
-------------------
benefit of its eligible employees. Effective as of the Closing Date, the Buyer's
401(k) Plan shall provide that all service with Sellers prior to the Closing
Date shall count as service with Buyer for purposes of eligibility to
participate in, and vesting under, the Buyer's 401(k) Plan. As soon as
practicable following the Closing Date, the Buyer's 401(k) Plan shall provide
each Employee who is employed by Buyer with the opportunity to roll over to the
Buyer's 401(k) Plan any distribution of his or her account balances under the
Sellers' 401(k) Plan. If an Employee has obtained a participant loan from the
Sellers' 401(k) Plan, Buyer shall provide the Employee with the opportunity to
borrow from Buyer, on a short-term basis at a commercially reasonable rate of
interest, an amount of money sufficient to permit the Employee to pay off the
outstanding balance of such participant loan so that he or she may receive a
distribution in cash of his or her entire account balances under the Sellers'
401(k) Plan.
6.6 Access Prior to Closing. Between the date of this Agreement and the
-----------------------
Closing Date, Sellers shall give Buyer and its authorized representatives
access, during normal business hours upon reasonable notice and in such manner
as will not unreasonably interfere with the conduct of the Business, to all
properties, personnel, facilities and offices of the Sellers and to the books
and records of the Sellers.
-19-
<PAGE>
6.7 No Negotiation. Between the date of this Agreement and the Closing
--------------
Date, Shareholder and Sellers will not directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from, discuss or negotiate with or
provide any non-public information to any person (other than Buyer), enter into
or participate in any negotiations or discussions concerning, any transaction
involving the sale of the business or assets (other than in the ordinary course
of business) of either of the Sellers, or any of the capital stock of either of
the Sellers, or any merger, consolidation, business combination or similar
transaction involving the Sellers.
6.8 Remediation of the Property.
---------------------------
(a) Subject to and effective upon delivery of consent in accordance with
Section 6.8(c) below, at the Closing, Industries will assign to Buyer all of
Industries' rights and benefits under Sections 13.c., 13.d. and 13.e. of the
Contract For Purchase and Sale of Real Property made and entered into as of
December 12, 1995 by and between Industries and Susan Bates, Inc. (the "1995
Contract"), a true and complete copy of which is attached hereto as Exhibit C.
(b) Subject to and effective upon delivery of consent in accordance with
Section 6.8(c) below, at the Closing, Industries will assign to Buyer all of
Industries' rights and benefits under Section 22 of the 1995 Contract, including
without limitation of the foregoing, the Guarantee of performance of Susan
Bates, Inc.'s obligations by Coats Viyella (North America), Inc.
(c) As a condition to closing, Industries shall deliver to Buyer evidence
of written consent to the assignment of Industries' rights and benefits in
accordance with this Section 6.8, given under and in accordance with Section 20
of the 1995 Contract, by Susan Bates, Inc. for itself and for Coats Viyella
(North America), Inc., or any successor thereto. The consent shall be in
substantially the form attached hereto as Exhibit D.
(d) Buyer shall assume and perform all of Industries' obligations to Susan
Bates, Inc. and to its affiliates and other Indemnified Persons under Section
13.f. of the 1995 Contract solely with respect to Contamination which occurs at
or on the Property after the transfer of title thereto to Buyer under this
Agreement pursuant to an assumption agreement, substantially in the form
attached hereto as Exhibit E (the "Contract Assumption Agreement").
(e) Buyer shall assume all obligations of Industries under Section 13.h. of
the 1995 Contract concerning Susan Bates, Inc.'s performance of its remedial
obligations pursuant to the Contract Assumption Agreement.
(f) Industries shall execute such filings with the Connecticut Department
of Environmental Protection, as may be required under the laws of the State of
Connecticut relating to the transfer of the Property to Buyer, including paying
all Transfer Act and other filing fees in connection with such filings.
(g) Industries has obtained a Covenant Not to Sue from the Connecticut
Department of Environmental Protection, a true, complete and correct copy of
which is attached hereto as Exhibit F. At Buyer's request, Industries shall
provide all reasonable assistance to Buyer to obtain a Covenant Not to Sue in
accordance therewith from the Connecticut Department of Environmental Protection
for itself or any other person.
-20-
<PAGE>
(h) Sellers or Shareholder shall perform or pay for any necessary
remediation caused by the disposal (which disposal shall not include leaching or
migration of Hazardous Materials disposed before Industries' acquisition of the
Property) of Hazardous Materials onto the Property between the date of
Industries' acquisition of the Property and the Closing Date.
6.9 Intellicard Warranty Claims. Notwithstanding Section 2.7(f), after
the Closing Date, Buyer shall satisfy all Intellicard Warranty Claims made by
any person. In the event that Buyer is notified of any Intellicard Warranty
Claims, Buyer will investigate the validity of the Intellicard Warranty Claims
in substantially the same manner that it investigates its warranty claims.
Within twenty (20) days after an Intellicard Warranty Claim is made, Buyer shall
provide Sellers with a written statement setting forth the type of Intellicard
Warranty Claim made and Buyer's estimate of the costs and expenses to be
incurred by Buyer in connection with satisfying such Intellicard Warranty Claim.
Within twenty (20) days of receipt by Sellers of such statement, Sellers shall
indicate, in writing, their agreement or disagreement with the validity of the
Intellicard Warranty Claims and/or Buyer's estimate. If Sellers do not object to
Buyer's statement, within twenty (20) days following satisfaction of such
Intellicard Warranty Claim and delivery by Buyer to Sellers of an invoice
therefor in reasonable detail with respect to each Intellicard Warranty Claim,
Sellers will pay Buyer an amount equal to all reasonable costs and expenses
incurred by Buyer in satisfying such Intellicard Warranty Claim up to the amount
specified in Buyer's statement. If Sellers do not agree with the validity of the
Intellicard Warranty Claim or Buyer's estimate with respect to any Intellicard
Warranty Claim, the obligation for satisfying such Intellicard Warranty Claim
shall be the sole responsibility of Sellers. Sellers will use their commercially
reasonable efforts to satisfy or otherwise deal in good faith with each
Intellicard Warranty Claim which becomes their sole responsibility in accordance
with the preceding sentence. Buyer will deal with and satisfy such Intellicard
Warranty Claims in the same manner, including effort and cost levels, it uses to
satisfy warranty claims incurred in its business and will use commercially
reasonable efforts to mitigate the costs and expenses of satisfying such
Intellicard Warranty Claims.
7. Taxes.
-----
7.1 Pre-Closing Taxes. Sellers shall be solely responsible for all
income and franchise taxes which are attributable to the operation of the
Business solely for periods ending on or prior to the Closing Date, regardless
of whether such taxes are due and payable after the Closing Date.
7.2 Post-Closing Taxes. Buyer shall bear full responsibility for all
------------------
income and franchise taxes which are attributable to the operation of the
Business solely for periods after the Closing Date.
7.3 Transfer Taxes. All transfer, documentary, sales, and other similar
--------------
taxes incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne equally by Buyer and Sellers; provided,
however, that Sellers shall be responsible for the payment of any conveyance
taxes payable to the State of Connecticut and the Town of Chester as a result of
the transfer of the Property to Buyer as contemplated by this Agreement.
-21-
<PAGE>
8. Indemnification.
---------------
8.1 Sellers' and Shareholder's Indemnity. Each of the Sellers and
Shareholder, jointly and severally, shall indemnify, defend and hold Buyer, its
officers, directors, agents and employees, and the heirs, successors and assigns
of each of the foregoing (collectively, the "Buyer Indemnified Parties")
harmless from, against and in respect of any and all Damages (as defined below)
to the extent suffered or incurred by any of the Buyer Indemnified Parties by
reason of any of the following:
(a) Sellers' and Shareholder's failure to pay, discharge or perform any of
their respective liabilities or obligations other than the Assumed Liabilities,
but including, without limitation, the Excluded Liabilities, provided, that this
Section 8.1(a) shall not apply to Environmental Matters, which are exclusively
addressed in Section 8.1(b);
(b) (i) any violations of or noncompliance with any Environmental Law by
either of the Sellers or Shareholder, or their respective agents,
representatives, employees or affiliates on or prior to the Closing Date, (ii)
any Environmental Compliance Liability existing as of the Closing Date or
Environmental Condition, either of which arises out of conditions existing on or
before the Closing Date (including, but not limited to, the continued leaching
or migration of Hazardous Materials released onto the Property on or before the
Closing Date), (iii) the transportation, storage or disposal of Hazardous
Materials by or for either of the Sellers or Shareholder on or prior to the
Closing Date or (iv) any failure of the persons referred to in Section 8.6(c) to
pay, discharge or perform any of the obligations or liabilities under Section
13.c, 13.d, 13.e and 22 of the 1995 Contract; provided, however, that this
Section 8.1(b) shall not include any matters described in Section 8.2(c);
(c) the misrepresentation or breach by either of the Sellers or Shareholder
of its representations or warranties set forth in this Agreement or in any of
the Ancillary Agreements or in any Schedule or Exhibit hereto or to any
Ancillary Agreement; and
(d) any other breach or non-fulfillment by either of the Sellers or
Shareholder of any of its respective covenants or agreements set forth in this
Agreement, in any Ancillary Agreement or in any Schedule or Exhibit hereto or to
any Ancillary Agreement.
8.2 Buyer's Indemnity. Buyer shall indemnify, defend and hold Sellers
------------------
and Shareholder and their respective officers, directors, agents and employees,
and the heirs, successors and assigns of each of the foregoing (collectively,
the "Seller Indemnified Parties") harmless from, against and in respect of any
and all Damages to the extent suffered or incurred by any of the Seller
Indemnified Parties by reason of any of the following:
(a) Buyer's failure to pay, discharge or perform any of its liabilities or
obligations constituting or with respect to the Assumed Liabilities; provided,
that this Section 8.2(a) shall not apply to Environmental Matters, which are
exclusively addressed in Section 8.2(c);
(b) Buyer's operation of the Business and use of the Purchased Assets after
the Closing; provided, that this Section 8.2(b) shall not apply to Environmental
Matters, which are exclusively addressed in Section 8.2(c);
-22-
<PAGE>
(c) (i) any violations of or noncompliance with any Environmental Law by
Buyer, its agents, representatives, employees or affiliates subsequent to the
Closing Date, (ii) any Environmental Compliance Liability arising after Closing
or Environmental Condition, either of which arises out of conditions arising
after the Closing Date (but not including the continued leaching of Hazardous
Materials released onto the Property on or before the Closing Date) and (iii)
the transportation, storage or disposal of Hazardous Materials by or for Buyer
subsequent to the Closing Date; provided, however, that this Section 8.2(c)
shall not include any matters described in Section 8.1(b);
(d) the misrepresentation or breach by Buyer of its representations or
warranties set forth in this Agreement or in any of the Ancillary Agreements or
in any Schedule or Exhibit hereto or to any Ancillary Agreement; and
(e) Any other breach or non-fulfillment by Buyer of any of its covenants or
agreements set forth in this Agreement, in any Ancillary Agreement or in any
Schedule or Exhibit hereto or to any Ancillary Agreement.
8.3 Certain Definitions. When used in this Article 8, the following
-------------------
definitions shall apply:
(a) Claims" shall mean Direct Claims and Third Party Claims.
(b) "Direct Claim" means any claim for indemnification under this Article
8 made by an Indemnitee against an Indemnitor, other than a Third Party Claim.
(c) "Damages" means any and all claims, government proceedings, causes of
action, demands, judgments, losses, expenses, costs, liabilities and damages of
any nature whatsoever (but subject to Section 8.6(d)), including, without
limitation, costs and reasonable fees and expenses of counsel, accountants and
other professionals incurred in connection with any of the foregoing (but not
including costs and fees and expenses of counsel, accountants and other
professionals incurred in connection with asserting a Claim).
(d) "Indemnitee" means any party who asserts a Claim for indemnification
pursuant to this Article 8.
(e) "Indemnitor" means any party against whom an Indemnitee asserts a Claim for
indemnification pursuant to this Article 8.
(f) "Third Party Claim" means a claim for indemnification under this
Article 8 in connection with a claim or legal proceeding by a third party
(including a government proceeding).
(g) "Environmental Compliance Liability" means any or all claims and/or
demands by and/or liabilities to third parties including, but not limited to,
-23-
<PAGE>
governmental entities prior to or after Closing arising under any and all
Environmental Laws, environmental permits, approvals, consents, stipulations,
licenses, registrations, certificates and authorizations which are required by
law, ordinance and regulation, and any and all environmental regulatory
compliance requirements applicable to the Business or operations or the
Property.
(h) "Environmental Conditions" means circumstances with respect to soil,
surface waters, ground waters, stream sediment, air and similar environmental
media, both on-site and off-site of the Property, that could or do require
remedial action and/or that may or do result in claims and/or demands by and/or
liabilities to third parties, including, but not limited to, governmental
entities, and including, but not limited to, the presence or release of any
Hazardous Materials, or any discharge, spillage, uncontrolled loss, seepage or
filtration of any Hazardous Materials, oil or petroleum or chemical liquids or
solid, liquid or gaseous products on or in or emanating or originating from the
Property, or any off-site transportation, treatment, storage or disposal of
Hazardous Materials, or any failure by the Indemnitor to comply with the terms
of any order, consent decree or agreement issued or entered into by any court or
administrative body, by the United States Environmental Protection Agency (the
"EPA"), the Connecticut Department of Environmental Protection or by any other
federal, state or municipal department or agency having regulatory authority
over Environmental Matters, with regard to any of the Property, contamination
from the Property of property contiguous to the Property, or the Business.
8.4 Direct Claims. Whenever any Direct Claim shall arise under this
Article 8, the Indemnitee shall notify the Indemnitor in writing of the Direct
Claim within sixty (60) days after the Indemnitee becomes aware of the Direct
Claim's existence, specifying (to the extent known) the factual basis for the
Direct Claim and the amount or an estimate (if known or reasonably determinable)
of the Damages that may arise therefrom; provided, however, that the failure of
the Indemnitee to so give such notice shall excuse the Indemnitor's obligation
to indemnify to the extent that the Indemnitor asserts that it has suffered
actual Damage or prejudice by reason of the Indemnitee's failure to give, or
delay in giving, such notice, except to the extent the Indemnitee can
demonstrate that the Indemnitor has not suffered actual Damage or prejudice by
reason of the Indemnitee's failure to give, or delay in giving, such notice.
8.5 Third Party Claims.
------------------
(a) In the event of a Third Party Claim, the Indemnitee shall give the
Indemnitor notice within sixty (60) days after the Indemnitee receives notice of
the third party's claim underlying the Third Party Claim and shall specify (if
known) the factual basis for the underlying third party's claim and the amount
or an estimate (if known or reasonably determinable) of the Damages that may
arise therefrom. In each such case, the Indemnitee agrees to give such notice to
the Indemnitor promptly; provided, however, that the failure of the Indemnitee
to so give such notice shall excuse the Indemnitor's obligation to indemnify to
the extent that the Indemnitor asserts that it has suffered actual Damage or
prejudice by reason of the Indemnitee's failure to give, or delay in giving,
such notice, except to the extent the Indemnitee can demonstrate that the
Indemnitor has not suffered actual Damage or prejudice by reason of the
Indemnitee's failure to give, or delay in giving, such notice.
-24-
<PAGE>
(b) The Indemnitor shall, within thirty (30) days of receipt of such notice
(or such longer period as will not prejudice Indemnitee with respect to such
Third Party Claim), notify the Indemnitee (i) whether or not the Indemnitor
disputes the liability of the Indemnitor to the Indemnitee hereunder with
respect to such Third Party Claim and (ii) if it does not dispute such
liability, whether or not it desires to defend the Indemnitee against such Third
Party Claim. In the event that the Indemnitor notifies the Indemnitee within
such period that it accepts liability hereunder with respect thereto and agrees
to defend the Indemnitee against such Third Party Claim, the Indemnitor shall
have the right to defend the Indemnitee by appropriate proceedings with counsel
of its choice reasonably satisfactory to the Indemnitee and shall have the sole
power to direct and control such defense, unless there is a conflict of interest
between the Indemnitor and the Indemnitee in the conduct of the defense of any
such Third Party Claim, in which case the Indemnitee shall be entitled to retain
separate counsel at the Indemnitor's expense. If no such conflict exists, and
the Indemnitee desires to participate in any such defense, it may do so at its
sole cost and expense. The parties shall consult with each other and keep each
other reasonably informed with respect to any Third Party Claim.
(c) The Indemnitee shall not settle, compromise or offer to settle or
compromise a Third Party Claim without the consent of the Indemnitor (such
consent not to be unreasonably withheld). The Indemnitor shall not, without the
prior written consent of the Indemnitee (such consent not to be unreasonably
withheld), settle, compromise or offer to settle or compromise any such Third
Party Claim on a basis which would result in (i) the imposition of a consent,
order, injunction or decree which would restrict the future activity or conduct
of the Indemnitee's business or any subsidiary or affiliate thereof, or (ii) any
admission of a violation of law.
(d) If any Third Party Claim is one that cannot by its nature be defended
solely by Buyer (including, without limitation, any federal or state tax
proceeding), then Sellers and Shareholder shall make available information and
assistance reasonably required to defend such Third Party Claim.
8.6 Limitations of Indemnities. This Section 8.6 (including provisions
that are expressed only as limitations of indemnification) shall apply to all
claims of any party hereto to the extent set forth in this Section 8.6, whether
asserted as Claims for indemnification or any other remedy (and including claims
and remediation based in contract, tort, strict liability, statutory liability
or any other theory of liability other than actual fraud) and, for this purpose,
references to Claims under a provision enumerated or referred to below (whether
by inclusion or exclusion) shall include claims made and remedies sought with
respect to a matter contemplated by, or which relates to the subject matter of,
that provision, whatever the basis or theory of liability asserted, and such
claims and remedies shall be subject to the limitations applicable to that
enumerated or referenced provision:
(a) (i) No payment shall be made by the Sellers and
Shareholder based upon any Claim of any of the Buyer Indemnified Parties under
Section 8.1(b) (excluding Section 8.1(b)(iv)), 8.1(c) or 8.1(d) (in the case of
Section 8.1(d), only to the extent the Claim relates to a breach of any covenant
or agreement to be performed prior to the Closing), or with respect to any Claim
of the Buyer Indemnified Parties with respect to Intellicard Warranty Claims,
until the amount of Damages suffered or incurred by the Buyer Indemnified
-25-
<PAGE>
Parties with respect to such Claims of the Buyer Indemnified Parties taken as a
whole (after deducting insurance proceeds and third party recoveries paid to or
for the benefit of any of the Buyer Indemnified Parties) shall total, in the
aggregate, two hundred fifty thousand dollars ($250,000) (the "Seller Minimum
Damages"), in which event only the amount of such Damages suffered or incurred
by the Buyer Indemnified Parties taken as a whole in excess of the Seller
Minimum Damages (after deducting any insurance proceeds and third party
recoveries paid to or for the benefit of any of the Buyer Indemnified Parties)
shall be paid in accordance with the terms of this Article 8; provided, however,
that the foregoing Seller Minimum Damages provision shall not apply to (A) tax
liabilities, (B) Sellers' or Shareholder's liability for the Bates Liabilities
(as defined below) or pursuant to Section 8.1(b)(iv) or (C) any Claim arising
out of a breach of the representation and warranty set forth in Section 4.1
(other than the last sentence thereof).
(ii) No payment shall be made by Buyer based upon any Claim of any
of the Seller Indemnified Parties under Sections 8.2(d) or 8.2(e) (in the case
of Section 8.2(e), only to the extent the Claim relates to a breach of any
covenant or agreement to be performed prior to the Closing), until the amount of
Damages suffered or incurred by the Seller Indemnified Parties with respect to
such Claims of the Seller Indemnified Parties taken as a whole (after deducting
insurance proceeds and third party recoveries paid to or for the benefit of any
of the Seller Indemnified Parties) shall total, in the aggregate, two hundred
fifty thousand dollars ($250,000) (the "Buyer Minimum Damages"), in which event
only the amount of such Damages suffered or incurred by the Seller Indemnified
Parties taken as a whole in excess of the Buyer Minimum Damages (after deducting
any insurance proceeds and third party recoveries paid to or for the benefit of
any of the Seller Indemnified Parties) shall be paid in accordance with the
terms of this Article 8.
(iii) The maximum liability of Shareholder and Sellers (in the
aggregate) under this Article 8 with respect to Claims under Sections 8.1(b)
(excluding Section 8.1(b)(iv)), 8.1(c), 8.1(d) and with respect to any Claim
with respect to Intellicard Warranty Claims (in the case of Section 8.1(d), only
to the extent the Claim relates to a breach of any covenant or agreement to be
performed prior to the Closing) shall be limited to four million dollars
($4,000,000) (the "Seller Maximum Damages"); provided, however, that the
foregoing Seller Maximum Damages limitation shall not apply to (A) Sellers' or
Shareholder's liability for the Bates Liabilities or pursuant to Section
8.1(b)(iv), or (B) any Claim arising out of a breach of the representation and
warranty set forth in Section 4.1 (other than the last sentence thereof).
(iv) The maximum liability of Buyer (in the aggregate) under this
Article 8 with respect to Claims under Section 8.2(c), 8.2(d) or 8.2(e) (in the
case of Section 8.2(e), only to the extent the Claim relates to a breach of any
covenant or agreement to be performed prior to the Closing) shall be limited to
four million dollars ($4,000,000).
(b) The parties' respective obligations to indemnify each other under
this Article 8 hereof shall expire on the following dates:
(i) the expiration of the applicable statute of limitations period, with
respect to all Claims relating to taxes or tax liabilities;
-26-
<PAGE>
(ii) with respect to Claims relating to the Bates Liabilities, the later of
December 21, 2005 or (B) the date on which both of the following events have
occurred: (1) Buyer has received a Covenant Not to Sue from the Commissioner of
the Connecticut Department of Environmental Protection (the "Commissioner") for
the Property, and (2) the Property has been remediated in accordance with the
Remediation Standards (as defined in the 1995 Contract) and such remediation has
been approved in writing by the Commissioner or verified by a Licensed
Environmental Professional pursuant to Connecticut law. Clause (B)(1) above
shall be inapplicable, and only clause (B)(2) above shall be required for the
expiration of the parties' respective obligations to indemnify each other
pursuant to this Section 8.6(b)(ii), if Buyer does not file, within twelve (12)
months of the Closing Date, an application for a Covenant Not to Sue with
respect to the Property and diligently and expeditiously pursue obtaining such a
covenant.
(iii) the fifth (5th) anniversary of the Closing Date, with respect to all
Claims involving Environmental Matters, other than those described in clause
(ii) above; and
(iv) the 18-month anniversary of the Closing Date, with respect to all
other matters;
provided, that the foregoing limitations in this paragraph (b) shall not apply
to any Claim for breach of a covenant or agreement contained herein or in any of
the Ancillary Agreements to be performed subsequent to the Closing Date or for
any Claim arising out of a breach of the representation and warranty set forth
in Section 4.1 (other than the last sentence thereof).
(c) (i) Notwithstanding any other provision of this Agreement, Buyer shall seek
to exhaust its remedies for indemnification for those matters which Susan Bates,
Inc. is obligated to indemnify under Section 13.c of the 1995 Contract, and
remediation obligations which Susan Bates, Inc. is obligated to perform pursuant
to Section 13.e. of the 1995 Contract (the "Bates Liabilities") from Susan
Bates, Inc., Coats Viyella (North America), Inc. or (A) their successors by
merger, consolidation or other statutory business combination, and (B) persons
who assume the obligations to perform the Bates Liabilities if Buyer has or
acquires actual knowledge of such assumption at any time from any source, before
seeking indemnification for Claims suffered or incurred by reason of the Bates
Liabilities or pursuant to Section 8.1(b)(iv) from Sellers.
(ii) When Buyer seeks indemnification or remediation as contemplated
by clause (i) of this paragraph (c) (other than from Sellers) during the period
contemplated by Section 8.6(b)(ii), it shall notify Sellers and the Escrow Agent
of this claim. If Buyer provides such notification, it shall, until the claim
made in such notice is resolved, constitute a Notice of Claim (as such term is
defined in the Indemnity Escrow Agreement) under the Indemnity Escrow Agreement
for the sole purpose of deferring the release to Sellers of escrow funds in the
amount of such Claim and the period during which a Notice of Claim may be given
shall be extended until sixty (60) days following exhaustion of remedies with
respect to such claim.
(iii) For purposes of this Section 8.6(c), "exhaustion of remedies" with
respect to a claim means (A) Buyer has obtained a final, non-appealable judgment
against Susan Bates, Inc. and Coats Viyella (North America), Inc. and their
successors for such claim which remains unsatisfied for thirty (30) days, (B)
-27-
<PAGE>
bankruptcy or insolvency proceedings of Susan Bates, Inc. and Coats Viyella
(North America), Inc. and their successors pending while such claim is being
asserted (excluding any involuntary proceeding which is dismissed within 120
days), (C) the dissolution of Susan Bates, Inc., Coats Viyella (North America),
Inc. and the successors thereto and the distribution outside of the United
States of all or substantially all of the assets of such entities or (D) the
termination of all United States operations by the foregoing entities and the
distribution outside of the United States of all or substantially all of the
assets of such entities.
(d) Notwithstanding anything to the contrary in this Agreement or in any
Ancillary Agreement, in no event will any party be liable for any lost profits,
exemplary, indirect, special, punitive or consequential damages of any nature
arising out of or in connection with this Agreement, the Ancillary Agreements or
the transactions contemplated hereby or thereby, regardless of whether based in
contract, tort, strict liability, statutory liability or any other theory of
liability (other than punitive damages to third parties for which any Indemnitee
becomes liable, which shall be indemnifiable Damages, to the extent within the
scope and limitations of the indemnities provided in this Article 8).
(e) Subject to the terms and conditions of the Indemnity Escrow Agreement,
all Claims of any of the Buyer Indemnified Parties for indemnification pursuant
to this Agreement shall be satisfied out of the Escrow Amount and only after all
of the Escrow Amount shall have been utilized to satisfy such Claims will the
Buyer be entitled to recover funds in satisfaction of indemnification Claims
from Sellers or Shareholder.
(f) Any amount which is finally determined to be payable by an Indemnitor
to an Indemnitee under this Article 8 shall bear interest from the later of (i)
the date on which the Indemnitee pays the amount giving rise to the Claim and
(ii) the date on which the Indemnitee gives notice with respect thereto under
Section 8.5 to the date on which the Indemnitor makes payment to the Indemnitee
at an annual rate equal to the Prime Rate plus 2% per annum.
8.7 Exclusive Remedy. With respect to any liability of Sellers for matters
----------------
covered by the Bates Liabilities, the indemnification provided by this Article 8
shall be the Buyer Indemnified Parties' exclusive remedy for any matter,
notwithstanding whether a claim with respect to such matter is based on or could
be asserted under another theory of liability, including, without limitation,
contract, tort, strict liability, statutory liability or any other theory of
liability other than actual fraud.
9. Closing Conditions.
------------------
9.1 Conditions to Sellers' Obligations. The obligations of Sellers to
----------------------------------
consummate the transactions provided for herein are subject, in the discretion
of Sellers, to the satisfaction, on or prior to the Closing Date, of each of the
following conditions; provided that Sellers shall have the right to waive any
such condition, and the parties hereto agree that the Closing of this Agreement
constitutes a waiver by Sellers of any such condition and of any claim or right
relating to the subject matter of any such condition:
-28-
<PAGE>
(a) Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date, except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms hereof, and
Buyer shall have performed in all material respects all agreements and covenants
required hereby to be performed by it prior to or at the Closing Date.
(b) Consents.
--------
(i) All consents, approvals and waivers from governmental authorities
and other third parties listed on Schedule 9.2(b) shall have been obtained.
(ii) The waiting period under the HSR Act applicable to the transactions
contemplated hereby shall have expired or been terminated.
(c) No Governmental Proceedings or Litigation. No action, suit or
-----------------------------------------
proceeding before any court or governmental body shall have been instituted (and
be pending) by any governmental authority to restrain or prohibit this Agreement
or the consummation of the transactions contemplated hereby. No preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction preventing consummation of the transactions contemplated
hereunder shall be in effect.
(d) Certificates. Buyer will furnish Sellers with such certificates of its
------------
officers and others to evidence compliance with the conditions set forth in this
Article 9 as may be reasonably requested by Sellers.
(e) Corporate Documents. Sellers shall have received resolutions adopted by
-------------------
the board of directors of Buyer approving this Agreement and the transactions
contemplated hereby, certified by Buyer's corporate secretary.
(f) Approval of Shareholder's Shareholders. The shareholders of Shareholder
--------------------------------------
shall have approved the transactions contemplated by this Agreement in
accordance with applicable law.
(g) Opinion of Counsel. Buyer shall deliver an opinion of its counsel in
------------------
favor of Sellers and Shareholder substantially in the form attached hereto as
Exhibit G.
(h) Indemnity Escrow Agreement. Buyer shall have delivered the Indemnity
--------------------------
Escrow Agreement, duly executed by Buyer.
(i) Contract Assumption Agreement. Buyer shall have delivered the Contract
-----------------------------
Assumption Agreement.
9.2 Conditions to Buyer's Obligations. The obligations of Buyer to
---------------------------------
consummate the transactions provided for hereby are subject, in the discretion
of Buyer, to the satisfaction, on or prior to the Closing Date, of each of the
following conditions; provided that Buyer shall have the right to waive any such
-29-
<PAGE>
condition, and the parties hereto agree that the closing of this Agreement
constitutes a waiver by Buyer of any such condition and of any claim or right
relating to the subject matter of any such condition.
(a) Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of Sellers and Shareholder contained in this Agreement shall be true
and correct in all material respects at and as of the Closing Date, except as
and to the extent that the facts and conditions upon which such representations
and warranties are based are expressly required or permitted to be changed by
the terms hereof, and Sellers and Shareholder shall have performed in all
material respects all agreements and covenants required hereby to be performed
by them prior to or at the Closing Date.
(b) Consents.
--------
(i) All consents, approvals and waivers from governmental authorities and
other parties listed on Schedule 9.2(b) shall have been obtained.
(ii) The waiting period under the HSR Act applicable to the transactions
contemplated hereby shall have expired or been terminated.
(iii) Sellers shall have delivered to Buyer evidence of written consent to
the assignment of Industries' rights given under and in accordance with Section
20 of the 1995 Contract by Susan Bates, Inc. for itself and for Coats Viyella
(North America), Inc., or any successor thereto, as required by Section 6.8(c)
above.
(c) No Governmental Proceedings or Litigation. No action, suit or
-----------------------------------------
proceeding before any court or governmental body shall have been instituted (and
be pending) by any governmental authority to restrain or prohibit this Agreement
or the consummation of the transactions contemplated hereby. No preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction preventing consummation of the transactions contemplated
hereunder shall be in effect.
(d) Certificates. Sellers will furnish Buyer with such certificates of its
------------
officers and others to evidence compliance with the conditions set forth in this
Article 9 as may be reasonably requested by Buyer.
(e) Corporate Documents. Buyer shall have received from Sellers and
-------------------
Shareholder, resolutions adopted by the board of directors of Sellers approving
this Agreement and the transactions contemplated hereby, certified by Sellers'
and Shareholder's corporate secretary.
(f) Approval of Shareholder's Shareholders. The shareholders of Shareholder
--------------------------------------
shall have approved the transactions contemplated by this Agreement in
accordance with applicable law.
(g) Material Adverse Change. Since the date of this Agreement, the Business
-----------------------
shall not have suffered a Material Adverse Effect.
-30-
<PAGE>
(h) Noncompetition Agreement. Sellers and Shareholder shall have executed
------------------------
and delivered to Buyer a Noncompetition Agreement substantially in the form
attached as Exhibit H.
(i) Deed. Sellers shall deliver to Buyer a warranty deed, in the form of
----
Exhibit I attached hereto, conveying good and marketable title to the Property
to Buyer, free and clear of any Lien of any nature other than the Permitted Real
Estate Encumbrances.
(j) Occupancy. Sellers shall deliver to Buyer possession of the Property,
---------
free from all tenants, occupants and users.
(k) Non-Foreign Certificate. Sellers shall deliver to Buyer a "non-foreign"
-----------------------
certificate as required by Section 1445 of the Code.
(l) Opinion of Counsel. Sellers and Shareholder shall deliver an
opinion of their counsel in favor of Buyer substantially in the form attached
hereto as Exhibit J.
(m) Indemnity Escrow Agreement. Sellers shall have delivered the Indemnity
--------------------------
Escrow Agreement, duly executed by Sellers.
(n) Assignment of Intellectual Property Rights. ellers shall have executed
------------------------------------------
and delivered assignments in form and substance reasonably satisfactory to Buyer
with respect to the Intellectual Property Rights set forth on Schedule 1.1,
including all goodwill associated therewith.
(o) Contract Assumption Agreement. Sellers and Shareholder shall have
-----------------------------
delivered the Contract Assumption Agreement.
10. Closing Documents.
-----------------
10.1 Provided by Buyer.
-----------------
(a) Funds. Wire transfer of the full amount of the Purchase Price as set
-----
forth in Section 3.2;
-31-
<PAGE>
(b) Assumptions. An executed Assumption Agreement in the form attached
-----------
hereto as Exhibit K.
(c) Secretary's Certificates. All resolutions of the Board of Directors of
------------------------
Buyer authorizing the transactions contemplated by this Agreement, certified by
the Secretary of Buyer.
10.2 Provided by Sellers.
-------------------
(a) Assignments and Bills of Sale. An executed Bill of Sale and Assignment
-----------------------------
in the form attached hereto as Exhibit L.
(b) Secretary's Certificates. All resolutions of the Board of Directors of
------------------------
Sellers and Shareholder and of the Shareholder as the sole shareholder of
Sellers authorizing the transactions contemplated by this Agreement, certified
by the Secretary of Sellers and Shareholder.
11. Conduct of Business Prior to the Closing. Each of the Sellers jointly
----------------------------------------
and severally agrees that, after the date hereof and prior to the Closing Date,
Sellers shall operate the Business and maintain the Property in the ordinary
course of business consistent with past practice. Sellers shall not, without the
prior written consent of Buyer: (a) sell inventory other than in the ordinary
course of business and consistent with past practice; (b) enter into contracts,
other than in the ordinary course of business consistent with past practice and
other than contracts which do not exceed $50,000 or which cannot be performed
within one year; (c) discharge or satisfy any material Lien or pay any material
obligation or liability (absolute or contingent) other than in the ordinary
course of business; (d) mortgage, pledge or subject to Lien any of the Purchased
Assets or agree to do so; (e) sell or transfer or agree to sell or transfer any
of the Purchased Assets, or cancel or agree to cancel any debt or claim, except
in each case in the ordinary course of business consistent with past practice;
(f) directly or indirectly increase the compensation payable or to become
payable by either of the Sellers to any employee of any of the Sellers over the
compensation being paid to them as of the date hereof, except for increases in
the ordinary course of business consistent with past practice; (g) terminate any
contract, agreement, license or other instrument to which either of the Sellers
is a party, other than in the ordinary course of business consistent with past
practice; (h) through negotiation or otherwise, make any commitment or incur any
liability or obligation to any labor organization other than in the ordinary
course of business consistent with past practice; (i) make or agree to make any
accrual or arrangement for or payment of bonuses or special compensation of any
kind to any shareholder, director, officer, employee or agent; (j) terminate any
employee or directly or indirectly pay or make a commitment to pay any severance
or termination pay to any employee or agent except in the ordinary course of
business consistent with past practice (or except for termination for cause);
(k) offer or extend more favorable prices, discounts or allowances than were
offered or extended in the ordinary course of business consistent with past
practice (except as reasonably required by competitive conditions); (l) incur
any expense or make capital expenditures or commitments therefor in excess of
$10,000, except for repairs and maintenance in the ordinary course of business
consistent with past practice; or (m) declare or pay any dividend or make any
other distribution other than in cash in respect of Sellers' capital stock or
purchase, acquire or redeem other than for cash any shares of the capital stock
of Sellers.
11. [Intentionally Omitted.]
12. Termination.
-----------
13.1 Termination Events. This Agreement may, by notice given prior to or at
------------------
the Closing, be terminated:
(a) (i) by Buyer if any of the conditions in Section 9.2 is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Sellers, if any of the conditions in Section
-32-
<PAGE>
9.1 is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(b) by mutual consent of Buyer and Sellers; or
(c) by either Buyer or Sellers if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before July 31, 2000, or
such later date as the parties may agree upon.
13.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 13.1, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 6.1 and 14.3 will survive;
provided, however, that if this Agreement is terminated by a party because of
the breach of this Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
13. Miscellaneous.
14.1 Successors and Assigns. Except as otherwise provided in this Agreement,
----------------------
no party hereto shall assign this Agreement or any rights or obligations
hereunder (including by operation of law) without the prior written consent of
the other parties hereto and any such attempted assignment without such prior
written consent shall be void and of no force and effect. This Agreement shall
inure to the benefit of and shall be binding upon the successors and permitted
assigns of the parties hereto. Prior to the Closing, Buyer may designate certain
affiliates of Buyer as the transferee of certain of the Purchased Assets to be
acquired hereunder, provided that no such designation or transfer shall relieve
Buyer of any of its obligations hereunder.
14.2 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of New York.
14.3 Expenses. Sellers, Shareholder and Buyer will pay their respective
--------
costs and expenses, including the expenses of their accounting and legal
representatives, in connection with the origin, negotiation, execution and
performance of this Agreement.
14.4 Severability. If any part or provision of this Agreement shall be
------------
determined to be invalid or unenforceable by a court of competent jurisdiction
or any other legally constituted body having jurisdiction to make such
determination, such part or provision shall be valid and enforceable to the
maximum extent permitted by law and the remaining provisions of this Agreement
shall be fully effective.
14.5 Brokers' and Finders' Fees. Each of the parties represents and warrants
--------------------------
that it has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement and, insofar as it knows, no broker
-33-
<PAGE>
or other person is entitled to any commission or finder's fee in connection with
any of these transactions, except that Buyer has engaged McFarlan Dewey & Co.
and shall be solely responsible for all fees and expenses thereof.
14.6 Notices. All notices, requests, demands and other communications under
-------
this Agreement shall be in writing and shall be deemed to have been duly given
(i) on the date of service if served personally on the party to whom notice is
to be given, (ii) on the day of transmission if sent by facsimile transmission
to the facsimile number given below, and telephonic confirmation of receipt is
obtained promptly after completion of transmission, (iii) on the day after
delivery to Federal Express or similar overnight courier or the Express Mail
service maintained by the United States Postal Service, or (iv) on the fifth
(5th) day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid and properly
addressed, to the party as follows:
If to any Seller or
Shareholder: PubliCARD, Inc.
620 Fifth Avenue
7th Floor
New York, New York 10020
Attn: Jan-Erik Rottinghuis
Telephone: (212) 489-8083
Facsimile: (212) 307-5781
Copy to: Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, NY 10022
Attention: Joel I. Greenberg, Esq.
Telephone: (212) 836-8201
Facsimile: (212) 836-8211
If to Buyer: The Eastern Company
112 Bridge Street
P.O. Box 460
Naugatuck, CT 06770
Telephone: (203) 727-2255
Facsimile: (203) 723-8653
Attention: John Sullivan
Copy to: Reid and Riege P.C.
One State Street
Hartford, Connecticut 06103
Telephone: (860) 278-1150
Facsimile: (860) 240-1002
Attention: Robert M. Mule, Esq.
Any party may change its address for the purpose of this Section 14.6 by giving
the other party notice of its new address in the manner set forth above.
-34-
<PAGE>
14.7 Amendments; Waivers. This Agreement may be amended, modified,
-------------------
superseded or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by written instrument
executed by both parties hereto, or in the case of a waiver, by the party
waiving compliance. Any waiver by any party of any condition, or of the breach
of any provision, term, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall not be deemed to be nor construed
as further or continuing waiver of any such condition, or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement.
14.8 Entire Agreement. This Agreement and the exhibits referred to herein
----------------
contain the entire agreement of the parties hereto with respect to the sale and
purchase of the Purchased Assets and the other transactions contemplated herein,
and any reference herein to this Agreement shall be deemed to include the
schedules and exhibits attached hereto. All oral or written agreements,
statements, representations, warranties, and understandings made or entered into
by the parties prior to or contemporaneously with the execution of this
Agreement are hereby rendered null and void and are merged herewith.
14.9 Further Matters. Each party agrees to execute such further instruments
---------------
of assignment and transfer and to perform such additional acts as are necessary
to consummate the transactions contemplated by this Agreement.
14.10 Parties in Interest. Nothing in this Agreement is intended to confer,
-------------------
or confers, any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective successors and
assigns. Nothing in this Agreement is intended to, or does, relieve or discharge
the obligations or liability of any third persons to any party to this
Agreement. No provision of this Agreement shall give any third persons any right
of subrogation or action over or against any party to this Agreement.
14.11 Survival. The representations, warranties and covenants of the parties
--------
set forth herein shall survive the Closing date of this Agreement for the
periods set forth in Section 8.6 hereof.
14.12 Section and Paragraph Headings. The section and paragraph headings in
------------------------------
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
14.13 Counterparts. This Agreement may be executed in several counterparts
------------
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
-35-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SHAREHOLDER:
PubliCARD, Inc.
By:
Title:
SELLERS:
Greenwald Industries, Inc.
By:
Title:
Greenwald Intellicard, Inc.
By:
Title:
BUYER:
The Eastern Company
By:
Title:
-36-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
1. Interpretation...........................................................................................1
1.1 Definitions.....................................................................................1
2. Sale of Assets and Assumption of Liabilities.............................................................2
2.1 Assets Sold and Retained........................................................................2
(a) Assets Purchased.......................................................................3
(b) Assets Excluded........................................................................4
(c) Transfers of Personal Property Leases, Real Property Lease and Contracts...............5
(d) Transfer of Know-How...................................................................5
2.2 Assignment of Intellectual Property Rights......................................................5
2.3 Risk of Loss....................................................................................5
2.4 "As Is" Condition...............................................................................5
2.5 Assumption of Contractual Rights and Obligations Related Thereto................................5
2.6 Assumption of Certain Liabilities by Buyer......................................................6
2.7 All Other Liabilities Excluded..................................................................7
3. Purchase Price; Payment; Adjustment......................................................................8
3.1 Purchase Price..................................................................................8
(a) Price..................................................................................8
(b) Allocation.............................................................................8
3.2 Payment of Purchase Price.......................................................................8
3.3 Adjustment to and Payment of the Balance of the Purchase Price..................................9
3.4 Closing Date...................................................................................10
3.5 Waiver of Bulk Transfer Provisions.............................................................10
4. Representations and Warranties of Sellers and Shareholder...............................................11
4.1 Title to and Condition of Assets...............................................................11
4.2 Organization and Qualification.................................................................11
4.3 Power and Authority............................................................................11
4.4 Approvals and Consents; Noncontravention.......................................................11
4.5 Tax Returns; Withholdings......................................................................12
4.6 Compliance with Laws...........................................................................12
4.7 Litigation.....................................................................................12
4.8 Financial Statements...........................................................................12
4.9 Absence of Undisclosed Liabilities.............................................................13
4.10 Personnel......................................................................................13
(a) Compensation Increases................................................................13
(b) Compensation and Benefit Plans........................................................13
4.11 Contracts and Other Agreements.................................................................14
4.12 Employment.....................................................................................14
4.13 Intellectual Property Rights...................................................................15
4.14 Insurance Policies.............................................................................15
<PAGE>
4.15 Environmental Matters..........................................................................15
(a) Definitions...........................................................................15
(b) Environmental Representations and Warranties of Sellers and Shareholder...............16
4.16 Absence of Certain Changes.....................................................................16
4.17 Purchased Assets Complete......................................................................17
4.18 Real Property..................................................................................17
5. Representations and Warranties of Buyer.................................................................17
5.1 Organization and Qualification.................................................................17
5.2 Power and Authority............................................................................17
5.3 Approvals and Consents; Noncontravention.......................................................17
5.4 Financial Capacity to Close....................................................................18
6. Covenants...............................................................................................18
6.1 Publicity......................................................................................18
6.2 Retention of and Access to Books and Records...................................................18
6.3 HSR Act........................................................................................19
6.4 Covenants of Sellers and Shareholder...........................................................19
(a) Sellers' 401(k) Plan..................................................................19
(b) Name..................................................................................19
(c) Cooperation with Respect to Accounts..................................................19
6.5 Covenants of Buyer.............................................................................19
(a) Employment............................................................................20
(b) Buyer's 401(k) Plan...................................................................20
6.6 Access Prior to Closing........................................................................20
6.7 No Negotiation.................................................................................20
6.8 Remediation of the Property....................................................................20
6.9 Intellicard Warranty Claims....................................................................21
7. Taxes...................................................................................................22
7.1 Pre-Closing Taxes..............................................................................22
7.2 Post-Closing Taxes.............................................................................22
7.3 Transfer Taxes.................................................................................22
8. Indemnification.........................................................................................22
8.1 Sellers' and Shareholder's Indemnity...........................................................22
8.2 Buyer's Indemnity..............................................................................23
8.3 Certain Definitions............................................................................24
8.4 Direct Claims..................................................................................25
8.5 Third Party Claims.............................................................................25
8.6 Limitations of Indemnities.....................................................................26
8.7 Exclusive Remedy...............................................................................29
9. Closing Conditions......................................................................................29
9.1 Conditions to Sellers' Obligations.............................................................29
(a) Representations, Warranties and Covenants.............................................29
<PAGE>
(b) Consents..............................................................................29
(c) No Governmental Proceedings or Litigation.............................................30
(d) Certificates..........................................................................30
(e) Corporate Documents...................................................................30
(f) Approval of Shareholder's Shareholders................................................30
(g) Opinion of Counsel....................................................................30
(h) Indemnity Escrow Agreement............................................................30
(i) Contract Assumption Agreement.........................................................30
9.2 Conditions to Buyer's Obligations..............................................................30
(a) Representations, Warranties and Covenants.............................................30
(b) Consents..............................................................................31
(c) No Governmental Proceedings or Litigation.............................................31
(d) Certificates..........................................................................31
(e) Corporate Documents...................................................................31
(f) Approval of Shareholder's Shareholders................................................31
(g) Material Adverse Change...............................................................31
(h) Noncompetition Agreement..............................................................31
(i) Deed..................................................................................31
(j) Occupancy.............................................................................32
(k) Non-Foreign Certificate...............................................................32
(l) Opinion of Counsel....................................................................32
(m) Indemnity Escrow Agreement............................................................32
(n) Assignment of Intellectual Property Rights............................................32
(o) Contract Assumption Agreement.........................................................32
10. Closing Documents.......................................................................................32
10.1 Provided by Buyer..............................................................................32
(a) Funds.................................................................................32
(b) Assumptions...........................................................................32
(c) Secretary's Certificates..............................................................32
10.2 Provided by Sellers............................................................................32
(a) Assignments and Bills of Sale.........................................................32
(b) Secretary's Certificates..............................................................32
11. Conduct of Business Prior to the Closing................................................................32
12. [Intentionally Omitted.]................................................................................33
13. Termination.............................................................................................33
13.1 Termination Events.............................................................................33
13.2 Effect of Termination..........................................................................34
14. Miscellaneous...........................................................................................34
14.1 Successors and Assigns.........................................................................34
14.2 Governing Law..................................................................................34
14.3 Expenses.......................................................................................34
14.4 Severability...................................................................................34
<PAGE>
14.5 Brokers' and Finders' Fees.....................................................................34
14.6 Notices........................................................................................34
14.7 Amendments; Waivers............................................................................35
14.8 Entire Agreement...............................................................................36
14.9 Further Matters................................................................................36
14.10 Parties in Interest............................................................................36
14.11 Survival.......................................................................................36
14.12 Section and Paragraph Headings.................................................................36
14.13 Counterparts...................................................................................36
</TABLE>
<PAGE>
Exhibit 10
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is entered into this 28th day of
June, 2000, by and between THE EASTERN COMPANY, a Connecticut corporation,
having its chief executive office at 112 Bridge Street, P.O. Box 460, Naugatuck,
Connecticut 06770-0460 (hereinafter referred to as "Borrower"), and FLEET
NATIONAL BANK f/k/a BankBoston, N.A., a national banking association organized
and existing under the laws of the United States of America, having a banking
office at 157 Church Street, 26th Floor, New Haven, Connecticut 06510
(hereinafter referred to as "Lender").
W I T N E S S E T H :
WHEREAS, Borrower has requested that Lender lend to Borrower the sum of
$25,000,000.00 (hereinafter referred to as the "Term Loan") and, in addition,
make available for Borrower revolving credit loans and commercial and standby
letters of credit from time to time in the aggregate amount of up to
$20,000,000.00 (such revolving credit loans being hereinafter referred to as the
"Revolving Credit Loan"; and such commercial and standby letters of credit being
hereinafter collectively referred to as "Letters of Credit" and individually
referred to as a "Letter of Credit"), and Lender is willing to agree to
Borrower's requests on the terms and conditions and in reliance upon the
representations and warranties of Borrower hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and in further
consideration of the mutual covenants herein contained, the parties hereto agree
as follows:
1. DEFINITIONS
As used herein the following terms shall have the following
meanings:
(a) "Affiliate" shall mean any Person, directly or indirectly,
controlling, controlled by, or under common control with another Person. A
Person shall be conclusively deemed to be in control of or to be controlled by
another Person if it holds 30% or more of the outstanding equity interest in
such other person or such other person holds 30% or more of its outstanding
equity interest. As used herein the term "equity interest" in the case of a
corporation shall mean the outstanding shares of such corporation having voting
power to elect a majority of its Board of Directors, whether or not at the time
the holders of any other class or classes of securities of such corporation
shall or might have such voting power by reason of the happening of any
contingency;
(b) "Business Day" shall mean and refer to any day other than
Saturday, Sunday or any other day on which commercial banks in Connecticut are
<PAGE>
authorized or required to close under the laws of the State of Connecticut, and
whenever such day relates to a Eurodollar Loan, a day on which dealings in U.S.
Dollar deposits are also carried out in the London interbank market;
(c) "Consolidated Subsidiaries" shall refer to the Subsidiaries
of Borrower described on Exhibit A attached hereto and made a part hereof, and
the term "Consolidated Subsidiary" shall refer to any one of them;
(d) "Debt" shall mean at any time, without duplication, (i) all
items (except items of capital stock, capital surplus and retained earnings)
which in accordance with generally accepted accounting principles would be
included in determining total consolidated liabilities of Borrower and the
Consolidated Subsidiaries as shown on the liability side of a consolidated
balance sheet of Borrower and the Consolidated Subsidiaries as at the date on
which Debt is to be determined; (ii) all Subordinated Debt; (iii) all
obligations secured by any lien to which any property or asset owned by Borrower
and/or the Consolidated Subsidiaries is subject, whether or not the obligation
secured thereby shall have been assumed by Borrower and/or the Consolidated
Subsidiaries; (iv) the face amount of all outstanding letters of credit issued
for the account of Borrower (including any letters of credit issued pursuant to
the terms hereof) and/or the Consolidated Subsidiaries and, without duplication,
all drafts drawn thereunder and not yet reimbursed; and (v) lease obligations of
Borrower and/or the Consolidated Subsidiaries which, in accordance with
generally accepted accounting principles, should be capitalized;
(e) "Debt Service" shall mean for any period, the sum of (i)
Interest Expense, (ii) Principal Amortization and (iii) scheduled payments by
Borrower and/or the Consolidated Subsidiaries on account of capitalized leases;
(f) "Debt Service Coverage Ratio" shall mean for any period, the
ratio of Operating Cash Flow to Debt Service;
(g) "EBITDA" shall mean for any period, an amount equal to
Borrower's and the Consolidated Subsidiaries' consolidated net earnings (or
loss) for such period, plus the sum of (i) Interest Expense of Borrower and the
Consolidated Subsidiaries, (ii) Federal, state and local income and franchise
tax expense of Borrower and the Consolidated Subsidiaries, and (iii)
depreciation and amortization of Borrower and the Consolidated Subsidiaries,
each to the extent deducted in determining such consolidated net earnings (or
loss);
(h) "Environmental Laws" shall mean any and all applicable
foreign, Federal, state and local statutes, laws, regulations, rules,
ordinances, orders, guidances, policies or common law (whether now existing or
hereafter enacted or promulgated) pertaining to the environment, of any and all
Federal, state or local governments and governmental and quasi-governmental
agencies, bureaus, subdivisions, commissions or departments which may now or
<PAGE>
hereafter have jurisdiction over Borrower and the Consolidated Subsidiaries and
all applicable judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, relating to injury to,
or the protection of, real or personal property or human health or the
environment, including, without limitation, all requirements pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
emissions, discharges, releases or threatened releases of Hazardous Substances,
chemical substances, pollutants or contaminants whether solid, liquid or gaseous
in nature, into the environment or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of such
Hazardous Substances, chemical substances, pollutants or contaminants.
Without limiting the generality of the foregoing, the term
"Environmental Laws" shall encompass each of the following statutes, and
regulations promulgated thereunder, and amendments and successors to such
statutes and regulations, as may be enacted and promulgated from time to time:
Federal Occupational Safety and Health Act ("OSHA"); the Clean Air Act ("CAA");
the Toxic Substances Control Act ("TSCA"); the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"); the Clean Water Act
("CWA"); the Resource Conservation and Recovery Act, as amended by the Hazardous
and Solid Waste Amendments of 1984 ("RCRA"); the Hazardous Materials
Transportation Act; and all applicable Environmental Laws of each state and
municipality in which Borrower and the Consolidated Subsidiaries conduct
business or locate assets and all rules and regulations thereunder and
amendments thereto and all similar state and local laws, rules and regulations;
(i) "Eurodollar Loan" shall mean any Revolving Credit Loan or
portion of the Term Loan bearing interest determined with reference to LIBOR;
(j) "Event of Default" shall mean the existence of a state of
facts under the provisions of Paragraph 8 of this Agreement which by the passage
of time, or giving of notice, or both, would constitute an Event of Default and
which permits Lender to declare the Term Loan and the Revolving Credit Loan due
and payable in their entireties;
(k) "Fixed Charge Coverage Ratio" shall mean for any period, the
ratio of (i) Operating Cash Flow minus permitted dividends actually paid by
Borrower during such period, to (ii) Debt Service;
(l) "Funded Debt" shall mean for any period, the total amount of
aggregate indebtedness for borrowed money owed as of such date of determination
by Borrower and the Consolidated Subsidiaries to Lender or any other Person
(including obligations on account of capitalized leases);
(m) "Greenwald Asset Purchase Agreement" shall mean and refer
to that certain Asset Purchase Agreement dated as of June 20, 2000, by and among
Borrower, as buyer, Greenwald Industries, Inc. and Greenwald Intellicard, Inc.,
<PAGE>
each a Delaware corporation, as sellers, and PubliCARD, Inc., a Pennsylvania
corporation, together with all exhibits and schedules thereto, and all
amendments, modifications and renewals thereof;
(n) "Guaranties" shall mean the irrevocable, unconditional
continuing guaranties of payment and performance of the Obligations of even date
herewith, executed by each of the Guarantors in favor of Lender, and the term
"Guaranty" shall mean any one of the Guaranties;
(o) "Guarantors" shall mean collectively each of the
Consolidated Subsidiaries;
(p) "Hazardous Substances" shall mean any chemical, compound,
material, mixture or substance: (i) the presence of which requires or may
hereafter require notification, investigation, monitoring or remediation under
any Environmental Law; (ii) which is or becomes defined as a "Hazardous Waste",
"Hazardous Material" or "Hazardous Substance" or "Toxic Substance" or
"Pollutant" or "Contaminant" under any present or future applicable Federal,
state or local law or under the rules and regulations adopted or promulgated
pursuant thereto, including, without limitation, the Environmental Laws; (iii)
which is toxic, explosive, corrosive, reactive, ignitable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political division thereof to the extent any of the
foregoing has or had jurisdiction over Borrower and the Consolidated
Subsidiaries; (iv) without limitation, which contains gasoline, diesel fuel or
other petroleum products, asbestos or polychlorinated biphenyls ("PBCs"); or (v)
any other chemical, material or substance, exposure to, or disposal of, which is
now or hereafter prohibited, limited or regulated by any federal, state or local
governmental body, instrumentality or agency;
(q) "Interbank Offered Rate" shall mean the rate of interest
determined by the Lender to be the prevailing rate per annum at which deposits
in U.S. dollars are offered to the Lender by first-class banks in the London
interbank market in which it regularly participates on or about 11:00 a.m.
(London time) two (2) Business Days before the first day of such Interest Period
in an amount approximately equal to the principal amount of the Term Loan or
Revolving Credit Loan to which such Interest Period is to apply for a period of
time approximately equal to such Interest Period;
(r) "Interest Expense" shall mean for any period all amounts
accrued by Borrower and the Consolidated Subsidiaries, whether as interest, late
charges, service fees, or other charge for money borrowed, on account of or in
connection with Borrower's and the Consolidated Subsidiaries' indebtedness for
money borrowed from the Lender or any other Person which is a lending or
financial institution or with respect to which Borrower and the Consolidated
<PAGE>
Subsidiaries or any of their respective properties are liable by assumption,
operation of law or otherwise, including, without limitation, any leases which
are required, in accordance with generally accepted accounting principles, to be
carried as a liability on Borrower's and the Consolidated Subsidiaries'
consolidated balance sheet;
(s) "Interest Period" shall mean with respect to either the Term
Loan or the Revolving Credit Loan, the period commencing on the date of the
making or continuation of or conversion to such Prime Rate Loan or Eurodollar
Loan, as the case may be, and ending 30, 60, 90 or 180 days thereafter, as
Borrower may elect in the applicable Notice of Borrowing or Conversion;
provided, however, that (i) 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, and (ii) any Interest Period that would otherwise extend beyond the
maturity date of the Term Loan or the Revolving Credit Loan, as the case may be,
shall end on such maturity date;
(t) "Interest Rate Swap Contract" shall mean any agreement,
whether or not in writing, relating to any transaction that is a rate swap,
basis swap, forward rate transaction, commodity swap, commodity option, equity
or equity index swap or option, bond, note or bill option, interest rate option,
forward foreign exchange transaction, cap, collar or floor transaction, currency
swap, cross-currency rate swap, swaption, currency option or any other similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing;
(u) "Letter of Credit Facility" shall mean and refer to the
Letters of Credit now or hereafter issued by Lender for the account of Borrower,
as more fully described in Paragraph 3I hereof;
(v) "LIBOR" shall mean, as applicable to a Eurodollar Loan, the
rate per annum (rounded upward, if necessary, to the nearest 1/32 of one
percent) as determined on the basis of the offered rates for deposits in U.S.
dollars, for a period of time comparable to such Eurodollar Loan which appears
on the Telerate page 3750 as of 11:00 a.m. London time on the day that is two
London Business Days preceding the first day of such Eurodollar Loan: provided,
however, if the rate described above does not appear on the Telerate System on
any applicable interest determination date, the LIBOR rate shall be the rate
(rounded upwards as described above, if necessary) for deposits in dollars for a
period substantially equal to the interest period on the Reuters Page "LIBO" (or
such other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day that is two
(2) London Business Days prior to the beginning of such interest period.
If both the Telerate and Reuters system are unavailable, then the rate for that
date will be determined on the basis of the offered rates for deposits in U.S.
dollars for a period of time comparable to such Eurodollar Loan which are
offered by four major banks in the London interbank marked at approximately
11:00 a.m. London time, on the day that is two (2) London Business Days
<PAGE>
preceding the first day of such Eurodollar Loan as selected by Lender. The
principal London office of each of the four major London banks will be requested
to provide a quotation of its U.S. dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to lending European banks for a period of time comparable to
such Eurodollar Loan offered by major banks in New York City at approximately
11:00 a.m. New York City time, on the day that is two London Business days
preceding the first day of such Eurodollar Loan. In the event that Lender is
unable to obtain any such quotation as provided above, it will be deemed that
LIBOR pursuant to a Eurodollar Loan cannot be determined. In the event that the
Board of Governors of the Federal Reserve system shall impose a Reserve
Percentage with respect to LIBOR deposits of Lender, then for any period during
which such Reserve Percentage shall apply, LIBOR shall be equal to the amount
determined above divided by an amount equal to 1 minus the Reserve Percentage.
"Reserve Percentage" shall mean the maximum aggregate reserve requirement
(including all basis, supplemental, marginal and other reserves) which is
imposed on member banks of the Federal Reserve System against
"Euro-currency Liabilities" as defined in Regulation D;
(w) "LIBOR Rate" shall mean and refer to a rate of interest per
annum equal to LIBOR for the particular Interest Period plus the applicable
LIBOR Rate Margin for each of the Term Loan and the Revolving Credit Loan;
(x) "LIBOR Rate Margin" shall mean the applicable margin in
excess of the LIBOR Rate in connection with any Eurodollar Loan. The initial
LIBOR Rate Margin shall be one and three-quarters percent (1.75%) for the Term
Loan, and one and one-half percent (1.50%) for the Revolving Credit Loan. The
applicable LIBOR Rate Margin may be decreased (or increased), as appropriate, on
a quarterly basis, commencing after Lender has received the December 31, 2000
consolidated audited year-end financial statements of Borrower and the
Consolidated Subsidiaries, and shall continue (if applicable) on a quarterly
basis thereafter for the period beginning five (5) Business Days after the day
on which the consolidated financial statements and compliance certificates
required by subparagraphs (d)(iii) and (iv) of Paragraph 5 with respect to
Borrower's and the Consolidated Subsidiaries' quarterly periods are actually
delivered by Borrower to Lender and ending on the date that the next such
quarterly consolidated financial statements are actually delivered by Borrower
to Lender, to the percentages set forth in the chart below if Borrower achieves
the ratio of Funded Debt to EBITDA set forth below as of the end of such
preceding quarterly period (for purposes hereof, EBITDA shall be calculated on a
rolling four (4) quarter basis):
<PAGE>
<TABLE>
<CAPTION>
Ratio of Funded Debt LIBOR Rate Margin LIBOR Rate Margin
to EBITDA for Term Loan for Revolving Credit Loan
--------- ------------- -------------------------
<S> <C> <C>
Greater than 2.25 to 1.0 Two percent (2.0%) One and three quarters percent (1.75%)
Greater than 1.75 to 1.0 One and three-quarters percent (1.75%) One and one-half percent (1.50%)
but less than or equal to
2.25 to 1.0
Greater than 1.0 to 1.0 but One and six-tenths percent (1.60%) One and thirty-five hundredths percent (1.35%)
less than or equal to
1.75 to 1.0
Less than 1.0 to 1.0 One and one-half percent (1.50%) One and one-quarter percent (1.25%)
</TABLE>
(y) "Lien" shall mean any mortgage, deed of trust, lien, pledge,
assignment, security interest, encumbrance or any transfer intended as security,
including, without limitation, any conditional sale or other title retention
agreement;
(z) "Loan Documents" shall mean collectively this Agreement, the
Notes, the Guaranties and any other agreement, instrument or document whether
now or hereafter executed and delivered to Lender in connection herewith,
together with any renewals, extensions, modifications or amendments thereof;
(aa) "Notes" shall mean the Term Note and the Revolving
Credit Note, together with any and all renewals, modifications or amendments
thereof;
(bb) "Obligations" shall mean the Term Loan, the Revolving
Credit Loan and the Letter of Credit Facility, together with interest thereon,
and any and all other liabilities and obligations of whatever nature of Borrower
to Lender (including, without limitation, the obligations of Borrower to Lender
under and in connection with any Interest Rate Swap Contract), no matter how or
when arising and whether under the Loan Documents, or under any other
agreements, guarantees, instruments or documents, past, present or future, and
the amount due on any notes, or other obligations of Borrower given to, received
by or held by Lender (including, without limitation, overdrafts or any debt,
liability or obligation of Borrower to others which Lender may obtain by
assignment or otherwise) for or on account of any of the foregoing, whether, in
each case, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising;
(cc) "Operating Cash Flow" shall mean for any period an amount
equal to the sum of Borrower's and the Consolidated Subsidiaries' EBITDA for
such period, less the sum of the following items in such period, (i) Federal,
state and local income and franchise taxes paid by Borrower and the Consolidated
Subsidiaries or required to be paid by Borrower and the Consolidated
Subsidiaries; and (ii) all internally-funded expenditures of Borrower and the
Consolidated Subsidiaries for fixed assets which are required to be capitalized
by Borrower and the Consolidated Subsidiaries in accordance with generally
accepted accounting principles;
<PAGE>
(dd) "Person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, joint stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof, or any other form of entity;
(ee) "Prime Rate" shall mean the variable per annum rate of
interest so designated from time to time by Lender or its successors at its head
office as its prime rate. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate being charged to any customer;
(ff) "Prime Rate Loan" shall mean any Revolving Credit Loan or
portion of the Term Loan bearing interest determined with reference to the Prime
Rate;
(gg) "Prime Rate Margin" shall mean the applicable margin in
excess of the Prime Rate in connection with any Prime Rate Loan. The initial
Prime Rate Margin shall be one-quarter of one percent (.25%) for each of the
Term Loan and the Revolving Credit Loan. The applicable Prime Rate Margin may be
decreased (or increased), as appropriate, on a quarterly basis, commencing after
Lender has received the December 31, 2000 consolidated audited year-end
financial statements of Borrower and the Consolidated Subsidiaries, and shall
continue (if applicable) on a quarterly basis thereafter for the period
beginning five (5) Business Days after the day on which the consolidated
financial statements and compliance certificates required by subparagraphs
(d)(iii) and (iv) of Paragraph 5 with respect to Borrower's and the Consolidated
Subsidiaries' quarterly periods are actually delivered by Borrower to Lender and
ending on the date that the next such quarterly consolidated financial
statements are actually delivered by Borrower to Lender, to the percentages set
forth in the chart below if Borrower achieves the ratio of Funded Debt to EBITDA
set forth as of the end of such preceding quarterly period (for purposes hereof,
EBITDA shall be calculated on a rolling four (4) quarter basis):
<TABLE>
<CAPTION>
Ratio of Funded Debt Prime Rate Margin Prime Rate Margin
to EBITDA for Term Loan for Revolving Credit Loan
--------- ------------- -------------------------
<S> <C> <C>
Greater than 2.25 to 1.0 One-half of one percent (.50%) One-quarter of one percent (.25%)
Greater than 1.75 to 1.0 but One-quarter of one percent (.25%) Fifteen hundredths of one percent
less than or equal to 2.25 to (.15%)
1.0
Greater than 1.0 to 1.0 but Fifteen-hundredths of one percent Zero percent (0%)
less than or equal to 1.75 to (.15%)
1.0
Less than 1.0 to 1.0 Zero percent (0%) Zero percent (0%)
</TABLE>
<PAGE>
(hh) "Principal Amortization" shall mean for any period all
amounts which Borrower and the Consolidated Subsidiaries is required to pay
(whether regularly scheduled or as a result of a default and acceleration and
whether or not actually paid by Borrower and the Consolidated Subsidiaries) in
reduction of Borrower's and the Consolidated Subsidiaries' indebtedness referred
to in the definition of Interest Expense, as required by the documents relating
to such indebtedness;
(ii) "Subordinated Debt" shall mean at any time, obligations of
Borrower and the Consolidated Subsidiaries for money borrowed by them from any
third Person which has been subordinated in favor of the Lender by such Person
to the repayment of the Obligations by virtue of a subordination agreement
executed and delivered to Lender, in form and content satisfactory to the
Lender;
(jj) "Subsidiary" shall mean a corporation (with respect to
another corporation) of which more than 30% of the outstanding stock having
voting power to elect a majority of its Board of Directors (whether or not at
the time the holders of any other class or classes of securities of such
corporation shall or might have such voting power by reason of the happening of
any contingency) is at any time directly or indirectly owned by another
corporation or an Affiliate of any such other corporation; and
(kk) "Tangible Net Worth" shall mean as at the date of
determination, the excess, if any, of Borrower's and the Consolidated
Subsidiaries' consolidated assets, excluding intangible assets such as goodwill,
licenses and patents and further excluding any amounts owed to Borrower by any
Affiliates of Borrower, whether in the form of Accounts, notes or other forms of
payment, minus the sum of (i) Borrower's and the Consolidated Subsidiaries'
consolidated liabilities (other than Subordinated Debt), plus (ii) any write-up
in the value of assets occurring after the date hereof, such assets and
liabilities to be determined in accordance with generally accepted accounting
principles.
2. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Lender that:
(a) The audited consolidated financial statements of Borrower
and the Consolidated Subsidiaries, dated as of December 31, 1999, prepared by
Borrower's independent certified public accountants and heretofore delivered to
Lender, present fairly, in all material respects, the consolidated position of
Borrower and the Consolidated Subsidiaries and the consolidated results of their
operations and their cash flows as of such date, in conformity with generally
accepted accounting principles, there has not been any material adverse change
in the financial condition of Borrower or the Consolidated Subsidiaries since
the date thereof, and Borrower and the Consolidated Subsidiaries have no
liabilities, fixed or contingent, which are not fully shown or provided for in
said financial statements as of the date thereof except (i) obligations to
perform after such date under contracts, purchase orders and other commitments
incurred in the ordinary course of business, and (ii) obligations of the
Borrower and the Consolidated Subsidiaries created after such date;
<PAGE>
(b) Borrower is a corporation duly organized and validly
existing under the laws of the State of Connecticut with all the requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted;
(c) There is no judgment, decree or order outstanding or
litigation or governmental proceeding or investigation pending, or, to
Borrower's knowledge, threatened against Borrower which might have a material
adverse effect upon Borrower's position, financial, operating or otherwise, and
Borrower has filed all tax returns and reports required to be filed by Borrower
with the United States government and all state and local governments and has
paid in full or made adequate provision for the payment of all taxes, interest,
penalties, assessments or deficiencies shown to be due or claimed to be due on
or in respect of such tax returns and reports;
(d) The Loan Documents are each valid, legal and binding upon
Borrower and enforceable in accordance with their respective terms, and the
execution and delivery of the Loan Documents have been duly authorized by all
necessary corporate action of Borrower;
(e) The execution and delivery of the Loan Documents, the
consummation of the transactions contemplated therein and the fulfillment of or
compliance with the terms and provisions of the Loan Documents: (i) will not
conflict with or result in a breach of any of the terms, conditions or
provisions of any agreement, instrument or other undertaking to which Borrower
is a party or by which Borrower is bound; (ii) do not constitute a default
thereunder or under any of them; (iii) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of Borrower's property or assets pursuant to the terms of any such agreement,
instrument or other undertaking; (iv) do not require the consent or approval of
any governmental body, agency or authority and will not violate the provisions
of any laws or regulations of any governmental instrumentality applicable to
Borrower; and (v) are within Borrower's powers, and are not in contravention of
any provisions of its Certificate of Incorporation or of its By-Laws. Borrower
is not in default under any material agreement, indenture, mortgage, deed of
trust, or any other agreement or any court order or other order issued by any
governmental regulatory authority to which Borrower is a party or by which
Borrower may be bound;
(f) Subject to any limitations stated therein or in connection
therewith, all information furnished or to be furnished by Borrower and any
Consolidated Subsidiary pursuant to the terms hereof or the other Loan Documents
will not, at the time the same is furnished, contain any untrue statement of a
material fact and, when taken as a whole, will not omit to state a material fact
necessary in order to make the information so furnished, in light of the
circumstances under which such information is furnished, not misleading;
<PAGE>
(g) Borrower and each Consolidated Subsidiary is in compliance
with all laws, ordinances, rules or regulations, applicable to it, of all
Federal, state or local governments or any instrumentality or agency thereof,
including, without limitation, the Employee Retirement Income Security Act
("ERISA"), the United States Occupational Safety and Health Act ("OSHA") and all
Federal, state and municipal laws, ordinances, rules and regulations relating to
the environment, including, without limitation, the Resource Conservation and
Recovery Act of 1976 ("RCRA") and the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), except where the failure to
comply by Borrower or such Consolidated Subsidiary would not have a material
adverse effect on the financial or operating condition of Borrower or such
Consolidated Subsidiary when taken as a whole;
(h) Other than the Consolidated Subsidiaries, Borrower has no
Subsidiaries and has not invested in the stock, common or preferred, of any
other corporation, and there are not fixed, contingent or other obligations on
the part of Borrower to issue any additional shares of its capital stock;
(i) Neither Borrower nor any of the Consolidated Subsidiaries is
a party to any agreement or instrument or subject to any corporate restriction
(including any restriction set forth in its Certificate of Incorporation)
materially and adversely affecting its operations, business, properties or
financial condition;
(j) Except as disclosed in the Greenwald Asset Purchase
Agreement, Borrower and each of the Consolidated Subsidiaries possesses all the
trademarks, trade names, copyrights, patents, licenses and governmental permits,
licenses, orders and approvals, or rights in any thereof, adequate for the
conduct of its business as now conducted and presently proposed to be conducted,
without conflict of the rights or claimed rights of others, and no action or
filing with or consent by, any Person or any governmental or public body or
authority, is required to authorize or is otherwise required in connection with
the conduct of Borrower's or any of the Consolidated Subsidiaries' respective
businesses as now and presently proposed to be conducted;
(k) The fair salable value of the consolidated assets of
Borrower and the Consolidated Subsidiaries exceeds and will, immediately
following the making and funding of the Term Loan and the Revolving Credit Loan,
exceed its total consolidated liabilities (including, without limitation,
contingent liabilities). The fair salable value of the consolidated assets of
Borrower and the Consolidated Subsidiaries is and will, immediately following
the making and funding of the Term Loan and the Revolving Credit Loan, be
greater than Borrower's and the Consolidated Subsidiaries' probable consolidated
liabilities (including, without limitation, contingent liabilities) on their
consolidated debts as such debts become absolute and matured. Borrower's and the
<PAGE>
Consolidated Subsidiaries' consolidated assets do not and, immediately following
the making and funding of the Term Loan and the Revolving Credit Loan, will not
constitute unreasonably small capital to carry out their respective businesses
as conducted or as proposed to be conducted. Neither Borrower nor any
Consolidated Subsidiary intends to, nor does it believe that it will incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be received by Borrower and such Consolidated
Subsidiary and the amounts to be payable on or in respect of obligations of
Borrower and such Consolidated Subsidiary);
(l) The name or trademark (if applicable and disclosed) of
Borrower has not changed during the immediately preceding six (6) years;
Borrower has conducted and currently conducts its business solely in its own
name without the use of a trade name or the intervention of or through any other
entity of any kind;
(m) (i) No fact, including but not limited to any "reportable
event", as that term is defined in Section 4043 of ERISA, exists in connection
with any pension or other employee benefit plans (hereinafter collectively
referred to as the "Plans" and individually as the "Plan") of Borrower or any of
the Consolidated Subsidiaries (collectively, the "Companies") under Sections
414(b), (c), (m), (n) and (o) of the Internal Revenue Code of 1986, as amended
(the "Revenue Code"), which might constitute grounds for termination of any such
Plan by the Pension Benefit Guaranty Corporation (the "PBGC"), or for the
appointment by the appropriate United States District Court of a trustee to
administer any such Plan. A list of all of the Companies' respective Plans are
attached hereto as Exhibit D and made a part hereof;
(ii) No "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Revenue Code exists or will exist
upon the execution and delivery of this Agreement and the other Loan Documents,
or the performance by the parties hereto or thereto of their respective duties
and obligations hereunder and thereunder;
(iii) Each of the Companies agrees to do all acts,
including, but not limited to, making all contributions necessary to maintain
compliance with ERISA and the Revenue Code, and agrees not to terminate any such
Plan in a manner or do so or fail to do any act which could result in the
imposition of a lien on any of its properties pursuant to Section 4068 of ERISA;
(iv) None of the Companies sponsors or maintains, and
has never contributed to, and has not incurred any withdrawal liability under a
"multi-employer plan" as defined in Section 3 of ERISA and none of the Companies
has any written or verbal commitment of any kind to establish, maintain or
contribute to any "multi-employer plan" under the Multi-Employer Pension Plan
Amendment Act of 1980;
(v) None of the Companies has any unfunded liability in
contravention of ERISA and the Revenue Code;
<PAGE>
(vi) Any Plan complies currently, and has complied in
the past, both as to form and operation, with its terms and with provisions of
the Revenue Code and ERISA, and all applicable regulations thereunder and all
rules issued by the Internal Revenue Service, U.S. Department of Labor and the
PBGC and as such, is and remains a "qualified" Plan under the Revenue Code;
(vii) No actions, suits or claims are pending (other than
routine claims for benefits) against any Plan, or the assets of any such Plan;
(viii) The Companies have performed all obligations
required to be performed by it or them under any Plan and the Companies are not
in default, or in violation of any Plan, and have no knowledge of any such
default or violation by any other party to any and all Plans;
(ix) No liability has been incurred by any of the
Companies to the PBGC or to participants or beneficiaries on account of any
termination of a Plan subject to Title IV of ERISA, no notice of intent to
terminate a Plan has been filed by (or on behalf of) any of the Companies
pursuant to Section 4041 of ERISA and no proceeding has been commenced by the
PBGC pursuant to Section 4042 of ERISA; and
(o) Borrower's counsel, Reid and Riege, P.C., has provided a
letter dated June 26, 2000 to Lender's counsel, Carmody & Torrance LLP,
describing the environmental investigation status of the real property located
in Chester, Connecticut being purchased by Borrower pursuant to the Greenwald
Asset Purchase Agreement (the "Environmental Investigation Status Letter"), a
copy of which Environmental Investigation Status Letter is attached hereto as
Exhibit E. Except as disclosed in the Environmental Investigation Status Letter:
(i) Borrower and each Consolidated Subsidiary has
obtained all permits, licenses and other authorizations which are required under
all Environmental Laws. Borrower and each Consolidated Subsidiary is in
compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder;
(ii) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by Borrower or any Consolidated Subsidiary to have any permit, license
or authorization required in connection with the conduct of Borrower's or such
Consolidated Subsidiary's business or with respect to any Environmental Laws,
including, without limitation, Environmental Laws relating to the generation,
treatment, storage, recycling, transportation, disposal or release of any
Hazardous Substances;
<PAGE>
(iii) No oral or written notification of a Release of a
Hazardous Material has been filed by or against Borrower or any Consolidated
Subsidiary and no property now or previously owned, leased or used by Debtor or
any Consolidated Subsidiary is listed or proposed for listing on the
Comprehensive Environmental Response, Compensation and Liability Inventory of
Sites or National Priorities List under CERCLA, as amended, or on any similar
state or federal list of sites requiring investigation or clean-up;
(iv) There are no Liens arising under or pursuant to any
Environmental Laws on any of the property or properties owned, leased or used by
Borrower or any Consolidated Subsidiary, and no governmental actions have been
taken or are in process which could subject any of such properties to such liens
or encumbrances or, as a result of which Borrower or any Consolidated Subsidiary
would be required to place any notice or restriction relating to the presence of
Hazardous Substances at any property owned by it in any deed to such property;
and
(v) Neither Borrower or any Consolidated Subsidiary
nor, to the best knowledge of Borrower or any Consolidated Subsidiary, any
previous owner, tenant, occupant or user of any property owned, leased or used
by Borrower or any Consolidated Subsidiary, has (i) engaged in or permitted any
operations or activities upon or any use or occupancy of such property, or any
portion thereof, for the purpose of or in any way involving the release,
discharge, refining, dumping or disposal (whether legal or illegal, accidental
or intentional) of any Hazardous Substances on, under, or in or about such
property, or (ii) transported or had transported any Hazardous Substances to
such property except to the extent such Hazardous Substances are raw products
commonly used in day-to-day manufacturing operations of such property and, in
such case, in compliance with, all Environmental Laws; (iii) engaged in or
permitted any operations or activities which would allow the facility to be
considered a treatment, storage or disposal facility as that term is defined in
40 CFR 264 and 265, (iv) engaged in or permitted any operations or activities
which would cause any of its properties to become subject to The Connecticut
Transfer Act, Section 22a-134 et seq., C.G.S., or (v) constructed, stored or
otherwise located Hazardous Substances on, under, in or about any such property
except to the extent commonly used in day-to-day operations of any such property
and, in such case, in compliance with all Environmental Laws. Further, to the
best knowledge of Borrower and each Consolidated Subsidiary, no Hazardous
Substances have migrated from other properties upon, about or beneath any such
property;
(p) Neither Borrower nor any Consolidated Subsidiary is a party
to any collective bargaining or union agreement except as set forth on Exhibit F
attached hereto and made a part hereof. Such union contracts are in full force
and effect and are not currently subject to renegotiation. Borrower and each
Consolidated Subsidiary is in full
<PAGE>
compliance with the terms and conditions of all such union contracts and knows
of no threatened work stoppage by any union members;
(q) Borrower shall use the proceeds of the Term Loan to repay in
full the outstanding balance of that certain term loan in the original principal
amount of $8,500,000.00 made by BankBoston, N.A. to Borrower (which term loan is
now owned and held by Lender) and to fund a portion of Borrower's acquisition of
substantially all of the real and personal property assets of Greenwald
Industries, Inc. and Greenwald Intellicard, Inc. pursuant to the terms and
conditions of the Greenwald Asset Purchase Agreement (the "Greenwald
Acquisition"), and Borrower shall use the proceeds of the initial advance on
account of the Revolving Credit Loan to fund a portion of the Greenwald
Acquisition and shall use subsequent advances thereunder to fund permitted
acquisitions and capital expenditures and for general working capital purposes;
and
(r) All representations and warranties of Borrower and the
Consolidated Subsidiaries contained herein shall survive the execution of this
Agreement.
3. TERMS OF TERM LOAN, REVOLVING CREDIT LOAN AND LETTER OF CREDIT
--------------------------------------------------------------
FACILITY
--------
Pursuant to the terms of this Agreement, Lender will make the
Term Loan to Borrower, will make advances to Borrower from time to time under
the Revolving Credit Loan, and will issue Letters of Credit for the account of
Borrower, upon the request of Borrower, upon the following terms and conditions:
A. Term Loan
(1) The Term Loan shall be in the amount of Twenty
-Five Million Dollars ($25,000,000.00) and shall be evidenced by a promissory
note dated the date hereof, in the original principal amount of $25,000,000.00,
executed by Borrower and payable to the order of Lender, in the form of Exhibit
B attached hereto and made a part hereof (herein referred to as the "Term
Note"). The outstanding principal balance of the Term Loan shall bear interest
at variable rate equal to, at Borrower's option, either: (a) the Prime Rate plus
the applicable Prime Rate Margin with respect to a Prime Rate Loan, which rate
shall change contemporaneously with any change in the Prime Rate, or (b) the
LIBOR Rate with respect to a Eurodollar Loan. Interest shall be charged on the
principal balance of the Term Loan from time to time outstanding on the basis of
the actual number of days elapsed computed on the basis of a three hundred sixty
(360) day year; and
(2) Interest accruing on the principal balance of
the Term Loan shall be payable quarterly and at maturity, on the first Business
Day of each calendar quarter hereafter, commencing on October 2, 2000, with
respect to any Prime Rate Loan, or on the earlier of: (a) the first Business Day
of each calendar quarter hereafter, commencing on October 2, 2000, or (b) the
last Business Day of each Interest Period and at maturity, with respect to any
Eurodollar Loan. The principal balance of the Term Loan shall be paid on a
<PAGE>
quarterly basis over a five (5) year term commencing on October 2, 2000 and
maturing on July 1, 2005, as more fully described in the Term Note. All payments
received by Lender on account of the Term Loan shall be in lawful money of the
United States of America and in immediately available funds, and shall be first
applied by Lender first to outstanding accrued interest and then to outstanding
principal.
B. Revolving Credit Loan
(1) Borrower shall have the right, until the
termination of Lender's obligations to make advances on account of the Revolving
Credit Loan as set forth in subparagraph (5) of this Paragraph 3B, to from time
to time borrow, pay and reborrow on account of the Revolving Credit Loan and,
until such termination, Lender shall make advances to Borrower on account of the
Revolving Credit Loan as described herein. The principal amount of the Revolving
Credit Loan, or such part thereof as may be from time to time outstanding, shall
be in the maximum amount of up to Twenty Million Dollars ($20,000,000.00) and
shall be evidenced by Borrower's promissory note, in the form of Exhibit C
attached hereto and made a part hereof (herein referred to as the "Revolving
Credit Note"), with appropriate insertions of dates and amounts. The maximum
amount available to Borrower on account of the Revolving Credit Loan shall be
reduced by the amount of the from time to time issued and outstanding Letters of
Credit. The Revolving Credit Note shall be in the amount of $20,000,000.00 and,
in the event Lender determines to increase the maximum principal amount of the
Revolving Credit Loan and Borrower agrees thereto, Borrower shall immediately
execute and deliver to Lender a further Revolving Credit Note to evidence such
increase;
(2) Each advance on account of the Revolving
Credit Loan shall bear interest at a rate per annum equal to, at Borrower's
option, either: (A) the Prime Rate plus the applicable Prime Rate Margin with
respect to a Prime Rate Loan, which rate shall change contemporaneously with any
change in the Prime Rate, or (B) the LIBOR Rate with respect to a Eurodollar
Loans. Interest shall be charged on the principal balance of the Revolving
Credit Loan from time to time outstanding on the basis of actual number of days
elapsed computed on the basis of a three hundred sixty (360) day year. Such
interest shall be payable quarterly, on the first Business Day of each calendar
quarter hereafter, commencing on October 2, 2000, with respect to Prime Rate
Loans, and shall be payable for such Interest Period on the earlier of: (a) the
first Business Day of each calendar quarter hereafter, commencing on October 2,
2000, or (b) the last Business Day of such Interest Period and when such
Eurodollar Loan is due, with respect to Eurodollar Loans. All payments received
by Lender on account of the Revolving Credit Loan shall be in lawful money of
the United States of America and in immediately available funds, and shall be
applied by Lender first to outstanding accrued interest and then to outstanding
principal;
(3) All advances on account of the Revolving
Credit Loans made by Lender to Borrower pursuant to this Paragraph 3B shall be
recorded in an account on the books of Lender bearing Borrower's name
(hereinafter called "Borrower's Account"). Lender shall render and send to
<PAGE>
Borrower a monthly statement of Borrower's Account showing the outstanding
aggregate principal balance of the Revolving Credit Loan, together with interest
and other appropriate debits and credits as of the date of the statement. The
statement of Borrower's Account shall be considered correct in all respects,
absent manifest error, and accepted by and be conclusively binding upon Borrower
unless Borrower makes specific written objections thereto within thirty (30)
days after the date the statement of Borrower's Account is sent;
(4) In the event that the aggregate principal
amount of the Revolving Credit Loan outstanding at any one time exceeds the sum
of $20,000,000.00, Borrower shall immediately pay to Lender an amount equal to
or otherwise eliminate such excess;
(5) The provisions of this Paragraph 3B shall
continue in effect until July 1, 2003 and from year to year thereafter, unless
terminated as to future transactions by either party hereto giving not less than
sixty (60) days written notice of termination prior to the end of any such one
year period to the other party hereto; provided, however, that Lender may
terminate the provisions of this Paragraph 3B at any time upon the happening of
an Event of Default hereunder. Upon the effective date of such termination,
Borrower shall immediately pay to Lender the then outstanding aggregate
principal amount of the Revolving Credit Loan, together with interest accrued
thereon to the date of payment. No such termination shall (i) in any way affect
or impair the security interest granted to Lender hereunder or any other rights
of Lender under any of the Loan Documents, arising prior to any such termination
or by reason thereof, (ii) relieve Borrower of any obligation to Lender under
any of the Loan Documents, or otherwise, until all the Obligations are fully
paid and performed, or (iii) affect any right or remedy of Lender under any of
the Loan Documents; and
(6) Borrower shall pay to Lender, on the first
(1st) Business Day of each calendar quarter following the date hereof,
commencing October 2, 2000, until the termination date of the Revolving Credit
Loan (as described in Paragraph 3B(5) above) and on such termination date, a
nonrefundable commitment fee for the calendar quarter (or portion thereof, as
appropriate) immediately preceding such payment in an amount equal to
one-quarter of one percent (.25%) per annum times the excess, if any, of (i)
$20,000,000.00 minus (ii) the average daily outstanding principal amount of the
Revolving Credit Loan plus the stated amount of any issued and outstanding
Letters of Credit during such calendar quarter (or portion thereof, as
appropriate). In the case of the first payment and last payment hereunder, if
the immediately preceding period is less than a full calendar quarter, the
commitment fee as so calculated shall be prorated by multiplying the same by a
fraction, the denominator of which shall be 91 and the numerator of which shall
be the actual number of days elapsed in such period.
<PAGE>
C. Notice and Manner of Borrowing.
------------------------------
(1) Whenever Borrower desires to obtain or
continue a Prime Rate Loan or a Eurodollar Loan (collectively, a "Loan")
hereunder or convert an outstanding Loan into a Loan of a different type
provided for in this Agreement, Borrower shall notify Lender (which notice shall
be irrevocable) by telex, telegraph or telephone (each a "Notice of Borrowing or
Conversion") received no later than 2:00 p.m. (New Haven, Connecticut time) (a)
on the date which the requested Loan is to be made or continued as or converted
to a Prime Rate Loan, or (b) two (2) Business Days prior to the date which the
requested Loan is to be made or continued as or converted to a Eurodollar Loan.
Such notice shall specify (A) the effective date and amount of each Revolving
Credit Loan or portion of the Term Loan to be continued or converted, (B) the
interest rate option to be applicable thereto, and (C) the duration of the
applicable Interest Period (Lender reserves the right to limit the duration of
the Interest Period on any Eurodollar Loan to 30 days); and
(2) Subject to the terms and conditions hereof,
Lender shall make each Revolving Credit Loan on the effective date specified
therefor by crediting the amount of such Loan to Borrower's demand deposit
account with Lender.
D. Payments Not at End of Interest Period. Borrower may
--------------------------------------
prepay a Eurodollar Loan only upon at least three (3) Business Days prior
written notice to Lender (which notice shall be irrevocable), and any such
prepayment shall occur only on he last day of the Interest Period for such
Eurodollar Loan. Borrower shall pay to Lender, upon request of Lender, such
amount or amounts as shall be sufficient (in the reasonable opinion of Lender)
to compensate it for any loss, cost, or expense incurred as a result of: (i) any
payment of a Eurodollar Loan on a date other than the last day of the Interest
Period for such Loan; (ii) any failure by Borrower to borrow a Eurodollar Loan
on the date specified by Borrower's written notice; (iii) any failure by
Borrower to pay a Eurodollar Loan on the date for payment specified in
Borrower's written notice. Without limiting the foregoing, Borrower shall pay to
Lender a "yield maintenance fee" in an amount computed as follows: The current
rate for United States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the term chosen
pursuant to the Fixed Rate election as to which the prepayment is made, shall be
subtracted from the LIBOR in effect at the time of prepayment. If the result is
zero or a negative number, there shall be no yield maintenance fee. If the
result is a positive number, then the resulting percentage shall be multiplied
by the amount of the principal balance being prepaid. The resulting amount shall
be divided by 360 and multiplied by the number of days remaining in the term
chosen pursuant to the Fixed Rate Election as to which the prepayment is made.
Said amount shall be reduced to present value calculated by using the above
referenced United States Treasury securities rate and the number of days
remaining in the term chosen pursuant to the Fixed Rate Election as to which
prepayment is made. The resulting amount shall be the yield maintenance fee due
to Lender upon the payment of a Eurodollar Loan. Each reference in this
paragraph to "Fixed Rate Election" shall mean the election by Borrower of the
LIBOR Rate. If by reason of an Event of Default, Lender elects to declare the
Notes to be immediately due and payable, then any yield maintenance fee with
respect to a Eurodollar Loan shall become due and payable in the same manner as
though the Borrower had exercised such right of prepayment.
<PAGE>
E. Computation of Interest and Fees. Interest and all
-----------------------------------
fees payable hereunder shall be computed daily on the basis of a year of 360
days and paid for the actual number of days for which due. If the due date for
any payment of principal is extended by operation of law, interest shall be
payable for such extended time. If any payment required by this Agreement
becomes due on a day that is not a Business Day such payment may be made on the
next succeeding Business Day, and such extension shall be included in computing
interest and fees in connection with such payment.
F. Late Charges. If the entire amount of any required
------------
principal and/or interest installment payment is not paid in full within ten
(10) days after the same is due, Borrower shall pay to Lender a late fee equal
to five percent (5%) of the required payment.
G. Default Rate of Interest. Interest on the Revolving
------------------------
Credit Loan and the Term Loan, at all times after the occurrence of and during
the continuation of an Event of Default, and interest on all payments of
interest that are not paid when due, shall accrue at a default rate per annum
equal to two percentage points (2%) above the Prime Rate, which rate shall
change contemporaneously with any change in the Prime Rate.
H. Closing Fee. Borrower shall pay to Lender, on the date
-----------
hereof and in immediately available funds, a fee in the amount of $49,000.00 in
connection with the closing and initial funding of the Term Loan and the
Revolving Credit Loan. Such fee shall be deemed earned in full by Lender on the
date hereof.
I. Letter of Credit Facility. Upon Borrower's request
-------------------------
therefor, Lender shall, from time to time so long as no Event of Default has
occurred and is continuing as of such date of request, issue (i) standby Letters
of Credit for the account of Borrower in an amount of up to $1,500,000.00, and
(ii) commercial Letters of Credit in an amount of up to $1,000,000.00, provided
the aggregate amounts available to be drawn under such standby and commercial
Letters of Credit (or actually drawn but not yet reimbursed by Borrower),
together with the sum of all advances on account of the Revolving Credit Loan
then outstanding, shall not exceed the sum of $20,000,000.00. Each such Letter
of Credit issued by Lender for the account of Borrower and unreimbursed drafts
drawn thereunder shall reduce the amount available to Borrower on account of the
Revolving Credit Loan in an amount equal to the stated amount of such Letter of
Credit so long as such Letter of Credit is outstanding or such draw unpaid. No
Letter of Credit shall be issued by Lender for the account of Borrower which has
an expiration date later than sixty (60) days prior to the termination date of
the Revolving Credit Loan described in Paragraph 3(B)(5) above. Upon payment by
<PAGE>
Lender under any Letter of Credit, any amount so paid shall be immediately due
and payable by Borrower and Lender shall have the right to effect payment
thereof, together with the payment of any fees, expenses and charges described
below, immediately by a charge to Borrower's operating account maintained with
Lender. Unless and until such charge to Borrower's operating account is made by
Lender, the unreimbursed amount of any drawn Letter of Credit shall be
considered an advance on account of the Revolving Credit Loan to satisfy
Borrower's reimbursement obligation to Lender which shall bear interest at the
default rate prescribed in Paragraph 3G above until paid in full by Borrower.
Lender shall charge Borrower its then-prevailing fee for the
issuance of such Letters of Credit, based upon the stated amount of each, which
fee shall be payable by Borrower to Lender upon the issuance thereof. In the
event that Borrower desires either a standby or a commercial Letter of Credit
(subject to the dollar amount limitations set forth above), the documentation
thereof shall consist of Lender's standard forms therefor and Borrower
specifically acknowledges that (i) the reimbursement obligation of Borrower and
any fee on account of such Letters of Credit shall be included in the
Obligations; and (ii) the occurrence of an Event of Default hereunder shall
constitute a default under the documentation relating to such Letters of Credit
and shall entitle Lender to exercise its rights thereunder with respect to such
default.
J. Foreign Exchange Contracts. Borrower and Lender shall,
--------------------------
from time to time, enter into foreign exchange contracts and/or forward exchange
contracts (including any such foreign exchange arrangements governed by an
Interest Rate Swap Contract) upon terms and conditions acceptable to Lender.
K. Automated Clearinghouse Cash Management Arrangement.
---------------------------------------------------
Borrower and Lender shall enter into Lender's form of Automated Clearinghouse
Agreement which shall provide for provisional credit thereunder for the benefit
of Borrower upon terms and conditions acceptable to Lender.
4. CAPITAL ADEQUACY PROVISIONS.
---------------------------
(a) Illegality. Notwithstanding any other provisions herein, if
any applicable law, regulation or directive, or any change therein or in the
interpretation or application thereof shall make it unlawful for Lender to make
or maintain any Eurodollar Loans as contemplated by this Agreement: (a) the
obligation of Lender to make Eurodollar Loans or to continue Eurodollar Loans as
such and convert Prime Rate Loans to Eurodollar Loans shall forthwith be
canceled, and (b) such Loans then outstanding as Eurodollar Loans, if any, shall
be converted automatically, without notice, to Prime Rate Loans on the
respective last Business Days of the then current Interest Periods with respect
thereto or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan is made on a day that is not the last Business Day of the
then current Interest Period applicable thereto, Borrower shall pay to Lender
such amount or amounts as may be required pursuant to Paragraph 3D hereof.
<PAGE>
(b) Increased Costs. In the event that applicable law, treaty or
regulation or directive from any government, governmental agency or regulatory
authority, or any change therein or in the interpretation or application
thereof, or compliance by Lender with any request or directive (whether or not
having the force of law) from any central bank or government, governmental
agency or regulatory authority, shall:
(i) subject Lender to any tax of any kind
whatsoever (except taxes on the overall net income of Lender) with respect to
this Agreement, the Notes or any of the Loans made by it, or change the basis of
taxation of payments to Lender in respect thereof (except for changes in the
rate of tax on the overall net income of Lender);
(ii) impose, modify or hold applicable any reserve,
premium, special deposit, compulsory loan or similar requirements against assets
held by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, or its
issuance of or participation in any letter of credit hereunder any office of any
Lender, including, without limitation, pursuant to Regulations of the Board of
Governors of the Federal Reserve System; or
(iii) in the opinion of Lender, cause the Notes, any
Loans or this Agreement to be included in any calculations used in the
computation of regulatory capital standards; or
(iv) impose on Lender any other condition; and the
result of any of the foregoing is to increase the cost to Lender of making,
renewing or maintaining any of the Loans or any part thereof or issuing or
participating in any letter of credit by an amount that Lender deems to be
material or to reduce the amount of any payment (whether of principal, interest
or otherwise) in respect of any of the Loans by an amount that Lender deems to
be material, then, in any case, Borrower shall promptly pay to Lender, upon its
demand, such additional amount as will compensate Lender for such additional
costs or such reduction as the case may be (collectively, the "Additional
Costs").
(c) Basis for Determining LIBOR Rate Inadequate or Unfair. In
the event that Lender shall have determined (which determination shall be
conclusive and binding upon Borrower) that (a) by reason of circumstances
affecting the interbank LIBOR market, adequate and reasonable means do not exist
for determining LIBOR, or (b) U.S. Dollar deposits in the relevant amount and
for the relevant maturity are no longer available to Lender in the interbank
LIBOR market, or (c) the making or continuation of Eurodollar Loans has been
made impractical or unlawful by the occurrence of a contingency that materially
and adversely affects the Interbank LIBOR market, or (d) the LIBOR Rate will not
<PAGE>
adequately and fairly reflect the cost to Lender of making or maintaining
Eurodollar Loans, or (e) the LIBOR Rate shall no longer represent the effective
cost to Lender of U.S. Dollar deposits in the relevant market for deposits in
which it regularly participates, Lender shall give Borrower notice of such
determination as soon as practicable. If such notice is given (i) any requested
Eurodollar Loan shall be made as a Prime Rate Loan, unless Borrower gives Lender
three (3) Business Days' prior written notice that its request for such
borrowing is canceled, (ii) any Prime Rate Loan that was to have been converted
to a Eurodollar Loan shall be continued as a Prime Rate Loan, and (iii) any
outstanding Eurodollar Loan shall be automatically converted, without notice, to
a Prime Rate Loan effective on the last Business Day of the then current
Interest Period applicable thereto. Until such notice has been withdrawn, no
further Eurodollar Loans shall be made or continued as such, nor shall Borrower
have the right to convert Prime Rate Loans to Eurodollar Loans.
(d) Indemnity. Borrower agrees to indemnify Lender and to hold
Lender harmless from any loss (including any of the Additional Costs referred to
in this Paragraph 4 and any lost profits) or expense that it may sustain or
incur as a consequence of (a) a default by Borrower in the payment of the
principal of or interest on any Eurodollar Loan, (b) the failure by Borrower to
complete a borrowing of, conversion into or continuation of a Eurodollar Loan
after notice thereof has been given, or (c) the making of a prepayment of a
Eurodollar Loan on a day which is not the first Business Day of the then current
Interest Period applicable thereto, including, but not limited to, in each case,
any such loss or expense arising from the reemployment of funds obtained by it
or from fees, interest or other amounts payable to terminate the deposits from
which such funds were obtained. Lender shall prepare a certificate as to any
additional amounts payable to it pursuant to this Paragraph 4, which certificate
shall be submitted by Lender to Borrower and shall, absent manifest error, be
deemed conclusive.
(e) Survival. The obligations and covenants of Borrower under
this Paragraph 4 shall survive the termination of this Agreement and the full,
final and indefeasible payment of the Term Loan and the Revolving Credit Loan
and the other Obligations.
5. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, from the date hereof until
the full payment of the Obligations, unless Lender otherwise agrees in writing,
Borrower shall:
(a) Maintain (i) a Debt Service Coverage Ratio of not less than
1.5 to 1.0, tested at the end of each fiscal quarter of Borrower for the
immediately preceding four (4) fiscal quarters; (ii) a Fixed Charge Coverage
Ratio of not less than 1.25 to 1.0, tested at the end of each fiscal quarter of
Borrower for the immediately preceding four (4) fiscal quarters; (iii) a ratio
of Funded Debt to EBITDA of not greater than 2.5 to 1.0, tested on a quarterly
basis at the end of each fiscal quarter of Borrower, reducing to a ratio of not
greater than 2.0 to 1.0 for the fiscal quarter ending December 31, 2001 and for
each fiscal quarter thereafter (for purposes of this calculation, EBITDA shall
be determined on a rolling four (4) quarter basis); and (iv) its Tangible Net
<PAGE>
Worth in an amount of not less than $20,000,000.00, tested at the end of each
fiscal quarter of Borrower, increasing for each fiscal year of Borrower
hereafter, commencing with the fiscal year ending December 31, 2001, by an
amount equal to the sum of (A) fifty percent (50%) of Borrower's consolidated
net income for the preceding fiscal year plus (B) one hundred percent (100%) of
the net proceeds received by Borrower from the sale of capital assets and/or
capital stock by Borrower during the preceding fiscal year; each of the
foregoing financial covenants to be determined in accordance with generally
accepted accounting principles consistently applied from year to year and tested
by Lender on a quarterly basis at the end of each fiscal quarter of Borrower
hereafter, commencing with the fiscal quarter ending September 30, 2000;
(b) Pay and discharge all taxes, general and special, charges
and assessments, and other governmental obligations, which may have been or
shall be levied, charged or assessed on or against Borrower, Borrower's
property, or Borrower's income or profits before they become delinquent and pay
and discharge on or before their due date any and all other lawful claims and
demands whatsoever, including, without limitation, trade obligations;
(c) Maintain, at all times:
(i) Insurance on Borrower's properties against
loss by fire and all available extended coverage risks in such amounts and with
such insurers as may be reasonably satisfactory to Lender, which insurance shall
by the terms of the policy provide that in the event of loss or damage, the
proceeds thereof shall be first payable to Lender pursuant to a loss payee
clause satisfactory to Lender. Lender shall have the right to apply the proceeds
of any such insurance in reduction of the Obligations, whether or not then due
and payable, in such manner as Lender in its sole discretion may determine, or
to pay over to Borrower, at such times and in such amounts, such proceeds or
part thereof, as Lender in its sole discretion may determine; and
(ii) General public liability insurance against
claims for personal injury, death or property damage in such amounts as are
reasonably satisfactory to Lender and Worker's Compensation insurance in
statutory amounts with companies licensed to do business in the State of
Connecticut or in other states where the Borrower's non-Connecticut facilities
are located;
(d) Furnish to Lender:
(i) Within one hundred twenty (120) calendar days
after the end of each of Borrower's and the Consolidated Subsidiaries' fiscal
years following the date hereof, Borrower's and the Consolidated Subsidiaries'
consolidated financial statements including Borrower's and the Consolidated
Subsidiaries' consolidated balance sheet, statement of income, statement of
capital/stockholders' equity, and statement of cash flows. Each of such
financial statements shall set forth in comparative form, the corresponding
figures for the preceding fiscal year, all in reasonable detail, including all
supporting schedules, comments and notes; shall be audited by independent
<PAGE>
certified public accountants of recognized standing selected by Borrower and
satisfactory to Lender; and shall be prepared in accordance with generally
accepted accounting principles consistently applied from year to year, including
the fiscal year preceding that for which such statement is being furnished;
(ii) Simultaneously with the delivery of the
consolidated financial statements required in clause (i) above, a written
statement, addressed to Lender, of Borrower's independent certified public
accountants referred to in clause (i) above, indicating that, in making the
examination necessary for rendering their opinion, as required in clause (i)
above, said accountants have obtained new knowledge of any default, whether or
not cured at the time of such examination, in the performance of any obligation
(including, without limitation, any affirmative or negative covenant) of
Borrower or any Consolidated Subsidiary under any of the Loan Documents, or
disclosing all such defaults of which they have obtained knowledge; provided,
however, that in making their examination, such accountants shall not be
required to go beyond the limited of generally accepted auditing standards;
(iii) Within sixty (60) calendar days after the end
of each quarter following the date hereof, the unaudited balance sheet of
Borrower and the Consolidated Subsidiaries as at the end of such period and the
end of the corresponding period of the preceding fiscal year, and a consolidated
statement of income and consolidated statement of cash flows (as applicable) of
Borrower and the Consolidated Subsidiaries for the period between the end of the
last fiscal year and the end of such period and for the corresponding period of
the preceding fiscal year, certified by the chief financial officer of Borrower
as fairly presenting the financial position of Borrower and the results of
Borrower's and the Consolidated Subsidiaries' operations as at the end of each
such period;
(iv) Concurrently with the delivery of any and all
financial statements required by this Agreement, a certificate of the President,
Treasurer or Vice President of Finance of Borrower (A) stating that (xx) to the
best of his/her knowledge and belief, all taxes, assessments and charges levied
upon Borrower which have become due have been paid, or specifying any such
taxes, assessments or charges which have not been paid and stating why they
remain unpaid; and (yy) to the best of his/her knowledge and belief, after
reviewing each and every obligation of Borrower hereunder and under the other
Loan Documents, Borrower is not in default in the performance of any of such
obligations, or specifying each default of which the signer has knowledge and
setting forth what action has been taken to cure any such default; and (B)
demonstrating compliance with the covenants contained in Paragraph 5(a) above;
(v) Within forty-five (45) days after the end of
each fiscal year of Borrower hereafter, a written forecast/projection of the
financial operations of Borrower and the Consolidated Subsidiaries for the next
fiscal year, in such form and containing such detail as Lender may reasonably
request;
<PAGE>
(vi) In the event that Borrower is contemplating an
acquisition of all or substantially all of the assets or capital stock of
another Person, a proforma covenant compliance certificate demonstrating
Borrower's compliance, after giving effect to the contemplated acquisition, with
the affirmative and negative covenants set forth herein;
(vii) Promptly, upon the filing of same with the
Securities and Exchange Commission, copies of all annual reports, quarterly
reports and statements and other materials filed with or issued by the
Securities and Exchange Commission; and
(viii) Promptly upon Lender's request therefor, such
other information relating to Borrower and the
Consolidated Subsidiaries and Borrower's and the Consolidated Subsidiaries'
affairs as Lender may from time to time reasonably request, including, without
limitation, all reports, notices or statements sent to Borrower's shareholders
by Borrower;
(f) Allow Lender by or through any of its officers, agents,
attorneys, or accountants designated by it (hereinafter "Examiners"), for the
purpose of ascertaining whether or not the Loan Documents are being performed
and for the purpose of examining Borrower's and the Consolidated Subsidiaries'
respective records, to enter the offices and plants of Borrower and the
Consolidated Subsidiaries to examine or inspect the properties, books and
financial records of Borrower and the Consolidated Subsidiaries, to make and
take away copies of such books and records or extracts therefrom, and to discuss
the affairs, finances and accounts of Borrower and the Consolidated Subsidiaries
with Borrower and the Consolidated Subsidiaries all at such reasonable times and
as often as Lender may reasonably request. The Lender and the Examiners shall
maintain all information obtained by them in strict confidence and shall not
disclose same to any third party (other than to bank regulators or examiners),
unless compelled to do so by court order;
(g) Pay to Lender, on demand, any and all expenses, including
attorneys' fees, incurred or expended by Lender in preparation of the Loan
Documents, in making or processing the Loans, in the collection or attempted
collection of the Obligations and in protecting and/or enforcing the rights of
Lender against Borrower under any of the Loan Documents;
(h) Keep complete and accurate books and records pertaining to
the Obligations and Borrower's and the Consolidated Subsidiaries' covenants
under this Agreement;
(i) Comply (and cause each of the Consolidated Subsidiaries to
comply) with all laws, ordinances and rules and regulations applicable to
Borrower and the Consolidated Subsidiaries of any Federal, state or local
government or any instrumentality or agency thereof, including, without
limitation, ERISA, OSHA, and Federal, state and municipal laws, ordinances,
rules and regulations concerning the environment, including, without limitation,
RCRA and CERCLA;
<PAGE>
(j) Promptly advise Lender of the happening of an Event of
Default or the existence of a state of facts which by the passage of time, the
giving of notice, or both, would constitute an Event of Default;
(k) Maintain Borrower's primary operating and deposit accounts
with Lender; and
(l) Maintain in full force and effect an Interest Rate Swap
Contract with Lender for an amount equal to at least $15,000,000.00 of the from
time to time outstanding balance of the Term Loan.
6. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, from the date hereof until
the full payment of the Obligations, unless Lender shall otherwise consent in
writing, Borrower shall not:
(a) Create, incur, assume or suffer to exist any Lien of any
kind upon or defect in title to or restriction upon the use of any of Borrower's
property or assets of any character, whether owned at the date hereof or
hereafter acquired except:
(i) Liens arising out of judgments or awards not
in excess of the aggregate sum of $100,000.00 in respect of which Borrower shall
in good faith be prosecuting an appeal or proceedings for review and in respect
of which Borrower shall have secured a subsisting stay of execution pending such
appeal or proceedings for review, provided Borrower shall have set aside on its
books adequate reserves with respect to such judgment or award;
(ii) Liens for taxes, assessments or governmental
charges or levies, provided payment thereof shall not at the time be required in
accordance with the provisions of Paragraph 5(b) of this Agreement;
(iii) Deposits or other Liens to secure payments of
workers' compensation, unemployment insurance, old age pensions or other social
security obligations;
(iv) Inchoate mechanic's, workmen's, repairmen's,
warehousemen's, vendors' or carriers' liens, or other similar Liens arising in
the ordinary course of business and securing sums which are not past due, or
deposits or pledges to obtain the release of any such liens;
<PAGE>
(v) Liens in favor of General Electric Capital
Corporation on the machinery and equipment described on Exhibit G attached
hereto and other Liens existing on the date hereof (which do not exceed the sum
of $250,000.00 in the aggregate), but not the extension of coverage to other
property, or the refunding or modification thereof in whole or in part, and the
encumbrances on the Chester, Connecticut real property disclosed in the
Greenwald Asset Purchase Agreement;
(vi) Liens securing purchase money financing
permitted by Paragraph 6(d) below; and
(vii) A future Lien in favor of the Connecticut
Development Authority or the State of Connecticut Department of Economic and
Community Development on Borrower's fee interest in the real property located in
Chester, Connecticut acquired by Borrower pursuant to the terms of the Greenwald
Asset Purchase Agreement to secure a loan from such State agency in an amount
not to exceed the sum of $4,000,000.00 (the "State Loan"), so long as one
hundred percent (100%) of the proceeds of such State Loan received by Borrower
are used by Borrower to make a mandatory pay down on the Term Loan to Lender;
(b) Sell, transfer, assign, lease, or otherwise dispose of any
of its properties or assets, or change the nature of its business, except for in
the ordinary course of Borrower's business for adequate consideration;
(c) Declare or pay any dividends or make any other distributions
on any shares of its capital stock (other than dividends payable solely in such
shares), or purchase, redeem, retire or otherwise acquire, directly or
indirectly, any such shares; provided, however, that (i) so long as no Event of
Default has occurred and is continuing or would result from the payment of such
dividends by Borrower, Borrower shall be entitled to declare and make annual
dividends, payable quarterly, and (ii) so long as no Event of Default has
occurred and is continuing or would result from the repurchase or redemption by
Borrower of its capital stock, Borrower shall be permitted to repurchase or
redeem an amount of up to $1,500,000.00 of its capital stock during fiscal year
2000 and an amount of up to $1,000,000.00 of its capital stock during each
fiscal year thereafter;
(d) Create or assume any obligations for money borrowed from any
Person other than Lender (other than the State Loan and the existing loans from
General Electric Capital Corporation), in excess of the aggregate sum of
$1,500,000.00 at any one time outstanding, and not incur any indebtedness for
borrowed money (including purchase money indebtedness) in excess of the sum of
$1,000,000.00 in any single transaction without the express prior written
consent of Lender;
(e) Endorse, guaranty, or become surety for the obligations of
any third Person, except for the endorsement of checks in the ordinary course of
business, and guaranties of the obligations of any Person (including any
Consolidated Subsidiary) in excess of the aggregate amount of $500,000.00 at any
one time outstanding;
<PAGE>
(f) Make any loans or advances, other than advances, not
exceeding $500,000.00, in the aggregate at any one time outstanding, to its
directors, officers, shareholders or employees for travel and other minor
business expenses in the ordinary course of business;
(g) Purchase or otherwise acquire any securities except
obligations of the United States Government or certificates of deposit issued by
a commercial bank having total assets of not less than $50,000,000.00, and an
office in the State of Connecticut, provided that the same are pledged to and
deposited with the Lender;
(h) Enter into any transactions of any kind with any of its
Affiliates upon terms that are less favorable to Borrower than terms that could
be obtained elsewhere on an arm's length basis;
(i) Enter into any merger or consolidation, or sell all or
substantially all of Borrower's assets, or liquidate, dissolve or otherwise
terminate or alter Borrower's existence, form or method of conducting Borrower's
business;
(j) Change its corporate name, adopt any trade names, or conduct
its business under any trade name or style other than as hereinabove set forth,
or change its chief executive office or places of business;
(k) Acquire, form or dispose of any Consolidated Subsidiaries or
acquire all or substantially all of the assets of any other Person or any
portion of the assets of any other Person which constitutes a division, product
line or line of business; and
(l) Make any capital expenditures attributable to capitalized
leases and/or purchase money financing in excess of the aggregate sum of
$1,500,000.00 during any fiscal year hereafter, or enter into any single
capitalized lease or purchase money financing transaction in excess of the sum
of $1,000,000.00 without the prior written consent of Lender.
7. RIGHTS OF LENDER
----------------
When the Obligations, or any of them, become immediately due and
payable, after the occurrence of an Event of Default, Lender may, pursue any
legal remedy available to it to collect the Obligations outstanding at said
time, to enforce its rights hereunder, and to enforce any and all other rights
or remedies available to it.
8. DEFAULT PROVISIONS
------------------
(a) The Notes shall forthwith become immediately due and
payable, and Borrower's eligibility to request any further advances on account
of the Revolving Credit Loan shall automatically terminate, without presentment,
<PAGE>
protest, demand or notice of any kind, if Borrower or any of the Guarantors
becomes insolvent (including in said term either a negative tangible net worth
or an inability to pay their respective debts as they mature) or bankrupt, or
makes an assignment for the benefit of their respective creditors, or consents
to the appointment of a trustee or receiver of all or a substantial part of
their respective properties or such appointment is made without their consent,
or if bankruptcy, reorganization, arrangement, receivership or liquidation
proceedings are instituted by or against Borrower or any of the Guarantors, and
any involuntary bankruptcy proceeding is not dismissed within sixty (60) days of
the filing of same;
(b) Lender may, at its option, declare the Notes due and payable
whereupon the same shall become due and payable forthwith, without presentment,
protest, demand or notice of any kind in any of the following cases:
(i) If any payment of principal or interest or any
other payment required by the Notes or by the terms of any of the Loan Documents
shall not be fully paid when demand (to the extent the same is payable on
demand) is made for the payment of the same or within ten (10) days after the
same shall fall due if payable other than on demand;
(ii) If any payment of principal or interest or any
other payment required by any of the obligations of Borrower or any of the
Guarantors for any other money borrowed by Borrower or any of the Guarantors
from Lender or for money borrowed by Borrower or any of the Guarantors from any
third person in excess of the aggregate sum of $50,000.00 shall not be fully
paid when demand is made for the payment of the same (to the extent payable on
demand) or when the same shall fall due, or if any of said obligations shall
become or be declared in default (and all applicable cure and/or grace periods
have expired);
(iii) If any warranty or representation by Borrower
or any of the Guarantors contained in the Loan Documents or in any statement
furnished by Borrower or any of the Guarantors to Lender proves incorrect in any
material respect;
(iv) If default exists in the due observance of any
of the covenants or agreements of Borrower or any of the Guarantors set forth in
any of the Loan Documents;
(v) If a final unappealable judgment (not covered
by insurance) in an amount in excess of $100,000.00 is entered against Borrower
or any of the Guarantors and remains unsatisfied for a period of forty-five (45)
calendar days;
(vi) If Borrower or any of the Guarantors is
voluntarily or involuntarily dissolved, or take any action to effect a
dissolution, ceases to conduct business;
<PAGE>
(vii) If any Guaranty shall for any reason cease to
be in full force and effect, or be declared null and void or unenforceable in
whole or in part, or the validity or enforceability of any Guaranty shall be
challenged or denied by any Guarantor;
(viii) If Borrower suffers a net loss on a
consolidated basis, as determined in accordance with generally accepted
accounting principles consistently applied, in any two (2) consecutive fiscal
quarters; or
(ix) If any "Change in Control" (as defined below)
occurs. As used herein, the term "Change in Control" shall mean the happening
of any of the following:
(A) When any "person", as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than Borrower or any Affiliate of Borrower, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Borrower representing more than twenty
percent (20%) of the combined voting power of either (I) the then outstanding
shares of common stock of Borrower (the "Outstanding Common Stock") or (II) the
then outstanding voting securities of Borrower entitled to vote generally in the
election of directors (the "Voting Securities"); or
(B) Individuals who, at the beginning of
any twenty-four (24) month period, constitute the Directors of Borrower (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Directors or cease to be able to exercise the powers of the majority of the
Board of Directors, provided that any individual becoming a director subsequent
to the beginning of such period whose election or nomination for election by
Borrower's stockholders was approved by a vote of at least a majority of the
Directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of
Directors of Borrower (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(C) Consummation by Borrower of a
reorganization, merger or consolidation (a "Business Combination"), in each
case, with respect to which all or substantially all of the individuals or
entities who were the respective beneficial owners of the Outstanding Common
Stock and Voting Securities immediately prior to such Business Combination do
not, following consummation of all transactions intended to constitute part of
such Business Combination, beneficially own, directly or indirectly, more than
seventy-five percent (75%) of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation, business trust or other entity resulting from or
<PAGE>
being the surviving entity in such Business Combination in substantially the
same proportion as their ownership immediately prior to such Business
Combination of the Outstanding Common Stock and Voting Securities, as the case
may be; or
(D) Consummation of a complete
liquidation or dissolution of Borrower or sale or other disposition of all or
substantially all of the assets of Borrower other than to a corporation,
business trust or other entity with respect to which, following consummation of
all transactions intended to constitute part of such sale or disposition, more
than seventy-five percent (75%) of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote in the election of directors, as the case may be, is
then owned beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Voting Securities, immediately prior to such
sale or disposition in substantially the same proportion as their ownership of
the Outstanding Common Stock and Voting Securities, as the case may be,
immediately prior to such sale or disposition.
Notwithstanding the foregoing, an Event of Default shall not occur hereunder if
any one of the foregoing Events of Default involves a Guarantor whose assets, on
a consolidated basis, do not represent ten percent (10%) or more of the
consolidated assets of Borrower and the Consolidated Subsidiaries as of the date
that such Event of Default occurs.
9. SET-OFF
-------
Borrower and each Guarantor hereby grants to Lender, a lien,
security interest and right of setoff as security for all liabilities and
obligations to Lender, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Lender or any entity under the
control of FleetBoston Financial Corporation, or in transit to any of them. At
any time, without demand or notice, Lender may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower and any
Guarantor even though unmatured. ANY AND ALL RIGHTS TO REQUIRE LENDER TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY COLLATERAL WHICH SECURES THE
LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS,
CREDITS OR OTHER PROPERTY OF THE BORROWR OR ANY GUARANTOR ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
10. INDEMNITY
Borrower hereby agrees to indemnify and hold harmless Lender and
its officers, directors, employees, agents and attorneys (herein collectively
called the "Indemnified Parties") from and against any and all claims, damages,
liabilities, costs and expenses which may be incurred by or asserted against any
of the Indemnified Parties in connection with or arising out of any
investigation, litigation or proceeding related to this Agreement or the
<PAGE>
negotiation and preparation of documentation in connection herewith, except for
claims or losses resulting solely from such Indemnified Parties' gross
negligence or willful misconduct.
11. CROSS-DEFAULT
-------------
Borrower acknowledges and agrees that an Event of Default under
any one of the Loan Documents shall constitute an Event of Default under each of
the other Loan Documents.
12. GENERAL PROVISIONS
------------------
(a) No delay or failure of Lender in exercising any right, power
or privilege hereunder shall affect such right, power or privilege, nor shall
any single or partial exercise preclude any further exercise thereof or the
exercise of any other rights, powers or privileges;
(b) This Agreement, the security interest hereby granted to
Lender by Borrower and every representation, warranty, covenant, promise and
other term herein contained shall survive until the Obligations have been paid
in full;
(c) This Agreement is an integrated document, contains a
complete statement of all arrangements between the parties hereto with respect
to the subject matter hereof and supersedes any and all previous agreements,
written or oral, between such parties concerning its subject matter. This
Agreement shall not be varied by parol evidence;
(d) THIS AGREEMENT IS MADE, EXECUTED AND DELIVERED IN THE STATE
OF CONNECTICUT, AND IT IS THE SPECIFIC DESIRE AND INTENTION OF THE PARTIES THAT
IT SHALL IN ALL RESPECTS BE CONSTRUED UNDER THE LAWS OF THE STATE OF
CONNECTICUT;
(e) All agreements between Borrower, the Guarantors and Lender
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to Lender for
the use or the forbearance of the indebtedness evidenced hereby exceed the
maximum permissible under applicable law. As used herein, the term "applicable
law" shall mean the law in effect as of the date hereof provided, however, that
in the event there is a change in the law which results in a higher permissible
rate of interest, then this Agreement shall be governed by such new law as of
its effective date. In this regard, it is expressly agreed that it is the intent
of Borrower and Lender in the execution, delivery and acceptance of this
Agreement to contract in strict compliance with the laws of the State of
Connecticut from time to time in effect. If, under or from any circumstances
whatsoever, fulfillment of any provision hereof or of any of the Loan Documents
<PAGE>
at the time of performance of such provision shall be due, shall involve
transcending the limit of such validity prescribed by applicable law, then the
obligation to be fulfilled shall automatically be reduced to the limits of such
validity, and if under or from circumstances whatsoever Lender should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between
Borrower, the Guarantors and Lender;
(f) Upon receipt by Borrower of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of any of the Notes or
any other security document which is not of public record, and, in the case of
any such loss, theft, destruction or mutilation, upon cancellation of such Note
or other security document, Borrower will issue, in lieu thereof, a replacement
note or other security document in the same principal amount thereof and
otherwise of like tenor;
(g) Lender shall have the unrestricted right at any time and
from time to time, and without the consent of or notice to Borrower or any
Guarantor, to grant to one or more banks or other financial institutions (each,
a "Participant") participating interests in Lender's obligation to lend
hereunder and/or any or all of the Loans held by Lender hereunder. In the event
of any such grant by Lender of a participating interest to a Participant,
whether or not upon notice to Borrower, Lender shall remain responsible for the
performance of its obligations hereunder and Borrower shall continue to deal
solely and directly with Lender in connection with Lender's rights and
obligations hereunder.
Lender may furnish any information concerning Borrower in its possession from
time to time to prospective Participants, provided that Lender shall require any
such prospective Participant to agree in writing to maintain the confidentiality
of such information.
(h) The captions for the paragraphs contained in this Agreement
have been inserted for convenience only and form no part of this Agreement and
shall not be deemed to affect the meaning or construction of any of the
covenants, agreements, conditions or terms hereof;
(i) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that Borrower shall not assign, voluntarily, by operation of
law or otherwise, any of its rights hereunder without the prior written consent
of Lender and any such attempted assignment without such consent shall be null
and void;
(j) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS. BORROWER ACKNOWLEDGES THAT LENDER IS
RELYING ON THE FOREGOING WAIVER IN ENTERING INTO THIS TRANSACTION;
<PAGE>
(k) BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY WAIVES ITS RIGHTS
TO: (1) NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES, OR OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH LENDER MAY DESIRE TO USE, AND (2) REQUEST THAT LENDER
POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWER AGAINST DAMAGES THAT
MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER BY VIRTUE
OF ANY DEFAULT OR PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
BORROWER FURTHER EXPRESSLY WAIVES DILIGENCE, DEMAND, PRESENTMENT, PROTEST,
NOTICE OF NONPAYMENT OR PROTEST, NOTICE OF THE ACCEPTANCE OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS, NOTICE OF ANY OTHER ACTION TAKEN IN RELIANCE HEREON
AND ALL OTHER DEMANDS AND NOTICES OF ANY DESCRIPTION IN CONNECTION WITH THIS
AGREEMENT (OTHER THAN THE NOTICES SPECIFICALLY REQUIRED BY THIS AGREEMENT) OR
THE OTHER LOAN DOCUMENTS, ANY OF THE OBLIGATIONS OR OTHERWISE; and
(l) BORROWER ACKNOWLEDGES THAT IT MAKES THE WAIVERS SET FORTH IN
SUBPARAGRAPHS (j) AND (k) OF THIS PARAGRAPH 12 KNOWINGLY AND VOLUNTARILY,
WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THOSE
WAIVERS WITH ITS ATTORNEYS. BORROWER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT
AGREED WITH OR REPRESENTED TO BORROWER THAT THE PROVISIONS OF SUBPARAGRAPHS (j)
AND (k) OF THIS PARAGRAPH 12 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
BORROWER:
--------
THE EASTERN COMPANY
By: /s/Leonard F. Leganza
-------------------------
Leonard F. Leganza
Its President and Chief Executive Officer
LENDER:
------
FLEET NATIONAL BANK
By: /s/Garth J. Collins
-----------------------
Garth J. Collins
Its Director - Commercial Banking
<PAGE>
LIST OF EXHIBITS
A - List of Consolidated Subsidiaries
B - Form of Term Note
C - Form of Revolving Credit Note
D - List of Pension or Other Employee Benefit Plans
E - Copy of Environmental Investigation Status Letter
F - List of Collective Bargaining or Union Agreements
G - List of General Electric Capital Corporation Machinery and Equipment
<PAGE>
EXHIBIT A
LIST OF CONSOLIDATED SUBSIDIARIES
Sesamee Mexicana, S.A. de C.V., a corporation organized under the laws of Mexico
World Security Industries Company Limited, a corporation organized under the
laws of Hong Kong
World Lock Co., Ltd., a corporation organized under the laws of the Republic of
China
Eberhard Hardware Manufacturing Limited, a corporation organized under the laws
of the Province of Ontario, Canada
Ashtabula Industrial Hardware Co., a corporation organized under the laws of the
State of Ohio
<PAGE>
TERM NOTE
Waterbury, Connecticut
$25,000,000.00 June 28, 2000
FOR VALUE RECEIVED, THE EASTERN COMPANY, a Connecticut corporation
("Maker"), promises to pay to the order of FLEET NATIONAL BANK, a national
baking association organized and existing under the laws of the United States of
America ("Payee"), at its banking office at 157 Church Street, 26th Floor, New
Haven, Connecticut 06510, or at such other place as may be designated in writing
from time to time by Payee, the principal sum of TWENTY-FIVE MILLION AND NO/100
DOLLARS ($25,000,000.00) in lawful money of the United States and in immediately
available funds, together with interest on the outstanding principal sum, for
the period commencing on the date hereof until the date on which the entire
principal balance hereof has been paid in full, at the rates per annum provided
in the Agreement (as defined below). Interest shall accrue and be payable in
arrears on the earlier of the first Business Day (as defined in the Agreement)
of each fiscal quarter hereafter, commencing on October 2, 2000, or the last
Business Day of each Interest Period (as defined in the Agreement), as the case
may be, until the entire principal balance of this Term Note shall have been
paid in full. The principal balance of this Term Note shall be payable in
quarterly installments over a five (5) year term, commencing on October 2, 2000
and maturing on July 1, 2005, as follows:
Payment Date Payment Amount
October 2, 2000 $ 625,000.00
January 1, 2001 $ 625,000.00
April 2, 2001 $ 625,000.00
July 2, 2001 $ 625,000.00
October 1, 2001 $ 750,000.00
January 1, 2002 $ 750,000.00
April 1, 2002 $ 750,000.00
July 1, 2002 $ 750,000.00
October 1, 2002 $ 875,000.00
January 1, 2003 $ 875,000.00
April 1, 2003 $ 875,000.00
July 1, 2003 $ 875,000.00
October 1, 2003 $ 1,000,000.00
January 1, 2004 $ 1,000,000.00
April 1, 2004 $ 1,000,000.00
July 1, 2004 $ 1,000,000.00
October 1, 2004 $ 1,000,000.00
January 3, 2005 $ 1,000,000.00
April 1, 2005 $ 1,000,000.00
July 1, 2005 Entire remaining principal
balance.
<PAGE>
The aforesaid payments shall be first applied to accrued interest and then to
principal. Interest charged on the principal sum outstanding hereunder shall be
calculated on the basis of the actual number of days elapsed on the basis of a
360 day year. If this Term Note or any payment hereunder becomes due on a day
which is not a Business Day, the due date of this Term Note or such payment
shall be extended to the next succeeding Business Day, and such extension of
time shall be included in computing interest and fees in connection with such
payment.
In addition to said principal sum and interest, Maker further promises
to pay, on demand, all reasonable costs and expenses, including, without
limitation, attorneys' fees, incurred by Payee in the collection of this Term
Note.
This Term Note is issued pursuant to a certain Loan Agreement of even
date herewith (hereinafter referred to as the "Agreement"), by and between Maker
and Payee, a copy of which is on file at the office of Payee at 157 Church
Street, 26th Floor, New Haven, Connecticut 06510. The terms of the Agreement are
incorporated into this Term Note by reference, and reference is hereby made to
the Agreement for a more particular statement of certain representations,
warranties, covenants and agreements of Maker and providing for Events of
Default.
Initially capitalized terms used herein shall have the same meanings
ascribed to them in the Agreement, unless otherwise indicated herein.
Any prepayment (whether in whole or in part) of this Term Note prior to
the end of any applicable Interest Period may be subject to a prepayment
premium, all as more particularly set forth in the Agreement. Except for such
prepayment premium, this Term Note may be prepaid at any time without premium or
penalty. Any permitted partial prepayment shall be accompanied by the amount of
accrued interest on the principal sum being prepaid and shall be applied to the
quarterly principal installments due hereunder in the inverse order of maturity
thereof.
Upon the occurrence and during the continuance of any Event of Default,
or if any payment required to be made on account of this Term Note shall remain
in arrears and unpaid for a period in excess of ten (10) days after the same
shall become due, in which latter event Maker agrees to pay to Payee the
additional sum of five percent (5%) of the amount of such late payment (other
than payments at maturity or after acceleration) to cover the additional
expenses of Payee's handling of such late payment but not as consideration for
making such late payment, and Payee shall be entitled to demand immediate
payment of the outstanding principal balance of this Term Note and all accrued
but unpaid interest hereon, and the interest rate(s) accruing hereunder shall,
from such default, be increased to a variable rate equal to two percentage
points (2%) per annum above the Prime Rate in effect immediately prior to such
default, such rate to change when and as said Prime Rate changes.
Maker hereby grants to Payee and any Affiliate of Payee, a lien,
security interest and right of set-off as security for all of Maker's
liabilities hereunder, whether now existing or hereafter arising, upon and
against all of Maker's deposits, credits, collateral and other property now or
hereafter in the possession, custody, safekeeping or control of Payee or any
Affiliate of Payee (including any entity under the control of FleetBoston
Financial Corporation) or in transit to it or any of them, except for any
<PAGE>
payroll account, pension or profit sharing balances or similar trust fund
accounts or balances of Maker. At any time, without demand or notice, Payee and
its Affiliates may setoff the same or any part thereof and apply the same or any
part thereof to any of Maker's liabilities hereunder, whether or not matured at
the time of such application and regardless of the adequacy of any other
collateral securing this Term Note. Maker shall be given prompt notice after the
occurrence of any such set-off and application. ANY AND ALL RIGHTS TO REQUIRE
PAYEE TO EXERCISE ITS RIGHS OR REMEDIES WITH RESPECT TO ANY COLLATERAL WHICH
SECURES THIS TERM NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF MAKER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
No delay or failure of Payee in exercising any right, power or
privilege hereunder or under the Agreement shall affect such right, power or
privilege, nor shall any single or partial exercise preclude any further
exercise thereof or the exercise of any other rights, powers or privileges.
Payee may at any time pledge all or any portion of its rights under
this Term Note to any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or
endorsement thereof shall release the Payee from its obligations hereunder or
under the Agreement.
Upon receipt by Maker of an affidavit of an officer of Payee as to the
loss, theft, destruction or mutilation of this Term Note and upon the
cancellation of this Term Note due to such loss, theft, destruction or
mutilation, Maker shall issue, in lieu thereof, a replacement note to Payee in
the same principal amount thereof and otherwise of like tenor.
All agreements between Maker and Payee are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of acceleration of
the maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to Payee for the use or the forbearance of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law. As used herein, the term "applicable law" shall mean the law in effect as
of the date hereof; provided, however, that in the event there is a change in
the law which results in a higher permissible rate of interest, then this Term
Note shall be governed by such new law as of its effective date. In this regard,
it is expressly agreed that it is the intent of Maker and Payee in the
execution, delivery and acceptance of this Term Note to contract in strict
compliance with the laws of the State of Connecticut from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or under the Agreement or the other Loan Documents at the time
of performance of such provision shall be due, shall involve transcending the
limit of such validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such validity, and if
under or from circumstances whatsoever Payee shall ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance
evidenced hereby and not to the payment of interest. This provision shall
control every other provision of all agreements between Maker and Payee.
<PAGE>
MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS TERM NOTE IS A
PART IS A COMMERCIAL TRANSACTION, AND HEREBY WAIVES MAKER'S RIGHTS TO: (1)
NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH PAYEE MAY DESIRE TO USE, AND (2) REQUEST THAT PAYEE POST A BOND,
WITH OR WITHOUT SURETY, TO PROTECT MAKER AGAINST DAMAGES THAT MAY BE CAUSED BY
ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY PAYEE BY VIRTUE OF ANY DEFAULT OR
PROVISION OF THIS TERM NOTE OR ANY LOAN DOCUMENT SECURING THIS TERM NOTE, AND
MAKER FURTHER WAIVES DILIGENCE, DEMAND, PROTEST, NOTICE OF NONPAYMENT OR
PROTEST, NOTICE OF THE ACCEPTANCE OF THIS TERM NOTE, NOTICE OF ANY OTHER ACTION
TAKEN IN RELIANCE HEREON AND ALL OTHER DEMANDS AND NOTICES OF ANY DESCRIPTION IN
CONNECTION WITH THIS TERM NOTE OR THE INDEBTEDNESS EVIDENCED HEREBY.
ADDITIONALLY, MAKER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, DEFENSE, COUNTERCLAIM, CROSSCLAIM AND/OR ANY FORM OF PROCEEDING BROUGHT
IN CONNECTION WITH THIS TERM NOTE OR RELATING TO ANY INDEBTEDNESS EVIDENCED
HEREBY.
MAKER ACKNOWLEDGES THAT IT HAS MADE THE FOREGOING WAIVERS KNOWINGLY AND
VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF
THESE WAIVERS WITH ITS ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT PAYEE HAS NOT
AGREED WITH OR REPRESENTED TO MAKER THAT THE FOREGOING WAIVERS WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
THIS TERM NOTE HAS BEEN MADE, EXECUTED AN DELIVERED IN THE STATE OF
CONNECTICUT AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CONNECTICUT.
THE EASTERN COMPANY
By: /s/Leonard F. Leganza
-------------------------
Leonard F. Leganza
Its President and Chief Executive Officer
<PAGE>
REVOLVING CREDIT NOTE
$20,000,000.00 Waterbury, Connecticut
June 28, 2000
FOR VALUE RECEIVED, THE EASTERN COMPANY, a Connecticut corporation
("Maker"), promises to pay to the order of FLEET NATIONAL BANK, a national
banking association organized and existing under the laws of the United States
of America ("Payee"), at its banking office at 157 Church Street, 26th Floor,
New Haven, Connecticut 06510, or at such other place as may be designated in
writing from time to time by Payee or any other holder hereof, the principal sum
of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00), or so much thereof as may
have been advanced from time to time by Payee to Maker and remains outstanding,
as conclusively evidenced by the books and records of Payee absent manifest
error, in lawful money of the United States of America and in immediately
available funds, together with interest on the outstanding principal sum, for
the period commencing on the date hereof until the date on which the entire
principal balance hereof has been paid in full, at the rates per annum and on
the dates provided for in the Agreement (as defined below). Interest shall be
charged on the principal sum outstanding hereunder and shall be calculated on
the basis of the actual number of days elapsed on the basis of a 360 day year.
All principal remaining unpaid and any accrued but unpaid interest shall in any
event be due and payable on the dates set forth in the Agreement. If this
Revolving Credit Note or any payment hereunder becomes due on a day which is not
a Business Day (as defined in the Agreement), the due date of this Revolving
Credit Note or such payment shall be extended to the next succeeding Business
Day, and such extension of time shall be included in computing interest and fees
in connection with such payment.
In addition to said principal sum and interest, Maker further promises
to pay, on demand, all reasonable costs and expenses, including, without
limitation, attorneys' fees, incurred by Payee in the collection of this
Revolving Credit Note.
This Revolving Credit Note is issued pursuant to a certain Loan
Agreement of even date herewith (hereinafter referred to as the "Agreement"), by
and between Maker and Payee, a copy of which is on file at the office of Payee
at 157 Church Street, 26th Floor, New Haven, Connecticut 06510. The terms of the
Agreement are incorporated into this Revolving Credit Note by reference, and
reference is hereby made to the Agreement for a more particular statement of
certain representations, warranties, covenants and agreements of Maker and
providing for Events of Default. The principal amount of this Revolving Note
shall be payable at the time set forth in Paragraph 3B and/or Paragraph 8 of the
Agreement.
<PAGE>
Initially capitalized terms used herein shall have the meanings
ascribed to them in the Agreement, unless otherwise indicated herein.
This Revolving Credit Note is a revolving note and, subject to the
terms and conditions of the Agreement, the Maker may, at its option, borrow,
pay, prepay and reborrow under this Revolving Credit Note, all in accordance
with the provisions hereof; provided, however, that the principal balance
outstanding shall at no time exceed the face amount of this Revolving Credit
Note.
Any prepayment (whether in whole or in part) of any outstanding
Eurodollar Loan may be subject to a prepayment premium, all as more particularly
set forth in the Agreement. Except for such prepayment premium, this Revolving
Credit Note may be prepaid at any time without premium or penalty.
Upon the occurrence and during the continuance of any Event of Default,
or if any payment required to be made on account of this Revolving Credit Note
shall remain in arrears and unpaid for a period in excess of ten (10) days after
the same shall become due, in which latter event Maker agrees to pay to Payee
the additional sum of five percent (5%) of the amount of such late payment
(other than payments at maturity or after acceleration) to cover the additional
expenses of Payee's handling of such late payment but not as consideration for
making such late payment, and Payee shall be entitled to demand immediate
payment of the outstanding principal balance of this Revolving Credit Note and
all accrued but unpaid interest hereon, and the interest rate(s) accruing
hereunder shall, from such default, be increased to a variable rate equal to two
percentage points (2%) per annum above the Prime Rate in effect immediately
prior to such default, such rate to change when and as said Prime Rate changes.
Maker hereby grants to Payee and any Affiliate of Payee, a lien,
security interest and right of set-off as security for all of Maker's
liabilities hereunder, whether now existing or hereafter arising, upon and
against all of Maker's deposits, credits, collateral and other property now or
hereafter in the possession, custody, safekeeping or control of Payee or any
Affiliate of Payee (including any entity under the control of FleetBoston
Financial Corporation) or in transit to it or any of them, except for any
payroll account, pension or profit sharing balances or similar trust fund
accounts or balances of Maker. At any time, without demand or notice, Payee and
its Affiliates may setoff the same or any part thereof and apply the same or any
part thereof to any of Maker's liabilities hereunder, whether or not matured at
the time of such application and regardless of the adequacy of any other
collateral securing this Revolving Credit Note. Maker shall be given prompt
notice after the occurrence of any such set-off and application. ANY AND ALL
RIGHTS TO REQUIRE PAYEE TO EXERCISE ITS RIGHS OR REMEDIES WITH RESPECT TO ANY
COLLATERAL WHICH SECURES THIS REVOLVING CREDIT NOTE, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
MAKER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
No delay or failure of Payee in exercising any right, power or
privilege hereunder or under the Agreement shall affect such right, power or
privilege, nor shall any single or partial exercise preclude any further
exercise thereof or the exercise of any other rights, powers or privileges.
<PAGE>
Payee may at any time pledge all or any portion of its rights under
this Revolving Credit Note to any of the twelve (12) Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No
such pledge or endorsement thereof shall release Payee from its obligations
hereunder or under the Agreement.
Upon receipt by Maker of an affidavit of an officer of Payee as to the
loss, theft, destruction or mutilation of this Revolving Credit Note and upon
the cancellation of this Revolving Credit Note due to such loss, theft,
destruction or mutilation, Maker shall issue, in lieu thereof, a replacement
note to Payee in the same principal amount thereof and otherwise of like tenor.
All agreements between Maker and Payee are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of acceleration of
the maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to Payee for the use or the forbearance of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law. As used herein, the term "applicable law" shall mean the law in effect as
of the date hereof; provided, however, that in the event there is a change in
the law which results in a higher permissible rate of interest, then this
Revolving Credit Note shall be governed by such new law as of its effective
date. In this regard, it is expressly agreed that it is the intent of Maker and
Payee in the execution, delivery and acceptance of this Revolving Credit Note to
contract in strict compliance with the laws of the State of Connecticut from
time to time in effect. If, under or from any circumstances whatsoever,
fulfillment of any provision hereof or under the Agreement or the other Loan
Documents at the time of performance of such provision shall be due, shall
involve transcending the limit of such validity prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity, and if under or from circumstances whatsoever Payee shall ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between Maker
and Payee.
MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS REVOLVING CREDIT
NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY WAIVES MAKER'S RIGHTS TO:
(1) NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES,
OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY
PREJUDGMENT REMEDY WHICH PAYEE MAY DESIRE TO USE, AND (2) REQUEST THAT PAYEE
POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT MAKER AGAINST DAMAGES THAT MAY
BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY PAYEE BY VIRTUE OF ANY
DEFAULT OR PROVISION OF THIS REVOLVING CREDIT NOTE OR ANY LOAN DOCUMENT SECURING
THIS REVOLVING CREDIT NOTE, AND MAKER FURTHER WAIVES DILIGENCE, DEMAND, PROTEST,
NOTICE OF NONPAYMENT OR PROTEST, NOTICE OF THE ACCEPTANCE OF THIS REVOLVING
CREDIT NOTE, NOTICE OF ANY OTHER ACTION TAKEN IN RELIANCE HEREON AND ALL OTHER
DEMANDS AND NOTICES OF ANY DESCRIPTION IN CONNECTION WITH THIS REVOLVING CREDIT
NOTE OR THE INDEBTEDNESS EVIDENCED HEREBY.
<PAGE>
ADDITIONALLY, MAKER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, DEFENSE, COUNTERCLAIM, CROSSCLAIM AND/OR ANY FORM OF PROCEEDING BROUGHT
IN CONNECTION WITH THIS REVOLVING CREDIT NOTE OR RELATING TO ANY INDEBTEDNESS
EVIDENCED HEREBY.
MAKER ACKNOWLEDGES THAT IT HAS MADE THE FOREGOING WAIVERS KNOWINGLY AND
VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF
THESE WAIVERS WITH ITS ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT PAYEE HAS NOT
AGREED WITH OR REPRESENTED TO MAKER THAT THE FOREGOING WAIVERS WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
THIS REVOLVING CREDIT NOTE HAS BEEN MADE, EXECUTED AN DELIVERED IN THE
STATE OF CONNECTICUT AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT.
THE EASTERN COMPANY
By: /s/Leonard F. Leganza
-------------------------
Leonard F. Leganza
Its President and Chief Executive Officer
<PAGE>
June 28, 2000
Fleet National Bank
157 Church Street
New Haven, Connecticut 06510
Attention: Mr. Garth J. Collins, Director-Commercial Banking
Dear Mr. Collins:
In connection with the closing of that certain $45,000,000.00 credit
facility made available by Fleet National Bank to The Eastern Company on the
date hereof (the "Credit Facilities"), as more fully described in that certain
Loan Agreement of even date herewith, by and between Fleet National Bank and The
Eastern Company (the "Loan Agreement"), The Eastern Company has agreed that its
five (5) "Consolidated Subsidiaries" will unconditionally guarantee the Credit
Facilities. Fleet National Bank has required that each of the Consolidated
Subsidiaries execute a written guaranty agreement in favor of Fleet National
Bank and deliver certified corporate resolutions authorizing such Consolidated
Subsidiary's execution, delivery and performance of such guaranty agreement in
favor of Fleet National Bank. The guaranty agreements are being executed on the
date hereof by each of the Consolidated Subsidiaries, but The Eastern Company
has requested that it be provided sixty (60) days from the date hereof to
provide such certified corporate resolutions from each of the Consolidated
Subsidiaries. Fleet National Bank has agreed to such request with the
understanding that the failure by The Eastern Company to deliver such certified
corporate resolutions from each of the Consolidated Subsidiaries on or before
Wednesday, August 30, 2000, shall constitute a default under the Loan Agreement.
As more fully described in the Loan Agreement, the initial advances
under the Credit Facilities are being used by The Eastern Company to (i) repay
in full its existing term loan from Fleet National Bank which has an outstanding
principal balance of $6,500,000.00, and (ii) fund the purchase price of its
acquisition of the assets of Greenwald Industries, Inc. and Greenwald
Intellicard, Inc. pursuant to the terms of the "Greenwald Asset Purchase
Agreement" (as such term is defined in the Loan Agreement). The closing and
funding of the Greenwald Asset Purchase Agreement is scheduled to take place in
New York, New York on Thursday, June 29, 2000. Upon receipt by Fleet National
Bank of an authorization from The Eastern Company (together with wire transfer
instructions) to wire transfer the sum of $22,500,000.00 to the "Sellers" (as
such term is defined in the Greenwald Asset Purchase Agreement), Fleet National
Bank shall fund such amount under the Credit Facilities. The Eastern Company's
authorization to fund the purchase price of the Greenwald Asset Purchase
Agreement shall constitute a representation by The Eastern Company to Fleet
National Bank that the asset acquisition described in the Greenwald Asset
Purchase Agreement has been consummated and closed.
If the foregoing terms and conditions are acceptable to Fleet National
Bank, please acknowledge Fleet National Bank's agreement to such terms and
conditions by executing a counterpart copy of this letter in the space provided
below.
THE EASTERN COMPANY
By: /s/Leonard F. Leganza
-------------------------
Leonard F. Leganza
Its President
Agreed to and accepted this
28th day of June, 2000
FLEET NATIONAL BANK
By: /s/Garth J. Collins
-----------------------
Garth J. Collins
Its Director-Commercial Banking
<PAGE>
DATE: Jul 10, 2000
TO: THE EASTERN COMPANY
ATTN: JOHN SULLIVAN
FAX: 203-723-8653
PHONE: 203-729-2255 X110
FROM: Fleet National Bank
ATTN: Derivatives Confirmation Unit
FAX: (617) 434-4284
PHONE: (617) 434-1491
RE: INTEREST RATE SWAP
Our Ref: 65464FB/118106
The purpose of this letter agreement is to set forth the terms and conditions of
the Transaction entered into between Fleet National Bank and THE EASTERN COMPANY
on the Trade Date specified below (the "Transaction"). This letter constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions, as
supplemented by the 1998 Supplement (the "Definitions"), each as published by
the International Swaps and Derivatives Association, Inc. ("ISDA"), are
incorporated into this Confirmation. In the event of any inconsistency between
the Definitions and provisions in this Confirmation, this Confirmation will
govern.
1. This Confirmation evidences a complete and binding agreement between you and
us as to the terms of the Transaction to which this Confirmation relates. In
addition, you and we agree to use our best efforts promptly to negotiate,
execute, and deliver an agreement in the form of the ISDA Master Agreement
(Multicurrency-Cross Border) (the "ISDA Form") published by ISDA, with such
modifications as you and we shall in good faith agree (such agreement, the
"Agreement"). Upon the execution by you and us of the Agreement, this
Confirmation will supplement, form a part of, and be subject to the Agreement.
All provisions contained or incorporated by reference in the Agreement, upon its
execution, shall govern this Confirmation except as expressly modified below.
Until we execute and deliver the Agreement, this Confirmation shall supplement,
form a part of, and be subject to an agreement in the form of the ISDA Form as
if we had executed an agreement in such form (with a Schedule thereto which
provides that Market Quotation and the Second Method apply for purposes of
Section 6(e) of such agreement) on the Trade Date hereof. In the event of any
inconsistency between this Confirmation and either the ISDA Form or the
Agreement, this Confirmation will govern.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Trade Date : Jun 27, 2000
Effective Date : Jun 29, 2000
Termination Date : Jul 01, 2005 subject to
adjustment in accordance with the
Modified Following Business Day
Convention.
Notional Amount : USD 15,000,000.00
NOTIONAL AMOUNT - FLOATING AMOUNTS SIDE
From Date To Date Ccy Notional
Jun 29, 2000 Oct 02, 2000 USD 15,000,000.00
Oct 02, 2000 Jan 02, 2001 USD 14,625,000.00
Jan 02, 2001 Apr 02, 2001 USD 14,250,000.00
Apr 02, 2001 Jul 02, 2001 USD 13,875,000.00
Jul 02, 2001 Oct 01, 2001 USD 13,500,000.00
Oct 01, 2001 Jan 02, 2002 USD 13,050,000.00
Jan 02, 2002 Apr 02, 2002 USD 12,600,000.00
Apr 02, 2002 Jul 01, 2002 USD 12,150,000.00
Jul 01, 2002 Oct 01, 2002 USD 11,700,000.00
Oct 01, 2002 Jan 02, 2003 USD 11,175,000.00
Jan 02, 2003 Apr 01, 2003 USD 10,650,000.00
Apr 01, 2003 Jul 01, 2003 USD 10,125,000.00
Jul 01, 2003 Oct 01, 2003 USD 9,600,000.00
Oct 01, 2003 Jan 02, 2004 USD 9,000,000.00
Jan 02, 2004 Apr 01, 2004 USD 8,400,000.00
Apr 01, 2004 Jul 01, 2004 USD 7,800,000.00
Jul 01, 2004 Oct 01, 2004 USD 7,200,000.00
Oct 01, 2004 Jan 04, 2005 USD 6,600,000.00
Jan 04, 2005 Apr 01, 2005 USD 6,000,000.00
Apr 01, 2005 Jul 01, 2005 USD 5,400,000.00
NOTIONAL AMOUNT - FIXED AMOUNTS SIDE
From Date To Date Ccy Notional
Jun 29, 2000 Oct 02, 2000 USD 15,000,000.00
Oct 02, 2000 Jan 02, 2001 USD 14,625,000.00
Jan 02, 2001 Apr 02, 2001 USD 14,250,000.00
Apr 02, 2001 Jul 02, 2001 USD 13,875,000.00
Jul 02, 2001 Oct 01, 2001 USD 13,500,000.00
Oct 01, 2001 Jan 02, 2002 USD 13,050,000.00
Jan 02, 2002 Apr 02, 2002 USD 12,600,000.00
Apr 02, 2002 Jul 01, 2002 USD 12,150,000.00
Jul 01, 2002 Oct 01, 2002 USD 11,700,000.00
Oct 01, 2002 Jan 02, 2003 USD 11,175,000.00
Jan 02, 2003 Apr 01, 2003 USD 10,650,000.00
Apr 01, 2003 Jul 01, 2003 USD 10,125,000.00
Jul 01, 2003 Oct 01, 2003 USD 9,600,000.00
Oct 01, 2003 Jan 02, 2004 USD 9,000,000.00
Jan 02, 2004 Apr 01, 2004 USD 8,400,000.00
Apr 01, 2004 Jul 01, 2004 USD 7,800,000.00
Jul 01, 2004 Oct 01, 2004 USD 7,200,000.00
Oct 01, 2004 Jan 04, 2005 USD 6,600,000.00
Jan 04, 2005 Apr 01, 2005 USD 6,000,000.00
Apr 01, 2005 Jul 01, 2005 USD 5,400,000.00
Floating Amounts
Floating Rate Payer : Fleet National Bank
Floating Rate Payment Dates: Monthly
on the 1st, commencing Oct
02, 2000 and ending on the
Termination Date subject to
adjustment in accordance
with the Modified Following
Business Day Convention.
Floating Rate for initial : 6.673750 %
Calculation Period
Floating Rate Option : USD-LIBOR-BBA
Designated Maturity : 1 month
Spread : 175.000000 basis points
Floating Rate Day Count : ACTUAL /360
Fraction
Floating Rate Reset Dates : The first Business Day of each
Calculation Period
Compounding : Inapplicable
Business Days : New York and London
Fixed Amounts
Fixed Rate Payer : THE EASTERN COMPANY
Fixed Rate Payment Dates : Monthly on the
1st, commencing Oct 02, 2000 and
ending on the Termination Date
subject to adjustment in accordance
with the Modified Following Business
Day Convention.
Fixed Rate : 9.095000 %
Fixed Rate Day Count Fraction: ACTUAL /360
Business Days : New York and London
Calculation Agent : Fleet National Bank
Governing Law : New York law
Documentation : ISDA Master Agreement to be provided
by Fleet National Bank
3. Relationship Between Parties
Each party represents to the other party that:
(a) Non-Reliance. It is acting for its own account, and it has made its
own independent decisions to enter this Transaction and as to whether this
Transaction is appropriate or proper for it based upon its own judgement and
upon advice from such advisors as it has deemed necessary. It is not relying on
any communication (written or oral) from the other party as investment advice or
as a recommendation to enter into this Transaction; it being understood that
information and explanations related to the terms and conditions of this
Transaction shall not be considered investment advice or a recommendation to
enter into this Transaction. It has not received from the other party any
assurance or guarantee as to the expected results of this Transaction.
(b) Evaluation and Understanding. It is capable of evaluating and
understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of this
Transaction. It is also capable of assuming, and assumes, the financial and
other risks of this Transaction.
(c) Status of Parties. The other party is not acting as a fiduciary or
an advisor for it in respect of this Transaction.
(d) Risk Management. It has entered into this Transaction for the purpose
of (i) managing its borrowings or investments, (ii) hedging its underlying
assets or liabilities or (iii) in connection with its line of business.
(e) It is an "eligible swap participant" within the meaning of Commodity
Futures Trading Commission Regulations Section 35.1(b)(2).
4. Settlement Instructions
Payments to THE EASTERN COMPANY in USD
*** Payment Instructions To Be Advised ***
Payments to Fleet National Bank in USD
*** Payment Instructions To Be Advised ***
5. Contact Instructions
Fleet National Bank: Tel: 617-434-7861
Resets/Payments
Fax: 617-434-3588
Confirmations Tel: 617-434-7878/2686
Fax: 617-434-4284
THE EASTERN COMPANY: Tel: 203-729-2255 X110
Fax: 203-723-8653
