December 23, 1996
Mr. Michael P. Downes, President
Tri-Star Technologies Co., Inc.
126 Merrimack Street
Methuen, MA 01844
Dear Mike:
The purpose of this letter is to serve as our letter of intent with
regard to the purchase by Tanon Manufacturing, Inc. ("Tanon") or its nominee
from Tri-Star Realty Trust (the "Trust") the approximately 120,000 square foot
building and the property it is located on (the "Building") currently occupied
by Tri-Star Technologies Co. ("Tri-Star" or the "Company").
The Trust and Tanon will in good faith undertake promptly after the
date hereof to complete a definitive purchase and sale agreement regarding such
purchase. Consummation of the transaction is contingent upon (i) approval of the
transaction by the Board of Directors of Tanon's parent corporation, EA
Industries, Inc. ("EAI"), (ii) simultaneous closing of the acquisition of the
assets or stock of Tri-Star, and (iii) completion to their satisfaction by Tanon
and EAI of due diligence.
Based upon our discussions and our review of the preliminary financial
information you have sent us, we have agreed as follows:
1. Tanon will purchase the Building free and clear of all liens,
claims, and encumbrances and there shall be no liens or encumbrances other than
the current loan obligations, (the "Debt") not to exceed $2.5 million, currently
secured by a mortgage on the Building which at Tanon's option will be assumed by
Tanon or paid off at closing. If the Debt is not assumable it shall be paid off
at closing. The manner of the transfer of responsibility for the debt shall be
reasonably satisfactory to Mr. Downes and shall include such releases as in the
judgment of counsel to the Trust are necessary or appropriate.
2. The Purchase Price for the Building shall be $3.5 million; payable,
(i) $2.5 million in cash at closing, and (ii) at closing $1.0 million in Tanon
common stock at the price such stock is first sold to the public in an initial
public offering of the Common Stock of Tanon or EAI Common Stock at the market
price at closing of the acquisition of the Building . Any shares of stock issued
in payment of the Purchase Price will be issued in a private placement and will
consist of restricted securities only tradable subject to the restrictions of
Rule 144 under the Securities Act of 1944, as amended. EA and Tanon will
covenant to comply with the requirements of Rule 144 pertaining to timely filing
of reports. The sales of such stock will also be subject to restrictions to the
extent that the insider trading rules are applicable and to the extent that the
seller is then subject to restrictions under section 16 of the Securities
Exchange Act of 1934.
3. EAI and Tanon will cause any personal guarantees of Mr. Downes for
obligations of the Company related to the Building to be removed on or before
closing. The manner and timing of the transfer of responsibility for the
guarantees shall be reasonably satisfactory to Mr. Downes and shall include such
releases as in the judgment of counsel to Mr. Downes are necessary or
appropriate.
4. In consideration of the substantial expenditures of time, effort and
expense to be undertaken by EAI and Tanon in connection with the preparation and
execution of a definitive Purchase Agreement, and the various investigations and
reviews referred to above, you agree that neither you nor the Company shall for
the period until closing or the termination hereof as set forth below enter into
or conduct any discussions with any other prospective purchaser of the Building.
It is agreed that the Purchase Agreement between the Trust, Tanon and
EAI will include the customary representations and warranties required by a
prudent investor concerning the state of title, environmental compliance and
condition, state of repair and other conditions with respect to the Building.
This letter of intent shall constitute a legally binding agreement by
the Trust to complete the sale of the Building in accordance with the terms
hereof subject to the agreement of Tanon, EA, and the Trust to negotiate in good
faith to complete a definitive purchase and sale agreement. The obligations of
Tanon and EAI to complete such purchase shall be contingent upon satisfactory
completion of their due diligence review of Tri-Star and the Building.
If closing does not occur by July 31, 1997 for any reason other than
the failure of the Trust to fulfill its obligations hereunder, the Trust may
terminate discussions, retain any funds previously paid to it as an advance on
the Purchase Price and thereafter all terms and conditions of this letter shall
become null and void without recourse to either party.
If the foregoing accurately reflects your understanding of our
intentions at this point, please sign where indicated below and return a copy to
me.
Very truly yours,
Paul E. Finer
President & CEO
Tanon Manufacturing, Inc.
Vice President
EA Industries, Inc.
Agreed to and Accepted
this day of December, 1996
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Michael P. Downes, Individually and
as Trustee of Tri-Star Realty Trust