Exhibit 10
FOURTH AMENDMENT TO LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (the "Fourth Amendment") is
entered into as of the 22nd day of September, 2006, by and between THE EASTERN
COMPANY, a Connecticut corporation, having its chief executive office at 112
Bridge Street, P.O. Box 460, Naugatuck, Connecticut 06778-0460 ("Borrower"), and
BANK OF AMERICA, N.A. (successor by merger to Fleet National Bank), a national
banking association organized and existing under the laws of the United States
of America, with a banking office at One Landmark Square, Stamford, Connecticut
06901 ("Lender").
W I T N E S S E T H:
WHEREAS, on or about June 28, 2000, Borrower and Lender entered into a
certain Loan Agreement (the "Loan Agreement") pursuant to which Lender made
available to Borrower certain term loans, revolving credit loans and other
credit facilities in an aggregate amount of up to $45,000,000.00; and
WHEREAS, effective as of December 27, 2002, Borrower and Lender entered
into a certain First Amendment to the Loan Agreement (the "First Amendment")
pursuant to which Lender agreed to (i) extend the maturity of the current
outstanding balance of the Term Loan (as such term is defined in the Loan
Agreement) from July 1, 2005 through January 1, 2009; (ii) extend the maturity
date of the Revolving Credit Loan (as such term is defined in the Loan
Agreement) from July 1, 2003 to July 1, 2005, and reduce the maximum aggregate
amount available to Borrower thereunder from an amount of up to $20,000,000 to
an amount of up to $7,500,000.00; and (iii) modify certain of the financial
covenants contained in Paragraph 5(a) of the Loan Agreement; and
WHEREAS, effective as of January 3, 2004, Borrower and Lender entered
into a Second Amendment to Loan Agreement (the "Second Amendment") pursuant to
which Borrower and Lender clarified the calculation of certain financial
covenants set forth in Paragraph 5(a) of the Loan Agreement; and
WHEREAS, on or about August 1, 2005, Borrower and Lender entered into a
Third Amendment to Loan Agreement (the "Third Amendment") pursuant to which
Lender agreed to (i) renew and extend the maturity of the Revolving Credit Loan
from July 1, 2005 to August 1, 2007; and (ii) restructure and increase the
existing balance of the Term Loan into a new five (5) year term loan in the
amount of $15,725,000.00; and
WHEREAS, Borrower has requested that Lender agree to (i) increase the
maximum amount available to Borrower under the existing Revolving Credit Loan
from an amount of up to $7,500,000.00 to an amount of up to $12,000,000.00 and
renew and extend the maturity date thereof from August 1, 2007 to September 22,
2009 (the third (3rd) anniversary of the date of this Fourth Amendment), (ii)
restructure and increase the exiting balance of the Term Loan into a new seven
(7) year term loan in the amount of $20,000,000.00, and (iii) make available to
Borrower an uncommitted guidance line of credit facility in an amount of up to
$5,000,000.00 for future acquisitions; and
WHEREAS, Borrower and Lender wish to further amend the provisions of
the Loan Agreement (as amended by the First Amendment, the Second Amendment and
the Third Amendment) upon the terms and conditions set forth in this Fourth
Amendment;
NOW, THEREFORE, in consideration of the foregoing and in further
consideration of the mutual covenants contained herein, the parties hereto agree
as follows:
1. Definitions. As used herein, initially capitalized terms shall have
the meanings ascribed to them in the Loan Agreement, unless otherwise defined
herein. All references herein to the Loan Agreement shall mean the Loan
Agreement as amended by the First Amendment, the Second Amendment and the Third
Amendment.
2. Amendments to Loan Agreement. From and after the date of this Fourth
Amendment, the Loan Agreement shall be amended as follows:
2.1 The following definitions set forth in Section 1 of the Loan
Agreement shall be amended and restated in their entireties as hereinafter set
forth:
"(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 one-quarter
percent (1.25%) for each of the Term Loan and 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, 2006
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):
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Ratio of Funded Debt LIBOR Rate Margin LIBOR Rate Margin
-------------------- ----------------- -----------------
to EBITDA for Term Loan for Revolving Credit Loan
--------- ------------- -------------------------
Greater than 2.25 to 1.0 1.65% 1.60%
Greater than 1.75 to 1.0 1.50% 1.45%
but less than or
equal to 2.25 to 1.0
Greater than 1.0 to 1.0 1.25% 1.25%
but less than or
equal to 1.75 to 1.0
Less than 1.0 to 1.0 1.0% 1.0%;
(aa) "Notes" shall mean the Term Note, the Revolving
Credit Note and each Acquisition Guidance Line of
Credit Note, together with any and all renewals, modifications or amendments
thereof;
(bb) "Obligations" shall mean the Term Loan, the
Revolving Credit Loan, the Letter of Credit Facility and
the Acquisition Guidance Line of Credit Loan, 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;
(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 fifteen-hundredths
of one percent (.15%) for the Term Loan, and zero percent (0%) for 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, 2006 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):
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Ratio of Funded Debt Prime Rate Margin Prime Rate Margin
-------------------- ----------------- -----------------
to EBITDA for Term Loan for Revolving Credit Loan
--------- ------------- -------------------------
Greater than 2.25 to 1.0 .50% .25%
Greater than 1.75 to 1.0 .25% .15%
but less than or
equal to 2.25 to 1.0
Greater than 1.0 to 1.0 .15% 0%
but less than or
equal to 1.75 to 1.0
Less than 1.0 to 1.0 0% 0%;".
2.2 Section 1 of the Loan Agreement shall be further amended to
add the following new definitions to the end thereof as hereinafter set forth:
"(ll) `Acquisition Guidance Line of Credit Loan' shall
mean that certain uncommitted guidance line of
credit loan in an amount of up to $5,000,000.00 which may be made available by
Lender to Borrower (in Lender's sole and absolute discretion) to fund future
acquisitions by Borrower; and
(mm) `Acquisition Guidance Line of Credit Note' shall
mean and refer to each promissory note made by
Borrower and payable to Lender evidencing a discretionary advance by Lender to
Borrower under the Acquisition Guidance Line of Credit Loan.".
2.3 Subparagraph A of Paragraph 3 of the Loan Agreement shall be
amended and restated in its entirety to hereafter read as follows:
"A. Second Amended and Restated Term Loan
(1) The Second Amended and Restated Term
Loan shall be in the amount of Twenty Million Dollars
($20,000,000.00) and shall be evidenced by a promissory note dated September 22,
2006, in the original principal amount of $20,000,000.00, executed by Borrower
and payable to the order of Lender, in the form of Exhibit B-II attached hereto
and made a part hereof (herein referred to as the "Second Amended and Restated
Term Note"). The outstanding principal balance of the Second Amended and
Restated 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 Amended and
Restated 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;
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(2) Interest accruing on the principal balance
of the Amended and Restated Term Loan shall be
payable quarterly and at maturity, on the first Business Day of each calendar
quarter hereafter, commencing on January 2, 2007, with respect to any Prime Rate
Loan, or on the earlier of: (a) the first Business Day of each calendar quarter
hereafter, commencing on January 2, 2007, or (b) the last Business Day of each
Interest Period and at maturity, with respect to any Eurodollar Loan. The
principal balance of the Second Amended and Restated Term Loan shall be paid on
a quarterly basis over a seven (7) year term commencing on January 2, 2007 and
maturing on September 22, 2013, as more fully described in the Second Amended
and Restated Term Note. All payments received by Lender on account of the Second
Amended and Restated 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; and
(3) The proceeds of the Second Amended and
Restated Term Loan shall be used by Borrower, on or
about September 22, 2006, to repay in full the outstanding balance of its
existing Amended and Restated Term Loan from Lender and to finance a portion of
the purchase price of Borrower's acquisition of the Royal Lock Corporation."
2.4 From and after the date of this Fourth Amendment, all
references in the Loan Agreement to the defined terms "Term Loan" and/or "Term
Note" shall hereafter be references to the defined terms "Second Amended and
Restated Term Loan" and/or "Second Amended and Restated Term Note", as the case
may be.
2.5 The Revolving Credit Note shall be amended by a Third
Allonge thereto dated as of September 22, 2006 to reflect an increase in the
original principal amount thereof from an amount of up to $7,500,000.00 to an
amount of up to $12,000,000.00. A copy of the Third Allonge to Revolving Credit
Note is attached hereto as Exhibit C-III and made a part hereof. All references
in the Loan Agreement to the defined term "Revolving Credit Note" shall
hereafter refer to the Revolving Credit Note as amended by the Allonge to
Revolving Credit Note, the Second Allonge to Revolving Credit Note, and Third
Allonge to Revolving Note.
In addition, subparagraph B of Paragraph 3 of the Loan Agreement shall
be amended and restated in its entirety to hereafter read as follows:
"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
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Twelve Million Dollars ($12,000,000.00) and shall be evidenced by the Revolving
Credit Note. 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 $12,000,000.00 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 January 2,
2007, 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 January 2, 2007, 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 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 $12,000,000.00, 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 September 22, 2009 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
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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 January 2, 2007, 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 fifteen hundredths of one percent (.15%) per annum (adjusted as
provided below) times the excess, if any, of (i) $12,000,000.00 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. The amount of the unused line fee shall be adjusted (increased or
decreased) based upon the ratio of Funded Debt to EBITDA set forth below (and
calculated on a quarterly basis in the same manner as for the LIBOR Rate Margin
and the Prime Rate Margin):
Ratio of Funded Debt Amount of Unused
-------------------- ----------------
to EBITDA Line Fee
--------- --------
Greater than 2.25 to 1.0 .10%
Greater than 1.75 to 1.0, but less
than or equal to 2.25 to 1.0 .15%
Greater than 1.0 to 1.0, but less
than or equal to 1.75 to 1.0 .15%
Less than 1.0 to 1.0 .25%."
2.6 Subparagraph I of Paragraph 3 of the Loan Agreement shall be
amended and restated in its entirety to hereafter read as follows:
"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 $4,000,000.00, and (ii) commercial Letters of Credit in an
amount of up to $2,500,000.00, provided the aggregate amounts available to be
drawn under such standby and commercial Letters of Credit (or actually drawn but
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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 $12,000,000.00. 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 one
(1) year after the termination date of the Revolving Credit Loan described in
Paragraph 3(B)(5) above. Upon payment by 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
standard commissions, fees, expenses and charges, 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 standard
commissions and fees for the issuance of such Letters of Credit. 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
commission or 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.".
2.7 Paragraph 3 of the Loan Agreement shall be further amended
to add the following new subparagraph L to the end thereof as follows:
"L. Acquisition Guidance Line of Credit Loan.
"Lender may, in the exercise of its sole and absolute
discretion, make available to Borrower advances in an
aggregate amount of up to Five Million Dollars ($5,000,000.00) to fund a portion
of the purchase price of future acquisitions by Borrower. The Acquisition
Guidance Line of Credit Loan shall be an uncommitted credit facility, and Lender
shall have no obligation to make any advances to Borrower thereunder. Any
discretionary advances made by Lender to Borrower under the Acquisition Guidance
Line of Credit Loan shall be evidenced by a separate Acquisition Guidance Line
of Credit Note. The terms and conditions (including, without limitation, the
repayment terms and interest rate) for each advance under the Acquisition
Guidance Line of Credit Loan shall be determined by Lender at the time of such
advance. Borrower may hereafter request an advance from Lender under the
Acquisition Guidance Line of Credit Loan and shall furnish to Lender any and all
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information and due diligence materials requested by Lender with respect to such
requested advance and the acquisition to be funded, in part, with the proceeds
of such requested advance. Lender may fund, or elect not to fund, such requested
advance in its sole and absolute discretion. In no event shall advances under
the Acquisition Guidance Line of Credit Loan exceed the aggregate sum of
$5,000,000.00.".
2.8 On the date hereof, Borrower shall pay to Lender a
non-refundable commitment fee with respect to the Term Loan in the amount of
$14,750.00 and a non-refundable commitment fee with respect to the Revolving
Credit Loan in the amount of $9,000.00, which commitment fees shall be deemed
earned in full by Lender as of the date hereof.
2.9 Subparagraph (a) of Paragraph 5 of the Loan Agreement shall
be amended and restated in its entirety to hereafter read as follows:
"(a) Maintain (i) a Fixed Charge Coverage Ratio of not
less than 1.1 to 1.0, tested at the end of each
fiscal quarter of Borrower for the immediately preceding four (4) fiscal
quarters; (ii) 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, (for
purposes of this calculation, EBITDA shall be determined on a rolling four (4)
quarter basis); and (iii) Tangible Net Worth in an amount of not less than
$26,000,000.00, tested at the end of each fiscal quarter of Borrower; 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, 2006;".
2.10 Exhibits B-II and C-III attached to this Fourth Amendment
shall hereafter be and become Exhibits B-II and C-III to the Loan Agreement
3. Representations and Warranties of Borrower. To induce Lender to
enter into this Fourth Amendment, Borrower represents and warrants to Lender
that (a) no Event of Default or state of facts which by the passage of time, the
giving of notice, or both, would constitute an Event of Default, has occurred or
is continuing; and (b) as of the effective date hereof, the representations and
warranties of Borrower contained in the Loan Agreement (including, without
limitation, Paragraph 2 thereof) are true and correct in every material respect.
4. Effect of this Fourth Amendment. Except as modified or amended
hereby, the terms and provisions of the Loan Agreement and the other Loan
Documents shall remain in full force and effect and the obligations, liabilities
and rights of the parties therein and thereunder shall remain unchanged. Nothing
herein shall operate to release Borrower of its obligations under the Loan
Agreement and such other Loan Documents.
5. Governing Law. This Fourth Amendment is made, executed and delivered
in the State of Connecticut and it is the specific desire and intention of the
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parties that it shall in all respects be construed under the laws of the State
of Connecticut.
6. Binding Effect. This Fourth Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
7. Counterparts. This Fourth Amendment may be executed in counterparts,
each of which shall be deemed an original, but which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have hereunto set their hands as
of the day and year first set forth above.
THE EASTERN COMPANY
By:/s/Leonard F. Leganza
------------------------
Leonard F. Leganza
Its President
BANK OF AMERICA, N.A. (successor
by merger to Fleet National Bank)
By: /s/Ashish Arora
-------------------
Ashish Arora
Its Vice President
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CONSENT OF GUARANTORS
The undersigned, having jointly, severally and unconditionally
guaranteed the Obligations of Borrower to Lender under the Loan Agreement
pursuant to a certain Unconditional, Unlimited Continuing Guaranty of Payment
and Performance agreements, each dated as of June 28, 2000 (collectively, the
"Guaranties"), hereby consent to the terms and conditions of this Fourth
Amendment. To induce Lender to enter into this Fourth Amendment and in
consideration of its so doing, the undersigned hereby consent to its execution
and delivery by Borrower and agree that Borrower's execution and delivery of
this Fourth Amendment will not in any way impair Lender's rights or alter,
diminish or otherwise affect the undersigneds' joint, several and unconditional
obligations to Lender under the Guaranties, which shall remain in full force and
effect.
The undersigned specifically acknowledge and agree that all documents,
agreements and instruments executed and delivered by the undersigned to Lender
in connection with the Guaranties shall remain in full force and effect without
modification, notwithstanding this Fourth Amendment.
Dated as of the 22nd day of September, 2006.
ASHTABULA INDUSTRIAL HARDWARE CO.
By:/s/Leonard F. Leganza
------------------------
Leonard F. Leganza
Its President
Duly Authorized
SESAMEE MEXICANA, S.A. de C.V.
By:/s/Leonard F. Leganza
------------------------
Leonard F. Leganza
Its Duly Authorized Agent
WORLD SECURITY INDUSTRIES
COMPANY LIMITED
By:/s/Leonard F. Leganza
------------------------
Leonard F. Leganza
Its Chairman
Duly Authorized
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WORLD LOCK CO., LTD.
By:/s/Leonard F. Leganza
------------------------
Leonard F. Leganza
Its Chairman
Duly Authorized
EBERHARD HARDWARE
MANUFACTURING LIMITED
By:/s/Leonard F. Leganza
------------------------
Leonard F. Leganza
Its President
Duly Authorized
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EXHIBIT B-11
SECOND AMENDED AND RESTATED TERM NOTE
Stamford, Connecticut
$20,000,000.00 September 22, 2006
FOR VALUE RECEIVED, THE EASTERN COMPANY, a Connecticut corporation
("Maker"), promises to pay to the order of BANK OF AMERICA, N.A. (successor by
merger to 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 One Landmark Square, Stamford, Connecticut 06901, or at such
other place as may be designated in writing from time to time by Payee, the
principal sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00) 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 January 2, 2007, 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 Second Amended and Restated Term Note shall have been paid in
full. The principal balance of this Second Amended and Restated Term Note shall
be payable in quarterly installments over a seven (7) year term, commencing on
January 2, 2007 and maturing on September 22, 2013 (the seventh (7th)
anniversary of the date hereof), as follows:
Payment Date Payment Amount
------------ --------------
January 2, 2007 $ 714,285.71
April 2, 2007 $ 714,285.71
July 2, 2007 $ 714,285.71
October 1, 2007 $ 714,285.71
January 2, 2008 $ 714,285.71
April 1, 2008 $ 714,285.71
July 1, 2008 $ 714,285.71
October 1, 2008 $ 714,285.71
January 2, 2009 $ 714,285.71
April 1, 2009 $ 714,285.71
July 1, 2009 $ 714,285.71
October 1, 2009 $ 714,285.71
January 4, 2010 $ 714,285.71
April 1, 2010 $ 714,285.71
July 1, 2010 $ 714,285.71
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October 1, 2010 $ 714,285.71
January 3, 2011 $ 714,285.71
April 1, 2011 $ 714,285.71
July 1, 2011 $ 714,285.71
October 3, 2011 $ 714,285.71
January 2, 2012 $ 714,285.71
April 2, 2012 $ 714,285.71
July 2, 2012 $ 714,285.71
October 1, 2012 $ 714,285.71
January 2, 2013 $ 714,285.71
April 1, 2013 $ 714,285.71
July 1, 2013 $ 714,285.71
September 22, 2013 Entire remaining principal
balance.
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 Second Amended and Restated Term Note or any payment
hereunder becomes due on a day which is not a Business Day, the due date of this
Second Amended and Restated 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 Second
Amended and Restated Term Note.
This Second Amended and Restated Term Note is issued pursuant to a
certain Loan Agreement dated as of June 28, 2000, as amended effective as of
December 27, 2002, January 3, 2004 and August 1, 2005, and as further amended on
the date hereof (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 One
Landmark Square, Stamford, Connecticut 06901. The terms of the Agreement are
incorporated into this Second Amended and Restated 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 Second Amended and
Restated 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 Second Amended and Restated
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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 Second Amended and
Restated 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 Second
Amended and Restated 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 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 Second Amended and Restated 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 RIGHTS OR REMEDIES WITH
RESPECT TO ANY COLLATERAL WHICH SECURES THIS SECOND AMENDED AND RESTATED 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 Second Amended and Restated 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.
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Upon receipt by Maker of an affidavit of an officer of Payee as to the
loss, theft, destruction or mutilation of this Second Amended and Restated Term
Note and upon the cancellation of this Second Amended and Restated 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 Second
Amended and Restated 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 Second Amended
and Restated 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.
MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS SECOND AMENDED
AND RESTATED 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 SECOND AMENDED AND RESTATED TERM NOTE
OR ANY LOAN DOCUMENT SECURING THIS SECOND AMENDED AND RESTATED TERM NOTE, AND
MAKER FURTHER WAIVES DILIGENCE, DEMAND, PROTEST, NOTICE OF NONPAYMENT OR
PROTEST, NOTICE OF THE ACCEPTANCE OF THIS SECOND AMENDED AND RESTATED TERM NOTE,
NOTICE OF ANY OTHER ACTION TAKEN IN RELIANCE HEREON AND ALL OTHER DEMANDS AND
NOTICES OF ANY DESCRIPTION IN CONNECTION WITH THIS SECOND AMENDED AND RESTATED
TERM NOTE OR THE INDEBTEDNESS EVIDENCED HEREBY.
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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 SECOND AMENDED AND RESTATED 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 SECOND AMENDED AND RESTATED TERM NOTE HAS BEEN MADE, EXECUTED AND
DELIVERED IN THE STATE OF CONNECTICUT AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT.
This Second Amended and Restated Term Note is given in replacement of
(but not in novation for) that certain Amended and Restated Term Note dated as
of August 1, 2005, in the original principal amount of $15,725,000.00, made by
Maker and payable to the order of Payee (as successor by merger to Fleet
National Bank).
THE EASTERN COMPANY
By:_________________________________
Leonard F. Leganza
Its President and Chief Executive Officer
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EXHIBIT C-III
THIRD ALLONGE TO REVOLVING CREDIT NOTE
THIRD ALLONGE TO REVOLVING CREDIT NOTE amending and attached to a
Revolving Credit Note in the original principal amount of $20,000,000.00, dated
as of June 28, 2000, executed and delivered by THE EASTERN COMPANY to the order
of BANK OF AMERICA, N.A. (successor by merger to Fleet National Bank), as
amended by that certain Allonge dated effective as of December 27, 2002 and by
that certain Second Allonge dated as of August 1, 2005 (said note, as amended,
being hereinafter referred to as the "Revolving Credit Note").
FOR VALUE RECEIVED, the Revolving Credit Note is amended from and after
the effective date hereof by:
(a) The principal amount of the Revolving Credit Note set forth in the
upper left hand corner thereof shall be increased from "7,500,000.00" to
"$12,000,000.00".
(b) Deleting the first paragraph on Page 1 of the Revolving Credit
Note and replacing it with the following:
"FOR VALUE RECEIVED, THE EASTERN COMPANY, a Connecticut
corporation ("Maker"), promises to pay to the order of BANK OF AMERICA, N.A.
(successor by merger to 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 One Landmark Square, Stamford, Connecticut 06901, 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 TWELVE MILLION AND NO/100 DOLLARS
($12,000,000.00), 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.".
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(c) Amending the defined term "Agreement" to hereafter refer to the
Loan Agreement dated as of June 28, 2000, by and between Maker and Payee, as
amended by that certain First Amendment to Loan Agreement dated effective as of
December 27, 2002, by that certain Second Amendment to Loan Agreement dated
effective as of January 3, 2004, by that certain Third Amendment to Loan
Agreement dated as of August 1, 2005, and by that certain Fourth Amendment to
Loan Agreement dated as of the date hereof.
All other terms and provisions of the Revolving Credit Note shall
remain as originally written.
IN WITNESS WHEREOF, Leonard F. Leganza, the President of THE EASTERN
COMPANY, has caused this Third Allonge to Revolving Credit Note to be executed
and delivered as of the 22nd day of September, 2006.
THE EASTERN COMPANY
By______________________
Leonard F. Leganza
Its President