10-K405

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10K

/X/
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 1, 2001

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-29288

GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)

Delaware	06-0868496
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Rockefeller Plaza New York, New York	10020
(Address of principal executive offices)	(Zip Code)

(212) 218-7910
(Registrant's Telephone Number, Including Area Code)

SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock $0.01 par value	Nasdaq National Market

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. /X/

        State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing: $13,080,000 approximately, based on the closing sales price on the Nasdaq National Market on February 8, 2002. Shares of Common Stock held by each executive officer, director, holders of greater than 10% of the outstanding Common Stock of the Registrant and persons or entities known to the Registrant to be affiliates of the foregoing have been excluded in that such persons may be deemed to be affiliates. This assumption regarding affiliate status is not necessarily a conclusive determination for other purposes.

        Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: Common Stock: 4,862,704 shares as of February 8, 2002.

PART I

ITEM 1.    BUSINESS

        Griffin Land & Nurseries, Inc. ("Griffin") and its subsidiaries comprise principally a landscape nursery and real estate business. At the end of its 2001 fiscal year Griffin engaged in two principal lines of business: (1) the landscape nursery products business, comprised of the growing of containerized landscape nursery products for sale principally to retail garden center operators, landscape nursery mass merchandisers and wholesale sales and service centers, whose main customers are landscape contractors; and (2) the real estate business, comprised of (x) the ownership, construction and management of commercial and industrial properties and (y) the development of residential subdivisions on real estate owned by Griffin in Connecticut and Massachusetts. On January 26, 2001, a portion of the landscape nursery products business which had related to the operation of wholesale sales and service centers (the "SSCs") was sold to Shemin Nurseries, Inc. ("Shemin"). Griffin holds an approximately 14% interest in the equity of Shemin Acquisition Corp. ("Acquisition"), the parent company of Shemin, acquired as part of the sale. The investment in Acquisition is accounted for under the cost method of accounting for investments. Griffin also owns an approximately 35% interest (32% fully diluted) in Centaur Communications, Ltd. ("Centaur"), a United Kingdom magazine and information services publisher which is accounted for under the equity method of accounting, and has a lesser interest in Linguaphone Group, plc ("Linguaphone"), a designer and distributor of language teaching materials based in the United Kingdom, which is accounted for under the cost method of accounting for investments.

Landscape Nursery Business

        The landscape nursery operations of Griffin are operated by its wholly-owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial is a grower, distributor and, to a small extent, broker of wholesale landscape nursery stock. The landscape nursery industry is extremely fragmented. Imperial believes that its volume places it among the twenty largest landscape nursery growers in the country. On January 26, 2001, Imperial completed the sale of its SSCs, which provided most of Imperial's operating profit in prior years. As a result of the sale, the central overhead of Imperial, which could be reduced only in part, was borne entirely by the growing operation in 2001 and will so continue to be borne in the future.

        Imperial's container growing operations are located on land owned by Griffin in Connecticut (approximately 455 acres currently used) and in northern Florida (approximately 450 acres currently used). The Florida growing operation is currently being expanded on adjacent lands owned by Griffin. If all current plans are implemented, the Florida farm will use approximately 490 acres. At that time, substantially all of the useable contiguous lands suitable for the container-growing operations in Connecticut and a large portion of such lands in northern Florida will be in use. The Florida farm has also improved and expanded its shipping docks and customer service facilities and is improving its irrigation and water recycling operations. Imperial's inventories consist of container-grown plants on these two farms. The largest products of Imperial are evergreens, flowering shrubs and hollies in Florida and rhododendron, evergreens and flowering shrubs in Connecticut. Other major product categories in Florida include juniper, perennials and crape myrtle. During 2000, a decision was made materially to reduce the number of azalea and juniper to be grown in Florida and to increase the number of larger plants of several varieties in Florida including leyland cypress, some varieties of deciduous shrubs, crape myrtle and shade trees. In Connecticut, alberta spruce, perennials and trees are other major products.

        Container-grown product is held principally from one to five years prior to its sale by Imperial. Over the past four years Imperial substantially increased its production and sales of perennials which have a much shorter growing cycle than most of the rest of Imperial's products. Because many

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perennials were grown for sale to the SSCs, after the sale of the SSCs, the number of perennials being grown has been reduced starting in 2002. During 1997, Imperial determined to terminate its own growing of field-grown product and recorded a loss accrual estimated to be sufficient to absorb the cost of terminating that operation. The termination of the field-grown operation was fully completed in 2000 within the loss accrual.

        Imperial is reviewing a variety of approaches to increase its return on assets in its growing operations, including changes in the relative quantities of some products currently grown and proposed to be grown and also possible changes in the potting and growing cycle for some of its containerized production. Some of these programs are also directed at developing faster growing products and improved soil mixes. A substantial portion of the products which are part of the expanded Florida production will be of larger sizes requiring an extended growing cycle. During 2002, there will be a substantial increase in inventory and improvements in Florida. This is the last year of major investment in nursery growing assets in the current cycle of planned investment. Imperial is also considering some other products and product sizes for both sales in its existing markets and expanding the market area served by the Florida farm. Any such changes, if successful, taking into account the growing cycles of the related plants, will take a substantial period to be reflected in results of operations to any material extent.

        The growing operations serve a market comprised principally of retail garden center operators, landscape nursery mass merchandisers and wholesale sales and service centers. Shemin, the purchaser of Imperial's SSCs, has a contract to purchase some Imperial grown product for each of the next two years. Imperial's major markets are in the Northeast, Mid-Atlantic, the northern portion of the Southeast and the Midwest. Nursery sales are extremely seasonal, peaking in Spring, and are strongly affected by commercial and residential building activity and are materially affected by weather conditions, particularly in the Spring planting season. Drought conditions currently affecting the East Coast could adversely affect sales of Imperial if such conditions continue into the Spring planting season. Competition in 2002 may be affected by product grown by Imperial and others which was not sold, when expected, last year. Competition may also reflect the weakened financial condition of at least one major grower and by the bankruptcies of two significant customers of Imperial, Frank's Nurseries and K-mart.

        Imperial's sales are made to a large variety of customers. In fiscal 2001, sales to one customer of Imperial represented 11.5% of Imperial's total sales. There were no customers in fiscal 2000 and fiscal 1999 that represented more than 10% of Imperial's annual sales in those years.

        Imperial has increased its containerized growing and shipping capacity to meet the potential volume and quality needs of its customers and to capitalize on expected growth in the Mid-Atlantic and Midwest markets. In coming years, Imperial expects that a higher portion of its shipping will be made on trucks outfitted with shelves, which may increase shipping expenses. Over the last two years, substantial additional sales support has been provided to the farming operation, and in future years additional sales support may be required to be provided to retail chain store customers.

        During 2000, Imperial operated seven SSCs which sold a wide range of plant material, including a large portion purchased from growers other than Imperial, and horticultural tools and products to the trade. The largest portion of the sales of the SSCs were to professional landscapers. The SSCs, all of which were owned by Imperial, were located in Windsor, Connecticut; Aston and Pittsburgh, Pennsylvania; Columbus and Cincinnati, Ohio; White Marsh, Maryland; and Manassas, Virginia. During 2000, operating results of the SSCs improved from the prior year. The SSCs had become the principal contributor to the operating profit of Imperial. In January 2001, the SSCs were sold to Shemin for cash and stock in Shemin Acquisition Corporation. Griffin reported a pretax profit of approximately $9.5 million on this transaction. See Note 2 to the consolidated financial statements included in Item 8.

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Real Estate Business

        Griffin is directly engaged in the real estate development business on portions of its land in Connecticut. Griffin develops portions of its properties for industrial, commercial and residential use. In future years, Griffin may seek to develop properties on land which it does not own at this time. The headquarters for this operation is in Bloomfield, Connecticut.

        For several years, the real estate market in the Hartford area, particularly that in the northwest quadrant where the majority of Griffin's acreage is located, was depressed by a number of factors, including the decline of employment in the defense and insurance industries. In 2000, there was some recovery in this market, including some recovery in the office portion of this market, which had been particularly weak. During 2001, in the area of Griffin's properties, there was not a significant change in the vacancy rates of office space, but Griffin and a joint venture in which it owns a 30% interest succeeded in leasing 42,000 square feet of office space (a portion with occupancy and rent commencing in 2002) and Griffin delivered to tenants approximately 235,000 square feet (net of vacated space) of industrial and flex space. There can be no assurance as to the condition of the real estate market in this region in the near future. Current projections, made by analysts, show little growth for this market during 2002 particularly in office space. Despite the decline in the insurance and defense industries, the unemployment rate in the area is quite low. The development of Griffin's land is also affected by land planning issues, particularly in the town of Simsbury, Connecticut.

Commercial and Industrial Developments

New England Tradeport

        A significant amount of Griffin's current commercial and industrial development efforts are focused on a 600 acre tract owned by Griffin near Bradley International Airport and Interstate 91 known as the New England Tradeport. To date, approximately 400,000 square feet of warehouse and light manufacturing space has been completed, of which approximately 330,000 (83%) is occupied or committed to be occupied, and a bottling and distribution plant has been built by the Pepsi Bottling Group ("Pepsi") on land sold to Pepsi by Griffin. Leases covering less than 25% of the currently leased space expire within the next twenty-four months. The only currently vacant spaces are a warehouse of approximately 57,000 square feet that was built in 2001 on speculation which became available for tenant improvement work at year end 2001 and approximately 10,000 square feet in one older industrial building owned by Griffin Land.

        Griffin has obtained a state traffic control certificate for the development of 1.2 million square feet for the New England Tradeport. Griffin intends to continue to direct its primary efforts in the industrial properties portion of its real estate business toward construction and leasing of light industrial and warehouse facilities at the New England Tradeport. Future development at the New England Tradeport may require investment in off-site infrastructure on behalf of Windsor, Connecticut and improvement of some state or town roads. At present, $13.8 million is invested in buildings at New England Tradeport and $2.7 million in the undeveloped land there.

Griffin Office Center and Griffin Center South

        Griffin's other substantial development is the combination of Griffin Center in Windsor, Connecticut and Griffin Center South in Bloomfield, Connecticut. Together these master planned developments comprise approximately 600 acres, approximately 63% of which have been developed with nearly 2,115,000 square feet of office and industrial space.

        Griffin Center currently includes ten corporate office buildings built by Griffin. Griffin currently maintains only a 30% interest in two office buildings which have an aggregate of 161,000 square feet in the Griffin Center office complex. During 2001 and early in 2002, occupancy of those buildings

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increased to 149,000 square feet (92.5%). The 70% owner of those buildings expects to offer them for sale in 2002 subject to receipt of acceptable offers. Griffin has a right of first refusal with respect to the buildings. During 2001, Griffin completed the shell of a light manufacturing building of 165,000 square feet in Griffin Center for JDS Uniphase Corporation ("JDS") which is leased to and occupied by JDS under a fifteen year lease. Under the agreement, JDS paid for its interior improvements, which were material to the total cost of the building. The agreement which provided for the development of that building also provides JDS options to have Griffin develop two additional buildings of 150,000 square feet each for lease to JDS. At present JDS has not exercised either such option. Griffin plans to build a 50,000 square foot single story office building in Griffin Office Center in 2002. Griffin's aggregate investment in Griffin Center is $11.3 million.

        In Griffin Center South, a 130-acre tract with sixteen buildings of industrial and research and development space, Griffin has retained for rental 9 buildings which are now substantially fully rented except for the 57,500 square feet accepted back from JDS during 2001. These buildings have an aggregate of approximately 225,000 square feet of flex and office space and 18,000 square feet of storage space. Leases covering less than 20% of the currently leased space expire within the next twenty-four months. Undeveloped land remaining in Griffin Center South is sufficient for one additional 50,000 square foot building and another small building. The aggregate investment in Griffin Center South is $11.3 million.

Other Office and Industrial Subdivisions

        Two additional Griffin parcels appropriate for office or industrial uses are available for development, including 28 acres in the Day Hill Technology Center in Windsor and 100 acres in the South Windsor Technology Center. Griffin has obtained state traffic certificates for these parcels for 500,000 square feet and 200,000 square feet of development, respectively. In addition, Griffin is subdividing a 16 acre parcel in Windsor for smaller build-to-suit industrial buildings.

Residential Developments

Simsbury

        In November 1999, Griffin filed plans for the creation of a residential community of 640 homes on a 363 acre site in Simsbury. After the conclusion of the original hearings in this matter Griffin reduced the number of proposed homes to 371. One quarter of these homes would be deed restricted affordable housing under Connecticut statutes. The public hearings focused on the density of the proposed development, as well as sewer, wetlands and soil contamination issues arising from prior use of the land for farming, as a result of which certain pesticides remain in the upper portion of the soil. The local commissions rejected the plan which is now before the Connecticut courts in a number of separate but related actions. See "Regulation: Environmental Matters". Griffin believes that its development plan for this site includes an appropriate method (which has received support from the Connecticut Department of Environmental Protection) of remediating the soils. The outcome of the pending litigation cannot be predicted. The book value of the land, including design and development costs to date, for this proposed development is $3 million. Griffin anticipates that obtaining subdivision approvals in many of the towns where it holds land appropriate for residential subdivision will be an extended process. Griffin owns another 500 acres in Simsbury, portions of which are zoned residential and other portions of which are zoned industrial. The industrial land is probably more suited to commercial use. Griffin may seek to develop or sell such lands if approvals can be obtained.

Windsor

        In 1988, a subsidiary of Griffin began infrastructure work at Walden Woods, a 153-acre site in Windsor, Connecticut, which was originally planned to contain more than 435 residential units. Through

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the end of fiscal 2001, 153 homes have been built. In 2000, Griffin entered into an agreement with a developer for the sale of the balance of the development rights at Walden Woods. Completion of this transaction, which is subject to site plan and other approvals by the town, would provide a significant cash flow to Griffin. Griffin's aggregate investment in Walden Woods is $2.9 million.

Suffield

        During 1999, one parcel of land in Suffield, Connecticut, which was in the process of subdivision, was sold at a substantial profit. Griffin is currently seeking to prepare another 95 acre piece in Suffield for residential subdivision.

Other

        In addition, approximately 500 acres in Connecticut are leased for tobacco growing to General Cigar Co., Inc., at annual rentals approximating the land's annual carrying cost. The lease for these properties, which extends for 7 years, may be terminated as to 100 acres annually, on one year's prior notice.

        Griffin is evaluating its other properties for residential development over a period of years.

Investments

Centaur Communications, Ltd.

        Griffin owns approximately 35% (32% fully diluted) of the outstanding common stock of Centaur, a privately-held publisher of business magazines in the United Kingdom and a compiler and supplier of computerized financial information through a subsidiary, Perfect Information, Ltd. As a result of a repurchase of common stock by Centaur and an additional investment by Griffin in 1998, Griffin's interest in Centaur was increased to its present level. The agreements relating to that transaction contemplate an offering of Centaur stock or sale of Centaur in the next two years subject to a number of factors, including market conditions.

Linguaphone Group, plc

        Griffin received, in 1997 from Centaur, a 25% interest in Linguaphone. In early 1999, a recapitalization of Linguaphone resulted in Griffin's interest being reduced to approximately 14% (11% fully diluted). Further transactions by Linguaphone have reduced Griffin's ownership interest to approximately 8%. Accordingly, Griffin now accounts for Linguaphone under the cost method of accounting for investments. Further dilution of Griffin's ownership interest in Linguaphone is expected as a result of a rights offering being contemplated by Linguaphone. Griffin's 2001 statement of operations includes a charge of approximately $2.2 million to write down its investment in Linguaphone to less than $100,000 due to Linguaphone's recent financial results and the contemplated offering of Linguaphone stock that reflects a substantially lower value of Linguaphone's common stock.

Shemin Acquisition Corporation

        In connection with Imperial's sale of the SSCs, Imperial now holds approximately 14% of the outstanding common stock of Shemin Acquisition Corporation, a privately held company that is the parent company of Shemin Nurseries, Inc. Imperial accounts for its investment in Acquisition under the cost method of accounting for investments.

Financial Information Regarding Industry Segments

        See Note 3 to the consolidated financial statements of Griffin included elsewhere herein for certain financial information regarding the landscape nursery business and the real estate business.

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Employees

        As of December 1, 2001, Griffin employed 240 persons on a full-time basis, including 18 in its real estate business and 218 in its landscape nursery business. At present, none of Griffin's employees are represented by a union. Griffin believes that its relations with its employees are satisfactory.

Competition

        The nursery business is competitive, and Imperial competes against a number of other companies, including national, regional and local nursery businesses. Some of Imperial's competitors in the nursery industry are larger than Imperial. Numerous real estate developers operate in the portion of Connecticut and Massachusetts in which Griffin's holdings are concentrated. Some of such businesses may have greater financial resources than Griffin.

Regulation: Environmental Matters

        Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure properly to remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. In connection with the ownership (direct or indirect), operation, management and development of real estate properties, Griffin may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. In Simsbury, Connecticut, the value of Griffin's land is affected by the presence of chlordane on a portion of the land which is intended for residential use. Although Griffin believes its proposed method of reducing chlordane contamination to levels below those that would impede residential development of such properties is appropriate and feasible, the acceptance of the method by any town commission has not yet been obtained. In the event that Griffin is unable adequately to remediate this property, its ability to develop such property for its intended purposes would be materially affected.

        Griffin periodically reviews its properties for the purpose of evaluating such properties' compliance with applicable state and federal environmental laws. Griffin does not anticipate experiencing, in the immediate future, material expense in complying with such laws other than in connection with development operations which may require additional clean up expenses.

ITEM 2.    PROPERTIES

Land Holdings

        Griffin is a major landholder in the State of Connecticut and also owns land in Massachusetts. In addition, Griffin owns approximately 1,100 acres in northern Florida, most of the useable portion of which is used for Imperial's growing operations or is contiguous to such operations. Through January 26, 2001 Griffin owned the sites for Imperial's seven sales and service centers. Each such center typically has a warehouse/office facility and 10-15 acres of nursery stock. On January 26, 2001, Imperial completed the sale of all of the assets of its sales and service centers to Shemin Nurseries, Inc. Those assets sold included 129 acres of real estate.

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        The book value of undeveloped land holdings owned by Griffin, principally in the Hartford, Connecticut area, is approximately $15 million. Griffin believes the fair market value of such land is substantially in excess of its book value, including land improvements.

        A listing of the locations of Griffin's commercial and nursery real estate, a portion of which, principally in Bloomfield, East Granby and Windsor, has been developed, is as follows:

Commercial Real Estate

Location of Property		Land Area (Acres)
Connecticut
	Bloomfield	376
	East Granby	172
	East Windsor	115
	Granby	95
	Simsbury	873
	South Windsor	103
	Suffield	380
	Windsor	1,217
Massachusetts
	Southwick	432
Florida
	Hillsborough County	9
	Leon County	6

Nursery Real Estate

Location of Property		Land Area (Acres)
Florida
	Quincy	1,066
Connecticut
	East Granby	393
	Granby	267

        Griffin also leases approximately 2,100 square feet in New York City for its Executive Offices.

ITEM 3.    LEGAL PROCEEDINGS

        As discussed in Item 1, certain parts of Griffin's property in Simsbury, Connecticut, are affected by the presence of chlordane. Although the various federal, state and local agencies may have an interest in the matter, there are no proceedings known by Griffin to be contemplated by any of these agencies in connection with possible chlordane exceedences on such land. Various aspects of Griffin's plans for its proposed residential development in Simsbury are currently being litigated.

        Griffin is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters will not be material to Griffin's financial position, results of operations or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

        The following are the high and low prices of common shares of Griffin Land & Nurseries, Inc. as traded on the Nasdaq National Market:

	1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
	High		Low		High		Low		High		Low		High		Low
2001	$	14.75	$	11.13	$	18.85	$	12.94	$	18.08	$	15.00	$	15.51	$	11.00
2000	$	12.38	$	9.75	$	13.75	$	10.00	$	13.00	$	11.00	$	15.00	$	11.38

        On February 8, 2002, the number of record holders of common stock of Griffin was approximately 528, which does not include beneficial owners whose shares are held of record in the names of brokers or nominees. The closing market price as quoted on the Nasdaq National Market on such date was $14.05 per share. The information appearing in Notes 7 and 11 to the consolidated financial statements is hereby incorporated by reference.

Dividend Policy

        Griffin's current policy is to retain any earnings to finance the operation and expansion of its businesses.

ITEM 6.    SELECTED FINANCIAL DATA

        The following table sets forth selected statement of operations data for fiscal years 1997 through 2001 and balance sheet data as of the end of each fiscal year.

	2001(a)			2000 (As Restated)(b)		1999		1998			1997
	(Dollars in Thousands, Except Per Share Data)
Statement of Operations Data:
Net sales & other revenue (c)	$	32,013		$	74,374	$	64,998	$	53,133		$	48,054
Operating (loss) profit		(3,182	)		3,812		3,130		74			(3,236	)
Gain on sale of sales and service centers		9,469			—		—		—			—
Income (loss) before equity investments (d)		1,490			1,670		1,623		86			(2,502	)
Net income (loss)		1,137			2,262		2,176		(65	)		(2,136	)
Basic net income (loss) per share (e)		0.23			0.47		0.45		(0.01	)		(0.45	)
Diluted net income (loss) per share (e)		0.22			0.45		0.42		(0.03	)		(0.45	)
Balance Sheet Data:
Total assets		124,175			127,284		112,885		104,730			103,736
Working capital		31,095			29,193		36,337		33,304			41,130
Long-term debt		15,940			9,008		8,860		2,666			2,830
Stockholders' equity (e)		96,916			95,718		93,270		91,000			90,523

(a)

The financial results for fiscal 2001 reflect primarily the sale of the Sales and Service Centers on January 26, 2001 as described in Item 1, Item 7, and Note 2 to the consolidated financial statements included in Item 8.

(b)

The financial data for fiscal 2000 has been restated as described in Item 7 and in Note 9 to the consolidated financial statements included in Item 8.

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(c)

Net sales for fiscal years 1997 through 2000 have been reclassified to reflect the adoption of Emerging Issues Task Force ("EITF") 00-10 "Accounting for Shipping and Handling Fees and Costs." See Note 1 to the consolidated financial statements included in Item 8.

(d)

Income before equity investment in fiscal 2001 includes a pretax charge of $2.2 million to write-down the value of Griffin's investment in Linguaphone Group plc.

(e)

Griffin was a wholly-owned subsidiary of Culbro Corporation ("Culbro") through July 3, 1997. Accordingly, the per share results for 1997 presented above are on a pro forma basis because the Griffin common stock was not outstanding for that entire year.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

        The consolidated financial statements of Griffin include the accounts of Griffin's subsidiary in the landscape nursery business, Imperial, and Griffin's Connecticut and Massachusetts based real estate business ("Griffin Land"). Griffin also has an equity investment in Centaur Communications, Ltd. ("Centaur"), a magazine publishing business based in the United Kingdom. On January 26, 2001, Imperial completed the sale of its wholesale sales and service centers (the "SSCs") to Shemin Nurseries, Inc. A substantial amount of the operating profit of Imperial in fiscal 1999 and fiscal 2000 was attributable to the SSCs. Imperial remains in the landscape nursery business with its container growing operations in Connecticut and northern Florida. Imperial has recently completed an expansion of its Connecticut growing operation and is currently expanding its operation in northern Florida. Griffin's statement of operations in fiscal 1999, fiscal 2000 and through the date of sale of the SSCs in fiscal 2001 include the results of operations of the SSCs, and Griffin's balance sheet as of December 2, 2000 includes the financial position of the SSCs.

        Griffin's equity results from Centaur for each of the three fiscal years ended December 1, 2001, reflect Centaur's results for the twelve month periods ended November 30, 2001, 2000 and 1999, respectively. Griffin's equity share of the results of Centaur for the fiscal year 2000 have been restated to reflect the inclusion of Centaur's results for the twelve month period ended November 30, 2000, rather than the ten month period ended September 30, 2000. The effect was to increase both equity income from Centaur and net income by $628,000. At the time Griffin was required to file its Form 10-Q for the third quarter of fiscal 2000, Centaur was in the process of preparing for a stock offering and any future disclosure of Centaur's interim results could have violated securities regulations in the United Kingdom after the offering. Accordingly, Griffin's third quarter of fiscal 2000 included Centaur's results for the one month ended June 30, 2000 and the fourth quarter and full year fiscal 2000 included Centaur's results for the three months and ten months ended September 30, 2000, respectively. During 2001, Centaur's offering was terminated. Accordingly, Griffin has restated its equity results from Centaur to report all periods on a current basis.

        Financial Reporting Release No. 60, which was recently released by the Securities and Exchange Commission ("SEC"), requires all registrants to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The notes to Griffin's consolidated financial statements included in Item 8 include a summary of the significant accounting policies and methods used in the preparation of Griffin's consolidated financial statements. However, in the opinion of management, Griffin does not have any individual accounting policy that is critical to the preparation of its consolidated financial statements. This is due principally to the definitive nature of the accounting requirements for the landscape nursery products and real estate businesses in which Griffin is engaged. Also, in many cases, Griffin must use an accounting policy or method because it is the only policy or

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method permitted under accounting principles generally accepted in the United States of America. The following is a review of the more significant accounting policies and methods used by Griffin:

Revenue Recognition—Griffin recognizes revenues for its landscape nursery business upon shipment of products to customers when title and risk of loss pass to the customers. In Griffin's real estate business, rental revenue is recorded in accordance with Statement of Financial Accounting Standard ("SFAS") No. 13, "Accounting for Leases", which generally requires that rental revenue be recognized on a straight-line basis over the term of the lease. Real estate sales are recorded in accordance with SFAS No. 66, "Accounting for Sales of Real Estate" which establishes standards for recognition of profit on real estate sales. These standards require that profit on a transaction not be recognized until the amount is determinable, collectability of the sales price is reasonably assured and the earnings process is complete.

Depreciation and Amortization—Griffin depreciates its property and equipment and its real estate held for lease using straight-line methods. Griffin amortizes goodwill related to its investment in Centaur on a straight-line method over forty years. Beginning in fiscal 2003, with the adoption of a new required accounting standard, Griffin will no longer be required to amortize the goodwill related to its investment in Centaur (see Note 1 to the consolidated financial statements in Item 8).

Inventories—Griffin's inventories of its landscape nursery business are stated at the lower of cost or market. Cost is determined using the average cost method. Although nursery stock includes certain inventories that will not be sold within one year, it is industry practice to include such inventories in current assets.

Impairment of Long-Lived Assets—Griffin evaluates the carrying value of its long-lived assets in relation to their operating performance and future undiscounted cash flows.

Results of Operations

Fiscal 2001 Compared to Fiscal 2000

        Griffin's net sales and other revenue were $32.0 million in fiscal 2001 as compared to $74.4 million in fiscal 2000. Net sales and other revenue at Imperial were $23.6 million in fiscal 2001 as compared to $68.6 million in fiscal 2000. The lower net sales at Imperial reflects the effect of the sale of the SSCs in January 2001. Net sales of the SSCs were $48.3 million in fiscal 2000 as compared to $1.9 million in fiscal 2001 through the date the SSCs were sold. Excluding the effect of the sale of the SSCs, net sales at Imperial increased by $1.4 million. The increase in net sales at Imperial principally reflects additional product available for sale as a result of the recent expansion of Imperial's Connecticut and northern Florida growing operations.

        Net sales and other revenue at Griffin Land increased from $5.8 million in fiscal 2000 to $8.4 million in fiscal 2001. This increase of $2.6 million reflects an increase of $2.3 million from higher rental revenue in fiscal 2001 as a result of leases on buildings completed and occupied in fiscal 2001 and new leases on space that was vacant in fiscal 2000 but occupied for most of fiscal 2001. Additionally, revenue in fiscal 2001 included $0.5 million from the agreement to terminate early a lease on one of its buildings. The increase in rental revenue and the revenue from the early termination at Griffin Land substantially offset lower revenue from land sales in fiscal 2001 as compared to fiscal 2000. Revenue from land sales decreased from $1.2 million in fiscal 2000 to $0.8 million in fiscal 2001.

        Griffin incurred an operating loss of $3.2 million in fiscal 2001 as compared to an operating profit of $3.8 million in fiscal 2000. Imperial incurred an operating loss of $2.7 million in fiscal 2001 as compared to an operating profit of $5.3 million in fiscal 2000. The lower operating results at Imperial reflects the effect of the sale of the SSCs in January 2001. Due to the seasonality of the landscape nursery business, the SSCs incurred an operating loss, before Imperial's central overhead expenses, of

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$0.8 million from the beginning of the 2001 fiscal year through their sale in January 2001. The SSCs generated an operating profit, before Imperial's central overhead expenses, of $6.6 million in fiscal 2000. Imperial's growing operations, including all of Imperial's central overhead expenses, incurred an operating loss of $1.9 million in fiscal 2001 as compared to an operating loss of $1.3 million in fiscal 2000. The effect of higher net sales of container grown plants by Imperial's growing operations was more than offset by higher cost of sales in fiscal 2001, which included a charge for unsaleable inventory of $0.6 million, due principally to horticultural issues, recorded in the 2001 third quarter. Imperial's operating expenses, excluding those expenses directly related to the SSCs, were $4.6 million in fiscal 2001 as compared to $5.4 million in fiscal 2000. As a percentage of net sales, operating expenses were 21.2% in fiscal 2001 as compared to 26.7% in fiscal 2000, as adjusted for the sale of the SSCs. The lower operating expenses in fiscal 2001 principally reflects lower central overhead expenses at Imperial due principally to staff reductions as a result of the sale of the SSCs and lower incentive compensation expense in fiscal 2001 as compared to fiscal 2000.

        Operating profit at Griffin Land increased to $1.0 million in fiscal 2001 as compared to $0.2 million in fiscal 2000. The increased operating profit at Griffin Land principally reflects higher profit from commercial properties as a result of the increase in rental revenue in fiscal 2001. Profit from Griffin Land's commercial properties, before depreciation and excluding the benefit of the lease termination, was $4.6 million in fiscal 2001 as compared to $2.9 million in fiscal 2000. The increase in profit from commercial properties, before depreciation, was partially offset by lower profit from property sales, higher operating expenses and higher depreciation expense. Profit from property sales declined from $0.5 million in fiscal 2000 to $0.1 million in fiscal 2001 due to the lower property sales revenue and fiscal 2000 including sales of properties with a lower cost basis. The higher depreciation expense reflected depreciation on new buildings placed into service in fiscal 2001.

        Griffin's results in fiscal 2001 reflect a write-down of $2.2 million on its investment in Linguaphone Group plc ("Linguaphone"). The write-down reflects the decrease in value of Griffin's investment in Linguaphone as a result of recent financial results and the contemplated offering of Linguaphone stock that reflects a substantially lower value of Linguaphone's common stock. Approximately 80% of the carrying value of Griffin's investment in Linguaphone resulted from a distribution in 1997 of the common stock of Linguaphone by its former parent company, Centaur. The remaining carrying value of Griffin's investment in Linguaphone, approximately $0.4 million, reflects a cash investment by Griffin.

        Griffin's interest expense declined from $1.1 million in fiscal 2000 to $0.9 million in fiscal 2001. Griffin's interest income increased by $0.1 million in fiscal 2001 as compared to fiscal 2000. The lower interest expense and higher interest income reflect repayment of the entire amount outstanding under Griffin's Credit Agreement from the cash proceeds received from the sale of the SSCs in January 2001. The remaining cash received from the sale of the SSCs, after repayment of the amount then outstanding under the Griffin Credit Agreement, was used to finance operations. Additionally, higher interest payments on mortgages, reflecting interest on a new mortgage entered into in March 2001, was more than offset by a higher amount of interest capitalized on new construction projects during fiscal 2001 as compared to fiscal 2000.

        Griffin's effective tax rate in fiscal 2001 is 54.5% as compared to 38.5% in fiscal 2000. The higher effective tax rate in 2001 reflects the effect of the tax basis of Griffin's investment in Linguaphone being lower than its book basis, therefore the write-down did not generate the expected tax benefit had the tax basis of that asset been comparable to its book basis.

        Griffin had a loss from Centaur in fiscal 2001 of $0.4 million as compared to equity income of $0.6 million in fiscal 2000. Although Centaur's operations were generally more profitable in fiscal 2001, Centaur incurred expenses, of which Griffin's allocable share was $0.9 million, related to a proposed stock offering or sale that did not take place.

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Fiscal 2000 Compared to Fiscal 1999

        In fiscal 2000, Griffin's net sales and other revenue increased $9.4 million, or 14%, to $74.4 million from $65.0 million in fiscal 1999. Net sales and other revenue increased at both Imperial and Griffin Land. At Imperial, net sales increased $9.0 million, or 15%, in fiscal 2000 to $68.6 million from $59.6 million in fiscal 1999. The higher net sales and other revenue at Imperial reflected principally increased volume from the SSCs, which accounted for $5.5 million of the sales increase at Imperial. The balance of the sales increase at Imperial reflected increased sales volume of container-grown plants from Imperial's farming operations in Connecticut and northern Florida. At Griffin Land, net sales and other revenue increased to $5.8 million in fiscal 2000 from $5.4 million in fiscal 1999. The increase of $0.4 million principally reflects an increase in rental revenue from Griffin Land's commercial properties. Rental revenue from Griffin Land's commercial properties was $4.0 million in fiscal 2000 as compared to $3.6 million in fiscal 1999. At the end of fiscal 2000, Griffin Land's occupancy rate on the buildings it owns, not including the joint venture office buildings in which Griffin Land has a 30% interest, was 96% (including a lease commitment on an approximately 100,000 square foot warehouse that was occupied in the 2001 second quarter).

        Griffin's consolidated operating profit (before interest) was $3.8 million in fiscal 2000 as compared to $3.1 million in fiscal 1999. Operating profit at Imperial increased to $5.3 million in fiscal 2000 from $3.9 million in fiscal 1999. The increased operating profit reflects the sales volume increase at Imperial which generated a $2.5 million increase in gross profit. Imperial's gross profit was $19.6 million in fiscal 2000 as compared to $17.1 million in fiscal 1999. Imperial's gross margin on sales in fiscal 2000 was 28.7%, as compared to 28.8% in fiscal 1999. Operating expenses at Imperial were $14.3 million in fiscal 2000 versus $13.2 million in fiscal 1999. The higher expenses reflected the support required to meet the additional sales volume. As a percentage of net sales, operating expenses at Imperial were 20.9% of net sales in fiscal 2000 as compared to 22.3% of net sales in fiscal 1999.

        Total operating profit at Griffin Land was $0.2 million in fiscal 2000 as compared to $0.8 million in fiscal 1999. The lower operating profit in fiscal 2000 as compared to fiscal 1999 reflects a $0.9 million profit on a sale of undeveloped land in fiscal 1999. There were no comparable land sales in fiscal 2000. Excluding the effect of that 1999 land sale, operating results at Griffin Land increased approximately $0.3 million in fiscal 2000 as compared to fiscal 1999. This increase reflected higher operating profit from Griffin's rental properties, partially offset by higher operating expenses. Operating profit, before depreciation, from Griffin Land's rental properties was $2.9 million in fiscal 2000 as compared to $2.7 million in fiscal 1999.

        Interest expense at Griffin increased to $1.1 million in fiscal 2000 from $0.6 million in fiscal 1999. The higher interest expense reflects higher borrowing levels under Griffin's revolving credit facilities in fiscal 2000 as compared to fiscal 1999 and interest expense on a mortgage that was in place the entire year in fiscal 2000 versus a partial year in fiscal 1999.

        Griffin's equity investment in Centaur reflected equity income of $0.6 million in fiscal 2000 and in fiscal 1999. Higher net sales at Centaur were substantially offset by higher costs and expenses.

Liquidity and Capital Resources

        Net cash used in operating activities was $6.1 million in fiscal 2001 as compared to net cash provided by operating activities of $5.1 million in fiscal 2000. The use of cash in operations in fiscal 2001 as compared to cash provided by operations in the prior year reflects the decrease in Griffin's operating results in fiscal 2001, due principally to the effect of the sale of the SSCs in January 2001. Additionally, the use of cash in operating activities in fiscal 2001 was due to the decrease in accounts payable and accrued liabilities by $1.9 million in fiscal 2001 as compared to accounts payable and accrued liabilities increasing by $2.9 million in fiscal 2000. This change principally reflects the timing of

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payments on construction projects at Griffin Land and lower accruals in fiscal 2001 for incentive compensation expense.

        Net cash provided by investing activities in fiscal 2001 reflects the net cash proceeds, after expenses, from the sale of the SSCs of $18.4 million. Partially offsetting the proceeds from the sale of the SSCs was $10.2 million of additions to Griffin Land's real estate assets and $2.9 million of capital expenditures at Imperial. The $10.2 million of real estate additions reflects the completion of the construction that was started in fiscal 2000 on two buildings, a 165,000 square foot commercial building in Griffin Center, in Windsor, Connecticut, and a 40,000 square foot commercial building in Griffin Center South, in Bloomfield, Connecticut. Both of these buildings were leased during fiscal 2001. Additionally, in fiscal 2001, Griffin Land constructed the shell of a 57,000 square foot commercial building in the New England Tradeport, Griffin's 600 acre industrial park in Windsor, Connecticut. In addition to the construction of these three buildings, Griffin Land's investment in real estate assets in fiscal 2001 included expenditures for development of a proposed residential subdivision in Simsbury, Connecticut. At Imperial, additions to property and equipment in fiscal 2001 were $2.8 million. Approximately $2.2 million of the 2001 capital expenditures at Imperial were related to the expansion of its operations. The 2001 expenditures were to complete the expansion at its Connecticut facility and continue the expansion at the Florida facility. Substantially all of the expansion of the Florida operation is expected to be completed in fiscal 2002. The total cost of the expansion and improvements in Connecticut and northern Florida is expected to be approximately $7.5 million, of which approximately $5.8 million has been expended through fiscal 2001.

        Net cash used in financing activities in fiscal 2001 includes the repayment of amounts outstanding under the Griffin Credit Agreement (the "1999 Credit Agreement") with the proceeds from the sale of the SSCs in January 2001. The increase in debt in fiscal 2001 principally reflects $6.4 million of proceeds from a new nonrecourse mortgage, $3.9 million of borrowings under the 1999 Credit Agreement prior to the sale of the SSCs and $1.0 million borrowed under a bridge loan (the "Bridge Loan"). The new nonrecourse $6.4 million mortgage was on the 165,000 square foot building completed and leased in fiscal 2001. The mortgage has an interest rate of 8.125% and a term of fifteen years with payments based on a twenty year amortization period.

        In fiscal 2001, Griffin financed its seasonal working capital requirements and its investment in real estate assets at Griffin Land and capital expenditures at Imperial with the proceeds from the sale of the SSCs that remained after the amounts outstanding under the 1999 Credit Agreement were repaid and the proceeds from the new mortgage at Griffin Land.

        On February 8, 2002, Griffin entered into a new $19.4 million revolving credit agreement (the "2002 Credit Agreement") with Fleet National Bank ("Fleet"). The initial borrowings under the 2002 Credit Agreement of $5.0 million were used to repay the $4.5 million then outstanding under the Bridge Loan, repay a mortgage of $0.4 million on one of Griffin's commercial buildings and certain expenses related to the 2002 Credit Agreement. The 2002 Credit Agreement has a three year term and is collateralized by certain of Griffin's real estate assets.

        In fiscal 2002, Griffin Land anticipates completing the interior of its new 57,000 square foot industrial building in the New England Tradeport, dependent upon leasing that space. Additionally, Griffin Land expects to construct a new 50,000 square foot office building in Griffin Center and will proceed with its proposed residential subdivision in Simsbury, Connecticut if regulatory approval is obtained. This matter is currently in litigation. Griffin Land also has an agreement for the sale of the remaining development rights at its Walden Woods residential development in Windsor, Connecticut. The completion of the sale is subject to the purchaser receiving approval from the town's commissions for their development plans and, based on such plans, we expect to generate approximately $3.0 million in proceeds. Griffin's operating results and cash flows in fiscal 2002 may be adversely affected if

14

drought conditions currently affecting the East Coast continue into the Spring, which could affect net sales at Imperial.

        Management believes that in the near term, based on the current level of operations and anticipated growth, borrowings under the 2002 Credit Agreement and cash generated from operations will be sufficient to finance Griffin's working capital requirements, expected capital expenditures of the landscape nursery business and development of its real estate assets. Over the intermediate and long term, additional mortgage placements or additional bank credit facilities may also be required to fund capital projects.

Forward-Looking Information

        The above information in Management's Discussion and Analysis of Financial Condition and Results of Operations includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although Griffin believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved, particularly with respect to the improvements and expansion of Imperial's farm operations, construction of additional facilities in the real estate business, completion of the sale of the development rights of Walden Woods and approval of proposed residential subdivisions. The projected information disclosed herein is based on assumptions and estimates that, while considered reasonable by Griffin as of the date hereof, are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, many of which are beyond the control of Griffin.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in earnings and cash flows.

        For fixed rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not earnings or cash flows. Griffin does not have an obligation to prepay any fixed rate debt prior to maturity, and therefore, interest rate risk and changes in the fair market value of fixed rate debt should not have a significant impact on earnings or cash flows until such debt is refinanced, if necessary. For variable rate debt, changes in interest rates generally do not impact the fair market value of the debt instrument, but do affect future earnings and cash flows. Griffin had $1 million of variable rate debt outstanding at December 1, 2001.

        Griffin is exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on market values of Griffin's cash equivalent short-term investments. These investments generally consist of overnight investments that are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned and cash flow from these investments.

        Griffin does not currently have any derivative financial instruments in place to manage interest costs, but that does not mean that Griffin will not use them as a means to manage interest rate risk in the future.

        Griffin does not use foreign currency exchange forward contracts or commodity contracts and does not have foreign currency exposure in operations. Griffin does have investments in companies based in the United Kingdom, and changes in foreign currency exchange rates could affect the results of an equity investment in Griffin's financial statements, and the ultimate liquidation of those investments and conversion of proceeds into United States currency is subject to future foreign currency exchange rates.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statement of Operations

(dollars in thousands, except per share data)

		For the Fiscal Years Ended,
		Dec. 1, 2001			Dec. 2, 2000 (As Restated) (Note 9)			Nov. 27, 1999
Net sales and other revenue		$	32,013		$	74,374		$	64,998
Cost of goods sold			24,948			52,175			45,220
Selling, general and administrative expenses			10,247			18,387			16,648
Operating (loss) profit			(3,182	)		3,812			3,130
Gain on sale of Sales and Service Centers			9,469			—			—
Write-down of investment			(2,225	)		—			—
Interest expense			(933	)		(1,141	)		(626	)
Interest income			149			43			81
Income before income tax provision			3,278			2,714			2,585
Income tax provision			1,788			1,044			962
Income before equity investments			1,490			1,670			1,623
(Loss) income from equity investments:
	Investment in Centaur Communications, Ltd.		(353	)		592			565
	Investment in Linguaphone Group plc		—			—			(12	)
(Loss) income from equity investments			(353	)		592			553
Net income		$	1,137		$	2,262		$	2,176
Basic net income per common share		$	0.23		$	0.47		$	0.45
Diluted net income per common share		$	0.22		$	0.45		$	0.42

See Notes to Consolidated Financial Statements.

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Balance Sheet

(dollars in thousands, except per share data)

	Dec. 1, 2001		Dec. 2, 2000 (As Restated) (Note 9)
ASSETS
Current Assets
Cash and cash equivalents	$	23	$	1,126
Accounts receivable, less allowance of $132 and $580		2,437		5,920
Inventories		30,449		31,869
Deferred income taxes		1,788		2,967
Other current assets		2,667		3,346
Total current assets		37,364		45,228
Real estate held for sale or lease, net		49,242		41,221
Investment in Centaur Communications, Ltd.		17,012		17,310
Property and equipment, net		11,418		17,069
Other assets		9,139		6,456
Total assets	$	124,175	$	127,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	5,761	$	8,341
Long-term debt due within one year		508		7,694
Total current liabilities		6,269		16,035
Long-term debt		15,940		9,008
Deferred income taxes		1,457		2,729
Other noncurrent liabilities		3,593		3,794
Total liabilities		27,259		31,566
Commitments and contingencies (Note 12)
Common stock, par value $0.01 per share, authorized 10,000,000 shares, issued and outstanding 4,862,704 shares		49		49
Additional paid in capital		93,584		93,584
Retained earnings		3,036		1,899
Accumulated other comprehensive income		247		186
Total stockholders' equity		96,916		95,718
Total liabilities and stockholders' equity	$	124,175	$	127,284

See Notes to Consolidated Financial Statements.

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statement of Stockholders' Equity

(dollars in thousands)

	Shares of Common Stock	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit) (As Restated) (Note 9)			Accumulated Other Comprehensive Income		Total (As Restated) (Note 9)
Balance at November 28, 1998	4,842,704	$	48	$	93,491	$	(2,539	)	$	—	$	91,000
Exercise of stock options, including $85 income tax benefit	20,000		1		93		—			—		94
Net income	—		—		—		2,176			—		2,176
Balance at November 27, 1999	4,862,704		49		93,584		(363	)		—		93,270
Other comprehensive income	—		—		—		—			186		186
Net income (Note 9)	—		—		—		2,262			—		2,262
Balance at December 2, 2000	4,862,704		49		93,584		1,899			186		95,718
Other comprehensive income	—		—		—		—			61		61
Net income	—		—		—		1,137			—		1,137
Balance at December 1, 2001	4,862,704	$	49	$	93,584	$	3,036		$	247	$	96,916

See Notes to Consolidated Financial Statements.

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statement of Cash Flows

(dollars in thousands)

		For the Fiscal Years Ended,
		Dec. 1, 2001			Dec. 2, 2000 (As Restated) (Note 9)			Nov. 27, 1999
Operating activities:
Net income		$	1,137		$	2,262		$	2,176
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
	Depreciation and amortization		2,919			2,533			2,204
	Gain on sale of Sales and Service Centers		(9,469	)		—			—
	Write-down of investment		2,225			—			—
	Loss (income) from equity investments		353			(592	)		(553	)
	Deferred income taxes		(93	)		927			895
Changes in assets and liabilities which (decreased) increased cash:
	Accounts receivable		2,328			30			(1,386	)
	Inventories		(3,033	)		(2,673	)		(2,450	)
	Income tax refund received		—			—			926
	Other current assets		27			(1,008	)		(639	)
	Accounts payable and accrued liabilities		(1,861	)		2,929			(174	)
	Other, net		(618	)		667			(69	)
Net cash (used in) provided by operating activities			(6,085	)		5,075			930
Investing activities:
Proceeds from sale of Sales and Service Centers			18,390			—			—
Additions to real estate held for sale or lease			(10,238	)		(9,108	)		(3,416	)
Additions to property and equipment			(2,899	)		(3,715	)		(2,822	)
Other, net			111			—			(377	)
Net cash provided by (used in) investing activities			5,364			(12,823	)		(6,615	)
Financing activities:
Payments of debt			(12,457	)		(429	)		(2,220	)
Increase in debt			12,075			7,300			8,173
Other, net			—			—			(324	)
Net cash (used in) provided by financing activities			(382	)		6,871			5,629
Net decrease in cash and cash equivalents			(1,103	)		(877	)		(56	)
Cash and cash equivalents at beginning of year			1,126			2,003			2,059
Cash and cash equivalents at end of year		$	23		$	1,126		$	2,003

See Notes to Consolidated Financial Statements.

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GRIFFIN LAND & NURSERIES, INC.

Notes to Consolidated Financial Statements

(dollars in thousands, except per share data)

1.    Summary of Significant Accounting Policies

Basis of Presentation

        The accompanying consolidated financial statements of Griffin Land & Nurseries, Inc. ("Griffin") include the accounts of Griffin's real estate division ("Griffin Land") and Griffin's wholly-owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). All intercompany transactions have been eliminated.

        Griffin accounts for its investments in Centaur Communications, Ltd. ("Centaur") and real estate joint ventures under the equity method. Centaur reports on a June 30 fiscal year in accordance with generally accepted accounting principles in the United Kingdom. Griffin reports its share of equity in Centaur's earnings based upon Griffin's fiscal year. Griffin converts Centaur financial statements to accounting principles generally accepted in the United States of America and translates balance sheet information at the exchange rate as of the balance sheet date and uses the average exchange rates over the period to translate the statement of operations. Substantially all of Griffin's investment in Centaur represents the excess of the cost of Griffin's investment over the book value of its equity in Centaur (representing publishing rights and goodwill) and is being amortized on a straight-line basis over 30-40 years, which commenced in 1985.

        Griffin's common equity ownership of Linguaphone Group plc ("Linguaphone") was reduced to 8% as the result of a recapitalization in fiscal 1999 and certain other transactions. As a result, Griffin now accounts for its investment in Linguaphone under the cost method of accounting for investments.

Business Segments

        Griffin is engaged in the landscape nursery and real estate businesses. Imperial, Griffin's subsidiary in the landscape nursery segment, is engaged in growing plants in containers which are sold principally to merchandisers, garden centers, wholesalers and landscape contractors. On January 26, 2001, Imperial completed the sale of its wholesale sales and service centers (see Note 2). Imperial remains in the landscape nursery business with its growing operations in Connecticut and northern Florida.

        Griffin's real estate segment, Griffin Land, builds and manages commercial and industrial properties and develops residential subdivisions on its land in Connecticut and Massachusetts.

Fiscal Year

        Griffin's fiscal year ends on the Saturday nearest November 30. Fiscal 2001 ended December 1, 2001 and contained 52 weeks. Fiscal 2000 ended December 2, 2000 and contained 53 weeks. Fiscal 1999 ended November 27, 1999 and contained 52 weeks. The effect of an additional week in fiscal 2000 as compared to fiscal 2001 and fiscal 1999 was not material to Griffin's results of operations or cash flows.

Inventories

        Griffin's inventories are stated at the lower of cost or market using the average cost method. Nursery stock includes certain inventories which will not be sold or used within one year. It is industry practice to include such inventories in current assets.

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Property and Equipment

        Property and equipment are carried at cost. Depreciation is determined on a straight-line basis over the estimated useful asset lives for financial reporting purposes and principally on accelerated methods for tax purposes.

Real Estate Held for Sale or Lease

        Real estate held for sale or lease is carried at cost. Interest is capitalized during the construction period of major facilities. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's useful life. Depreciation is determined on a straight-line basis over the estimated useful asset lives for financial reporting purposes and principally on accelerated methods for tax purposes. Repair and maintenance costs are expensed as incurred.

Impairment of Investments in Long-Lived Assets

        Griffin periodically reviews long-lived assets to determine if there are indicators of impairment. When indicators of impairment are present, Griffin evaluates the carrying value of the assets in relation to the operating performance and future undiscounted cash flows of the underlying assets. Griffin adjusts the net book value of the underlying assets if the sum of the expected future cash flows is less than book value.

Revenue and Gain Recognition

        In the landscape nursery business, sales and the related cost of sales are recognized upon shipment of products. Sales returns are not material. In 2000, the Financial Accounting Standards Board's ("FASB") Emerging Issues Task Force ("EITF") issued EITF 00-10, "Accounting for Shipping and Handling Fees and Costs" which Griffin adopted at the beginning of fiscal 2001. EITF 00-10 stated that all amounts billed to customers for shipping and handling should be included in net sales and the costs of shipping and handling should be included in cost of sales. To reflect the adoption of EITF 00-10, net sales and cost of sales for fiscal 2000 have been increased $2,635 and $2,401, respectively, and selling, general and administrative expenses have been increased $234, and net sales and cost of sales for fiscal 1999 have been increased $2,054 and $1,899, respectively, and selling, general and administrative expenses have been increased $155.

        In the real estate business, revenue includes rental revenue from Griffin Land's commercial and industrial properties and proceeds from the sales of real estate. Rental revenue is accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases." Gains on real estate sales are recognized in accordance with SFAS No. 66, "Accounting for Sales of Real Estate," based on the specific terms of the sale.

Recent Accounting Pronouncements

        In June 2001, the FASB issued SFAS No. 141 "Business Combinations." Under the provisions of SFAS No. 141, the purchase method of accounting is required to be used for all business combinations completed after June 30, 2001. There was no effect on Griffin from SFAS No. 141.

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        In June 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible Assets." Under the provisions of SFAS No. 142, goodwill will no longer be amortized, but will be subject to a periodic test for impairment based upon fair values. Griffin's results from its equity investment in Centaur for fiscal 2001, fiscal 2000 and fiscal 1999 would have increased approximately $0.5 million annually due to the elimination of goodwill amortization. SFAS No. 142 will be effective for Griffin in fiscal 2003.

        In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations." This new pronouncement addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 will be effective for Griffin in fiscal 2003. Management is currently assessing the impact, if any, of this new standard.

        In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." This new pronouncement retains the requirements of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" to recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flow and measures an impairment loss as the difference between the carrying amount and fair value of the asset. This pronouncement also addresses the accounting for long-lived assets to be disposed of other than by sale and long-lived assets to be disposed of by sale. SFAS No. 144 will be effective for Griffin in fiscal 2003. Management is currently assessing the impact, if any, of this new standard.

Environmental Matters

        Environmental expenditures are expensed or capitalized as appropriate, depending upon their future economic benefit. Expenditures that relate to an existing condition caused by past operations, and that do not have future economic benefit, are expensed. Expenditures that create future benefit or contribute to future revenue generation are capitalized. Liabilities related to future remediation costs are recorded when environmental assessments and/or cleanups are probable, and the costs can be reasonably estimated. There were no liabilities related to environmental assessments as of December 1, 2001 and December 2, 2000.

Fair Value of Financial Instruments

        The amounts included in the financial statements for accounts receivable, accounts payable and accrued liabilities reflect their fair values because of the short-term maturity of these instruments. The fair values of Griffin's other financial instruments are discussed in Note 5.

Stock Options

        Griffin accounts for stock-based compensation under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The pro forma effect on earnings and earnings per share using the fair value method of accounting for stock-based compensation is disclosed in Note 7.

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Earnings Per Share

        Basic net income per common share is calculated by dividing net income by the average number of common shares outstanding during the year. Diluted net income per common share is calculated by adjusting outstanding shares, assuming conversion of all potentially dilutive stock options.

Reclassifications

        Certain prior year balances have been reclassified to conform with the current year presentation.

Use of Estimates

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the period reported. Actual results could differ from those estimates. The more significant estimates include, among others, the impairment charge for Linguaphone, the allowance for doubtful accounts, the inventory reserves and the assumptions used in determining the accrual for postretirement benefits.

2.    Sale of Sales and Service Centers

        On January 26, 2001, Imperial completed the sale of all of the assets of its seven wholesale sales and service centers (the "SSCs") to Shemin Nurseries, Inc. ("Shemin"). Shemin also assumed certain liabilities related to the SSCs. The SSCs sold a wide variety of plant material and horticultural tools and products to the landscape trade, and were located in Windsor, Connecticut; Aston and Pittsburgh, Pennsylvania; Columbus and Cincinnati, Ohio; White Marsh, Maryland; and Manassas, Virginia. A portion of the products sold by the SSCs were grown by Imperial's farming operations. Imperial's only continuing involvement in Shemin is an approximately 13.8% ownership interest in Shemin's parent company (see below) and a three year supply agreement pursuant to which Shemin is obligated to purchase Imperial grown product for the SSCs. The net book value of the assets sold and liabilities assumed by Shemin was $13.5 million. Prior to the sale of the SSCs in fiscal 2001, the net sales of the SSCs were $1.9 million and the SSCs incurred an operating loss, before Imperial's central overhead expenses, of $0.8 million through the date of the sale. For fiscal 2000, net sales of the SSCs were $48.3 million and the operating profit of the SSCs, before Imperial's central overhead expenses, was $6.6 million. Imperial will continue in the landscape nursery business with its container growing operations in Connecticut and northern Florida.

        The consideration received by Imperial on the sale of the SSCs included cash of approximately $18.4 million after expenses. Cash of $11.2 million from the sale was used to repay all of the amount outstanding under Griffin's Revolving Credit Agreement. The remaining cash was used for general corporate purposes. In addition to the cash payment, Griffin received 20,570 shares of common stock (representing approximately 13.8% of the outstanding common stock) of Shemin Acquisition Corporation ("Acquisition"), the parent company of Shemin. The common stock of Acquisition is valued at $6.1 million and is included in other assets on the accompanying balance sheet. As a result of Griffin retaining a common equity ownership interest in Acquisition, $1.5 million of the gain from the

23

sale of the SSCs has been deferred, and is offset against the investment in Acquisition on Griffin's balance sheet. Imperial accounts for its investment in Acquisition under the cost method of accounting for investments.

        The sale of the SSCs reflected the disposition of the following assets and liabilities by Imperial:

Accounts receivable	$	1,407
Inventories		4,453
Other current assets		1,037
Fixed assets, net		7,393
Other assets		161
		14,451
Accounts payable and accrued liabilities		(719	)
Capital leases		(271	)
Net assets disposed	$	13,461

        The following unaudited Pro Forma Condensed Consolidated Statement of Operations for the fiscal years ended December 1, 2001 and December 2, 2000 include pro forma adjustments to reflect the sale of the SSCs as if it had taken place at the beginning of the respective fiscal periods. Such adjustments include the elimination of sales, cost of sales and direct operating expenses of the SSCs, the elimination of salaries and benefits of employees terminated as a result of the sale of the SSCs, the inclusion of sales from Imperial's growing operations to the SSCs acquired by Shemin, the effect of the net cash proceeds on Griffin's interest expense and interest income, and adjustment to Griffin's income tax provision.

        In the opinion of management, all adjustments necessary to fairly present this pro forma information have been made. The pro forma information does not purport to be indicative of the results that would have been reported had this transaction actually occurred on the dates specified, nor is it indicative of Griffin's future results.

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Pro Forma Condensed Consolidated Statement of Operations (Unaudited)

	For the Fiscal Years Ended,
	Dec. 1, 2001			Dec. 2, 2000 (As Restated) (Note 9)
Net sales and other revenue	$	30,130		$	28,841
Cost of goods sold		23,517			21,566
Selling, general and administrative expenses		8,931			9,052
Operating loss		(2,318	)		(1,777	)
Gain on sale of Sales and Service Centers		9,469			9,469
Write-down of investment		(2,225	)		—
Nonoperating expenses, net		(624	)		(175	)
Income before income tax provision		4,302			7,517
Income tax provision		2,198			2,950
Income before equity investment		2,104			4,567
Income (loss) from equity investment		(353	)		592
Net income	$	1,751		$	5,159
Basic net income per share	$	0.36		$	1.06
Diluted net income per share	$	0.35		$	1.04

3.    Industry Segment Information

        Griffin's reportable segments are defined by their products and services, and are comprised of the landscape nursery and real estate segments. Management operates and receives reporting based upon these segments. Griffin has no operations outside the United States. Griffin's export sales and transactions between segments are not material.

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	For the Fiscal Years Ended,
	Dec. 1, 2001			Dec. 2, 2000			Nov. 27, 1999
Net sales and other revenue
Landscape nursery product sales	$	23,610		$	68,563		$	59,624
Real estate sales and rental revenue		8,403			5,811			5,374
	$	32,013		$	74,374		$	64,998
Operating profit (loss)
Landscape nursery	$	(2,741	)	$	5,303		$	3,938
Real estate		1,046			151			798
Industry segment totals		(1,695	)		5,454			4,736
General corporate expense		(1,487	)		(1,642	)		(1,606	)
Gain on sale of Sales and Service Centers		9,469			—			—
Write-down of investment		(2,225	)		—			—
Interest expense, net		(784	)		(1,098	)		(545	)
Income before income tax provision	$	3,278		$	2,714		$	2,585

	Dec. 1, 2001		Dec. 2, 2000 (As Restated) (Note 9)		Nov. 27, 1999
Identifiable assets
Landscape nursery	$	48,908	$	56,336	$	52,564
Real estate		55,746		46,814		38,248
Industry segment totals		104,654		103,150		90,812
General corporate (consists primarily of investments)		19,521		24,134		22,073
	$	124,175	$	127,284	$	112,885

	Capital Expenditures						Depreciation and Amortization
	For the Fiscal Years Ended,						For the Fiscal Years Ended,
	Dec. 1, 2001		Dec. 2, 2000		Nov. 27, 1999		Dec. 1, 2001		Dec. 2, 2000		Nov. 27, 1999
Landscape nursery	$	2,815	$	3,618	$	2,795	$	1,267	$	1,463	$	1,268
Real estate		10,322		9,205		3,443		1,613		1,056		920
Industry segment totals		13,137		12,823		6,238		2,880		2,519		2,188
General corporate		—		—		—		39		14		16
	$	13,137	$	12,823	$	6,238	$	2,919	$	2,533	$	2,204

        See Note 2 regarding the sale of the SSCs, and Note 9 for information on Griffin's equity investment in Centaur. As stated in Note 1, landscape nursery net sales for fiscal years 2000 and 1999 were reclassified in connection with the adoption of EITF 00-10.

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4.    Income Taxes

        Griffin's income tax provisions and deferred tax assets and liabilities in the accompanying financial statements have been calculated in accordance with SFAS No. 109 "Accounting for Income Taxes." The income tax provisions for fiscal 2001, fiscal 2000 and fiscal 1999 are summarized as follows:

	For the Fiscal Years Ended,
	Dec. 1, 2001			Dec. 2, 2000		Nov. 27, 1999
Current federal	$	1,525		$	8	$	76
Current state and local		356			110		76
Deferred		(93	)		926		810
Total income tax provision	$	1,788		$	1,044	$	962

        The reasons for the difference between the United States statutory income tax rate and the effective rates are shown in the following table:

	For the Fiscal Years Ended,
	Dec. 1, 2001			Dec. 2, 2000			Nov. 27, 1999
Tax provision at statutory rates	$	1,115		$	923		$	879
State and local taxes		427			187			141
Basis difference on investment		343			—			—
Other		(97	)		(66	)		(58	)
Total income tax provision	$	1,788		$	1,044		$	962

        The significant components of Griffin's deferred tax asset and liability are as follows:

	Dec. 1, 2001		Dec. 2, 2000
Inventory	$	1,212	$	1,398
NOL carryover		99		876
Other		477		693
Deferred tax asset	$	1,788	$	2,967

	Dec. 1, 2001			Dec. 2, 2000
Depreciation	$	2,076		$	2,361
Deferred gain on sale of SSCs		(551	)		—
Write-down on investment		(413	)		—
Other		345			368
Deferred tax liability	$	1,457		$	2,729

        In 1997, Griffin entered into a Tax Sharing Agreement with its parent company at that time, Culbro Corporation ("Culbro"), which provided, among other things, for the allocation between Culbro

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and Griffin of federal, state, local and foreign tax liabilities for all periods that Griffin was a wholly-owned subsidiary of Culbro. With respect to the consolidated tax returns filed by Culbro, the Tax Sharing Agreement provides that Griffin will be liable for any amounts that it would have been required to pay with respect to any deficiencies assessed through the date that the common stock of Griffin was distributed to Culbro shareholders, generally as if Griffin had filed separate tax returns.

5.    Long-Term Debt

        Long-term debt includes:

	Dec. 1, 2001		Dec. 2, 2000
Mortgages	$	14,779	$	8,590
Credit Agreement		—		7,300
Bridge Loan		1,000		—
Capital leases		669		812
Total		16,448		16,702
Less: due within one year		508		7,694
Total long-term debt	$	15,940	$	9,008

        On March 12, 2001, Griffin entered into a nonrecourse mortgage of $6.4 million on a building recently constructed by Griffin Land. The mortgage has an interest rate of 8.125% and a term of fifteen years with payments based on a twenty year amortization period. The annual principal payment requirements under the terms of all of Griffin's mortgages for the years 2002 through 2006 are $277, $301, $326, $684 and $716, respectively. The book value of buildings under the mortgages was $16.3 million at December 1, 2001.

        A portion of the cash received from the sale of the SSCs was used to repay all of the amount then outstanding ($11.2 million) under the Griffin Credit Agreement (the "1999 Credit Agreement") with Fleet National Bank ("Fleet"), which terminated on May 31, 2001. The amount outstanding under the 1999 Credit Agreement was classified as due within one year at December 2, 2000.

        On October 23, 2001, Griffin entered into a short-term bridge loan (the "Bridge Loan") with Fleet. The Bridge Loan provided financing until the 2002 Credit Agreement (see below) was completed and was terminated upon completion of the 2002 Credit Agreement. On February 8, 2002, Griffin entered into a $19.4 million revolving credit agreement (the "2002 Credit Agreement") with Fleet. The initial borrowings under the 2002 Credit Agreement were used to repay the $4.5 million then outstanding under the Bridge Loan (see below), repay a mortgage of $0.4 million on one of Griffin's commercial buildings and pay certain expenses related to the 2002 Credit Agreement. The 2002 Credit Agreement has a three year term and will be used to finance working capital at Griffin's landscape nursery and real estate businesses and for investment in Griffin's real estate assets. Borrowings under the 2002 Credit Agreement may be, at Griffin's option, on an overnight basis or for periods of one, two, three or six months. Overnight borrowings bear interest at Fleet's prime rate plus a margin of 0.5% per annum. Borrowings of one month and longer bear interest at the London Interbank Offered Rate ("LIBOR") plus a margin of 2.5% per annum. The margins can be reduced if Griffin achieves

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certain debt service coverage ratios (as defined). There are no compensating balance requirements, and Griffin pays a commitment fee of 0.25% per annum on unused borrowing capacity. The 2002 Credit Agreement is collateralized by certain of Griffin's real estate assets and includes financial covenants with respect to Griffin's fixed charge coverage (as defined), net worth and leverage. The Bridge Loan is classified as long-term on Griffin's balance sheet due to refinancing borrowings under the Bridge Loan with the 2002 Credit Agreement.

        At December 1, 2001, the fair value of Griffin's mortgages was $15.8 million. At December 2, 2000, the amounts included on Griffin's balance sheet for mortgages reflected their fair value. Fair value was based on the present value of future cash flows discounted at estimated borrowing rates for comparable risks, maturities and collateral. Management believes that because of their variable interest rates, the amounts included on Griffin's balance sheet at December 1, 2001 and December 2, 2000 for the Bridge Loan and the 1999 Credit Agreement reflect their fair values.

        Future minimum lease payments under capital leases for transportation equipment and the present value of such payments as of December 1, 2001 were:

2002	$	279
2003		226
2004		160
2005		77
2006		12
Total minimum lease payments		754
Less: amounts representing interest		85
Present value of minimum lease payments (a)	$	669

(a)

Includes current portion of $231 at December 1, 2001.

        At December 1, 2001 and December 2, 2000, machinery and equipment included capital leases amounting to $411 and $812, respectively, which is net of accumulated amortization of $883 and $2,110, respectively, at December 1, 2001 and December 2, 2000. Amortization expense relating to capital leases in fiscal 2001, fiscal 2000 and fiscal 1999 was $204, $295 and $250, respectively.

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6.    Retirement Benefits

Savings Plan

        Griffin maintains the Griffin Land & Nurseries, Inc. 401 (k) Savings Plan (the "Griffin Savings Plan") for its employees, a defined contribution plan whereby Griffin matches 60% of each employee's contribution, up to a maximum of 5% of base salary. Griffin's contributions to the Griffin Savings Plan in fiscal 2001, fiscal 2000 and fiscal 1999 were $156, $251 and $236, respectively.

Deferred Compensation Plan

        In fiscal 1999, Griffin adopted a non-qualified deferred compensation plan (the "Deferred Compensation Plan") for selected employees who, due to Internal Revenue Service guidelines, cannot take full advantage of the Griffin Savings Plan. Contributions to the Deferred Compensation Plan started in fiscal 2000. At December 1, 2001 and December 2, 2000, Griffin's liability under the Deferred Compensation Plan was $189 and $102, respectively. The expense for Griffin's matching contributions to the Deferred Compensation Plan in fiscal 2001 and fiscal 2000 was $27 and $19, respectively. The Deferred Compensation Plan is unfunded, with benefits to be paid from Griffin's general assets.

Postretirement Benefits

        Griffin maintains a postretirement benefits program which provides principally health and life insurance benefits to certain of its employees. The liability for postretirement benefits is included in other noncurrent liabilities on the consolidated balance sheet. Because Griffin's obligation for retiree medical benefits is fixed under the terms of Griffin's postretirement benefits program, any increase in the medical cost trend would have no effect on the accumulated postretirement benefit obligation, service cost or interest cost. The components of Griffin's postretirement benefits expense is as follows:

	For the Fiscal Years Ended,
	Dec. 1, 2001		Dec. 2, 2000		Nov. 27, 1999
Service cost	$	24	$	21	$	23
Interest		32		29		28
Total expense	$	56	$	50	$	51

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        Griffin's liability for postretirement benefits, as determined by the Plan's actuaries, is shown below. None of these liabilities have been funded December 1, 2001 and December 2, 2000.

	Dec. 1, 2001			Dec. 2, 2000
Retirees	$	36		$	—
Fully eligible active participants		85			104
Other active participants		433			317
Unrecognized net (loss) gain from experience differences and assumption changes		(77	)		4
Liability for postretirement benefits	$	477		$	425

        Discount rates of 7.0% and 7.75% were used to compute the accumulated postretirement benefit obligations at December 1, 2001 and December 2, 2000, respectively.

7.    Stockholders' Equity

Per Share Results

        Basic and diluted per share results were based on the following:

	For the Fiscal Years Ended,
	Dec. 1, 2001			Dec. 2, 2000 (As Restated) (Note 9)			Nov. 27, 1999
Net income as reported for computation of basic per share results	$	1,137		$	2,262		$	2,176
Adjustment to net income for assumed exercise of options of equity investee (Centaur)		(23	)		(41	)		(104	)
Adjusted net income for computation of diluted per share results	$	1,114		$	2,221		$	2,072

	For the Fiscal Years Ended,
	Dec. 1, 2001	Dec. 2, 2000	Nov. 27, 1999
Weighted average shares outstanding for computation of basic per share results	4,863,000	4,863,000	4,847,000
Incremental shares from assumed exercise of Griffin stock options	114,000	67,000	77,000
Adjusted weighted average shares for computation of diluted per share results	4,977,000	4,930,000	4,924,000

Griffin Stock Option Plan

        The Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan"), adopted in 1997 and subsequently amended, makes available a total of 1,250,000 options to purchase shares of Griffin common stock. Options granted under the Griffin Stock Option Plan may be either

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incentive stock options or non-qualified stock options issued at market value on the date approved by the Board of Directors of Griffin. None of the options outstanding at December 1, 2001 may be exercised as stock appreciation rights.

        The Griffin Stock Option Plan is administered by the Compensation Committee of the Board of Directors of Griffin. A summary of the activity under the Griffin Stock Option Plan is as follows:

	Number of Shares		Weighted Avg. Exercise Price
Outstanding at November 28, 1998	369,607		$	10.66
Options granted by Griffin in 1999	252,100			13.25
Exercised in 1999	(20,000	)		0.92
Outstanding at November 27, 1999	601,707			12.16
Options granted by Griffin in 2000	27,000			11.34
Cancelled in 2000	(900	)		13.25
Outstanding at December 2, 2000	627,807			12.12
Options granted by Griffin in 2001	55,300			14.29
Cancelled in 2001	(53,800	)		13.97
Outstanding at December 1, 2001	629,307		$	12.18
Number of option holders at December 1, 2001	28

Range of Exercise Prices	Outstanding at Dec. 1, 2001	Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (in years)
Under $3.00	34,435	$	1.75	2.4
$3.00-$9.00	100,172		7.52	4.2
Over $9.00	494,700		13.85	6.8
	629,307

        Of the options issued in fiscal 2001, 40,300 vest in equal installments on the third, fourth and fifth anniversaries from the date of grant and 15,000 vest on the second anniversary from the date of grant. Of the options issued in fiscal 2000, 20,000 options vest in equal installments on the third, fourth and fifth anniversaires from the date of grant, 4,000 options vest on the second anniversary from the date of grant and 3,000 were vested on the date of grant. Of the options granted by Griffin in fiscal 1999, 248,100 options vest in equal installments on the third, fourth and fifth anniversaries from the date of grant and 4,000 options vest on the second anniversary from the date of grant. At December 1, 2001, 276,605 options outstanding under the Griffin Stock Option Plan were exerciseable with a weighted average price of $10.44 per share.

Stock-Based Compensation

        Griffin accounts for stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and has adopted the disclosure provisions of SFAS No. 123 which

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require disclosing the pro forma effect on earnings and earnings per share of the fair value method of accounting for stock-based compensation. Griffin's results would have been the following pro forma amounts under the method prescribed by SFAS No. 123.

	For the Fiscal Years Ended,
	Dec. 1, 2001		Dec. 2, 2000 (As Restated) (Note 9)		Nov. 27, 1999
Net income, as reported	$	1,137	$	2,262	$	2,176
Net income, pro forma (under SFAS No. 123)	$	780	$	1,874	$	1,831
Basic net income per common share, as reported	$	0.23	$	0.47	$	0.45
Basic net income per common share, pro forma (under SFAS No. 123)	$	0.16	$	0.39	$	0.38
Diluted net income per common share, as reported	$	0.22	$	0.45	$	0.42
Diluted net income per common share, pro forma (under SFAS No. 123)	$	0.15	$	0.37	$	0.35

        The weighted average fair value of each option granted during fiscal 2001, fiscal 2000 and fiscal 1999, were $4.82, $5.20 and $5.17, respectively, estimated as of the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used in the model to calculate the fair value of each option; expected volatility of approximately 35% in all years; risk free interest rates in fiscal 2001, fiscal 2000 and fiscal 1999 of 2.00%, 5.15% and 4.91%, respectively; expected option term of 5 years and no dividend yield for all options issued.

8.    Operating Leases

        Future minimum rental payments for the next five years under noncancelable leases as of December 1, 2001 were:

2002	$	138
2003		98
2004		10
2005		5
2006		2
Total minimum lease payments	$	253

        Total rental expense for all operating leases in fiscal 2001, fiscal 2000 and fiscal 1999 was $182, $408 and $518, respectively.

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        As lessor, Griffin Land's real estate activities include the leasing of office and industrial space in Connecticut. Future minimum rentals to be received under noncancelable leases as of December 1, 2001 were:

2002	$	5,924
2003		5,622
2004		4,855
2005		4,298
2006		3,010
Later years		15,212
Total minimum rental revenue	$	38,921

        Total rental revenue from all leases in fiscal 2001, fiscal 2000 and fiscal 1999 was $5,402, $3,629 and $3,247, respectively.

9.    Investments

Investment in Centaur

        Griffin holds approximately 5.4 million shares of the 15.3 million shares of Centaur common stock outstanding, or approximately 35%. Griffin's equity results from Centaur for each of the three fiscal years ended December 1, 2001, reflect Centaur's results for the twelve month periods ended November 30, 2001, November 30, 2000 and November 30, 1999, respectively. Griffin's equity share of the results of Centaur for fiscal year 2000 have been restated to reflect the inclusion of Centaur's results for the twelve month period ended November 30, 2000 rather than the ten month period ended September 30, 2000. The effect of this was to increase both income from equity investment and net income by $628. Griffin's equity income (loss) from Centaur for each of the three fiscal years ended December 1, 2001 includes $575 for amortization of the excess of the cost of Griffin's investment over the book value of its equity in Centaur (representing publishing rights and goodwill). The following table reflects Centaur's results for the twelve month periods ended November 30, 2001, November 30, 2000 and November 30, 1999.

	Twelve Months Ended,
	Nov. 30, 2001		Nov. 30, 2000		Nov. 30, 1999
Net sales	$	101,723	$	109,450	$	95,911
Costs and expenses		96,751		101,920		87,925
Operating profit		4,972		7,530		7,986
Nonoperating expense, principally interest		1,945		2,389		2,638
Pretax income		3,027		5,141		5,348
Income taxes		2,097		2,025		2,141
Net income	$	930	$	3,116	$	3,207

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	Nov. 30, 2001			Nov. 30, 2000
Current assets	$	23,701		$	32,753
Intangible assets		19,157			21,066
Other noncurrent assets		11,691			10,800
Total assets	$	54,549		$	64,619
Current liabilities	$	31,594		$	31,328
Debt		20,803			31,820
Noncurrent liabilities		3,135			3,372
Total liabilities		55,532			66,520
Accumulated deficit		(983	)		(1,901	)
Total liabilities and accumulated deficit	$	54,549		$	64,619

Investment in Linguaphone Group, plc

        In the year ended December 1, 2001, Griffin incurred an impairment charge of $2.2 million related to its investment in Linguaphone based upon Linguaphone's recent financial results and a contemplated offering of Linguaphone common stock that reflects a substantially lower value of Linguaphone's common stock. As a result of this charge, Griffin's investment in Linguaphone was reduced from $2.3 million to less than $0.1 million, which is included in other assets on Griffin's balance sheet.

Real Estate Joint Ventures

        Included in other assets at December 1, 2001 and December 2, 2000 is $3,302 and $3,285, respectively, for Griffin's 30% interest in a real estate joint venture that owns commercial properties in Connecticut. Results of this investment are included in operating profit.

10.    Supplemental Financial Statement Information

Related Party Transactions

        Prior to the July 3, 1997 distribution of the common stock of Griffin to Culbro stockholders (the "Distribution"), Griffin was a wholly-owned subsidiary of Culbro. Prior to the Distribution, Griffin, as lessor, and General Cigar Co., Inc. ("General Cigar"), as lessee, entered into a lease for certain agricultural land in Connecticut and Massachusetts (the "Agricultural Lease"). At the time the Agricultural Lease was consummated, both Griffin and General Cigar were wholly-owned subsidiaries of Culbro. The Agricultural Lease is for approximately 500 acres of arable land held by Griffin for possible development in the long term, but which is being used by General Cigar for growing Connecticut Shade wrapper tobacco. General Cigar's use of the land is limited to the cultivation of cigar wrapper tobacco. The Agricultural Lease has an initial term of ten years and provides for the extension of the lease for additional periods thereafter. In addition, at Griffin's option, the Agricultural Lease may be terminated with respect to 100 acres of such land annually upon one year's prior notice. The rent payable by General Cigar under the Agricultural Lease is approximately equal to the aggregate amount of all taxes and other assessments payable by Griffin attributable to the land leased. In fiscal 2001, fiscal 2000 and fiscal 1999 General Cigar made rental payments of $144, $148 and $108, respectively, to Griffin with respect to the Agricultural Lease.

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        Also prior to the Distribution in 1997, Griffin entered into a Services Agreement (the "Services Agreement") with Culbro, and its successor, General Cigar Holdings, Inc. ("GC Holdings"). The Services Agreement was terminated with respect to all services provided by GC Holdings after one year, except for certain transportation services, with respect to which the Services Agreement was amended and extended through March 2002. In fiscal 2001, fiscal 2000 and fiscal 1999 Griffin paid $109, $141 and $150, respectively, to GC Holdings under the Services Agreement. As of December 1, 2001 and December 2, 2000 amounts due GC Holdings from Griffin with respect to the Services Agreement were $110 and $119, respectively.

        In 1997 subsequent to the Distribution, Griffin, as lessor, and General Cigar, as lessee, entered into a lease for approximately 40,000 square feet of office space in the Griffin Center South office complex in Bloomfield, Connecticut (the "Commercial Lease"). The Commercial Lease has an initial term of ten years and provides for the extension of the lease for additional annual periods thereafter. Under the Commercial Lease, General Cigar made rental payments to Griffin in fiscal 2001, fiscal 2000 and fiscal 1999 of $571, $511 and $464, respectively. Management believes the rent payable by General Cigar to Griffin under the Commercial Lease approximates market rates.

Comprehensive Income

        The statement of stockholders' equity for the years ended December 1, 2001 and December 2, 2000 includes other comprehensive income of $61 and $186, respectively, relating to the effect of translation adjustments on Griffin's equity investment in Centaur.

Inventories

        Inventories consist of:

	Dec. 1, 2001		Dec. 2, 2000
Nursery stock	$	29,514	$	29,488
Finished goods		—		1,574
Materials and supplies		935		807
	$	30,449	$	31,869

        Although all inventories are classified as a current asset based upon industry practice (see Note 1), approximately $15.0 million of the inventory at December 1, 2001 is not expected to be sold within twelve months of the balance sheet date.

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Property and Equipment

        Property and equipment consist of:

	Estimated Useful Lives	Dec. 1, 2001			Dec. 2, 2000
Land and improvements		$	4,175		$	7,904
Buildings	10 to 40 years		2,960			5,145
Machinery and equipment	3 to 20 years		15,093			16,985
			22,228			30,034
Accumulated depreciation			(10,810	)		(12,965	)
		$	11,418		$	17,069

        Total depreciation expense related to property and equipment in fiscal 2001, fiscal 2000 and fiscal 1999 was $1,367, $1,526 and $1,323, respectively.

Real Estate Held for Sale or Lease

        Real estate held for sale or lease consists of:

		December 1, 2001
	Estimated Useful Lives	Held for Sale		Held for Lease			Total
Land		$	1,342	$	3,097		$	4,439
Land improvements	15 years		—		3,948			3,948
Buildings	40 years		—		40,613			40,613
Development costs			5,991		4,744			10,735
			7,333		52,402			59,735
Accumulated depreciation			—		(10,493	)		(10,493	)
		$	7,333	$	41,909		$	49,242

		December 2, 2000
	Estimated Useful Lives	Held for Sale		Held for Lease			Total
Land		$	1,589	$	3,097		$	4,686
Land improvements	15 years		—		3,753			3,753
Buildings	40 years		—		30,919			30,919
Development costs			6,164		4,917			11,081
			7,753		42,686			50,439
Accumulated depreciation			—		(9,218	)		(9,218	)
		$	7,753	$	33,468		$	41,221

        Griffin capitalized interest in fiscal 2001, fiscal 2000 and fiscal 1999 of $377, $91 and $103, respectively. Total depreciation expense related to real estate held for sale or lease in fiscal 2001, fiscal 2000 and fiscal 1999 was $1,494, $937 and $869, respectively.

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Accounts Payable and Accrued Expenses

        Accounts payable and accrued expenses consist of:

	Dec. 1, 2001		Dec. 2, 2000
Trade payables	$	2,165	$	3,463
Retainage		659		352
Accrued construction costs		650		1,104
Accrued salaries, wages and other compensation		376		1,672
Other accrued liabilities		1,911		1,750
	$	5,761	$	8,341

Supplemental Cash Flow Information

        Griffin incurred capital lease obligations in fiscal 2001, fiscal 2000 and fiscal 1999 of $412, $576 and $239, respectively.

        In fiscal 2001 and fiscal 2000, Griffin made income tax payments of $2,272 and $141, respectively. In fiscal 1999 Griffin received an income tax refund, net of income tax payments, of $654. Interest payments, net of capitalized interest, were $988, $1,086 and $626 in fiscal 2001, fiscal 2000 and fiscal 1999, respectively.

11.    Quarterly Results of Operations (Unaudited)

        Summarized quarterly financial data are presented below:

2001 Quarters (a)	1st		2nd		3rd			4th(b)			Total
Net sales and other revenue	$	3,947	$	16,808	$	6,453		$	4,805		$	32,013
Gross profit		1,021		3,503		1,558			983			7,065
Net income (loss)		4,069		719		(1,289	)		(2,362	)		1,137
Basic net income (loss) per share		0.84		0.15		(0.27	)		(0.49	)		0.23
Diluted net income (loss) per share (c)		0.82		0.14		(0.27	)		(0.49	)		0.22

2000 Quarters (a)	1st			2nd		3rd		4th		Total
Net sales and other revenue	$	5,550		$	33,535	$	17,365	$	17,924	$	74,374
Gross profit		1,792			9,590		5,248		5,569		22,199
Net income (loss)		(1,704	)		3,217		217		532		2,262
Basic net income (loss) per share (c)		(0.35	)		0.66		0.04		0.11		0.47
Diluted net income (loss) per share		(0.35	)		0.65		0.04		0.11		0.45

(a)

Results for first, second and third quarters of fiscal 2001 and the fourth quarter of fiscal 2000 have been restated to include Griffin's equity share of Centaur's results for the corresponding three-month periods. Results for the third quarter of fiscal 2000 have been restated to include the three months then ended rather than the one month ended June 30, 2000. The impact of the adjustment for the third quarter of 2000 was to decrease net income by $311, basic net income per share by $0.07 and diluted net income per share by $0.06. The impact of the adjustment for the fourth quarter of 2000 was to increase net income by $939 and basic and diluted net income per share by $0.19. The impact of the adjustment for the first quarter of 2001 was to decrease net

38

income by $297 and basic and diluted net income per share by $0.06. The impact of the adjustment for the second quarter of 2001 was to decrease net income by $33 with no change in basic and diluted net income per share. The impact of the adjustment for the third quarter of 2001 was to increase the net loss by $946, basic net loss per share by $0.20 and diluted net loss per share by $0.19.

(b)

The 2001 fourth quarter includes an impairment charge of $2.2 million to write-down Griffin's investment in Linguaphone.

(c)

Quarterly results do not agree with the total for the year due to rounding.

12.    Commitments and Contingencies

        Griffin is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters will not be material to Griffin's financial position, results of operations of cash flows.

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Report of Independent Accountants

To the Stockholders and Directors of
Griffin Land & Nurseries, Inc.

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Griffin Land & Nurseries, Inc. and its subsidiaries at December 1, 2001 and December 2, 2000, and the results of their operations and their cash flows for the fiscal years ended December 1, 2001, December 2, 2000 and November 27, 1999, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the management of Griffin Land & Nurseries, Inc.; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these consolidated financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 9 to the consolidated financial statements, the Company's equity share of the results of Centaur Communications, Ltd. for fiscal year 2000 have been restated to reflect the inclusion of Centaur's results for the twelve month period ended December 2, 2000.

/s/  PRICEWATERHOUSECOOPERS LLP

February 22, 2002
Hartford, Connecticut

Consent of Independent Accountants

        We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-30639) of Griffin Land & Nurseries, Inc. of our report dated February 22, 2002 which appears above in this Form 10-K of Griffin Land & Nurseries, Inc. for the fiscal year ended December 1, 2001. We also consent to the incorporation by reference in such Registration Statement on Form S-8 of our report on the financial statement schedules, which appears in Exhibit 23.2 of this Form 10-K of Griffin Land & Nurseries, Inc. for the fiscal year ended December 1, 2001.

/s/  PRICEWATERHOUSECOOPERS LLP

February 22, 2002
Hartford, Connecticut

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ITEM 9.    DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION

        The following table sets forth the information called for in this Item 10:

Name	Age	Position
Edgar M. Cullman	84	Chairman of the Board and Director
Frederick M. Danziger	61	President, Chief Executive Officer and Director
Anthony J. Galici	44	Vice President, Chief Financial Officer and Secretary
John L. Ernst	61	Director
Winston J. Churchill, Jr.	61	Director
Thomas C. Israel	57	Director
David F. Stein	61	Director
Gregory M. Schaan	44	President and Chief Executive Officer of Imperial Nurseries, Inc.

        Edgar M. Cullman has been the Chairman of the Board of Griffin since April 1997. He has been Chairman of the Board of General Cigar Holdings, Inc., since December 1996. From 1962 to 1996 he served as Chief Executive Officer of Culbro Corporation. Mr. Cullman served as a Director of Culbro Corporation from 1961 until 1997 and was Chairman of Culbro Corporation from 1975 until 1997. He also is a Director of Centaur Communications, Ltd., and Bloomingdale Properties, Inc. Edgar M. Cullman is the uncle of John L. Ernst and the father-in-law of Frederick M. Danziger.

        Frederick M. Danziger has been a Director and the President and Chief Executive Officer of Griffin since April 1997, and was a Director of Culbro Corporation from 1975 until 1997. He was previously involved in the real estate operations of Griffin in the early 1980's. Mr. Danziger was Of Counsel to the law firm of Latham & Watkins from 1995 until 1997. From 1974 until 1995, Mr. Danziger was a Member of the law firm of Mudge Rose Guthrie Alexander & Ferdon. Mr. Danziger also is a Director of Monro Muffler/Brake, Inc., Bloomingdale Properties, Inc. and Centaur Communications, Ltd.

        Anthony J. Galici has been the Vice President, Chief Financial Officer and Secretary of Griffin since April 1997. Mr. Galici was Vice President and Assistant Controller of Culbro Corporation from 1995 until 1997. Prior to 1995, he was Assistant Controller of Culbro Corporation.

        John L. Ernst has been a Director of Griffin since April 1997. Mr. Ernst also was a Director of Culbro Corporation from 1983 until 1997 and a Director of General Cigar Holdings, Inc. from December 1996 through May 2000. He is the Chairman of the Board and President of Bloomingdale Properties, Inc., an investment and real estate company. Mr. Ernst also is a Director of the Doral Financial Corporation.

        Winston J. Churchill, Jr. has been a Director of Griffin since April 1997. Mr. Churchill, Jr. is also a member of the board of Amkor Technology, Inc. and Innovative Solutions and Support, Inc. He is a managing general partner of SCP Private Equity Partners, L.P., a private equity fund sponsored by Safeguard Scientifics Inc., and is Chairman of Churchill Investment Partners, Inc. and CIP Capital, Inc.

41

        Thomas C. Israel has been a Director of Griffin since July 2000. Mr. Israel was a Director of Culbro Corporation from 1989 until 1997 and a Director of General Cigar Holdings, Inc. from December 1996 through May 2000. Mr. Israel is Chairman of A.C. Israel Enterprises, Inc., an investment company.

        David F. Stein has been a Director of Griffin since November 1997. Mr. Stein is Vice Chairman of J&W Seligman & Co., Inc., an asset management firm. He has been Vice Chairman since 1996. Mr. Stein was Managing Director of J&W Seligman & Co., Inc., from 1990 until 1996.

        Gregory M. Schaan has been the President and Chief Executive Officer of Imperial Nurseries, Inc. ("Imperial") since October 1999. From 1997 until 1999 he was Senior Vice President of Sales and Marketing of Imperial. From 1992 until 1997 he was Vice President of Sales and Marketing of Imperial.

ITEM 11.    EXECUTIVE COMPENSATION

        The following table sets forth the annual and long-term compensation for Mr. Danziger, Griffin's President and Chief Executive Officer and Mr. Galici, Griffin's Vice President, Chief Financial Officer and Secretary (the "Named Executive Officers"), as well as the total compensation paid by Griffin during 2001, 2000 and 1999 to the Named Executive Officers.

Summary Compensation Table

						Long Term Compensation Awards
	Annual Compensation
Name and Principal Position						Other Annual Compensation(1)		Securities Underlying Options
	Year	Salary		Bonus
Frederick M. Danziger President and Chief Executive Officer	2001 2000 1999	$	398,086 386,538 345,205	$	261,000 111,000 93,650	$	12,312 12,138 3,178	— — 150,000
Anthony J. Galici Vice President, Chief Financial Officer and Secretary	2001 2000 1999	$	188,846 180,577 171,726	$	123,000 48,000 33,800	$	14,199 5,923 4,117	7,500 10,000 15,000

(1)

Amounts shown under Other Annual Compensation include matching contributions made by Griffin under its 401(k) Savings Plan and its Deferred Compensation Plan, and other miscellaneous cash benefits, but do not include funding for or receipt of retirement plan benefits. No Executive Officer who would otherwise have been includable in such table resigned or terminated employment during 2001, 2000 and 1999.

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        There were no stock options exercised by the Named Executive Officers in 2001, 2000 and 1999. The following table presents the value of unexercised options held by the Named Executive Officers at December 1, 2001.

	Number of Securities Underlying Options Held at Fiscal Year End		Value of Unexercised In-the-Money Options at Fiscal Year End(1)
Name
	Exercisable	Unexercisable	Exercisable		Unexercisable
Frederick M. Danziger	100,000	200,000	$	—	$	—
Anthony J. Galici	17,641	37,500		79,610		13,310

(1)

The amounts presented in this column have been calculated based upon the difference between the fair market value of $12.55 per share (the average of the high and low prices of Griffin's Common Stock on November 30, 2001) and the exercise price of each stock option.

Compensation of Directors

        Members of the Board of Directors who are not employees of Griffin receive $15,000 per year and $750 for each Board and Committee meeting attended. The 1997 Stock Option Plan, as amended, provides that non-employee Directors who are not members of the Cullman & Ernst Group receive annually options exercisable for 5,000 shares of Common Stock at an exercise price that is the market price at the time of grant. In 2001 Griffin granted Mr. Churchill, Jr., Mr. Stein, and Mr. Israel each options exercisable for 5,000 shares of Common Stock, and expects to grant additional options to Messrs. Churchill, Jr., Israel and Stein in 2002 consistent with the 1997 Stock Option Plan, as amended.

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires Griffin's officers and directors, and persons who own more than ten percent of its Common Stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Such persons are required by regulation to furnish Griffin with copies of all Section 16(a) forms they file. Certain officers and directors of Griffin have not timely filed reports on Form 4 or Form 5 with respect to stock options granted in the ordinary course and consistent with past practice under Griffin's 1997 Stock Plan, as amended. The stock option ownership of the officers is disclosed in the stock option table set forth above and the description of stock option grants to directors is disclosed under the heading "Compensation of Directors."

Compensation Committee Interlocks and Insider Participation

        Messrs. Cullman, Danziger, and Ernst are members of the Board of Directors of Bloomingdale Properties, of which Mr. Ernst is Chairman and President and other members of the Cullman & Ernst Group are associated. Mr. Danziger also serves as trustee of the retirement plan for Bloomingdale Properties.

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ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table lists the number of shares and options to purchase shares of Common Stock of Griffin beneficially owned or held by (i) each person known by Griffin to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) the nominees for election as directors (who are all current directors), (iii) the Named Executive Officers (as defined in Item 11) and (iv) all directors and officers of Griffin, collectively. Unless otherwise indicated, information is provided as of December 1, 2001.

Name and Address(1)	Shares Beneficially Owned(2)	Percent of Total
Edgar M. Cullman (3)	977,342	19.0
Edgar M. Cullman, Jr. (3)	946,038	18.4
Louise B. Cullman (3)	846,775	16.5
Susan R. Cullman (3)	758,607	14.8
Frederick M. Danziger (3)	376,320	7.3
Lucy C. Danziger (3)	1,043,992	20.3
John L. Ernst (3)	421,250	8.2
Winston J. Churchill, Jr.	67,000	1.3
Thomas C. Israel	15,000	*
David F. Stein	42,000	*
Anthony J. Galici	23,913	*
B. Bros. Realty Limited Partnership (4)	233,792	4.6
Gabelli Funds, Inc. et al (5)	1,453,030	28.3
All directors and officers collectively, consisting of 7 persons (6)	1,907,825	37.1

*

Less than 1%

(1)

Unless otherwise indicated, the address of each person named in the table is 641 Lexington Avenue, New York, New York 10022.

(2)

This information reflects the definition of beneficial ownership adopted by the Securities and Exchange Commission (the "Commission"). Beneficial ownership reflects sole investment and voting power, except as reflected in footnote 3. Where more than one person shares investment and voting power in the same shares, such shares may be shown more than once. Such shares are reflected only once, however, in the total for all directors and officers. Includes options exercisable within 60 days granted to Directors pursuant to the 1997 Stock Option Plan. Excluded are shares held by charitable foundations and trusts of which members of the Cullman and Ernst families, including persons referred to in this footnote 2, are officers and directors. As of December 1, 2001, a group (the "Cullman and Ernst Group") consisting of Messrs. Cullman, direct members of their families and trusts for their benefit; Mr. Ernst, his sister and direct members of their families and trusts for their benefit; a partnership in which members of the Cullman and Ernst families hold substantial direct and indirect interests; and charitable foundations and trusts of which members of the Cullman and Ernst families are directors or trustees, owned an aggregate of approximately 2,327,295 shares of Common Stock (approximately 47.86% of the outstanding shares of Common Stock). Among others, Edgar M. Cullman, Edgar M. Cullman, Jr., Mr. Ernst and Mr. Danziger (who is a member of the Cullman & Ernst Group) hold investment and voting power or shared investment and voting power over such shares. Certain of such shares are pledged as security for loans payable under standard pledge arrangements. A form filed with the Commission on behalf of the Cullman & Ernst Group states that there is no formal agreement governing the group's holding and voting of such shares but that there is an informal understanding that the persons and entities included in the group will hold and vote together with shares owned by each of them in

44

each case subject to any applicable fiduciary responsibilities. Louise B. Cullman is the wife of Edgar M. Cullman; Edgar M. Cullman, Jr., is the son of Edgar M. Cullman and Louise B. Cullman; Susan R. Cullman and Lucy C. Danziger are the daughters of Edgar M. Cullman and Louise B. Cullman; and Lucy C. Danziger is the wife of Frederick M. Danziger.

(3)

Included within the shares shown as beneficially owned by Edgar M. Cullman are 866,204 shares in which he holds shared investment and/or voting power; included within the shares shown as beneficially owned by John L. Ernst are 411,321 shares in which he holds shared investment and/or voting power; and included within the shares shown as beneficially owned by Frederick M. Danziger are 209,778 shares in which he holds shared investment and/or voting power. Included within the shares shown as beneficially owned by Edgar M. Cullman, Jr., are 716,918 shares in which he holds shared investment and/or voting power; included with the shares owned by Louise B. Cullman are 743,365 shares in which she holds shared investment and/or voting power; included within the shares shown as beneficially owned by Susan R. Cullman are 670,842 shares in which she holds shared investment and/or voting power; and included within the shares shown as beneficially owned by Lucy C. Danziger are 962,150 shares in which she holds shared investment and/or voting power. Excluded in each case are shares held by charitable foundations and trusts in which such persons or their families or trusts for their benefit are officers and directors. Messrs. Cullman, Danziger and Ernst disclaim beneficial interest in all shares over which there is shared investment and/or voting power and in all excluded shares.

(4)

The address of B. Bros. Realty Limited Partnership ("B. Bros.") is 641 Lexington Avenue, New York, New York 10022. Lucy C. Danziger and John L. Ernst are the general partners of B. Bros.

(5)

The address of such person is Gabelli Funds, Inc., One Corporate Center, Rye, New York 10580. A form filed with the Securities and Exchange Commission in July 1997 by Gabelli Funds, Inc. et al, as subsequently amended, indicates that the securities have been acquired by Gabelli Group Capital Partners, Inc., and certain of its direct and indirect subsidiaries on behalf of their investment advisory clients. Griffin has been informed that no individual client of Gabelli Group Capital Partners, Inc. et al, has ownership of more than 5% of Griffin's outstanding Common Stock.

(6)

Excluding shares held by certain charitable foundations, the officers and/or directors of which include certain officers and directors of Griffin.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        For the information of stockholders, attention is called to the following transactions between Griffin and other parties in which the persons mentioned below might have had a direct or indirect interest.

        Messrs. Cullman, Danziger and Ernst are members of the Board of Directors of Bloomingdale Properties, Inc. ("Bloomingdale Properties") of which Mr. Ernst is Chairman and President and other members of the Cullman & Ernst Group are associated. Real estate management and advisory services have been provided to Griffin by John Fletcher, an employee of Bloomingdale Properties, for which Mr. Fletcher receives compensation at a rate of approximately $50,000 per year.

        Edgar M. Cullman, the Chairman of Griffin, is also the Chairman of General Cigar Holdings, Inc. ("GC Holdings"), the successor to Culbro. In addition, certain members of the Cullman & Ernst Group who may be deemed to beneficially own more than five percent of Griffin's Common Stock (see Item 12) also may be deemed to beneficially own more than five percent of the Common Stock of GC Holdings. Prior to the distribution of the common stock of Griffin to Culbro stockholders in 1997 (the "Distribution"), Griffin, as lessor, and General Cigar Co., Inc. ("General Cigar"), a wholly-owned subsidiary of GC Holdings, as lessee, entered into a lease for certain agricultural land in Connecticut

45

and Massachusetts (the "Agricultural Lease"). The Agricultural Lease is for approximately 500 acres of arable land held by Griffin for possible development in the long term, but which is being used by General Cigar for growing Connecticut Shade wrapper tobacco. General Cigar's use of the land is limited to the cultivation of cigar wrapper tobacco. The Agricultural Lease has an initial term of ten years and provides for the extension of the lease for additional periods thereafter. In addition, at Griffin's option, the Agricultural Lease may be terminated with respect to 100 acres of such land annually upon one year's prior notice. In fiscal 2001, fiscal 2000 and fiscal 1999, General Cigar made rental payments of $144,000, $148,000 and $108,000, respectively, to Griffin with respect to the Agricultural Lease.

        Also in 1997, Griffin entered into a Services Agreement (the "Services Agreement") with Culbro. Pursuant to the Services Agreement, Culbro, and its successor GC Holdings, provided Griffin, for a period of one year after the Distribution, with certain administrative services, including internal audit, tax preparation, legal and transportation services. The Services Agreement was terminated with respect to all services provided by GC Holdings as of July 1998, except for certain transportation services, with respect to which the Services Agreement was amended and extended through March 2002. In fiscal 2001, fiscal 2000 and fiscal 1999, Griffin paid $109,000, $141,000 and $150,000, respectively, to GC Holdings under the Services Agreement.

        In late 1997, Griffin, as lessor, and General Cigar, as lessee, entered into a lease for approximately 40,000 square feet of office space in the Griffin Center South office complex in Bloomfield, Connecticut (the "Commercial Lease"). The Commercial Lease has an initital term of ten years and provides for the extension of the lease for additional annual periods thereafter. In fiscal 2001, fiscal 2000 and fiscal 1999 General Cigar made rental payments to Griffin of $571,000, $511,000 and $464,000, respectively, under the Commercial Lease. Management believes the rent payable by General Cigar to Griffin under the Commercial Lease is at market rates.

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PART IV

ITEM 14.    FINANCIAL STATEMENTS AND EXHIBITS

    (a)(1)  Financial Statements-see also Item 8

        (2)  Financial Statement Schedules and Financial Statements of Equity Investee

        The following financial statements of Griffin's equity investee and additional financial data should be read in conjunction with the financial statements in such 2001 Annual Report to Shareholders. Schedules not included with this additional financial data have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

SCHEDULES

II—Valuation and Qualifying Accounts and Reserves	S-1
III—Real Estate and Accumulated Depreciation	S-2/S-3

FINANCIAL STATEMENTS

Centaur Communications, Ltd. financial statements for the year ended June 30, 2001 F-1

(b)

There were no reports on Form 8-K filed by Griffin in the 2001 fourth quarter.



(c)

Exhibits

Exhibit No.	Description
2.1	Form of Distribution Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. And General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24,1996, as amended)
2.2	Asset Purchase Agreement among Shemin Nurseries, Inc., Shemin Acquisition Corporation and Imperial Nurseries, Inc. dated January 5, 2001 (incorporated by reference to the Form 8-K of Griffin Land & Nurseries, Inc. dated January 26, 2001 filed February 12, 2001)
3.1	Form of Amended and Restated Certificate of Incorporation of Griffin Land & Nurseries, Inc. (incorporated by reference to the Form 10 of Griffin Land & Nurseries, Inc., filed April 8, 1997, as amended)
3.2	Form of Bylaws of Griffin Land & Nurseries, Inc. (incorporated by reference to the Form 10 of Griffin Land & Nurseries, Inc., filed April 8, 1997, as amended)
10.1	Form of Tax Sharing Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.2	Form of Benefits and Employment Matters Allocation Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.3	Form of Services Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)

47

10.4	Form of Agricultural Lease between Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.5	Employment Agreement between Culbro Corporation and Jay M. Green, dated as of April 8, 1994, and as amended on January 11, 1997 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.6	Form of 1997 Stock Option Plan of Griffin Land & Nurseries, Inc. (incorporated by reference to the Form 10 of Griffin Land & Nurseries, Inc., filed April 8, 1997, as amended)
10.7	Form of 401 (k) Plan of Griffin Land & Nurseries, Inc. (incorporated by reference to the Form 10 of Griffin Land & Nurseries, Inc., filed April 8, 1997, as amended)
10.8	1996 Stock Plan of Culbro Corporation dated as of March 15, 1996 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 15, 1996, for its Annual Meeting of Shareholders held on April 11, 1996)
10.9	1992 Stock Plan of Culbro Corporation, dated December 10, 1993 (incorported by reference to the definitive proxy statement of Culbro Corporation, dated March 31, 1993, for its Annual Meeting of Shareholders held on April 8, 1993)
10.10	Stock Option Plan for Non-employee Directors of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of Shareholders held on April 8, 1993)
10.11	1991 Employees Incentive Stock Option Plan of Culbro Corporation, dated as of January 31, 1991 and as amended on February 12, 1995 (incorporated by reference to the definitive proxy statement of Culbro Corporation, dated April 9, 1991, for its Annual Meeting of Shareholders held on May 9, 1991)
10.12	Annual Incentive Compensation Plan of Culbro Corporation, dated as of December 7, 1995 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.13	Annual Incentive Compensation Plan of General Cigar Co., Inc., dated as of December 7, 1995 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.14	Long-Term Performance Plan of Culbro Corporation for the three-year period 1995-1997 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.15	Deferred Incentive Compensation Plan of Culbro Corporation, dated as of December 13, 1982 and as amended on February 12, 1985 (incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, as amended)
10.16	Revolving Credit Agreement and Guaranty dated May 6, 1998 (incorporated by reference to Form 10-Q dated May 30, 1998 filed July 10, 1998)
10.17	Loan Agreement dated June 24, 1999 (incorporated by reference to Form 10-Q dated August 28, 1999 filed October 8, 1999)

48

10.18	Revolving Credit Agreement dated August 3, 1999 (incorporated by reference to Form 10-Q dated August 28, 1999 filed October 8, 1999)
10.19	Credit Agreement dated as of February 8, 2002 by and between Griffin Land & Nurseries, Inc. and Fleet National Bank
21	Subsidiaries of Griffin Land & Nurseries, Inc. (incorporated by reference to the Form 10 of Griffin Land & Nurseries, Inc., filed April 8, 1997, as amended)
23.1	Consent of PricewaterhouseCoopers LLP (included with the report accompanying Item 8 of this Form 10-K)
23.2	Report of Independent Accountants on Financial Statement Schedules

49

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRIFFIN LAND & NURSERIES, INC.
By:	/s/  FREDERICK M. DANZIGER Frederick M. Danziger Chief Executive Officer
By:	/s/  ANTHONY J. GALICI Anthony J. Galici Vice President, Chief Financial Officer and Secretary

        Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed by the following persons on behalf of the Corporation and in the capacities indicated as of March 1, 2002.

Name	Title
/s/  WINSTON J. CHURCHILL, JR. Winston J. Churchill, Jr.	Director
/s/  EDGAR M. CULLMAN Edgar M. Cullman	Chairman of the Board and Director
/s/  FREDERICK M. DANZIGER Frederick M. Danziger	President, Director and Chief Executive Officer
/s/  JOHN L. ERNST John L. Ernst	Director
/s/  ANTHONY J. GALICI Anthony J. Galici	Vice President, Chief Financial Officer and Secretary
/s/  THOMAS C. ISRAEL Thomas C. Israel	Director
/s/  DAVID F. STEIN David F. Stein	Director

50

Schedule II—Valuation and Qualifying Accounts and Reserves

(dollars in thousands)

Description	Balance at Beginning of Year		Charged to Cost and Expenses	Charged to Other Accounts	Deductions From Reserves		Balance at End of Year
For fiscal year ended December 1, 2001
Reserves:					196	(1)
Uncollectible accounts—trade	$	580	48	4	304	(3)	$	132
Inventories	$	135	60	—	65	(2)	$	130
For fiscal year ended December 2, 2000
Reserves:
Uncollectible accounts—trade	$	564	72	14	70	(3)	$	580
Inventories	$	601	227	—	693	(2)	$	135
For fiscal year ended November 27, 1999
Reserves:
Uncollectible accounts—trade	$	490	120	6	52	(3)	$	564
Inventories	$	2,822	146	3	2,370	(2)	$	601

Notes:

(1)

Reflects amount related to the disposition of the Sales and Service Centers by Imperial Nurseries, Inc. on January 26, 2001.

(2)

Inventories disposed.

(3)

Accounts receivable written off.

S-1

Schedule III—Real Estate and Accumulated Depreciation

(dollars in thousands)

				Initial Cost						Gross Amount at December 1, 2001
Description		Encum- brances		Land		Bldg. & Improve.		Cost Capitalized Subsequent to Acquisition		Land		Land Improve.		Building		Devel. Cost		Total		Accum. Dep.			Date of Cons- truction	Date of Acquisition	Depr. Life
Real Estate Held for Sale
Undeveloped Land		$	—	$	1,071	$	—	$	—	$	1,071	$	—	$	—	$	—	$	1,071	$	—
Residential Development Simsbury, CT			—		203		—		2,884		203		—		—		2,884		3,087		—
Residential Development Windsor, CT			—		68		—		2,800		68		—		—		2,800		2,868		—
Others			—		—		—		307		—		—		—		307		307		—
Subtotal			—		1,342		—		5,991		1,342		—		—		5,991		7,333		—
Real Estate Held for Lease
Undeveloped Land			—		2,185		—		—		2,185		—		—		—		2,185
New England Tradeport
Windsor/East Granby, CT
	Undeveloped portion		—		439		—		2,251		439		—		—		2,251		2,690		—
	Industrial Buildings		8,046		29		—		3,897		29		391		3,497		9		3,926		(2,327	)	1978		40 yrs.
	Industrial Building		—		13		1,722		391		13		317		1,796		—		2,126		(868	)		1989	40 yrs.
	Industrial Building		—		9		—		3,924		9		309		3,615		—		3,933		(363	)	1998		40 yrs.
	Industrial Building		—		10		—		5,609		10		321		5,288		—		5,619		(423	)	1999		40 yrs.
	Industrial Building		—		10		—		2,214		10		—		2,214		—		2,224				2001
Griffin Center
Windsor, CT
	Undeveloped portion		—		179		—		1,997		179		—		—		1,997		2,176		—
	Industrial Building		6,312		22		—		8,648		22		—		8,648		—		8,670		(157	)	2001		40 yrs.
	Restaurant		—		—		—		1,389		—		207		1,182		—		1,389		(751	)	1983		40 yrs.
Griffin Center South
Bloomfield, CT
	Undeveloped portion		—		142		—		214		142		—		—		214		356		—
	Flex Building		421		47		—		2,949		47		341		2,588		20		2,996		(1,658	)	1977		40 yrs.
	Office Building		—		3		—		1,949		3		248		1,673		28		1,952		(806	)	1985		40 yrs.
	Office Building		—		1		—		1,792		1		364		1,428		—		1,793		(605	)	1988		40 yrs.
	Office Building		—		1		—		1,517		1		177		1,340		—		1,518		(567	)	1989		40 yrs.
	Office Building		—		—		—		670		—		82		588		—		670		(261	)	1988		40 yrs.
	Office Buildings		—		5		—		3,440		5		123		3,317		—		3,445		(944	)	1991		40 yrs.
	Office Building				2		—		3,439		2		—		3,439		—		3,441		(62	)	2001		40 yrs.
Others			—		—		—		1,293		—		1,068		—		225		1,293		(701	)
Subtotal			14,779		3,097		1,722		47,583		3,097		3,948		40,613		4,744		52,402		(10,493	)
		$	14,779	$	4,439	$	1,722	$	53,574	$	4,439	$	3,948	$	40,613	$	10,735	$	59,735	$	(10,493	)

S-2

Schedule III—Real Estate and Accumulated Depreciation (continued)

(dollars in thousands)

Fiscal year ended December 1, 2001

	Cost			Accumulated Depreciation
Balance at beginning of year	$	50,439		$	(9,218	)
Changes during the year:
Improvements		10,238			—
Additions to accumulated depreciation charged to costs and expense		—			(1,494	)
Cost of sales		(942	)		219
Balance at end of year	$	59,735		$	(10,493	)

Fiscal year ended December 2, 2000

	Cost			Accumulated Depreciation
Balance at beginning of year	$	42,047		$	(8,281	)
Changes during the year:
Improvements		9,108			—
Additions to accumulated depreciation charged to costs and expense		—			(937	)
Cost of sales		(716	)		—
Balance at end of year	$	50,439		$	(9,218	)

Fiscal year ended November 27, 1999

	Cost			Accumulated Depreciation
Balance at beginning of year	$	38,975		$	(7,456	)
Changes during the year:
Improvements		3,416			—
Additions to accumulated depreciation charged to costs and expense		—			(825	)
Cost of sales		(344	)		—
Balance at end of year	$	42,047		$	(8,281	)

S-3

Centaur Communications Limited

(Registered number 1595235)

Annual report

for the year ended 30 June 2001

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and shareholders of Centaur Communications Limited

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of changes in financial position (cash flows) and of changes in capital stock, reserves not available for distribution and unappropriated earnings (shareholders’ equity) present fairly, in all material respects, the financial position of Centaur Communications Limited and its subsidiaries at 30 June 2001 and 2000, and the results of their operations and their cash flows for each of the years ended 30 June 2001 and 2000, in conformity with accounting principles generally accepted in the United Kingdom. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of consolidated net income expressed in sterling for each of the years ended 30 June 2001 and 2000 and the determination of consolidated stockholders’ equity and consolidated financial position also expressed in sterling at 30 June 2001 and 2000 to the extent summarised in note 30 to the consolidated financial statements.

/s/ PricewaterhouseCoopers

PricewaterhouseCoopers

Chartered Accountants and Registered Auditors

London

29 November 2001

except for the information presented in

note 30 for which the date is 21 January 2002

F-2

Consolidated profit and loss account for the year ended 30 June 2001

	Note	2001		2000
		£’000		£’000
Turnover	1	76,520		68,096
Cost of sales		(42,641	)	(40,223	)
Gross profit		33,879		27,873
Distribution costs		(4,589	)	(4,570	)
Administrative expenses		(23,006	)	(17,982	)
Adjusted EBITDA	1	11,842		9,392
Depreciation of tangible fixed assets		(2,255	)	(2,791	)
Amortisation of goodwill		(875	)	(829	)
Exceptional administrative costs	3	(2,428	)	(451	)
Operating profit		6,284		5,321
Loss on disposal of business		(105	)	—
Profit on sale of investment		—		629
Interest receivable and similar income	5	67		93
Interest payable and similar charges	6	(1,592	)	(2,109	)
Profit on ordinary activities before taxation	2	4,654		3,934
Tax on profit on ordinary activities	7	(2,365	)	(1,363	)
Profit on ordinary activities after taxation		2,289		2,571
Equity minority interests		(101	)	(120	)
Profit for the financial year		2,188		2,451
Dividends	8	(191	)	—
Retained profit for the financial year	19	1,997		2,451

All turnover and profit arises from continuing operations.

Adjusted EBITDA is calculated as operating profit excluding depreciation, amortisation, the professional fees incurred in respect of the long term financing review and the costs of long term executive incentive schemes.

The accounting policies on pages 12 and 13 and notes on pages 14 to 31 form an integral part of these financial statements.

F-3

Consolidated balance sheet at 30 June 2001

The financial statements were approved by the Board of Directors on 29 November 2001, except for the information presented in note 30 which was approved on 21 January 2002, and were signed on its behalf by:

	Note	2001			2000
		£’000	£’000		£’000	£’000
Fixed assets
Intangible fixed assets	9	12,060			12,744
Tangible fixed assets	10	7,750			6,728
Investments	11	423			359
			20,233			19,831
Current assets
Stocks	12	601			463
Debtors	13	16,454			20,436
Cash at bank and in hand		3,898			1,136
			20,953			22,035
Creditors: amounts falling due within one year	14		(26,011	)		(21,542	)
Net current (liabilities)/assets			(5,058	)		493
Total assets less current liabilities			15,175			20,324
Creditors: amounts falling due after more than one year	15		(15,125	)		(21,532	)
Provisions for liabilities and charges	17		(758	)		(1,420	)
			(708	)		(2,628	)
Capital and reserves
Called up share capital	18		1,532			1,532
Share premium account	18		13,378			13,378
Capital redemption reserve	18		483			483
Profit and loss account	19		(16,158	)		(18,155	)
Equity shareholders’ funds			(765	)		(2,762	)
Equity minority interests	24		57			134
			(708	)		(2,628	)

The financial statements were approved by the Board of Directors on 29 November 2001, except for the information presented in note 30 which was approved on 21 January 2002, and were signed on its behalf by:

GTD Wilmot

Director

The accounting policies on pages 12 and 13 and notes on pages 14 to 31 form an integral part of these financial statements

F-4

Company balance sheet at 30 June 2001

	Note	2001			2000
		£’000	£’000		£’000	£’000
Fixed assets
Intangible assets	9	474			521
Tangible assets	10	53			65
Investments	11	4,741			4,291
			5,268			4,877
Current assets
Debtors	13	52,252			59,049
Cash at bank and in hand		1,007			200
			53,259			59,249
Creditors: amounts falling due within one year	14		(18,501	)		(17,702	)
Net current assets			34,758			41,547
Total assets less current liabilities			40,026			46,424
Creditors: amounts falling due after more than one year	15		(15,125	)		(21,532	)
Provisions for liabilities and charges	17		(1,254	)		(1,254	)
			23,647			23,638
Capital and reserves
Called up share capital	18		1,532			1,532
Share premium account	18		13,378			13,378
Capital redemption reserve	18		483			483
Profit and loss account	19		8,254			8,245
Equity shareholders’ funds			23,647			23,638

The financial statements were approved by the Board of Directors on 29 November 2001, except for the information presented in note 30 which was approved on 21 January 2002, and were signed on its behalf by:

GTD Wilmot

Director

The accounting policies on pages 12 and 13 and notes on pages 14 to 31 form an integral part of these financial statements

F-5

Consolidated cash flow statement for the year ended 30 June 2001

	Note	2001		2000
		£’000		£’000
Net cash inflow from operating activities	25	13,991		7,511
Returns on investments and servicing of finance
Interest received		67		93
Interest paid		(1,549	)	(2,150	)
Dividends paid to minority interests		(120	)	(73	)
Net cash inflow/(outflow) from returns on investments and servicing of finance		(1,602	)	(2,130	)
Taxation		(1,811	)	(2,020	)
Capital expenditure and financial investment
Purchase of intangible fixed assets		—		(86	)
Purchase of tangible fixed assets		(3,332	)	(2,854	)
Sale of tangible fixed assets		52		92
(Acquisition)/disposal of trade investments		(74	)	674
Net cash inflow/(outflow) for capital expenditure and financial investment		(3,354	)	(2,174	)
Acquisitions and disposals
Purchase of additional investment in subsidiary undertaking	28	(491	)	—
Disposal of unincorporated business	29	137		—
Net cash outflow for acquisitions and disposals		(354	)	—
Net cash inflow before financing		6,870		1,187
Financing
Issue of ordinary share capital		—		15
Proceeds from bank and other borrowings		—		1,500
Repayment of bank and other borrowings		(6,450	)	(2,300	)
Net cash outflow from financing		(6,450	)	(785	)
Increase in cash	26,27	420		402

The accounting policies on pages 12 and 13 and notes on pages 14 to 31 form an integral part of these financial statements

F-6

Statement of Group total recognised gains and losses

	2001		2000
	£’000		£’000
Profit for the financial year	2,188		2,451
Dividends	(191	)	—
Total recognised gains relating to the financial year	1,997		2,451

Reconciliation of movements in Group shareholders’ funds

	2001		2000
	£’000		£’000
Profit for the financial year	2,188		2,451
Dividends	(191	)	—
New share capital issued	—		15
Net increase in shareholders’ funds	1,997		2,466
Opening shareholders’ funds	(2,762	)	(5,228	)
Closing shareholders’ funds	(765	)	(2,762	)

The accounting policies on pages 12 and 13 and notes on pages 14 to 31 form an integral part of these financial statements

F-7

                Centaur Communications Limited

                Principal Accounting Policies

a)             Basis of preparation

The financial statements have been prepared under the historical cost convention in accordance with applicable accounting standards in the United Kingdom.

b)             Basis of consolidation

The financial statements incorporate that of the Company and of its subsidiary undertakings, and have been consolidated using the acquisition method of accounting. Profits or losses on intra-Group transactions are eliminated in full.  The results of subsidiaries or unincorporated businesses acquired or disposed of are included from the date of acquisition or up to the date of disposal.

c)             Turnover

Turnover represents sales of advertising space, subscriptions and individual publications and revenue from exhibitions and conferences, exclusive of value added tax.

Sales of advertising space are recognised in the period in which publication occurs.  Sales of publications are recognised in the period in which the sale is made.  Revenue received in advance for exhibitions and conferences is deferred and recognised in the period in which the event takes place.

Revenue from subscriptions to publications and on-line services is deferred and recognised in the profit and loss account on a straight-line basis over the subscription period.

d)             Investments

Investments are recorded at cost less provisions for impairment in value.

e)             Goodwill

Goodwill purchased or arising on consolidation has been capitalised and is amortised over its estimated useful economic life of 20 years, which is the period over which the directors estimate that the values of the underlying businesses acquired are expected to exceed the value of the underlying assets.

f)             Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation of tangible assets is provided on a straight-line basis over the following estimated useful lives of the assets:

Leasehold improvements	—	20 years or the length of the lease if shorter
Fixtures and fittings	—	10 years
Computer equipment	—	3 - 5 years (except costs of developing computer databases — 10 years)
Motor vehicles	—	4 years

F-8

g)            Taxation including deferred tax

Deferred taxation is calculated using the liability method.  Taxation deferred or accelerated by reason of short-term or other timing differences is accounted for to the extent that it is probable that a liability or asset will crystallise in the future.

h)            Stocks

Stocks are stated at the lower of cost and net realisable value.  For raw materials cost is the purchase price.  Work in progress comprises costs incurred relating to publications, exhibitions and conferences prior to the publication date or the date of the event.  For goods for resale cost is the purchase price, or, in the case of publications, the direct cost of production.

i)             Operating leases

Rentals payable under operating leases are charged to the profit and loss account on a straight-line basis over the term of the lease.

j)             Pensions

Pension costs charged to the profit and loss account represent the amount of contributions payable to the Company’s defined contribution scheme in respect of the accounting period.

k)            Remuneration element of share options

In accordance with Urgent Issues Task Force (“UITF”) Abstract 17 “Employee share schemes,” the fair value of share options at the date of grant, less any consideration to be received from the employee, is charged to the profit and loss account over the performance period to which the grant relates. An equal amount is credited directly to reserves in the same period.

F-9

Notes to the Financial Statements

1              Segmental reporting

The Group is involved in the single activity of the creation and dissemination of business and professional information.  There is therefore no segmental reporting required.  However, set out below are analyses of turnover and adjusted EBITDA of the Group by the communities it serves, by source of revenue, and by established activities and new products.

Analysis by community

	Turnover		Adjusted EBITDA
	2001	2000	2001		2000
	£’000	£’000	£’000		£’000
Marketing, creative and new media	30,460	28,288	8,821		8,620
Legal and financial	27,418	21,869	4,530		2,575
Engineering and construction	10,467	12,094	(1,417	)	(2,294	)
Other	8,175	5,845	(92	)	491
	76,520	68,096	11,842		9,392
Analysis by source of revenue
	Turnover		Adjusted EBITDA
	2001	2000	2001		2000
	£’000	£’000	£’000		£’000
Printed products	55,179	51,728	12,400		10,606
Electronic products	9,801	5,877	(2,448	)	(2,812	)
Exhibitions and conferences	10,511	9,645	1,287		1,235
Other	1,029	846	603		363
	76,520	68,096	11,842		9,392

Analysis by established activities and new products

	Turnover		Adjusted EBITDA
	2001	2000	2001		2000
	£’000	£’000	£’000		£’000
Established activities	66,444	58,196	16,946		13,545
New products	10,076	9,900	(5,104	)	(4,153	)
	76,520	68,096	11,842		9,392

A product is regarded as new until the earlier of 3 years from date of launch or acquisition and the end of a 3-month consecutive period of positive adjusted EBITDA for that product.  Substantially all net assets are located and all turnover and adjusted EBITDA are generated in the United Kingdom.

F-10

2              Profit on ordinary activities before taxation

Profit on ordinary activities before taxation is stated after charging:

	2001	2000
	£’000	£’000
Staff costs (note 4)	27,343	22,438
Exceptional administrative costs (note 3)	2,428	451
Leasehold property rentals	2,187	2,058
Depreciation of tangible fixed assets	2,255	2,791
Amortisation of goodwill	875	829
Loss on disposal of fixed assets	3	1
Loss on disposal of trade investment	10	—
Auditors’ remuneration:
— audit services	92	89
— non-audit services (of this £702,000 is included in the exceptional administrative costs above)	707	41

3              Exceptional administrative costs

Exceptional administrative costs relate to continuing operations and comprise:

	2001	2000
	£’000	£’000
Professional fees incurred in respect of the long term financing review	1,663	—
Amounts payable under executive incentive schemes	765	451
	2,428	451

4              Employees and directors

Staff costs

	2001	2000
	£’000	£’000
Wages and salaries	24,516	20,354
Social security costs	2,472	1,840
Other pension costs	355	244
	27,343	22,438

The average monthly number of persons employed during the year, including executive directors, was 803 (2000: 750).

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Directors’ emoluments

	2001	2000
	£’000	£’000
Aggregate emoluments	609	560
Pension contributions to money purchase schemes	70	64
	679	624

During the year 2 directors (2000: 2 directors) participated in money purchase pension schemes.

Options have been granted, in prior years, to certain directors to subscribe for ordinary shares of 10p each in Centaur Communications Limited. Full details are given in the directors’ report.

Highest paid director

	2001	2000
	£’000	£’000
Aggregate emoluments	327	300
Pension contributions to money purchase scheme	47	42
	374	342

5              Interest receivable and similar income

	2001	2000
	£’000	£’000
Interest on bank deposits	67	93

6              Interest payable and similar charges

	2001	2000
	£’000	£’000
Interest on bank loans and overdrafts	1,549	2,066
Amortisation of borrowings issue costs (note 16)	43	43
	1,592	2,109

F-12

7              Tax on profit on ordinary activities

	2001	2000
	£’000	£’000
UK corporation tax at 30% (2000: 30%):
— current year	2,231	1,464
Deferred taxation:
— current year	16	(101	)
— adjustments in respect of prior years	118	—
	2,365	1,363

The effective rate of taxation in 2001 is affected by the non-allowance of amortisation, the loss on disposal of a trade investment, the Professional fees incurred in respect of aborted IPO and other minor permanent differences.  The 2000 effective rate is affected by the non-allowance of amortisation.

8              Dividends

The Company has declared the following dividend:

		£’000
Class A shares	2.11 pence per share	35
Class B shares	1.44 pence per share	78
Class C shares	1.44 pence per share	78
		191

No dividend was declared in respect of the year ended 30 June 2000.

F-13

9              Intangible fixed assets

	Goodwill
	Group		Company
	£’000		£’000
Cost
At 1 July  2000	16,639		1,121
Additions	433		9
Disposals	(387	)	—
At 30 June 2001	16,685		1,130
Amortisation
At 1 July 2000	3,895		600
Disposals	(145	)	—
Charge for the year	875		56
At 30 June 2001	4,625		656
Net book amount At 30 June 2001	12,060		474
At 30 June 2000	12,744		521

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10           Tangible fixed assets

	Leasehold improvements	Fixtures and fittings		Computer equipment		Motor Vehicles		Total
	£’000	£’000		£’000		£’000		£’000
Group
Cost
At 1 July 2000	669	2,172		9,727		648		13,216
Additions	251	329		2,564		188		3,332
Disposals	—	(1	)	(1	)	(164	)	(166	)
At 30 June 2001	920	2,500		12,290		672		16,382
Depreciation
At 1 July 2000	221	964		4,945		358		6,488
Charge for the year	58	198		1,864		135		2,255
Disposals	—	(1	)	—		(110	)	(111	)
At 30 June 2001	279	1,161		6,809		383		8,632
Net book amount At 30 June 2001	641	1,339		5,481		289		7,750
At 30 June 2000	448	1,208		4,782		290		6,728
Company
Cost
At 1 July  2000 and at 30 June 2001	193	314		12		18		537
Depreciation
At 1 July 2000	132	310		12		18		472
Charge for the year	10	2		—		—		12
At 30 June 2001	142	312		12		18		484
Net book amount At 30 June 2001	51	2		—		—		53
At 30 June 2000	61	4		—		—		65

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11           Investments

	Investments in subsidiary undertakings		Unlisted trade investments		Total
	£’000		£’000		£’000
Group
Cost and net book amount
At 1 July 2000	—		359		359
Additions	—		79		79
Disposals	—		(15	)	(15	)
At 30 June 2001	—		423		423
Company
Cost
At 1 July 2000	7,286		135		7,421
Additions	491		79		570
Disposals	—		(15	)	(15	)
At 30 June 2001	7,777		199		7,976
Provisions
At 30 July 2000	(3,130	)	—		(3,130	)
Provision for the year	(105	)	—		(105	)
At 30 June 2001	(3,235	)	—		(3,235	)
Net book amount
At 30 June 2001	4,542		199		4,741
At 30 June 2000	4,156		135		4,291

In the opinion of the Directors, the value of the Group’s investments is not less than their carrying amount.

During the prior year, the Company disposed of a trade investment for proceeds of £674,000 and realised a profit of £629,000.

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Principal subsidiary undertakings at 30 June 2001

	Holding of ordinary shares
Name	Group %	Company %	Principal activity
Chiron Communications Limited	100	100	Magazine publishing
Hali Publications Limited	100	69.6	Magazine publishing
Ascent Publishing Limited	100	100	Magazine publishing
IFA Events Limited	80	80	Exhibitions
Your Business Magazine Limited	100	100	Holding company
Perfect Information Limited	99.78	99.78	Financial information services
Consultancy Europe Associates Limited	100	100	Legal information services
Mind Advertising Limited	50	50	Information services

In addition to the holdings above, the Company holds 100% of the issue preference share capital of Hali Publications Limited.

All the above subsidiary undertakings are incorporated in England and Wales.  A full list of subsidiary undertakings will be included with the Company’s next annual return.

12           Stocks

	2001		2000
	Group	Company	Group	Company
	£’000	£’000	£’000	£’000
Raw materials	60	—	158	—
Work in progress	533	—	299	—
Goods for resale	8	—	6	—
	601	—	463	—

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13           Debtors

	2001		2000
	Group	Company	Group	Company
	£’000	£’000	£’000	£’000
Trade debtors	15,094	—	19,289	—
Amounts owed by Group undertakings	—	52,202	—	58,980
Other debtors	264	50	439	69
Prepayments and accrued income	1,096	—	708	—
	16,454	52,252	20,436	59,049

14           Creditors: amounts falling due within one year

	2001		2000
	Group	Company	Group	Company
	£’000	£’000	£’000	£’000
Bank and other borrowings	4,292	1,950	1,950	1,950
Amounts owed to Group undertakings	—	15,919	—	15,360
Trade creditors	2,270	—	1,763	—
Corporation tax	763	172	343	8
Social security and other taxes	1997	25	2,710	—
Other creditors	336	191	170	76
Accruals and deferred income	16,353	244	14,606	308
	26,011	18,501	21,542	17,702

15           Creditors: amounts falling due after more than one year

	2001		2000
	Group	Company	Group	Company
	£’000	£’000	£’000	£’000
Bank and other borrowings	15,125	15,125	21,532	21,532

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16           Bank and other borrowings

	2001		2000
	£’000		£’000
Group and Company
Revolving credit facility	8,500		13,000
Term loan	8,750		10,700
Issue costs of term loan	(300	)	(300	)
	16,950		23,400
Amortisation of issue costs	125		82
	17,075		23,482
The principal amounts of these borrowings are repayable as follows:
Within 1 year:
Term loan	1,950		1,950
Between 1 and 2 years:
Term loan	2,600		1,950
Revolving credit facility	1,700		—
Between 2 and 5 years:
Revolving credit facility	6,800		13,000
Term loan	4,200		6,800

The Term Loan was granted on 4 August 1998 and is guaranteed by the Company’s subsidiaries, Chiron Communications Limited, Ascent Publishing Limited, Hali Publications Limited and Your Business Magazine Limited. It is repayable in quarterly instalments commencing 30 September 1999 and ending 30 June 2005.  The interest rate is calculated by reference to a formula and approximated to 7.2% per annum in 2000 and 7.1% per annum in 2001.

The Revolving Credit Facility was granted on 4 August 1998 and is guaranteed by the Company’s subsidiaries, Chiron Communications Limited, Ascent Publishing Limited, Hali Publications Limited and Your Business Magazine Limited.  The maximum facility allowed is £17,000,000 reducing quarterly from 30 September 1999 to zero at 30 June 2005. The interest rate is calculated by reference to a formula and approximated to 7.2% per annum in 2000 and 7.1% per annum in 2001.

Both the above cross guarantees are secured by fixed and floating charges over the Group’s assets.

On 5 August 1999 the Company entered into an interest rate swap arrangement, under which the variable rate applying to a principal amount of £11,833,000 of the Term Loan is swapped to a fixed rate of 6.98% until 30 June 2002.

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17           Provisions for liabilities and charges

	Deferred tax		Long term executive incentive schemes			Total
	Group	Company	Group		Company	Group		Company
	£’000	£’000	£’000		£’000	£’000		£’000
At 1 July 2000	624	1,254	796		—	1,420		1,254
Charge for the year	134	—	—		—	134		—
Transfer to accruals	—	—	(796	)	—	(796	)	—
At 30 June 2001	758	1,254	—		—	758		1,254

The provision for long term incentives is recorded as an accrual at the year end as it became payable in June 2001.

The provision for deferred tax comprises the following amounts:

	2001		2000
	Group	Company	Group	Company
	£’000	£’000	£’000	£’000
Accelerated capital allowances	247	13	96	13
Other timing differences	511	1,241	528	1,241
	758	1,254	624	1,254

Unprovided deferred tax liabilities comprise the following amounts:

	2001				2000
	Group		Company		Group	Company
	£’000		£’000		£’000	£’000
Accelerated capital allowances	(180	)	—		—	—
Other timing differences	(3,065	)	(1,980	)	357	357
	(3,245	)	(1,980	)	357	357

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18           Called up share capital, share premium account and capital redemption reserve

	Called up share capital	Share premium account	Capital redemption reserve
	£’000	£’000	£’000
At 1 July 2000 and at 30 June 2001	1,532	13,378	483

Called up share capital

	2001	2000
	£’000	£’000
Authorised
50,000,000 Ordinary shares of 10p each	5,000	5,000
Allotted and fully paid
15,324,757 Ordinary shares of 10p each (2000: 15,324,257)	1,532	1,532

During the year employees of the Group exercised their options over ordinary shares in the Company at a price of £1.00 per share as follows:

Date of  exercise	Number of shares
16 November 2000	500

At 30 June 2001 options had been granted and agreed to be granted to certain directors and employees to subscribe for a total of 1,880,896 ordinary shares of 10p each at varying times and prices up to August 2006.  The directors’ options are disclosed in the directors’ report.

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19           Profit and loss account

	Group		Company
	£’000		£’000
At 1 July 2000	(18,155	)	8,245
Retained profit for the financial year	1,997		9
At 30 June 2001	(16,158	)	8,254

At 30 June 2001, £98,000 of goodwill remained eliminated directly against the profit and loss account reserve.  This will be charged to the profit and loss account in the period in which disposal of the related business is made.

Of the Company’s profit and loss account at 30 June 2001, £1,023,000 is regarded as being available for distribution.  In addition, a further £2,078,000 may become available for distribution if dividends are declared and paid up to the Company by subsidiaries.

The Company has taken advantage of the exemption available under section 230 of the Companies Act 1985 and has not presented its own profit and loss account in these financial statements.  Of the Group profit for the financial year, £9,000 (2000: £937,000) is dealt with in the financial statements of the Company.

20           Capital commitments

The Group had no capital commitments at 30 June 2001 or 30 June 2000.

21           Operating lease commitments

The operating lease rentals payable within one year of the balance sheet date are as follows:

	Land and buildings		Equipment
	2001	2000	2001	2000
	£’000	£’000	£’000	£’000
On leases expiring:
—   within 1 year	22	—	—	13
—   between 2 and 5 years	38	17	211	101
—   after 5 years	2,671	2,134	—	—
	2,731	2,151	211	114

22           Pension schemes

The Group contributes to individual and collective money purchase pension schemes in respect of directors and employees once they have completed the requisite period of service.  The charge for the year in respect of these pension schemes is shown in note 4.

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23           Contingent liabilities

The Company, together with its subsidiary undertakings, has granted a cross guarantee in favour of its bankers in respect of the bank borrowings of the Group.  The guarantee is secured by fixed and floating charges over the Group’s assets.

24           Equity Minority interests

At 1 July 2000	134
Dividend paid	(120	)
Additional investment in IFA Events Limited	(58	)
Share of net income for the year	101
At 30 June 2001	57

25           Net cash inflow from operating activities

Reconciliation of operating profit to net cash inflow from operating activities:

	2001		2000
	£’000		£’000
Operating profit	6,284		5,321
Depreciation of tangible fixed assets	2,255		2,791
Amortisation of goodwill	875		829
Loss on disposal of fixed assets	3		1
Loss on disposal of trade investment	10		—
(Increase)/decrease in stocks	(138	)	16
Decrease/(increase) in debtors	3,982		(4,932	)
Increase in creditors	720		3,034
Increase in provisions	—		451
Net cash inflow from operating activities	13,991		7,511

26           Analysis of movement in net debt

	At 1 July 2000		Cash flow	Other non- cash changes		At 30 June 2001
	£’000		£’000	£’000		£’000
Cash at bank and in hand	1,136		420	—		1,556
Debt due within 1 year (before issue costs)	(1,950	)	1,950	(1,950	)	(1,950	)
Debt due after 1 year (before issue costs)	(21,750	)	4,500	1,950		(15,300	)
	(23,700	)	6,450	—		(17,250	)
	(22,564	)	6,870	—		(15,694	)

F-23

27           Reconciliation of net cash flows to movements in net debt

	2001		2000
	£’000		£’000
Increase in cash in the year	420		402
Cash outflow from changes in debt	6,450		800
Change in net debt resulting from cash flows	6,870		1,202
Movement in net debt in the year	6,870		1,202
Net debt at 1 July (before issue costs)	(22,564	)	(23,766	)
Net debt at 30 June (before issue costs)	(15,694	)	(22,564	)

28           Acquisitions

During the year ended June 2001 the Group made the following acquisitions:

	Mind Advertising Limited (a)		IFA Events Limited (b)		IFA Events Limited (c)		Total
	£’000		£’000		£’000		£’000
Tangible fixed assets	3		28		26		57
Stocks	—		60		54		114
Debtors	9		293		452		754
Cash at bank and in hand	4		103		283		390
Creditors: amounts falling due within one year	(15	)	(344	)	(583	)	(942	)
	1		140		232		373
Minority interests	(1	)	(126	)	(188	)	(315	)
Group share of net assets acquired	—		14		44		58
Goodwill	50		137		246		433
Consideration	50		151		290		491
Satisfied by:
Cash	50		151		290		491

a)             Mind Advertising Limited

On 27 July 2000, the Group acquired 50% of the assets and liabilities of Mind Advertising Limited for a consideration of £50,000.  This purchase was accounted for by the acquisition method of accounting.  The book values of the assets and liabilities acquired, which are shown in the table above, approximated to their fair values.

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b)             IFA Events Limited

On 18 October 2000, the Group acquired a further 10% of the issued share capital of IFA Events Limited for a consideration of £151,000.  This purchase was accounted for by the acquisition method of accounting.  The book values of the assets and liabilities acquired, which are shown in the table above, approximated to their fair values.

c)             IFA Events Limited

On 3 May 2001, the Group acquired a further 19% of the issued share capital of IFA Events Limited for a consideration of £290,000.  This purchase was accounted for by the acquisition method of accounting.  The book values of the assets and liabilities acquired, which are shown in the table above, approximated to their fair values.

29           Disposal of business

On 5 October 2000, the Group disposed of the business of EXE for a cash consideration of £137,000, giving rise to a loss of £105,000.

30           Reconciliation to generally accepted accounting principles in the United States (“US GAAP”)

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom (“UK GAAP”), which differs in certain significant respects from US GAAP.  Such differences include methods for measuring the amounts shown in the financial statements, as well as additional disclosures required by US GAAP.

The effect on the consolidated net income and shareholders’ equity of applying the significant differences between UK GAAP and US GAAP is summarised in the reconciliation statements below:

30           Reconciliation to generally accepted accounting principles in the United States (“US GAAP”) (continued)

	2001		2000
	£’000		£’000
(a)  Reconciliation of net income
Net income in accordance with UK GAAP	1,997		2,451
Dividend proposed (1)	191		—
Amortisation of goodwill (2)	299		276
Disposal of unincorporated business (3)	(48	)	—
Net income in accordance with US GAAP	2,439		2,727

F-25

	2001		2000
	£’000		£’000
(b)  Reconciliation of shareholders’ equity
Equity shareholders’ funds in accordance with UK GAAP	(765	)	(2,762	)
Dividend proposed (1)	191		—
Amortisation of goodwill (2)	1,572		1,273
Disposal of business (3)	(48	)	—
Reinstatement of goodwill written off (4)	98		98
Remuneration element of equity share options (5)	(1,499	)	(1,499	)
	(451	)	(2,890	)
(c)  Changes in US GAAP shareholders’ equity
Shareholders’ equity at the beginning of the year	(2,890	)	(5,642	)
Net income	2,439		2,727
Exercise or lapse of equity share options (5)	—		10
Issue of share capital	—		15
	(451	)	(2,890	)

(1)A dividend of £191,000 was proposed for the period ended 30 June 2001.  Under UK GAAP dividends are reported on an accruals basis and therefore was included in arriving at the net income for the year ended 30 June 2001.  Under US GAAP dividends are not reported until the board declare the dividend to the shareholders and therefore the dividend will be a reconciling item until paid.  The dividend was declared in the quarter ending 31 December 2001.

(2)Under UK GAAP, goodwill is being amortised over a maximum period of 20 years, following the adoption of FRS 10.  In accordance with US GAAP goodwill is amortised over an estimated economic life of 30 years.

(3)During the year, the Group disposed of an unincorporated business, EXE and the related goodwill.  The profit on disposal under US GAAP was lower by £48,000, being the difference in accumulated amortisation on the EXE goodwill asset.

(4)Under UK GAAP, the group has previously written off goodwill of £98,000 directly to shareholders’ equity.  Under US GAAP, the goodwill is reinstated and is being amortised over 30 years.

(5)Under UK GAAP, the remuneration element of stock options is charged against net income in the period between the options being granted and the date of vesting, with an equal amount credited directly to shareholders’ equity.  Under US GAAP, an available alternative method is to charge net income and credit a liability account, with the balance on the liability account being subsequently transferred to shareholders’ equity as the options are exercised or lapse.

The Group has adopted this available alternative method and accordingly a GAAP difference arises in shareholders’ equity.

F-26

(6)Under UK GAAP, the deferred tax effects of timing differences existing at the balance sheet date are calculated under the liability method (using tax rates likely to apply in the future when the timing differences will reverse).  However, the Group is not required to record the full liability, and may elect to use the partial provision approach.  Under the partial provision approach, the amount of deferred tax to be provided is the liability that is expected to arise in the future based on a projection of the extent to which the cumulative timing differences existing at the balance sheet date are expected to reverse.  Under US GAAP deferred taxes are provided for on a full liability basis.  Under the full liability method, deferred tax assets and liabilities are recognised between the financial and tax bases of assets and liabilities and for tax loss carry forwards at the statutory rate of each reporting date.  A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realised.

A subsidiary undertaking of Centaur Communications Limited, Perfect Information Limited, incurred tax losses up to April 1998 of £3,169,000, which under UK tax law are carried forward indefinitely to be offset against taxable profits arising from the same trade.  It is currently uncertain as to when or if the losses may be utilised in the future.  Accordingly under US GAAP a full valuation allowance has been set against the related deferred tax asset.  Tax losses incurred since April 1998 have been available and used for offset against profits arising elsewhere in the Group.

F-27

QuickLinks

PART I

ITEM 1. BUSINESS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Accountants
Consent of Independent Accountants

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. FINANCIAL STATEMENTS AND EXHIBITS

SIGNATURES

EX-10.19

Exhibit 10.19

CREDIT AGREEMENT

Dated as of February 8, 2002

by and between

Griffin Land & Nurseries, Inc.

and

Fleet National Bank

TABLE OF CONTENTS

ii

iii

iv

CREDIT AGREEMENT

This CREDIT AGREEMENT is made as of February 8, 2002, by and between Griffin Land & Nurseries, Inc., a Delaware corporation having its principal place of business at 204 West Newberry Road, Bloomfield, Connecticut 06002 (the “Borrower”) and Fleet National Bank (the “Bank”), a national banking association, with an office at 777 Main Street, Hartford, Connecticut 06115.

1.  DEFINITIONS AND RULES OF INTERPRETATION.

1.1.  Definitions.

The following terms shall have the meanings set forth in this §1 or elsewhere in the provisions of this Credit Agreement referred to below:

Adjustment Date.  The first day of the month immediately following the month in which a Compliance Certificate is to be delivered by the Borrower pursuant to §8.4(d).

Affiliate.  Any Person that would be considered to be an affiliate of the Borrower under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if the Borrower were issuing securities.

Applicable Margin.  For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a “Rate Adjustment Period”), the Applicable Margin shall be the applicable margin set forth below with respect to the Debt Service Coverage Ratio, as determined for the Debt Service Reference Period of the Borrower and its Subsidiaries ending on the fiscal quarter ended immediately prior to the applicable Rate Adjustment Period.

Level	Debt Service Coverage Ratio	Base Rate Loans	LIBOR Rate Loans
I	Less than 2.00:1.00	0.50%	2.50%
II	Greater than or equal to 2.00:1.00 but less than or equal to 3.00:1.00	0.00%	1.75%
III	Greater than 3.00:1.00	–0.50%	1.50%

Notwithstanding the foregoing, (a) for the Loans outstanding during the period commencing on the Closing Date through the date immediately preceding the first Adjustment Date to occur after the fiscal quarter ending June 1, 2002, the Applicable Margin shall be the Applicable Margin set forth in Level I above, and (b) if the Borrower fails to deliver any Compliance Certificate pursuant to §8.4(d) hereof then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the

date immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be the highest Applicable Margin set forth above.

Assignments of Leases and Rents.  The Assignments of Leases and Rents, dated or to be dated on or prior to the Closing Date, from the Borrower and River Bend to the Bank and each in form and substance satisfactory to the Bank.

Balance Sheet Date.  September 1, 2001.

Bank.  As defined in the preamble hereto.

Base Rate. The variable per annum rate of interest so designated from time to time by the Bank 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.  Changes in the rate of interest resulting from changes in the Prime Rate shall take place immediately without notice or demand of any kind.

Base Rate Loans.  Any Loans bearing interest calculated by reference to the Base Rate.

Borrower.  As defined in the preamble hereto.

Business Day.  Any day other than a Saturday, Sunday or day which shall be in the State of Connecticut a legal holiday on which banking institutions are required or authorized to close and, in the case of LIBOR Rate Loans, also a day which is a LIBOR Business Day.

Capital Assets.  Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and good will); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with generally accepted accounting principles.

Capital Expenditures.  Amounts paid or Indebtedness incurred by the Borrower or any of its Subsidiaries in connection with (a) the purchase or lease by the Borrower or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with generally accepted accounting principles or (b) the lease of any assets by the Borrower or any of its Subsidiaries as lessee under any Synthetic Lease to the extent that such assets would have been Capital Assets had the Synthetic Lease been treated for accounting purposes as a Capitalized Lease.

Capitalized Leases.  Leases under which the Borrower or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles; provided, however, that any leases entered into by the Borrower prior to the date hereof shall be treated by the Borrower as the Borrower has treated such leases consistent with past principles regardless of whether such treatment is in accordance with generally accepted accounting principles.

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Cash Flow Positive.  With respect to any fiscal period, any Real Estate owned by the Borrower and which is encumbered by a Non-Recourse Mortgage and as to which the operating revenues received by the Borrower from such Real Estate during such fiscal period exceeds the sum of (a) the aggregate amount of reasonable and necessary operating expenses which are incurred and paid or accrued by the Borrower during such period in connection with the ownership, maintenance and operation of such Real Estate, plus (b) the principal, interest and other amounts payable in respect of Indebtedness incurred by the Borrower or any of its Subsidiaries which is secured by the Non-Recourse Mortgage on such Real Estate during such period each as determined in accordance with generally accepted accounting principles.

Centaur.  Centaur Communications Ltd.

CERCLA.  See §7.15(a).

Change of Control.  An event or series of events by which (a) the Cullman Group ceases to own at least forty percent (40%) of the outstanding shares of any class of voting stock of the Borrower; and (b) members of the Cullman Group cease to hold thirty percent (30%) of the seats on the board of directors of the Borrower.

Closing Date.  The first date on which the conditions set forth in §11 have been satisfied and any Loans are to be made or any Letter of Credit is to be issued hereunder.

Code.  The Internal Revenue Code of 1986, as amended from time to time.

Collateral.  All of the property, rights and interests of the Borrower and its Subsidiaries that are or are intended to be subject to the security interests and mortgages created by the Security Documents.

Commitment.  The obligation of the Bank to make Loans to, and to issue, extend and renew Letters of Credit for the account of, the Borrower up to an aggregate outstanding principal amount not to exceed the result of (a) $19,380,000, minus (b) the sum of the Commitment Reduction Amounts, as the same may be reduced from time to time; or if such commitment is terminated pursuant to the provisions hereof, zero.

Commitment Reduction Amount.  With respect to any Released Property, the amount set forth on Schedule 1 hereto opposite the applicable Released Property.

Compliance Certificate.  See §8.4(d) hereof.

Consolidated or consolidated.  With reference to any term defined herein, shall mean that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated in accordance with generally accepted accounting principles.

Consolidated Net Income (or Loss).  The consolidated net income (or loss) of the Borrower and its Subsidiaries, determined in accordance with generally accepted accounting principles, after eliminating therefrom (a) all extraordinary nonrecurring items of income of the Borrower and its Subsidiaries and all extraordinary nonrecurring non-cash losses with respect to the real estate business of the Borrower and its Subsidiaries and (b) any and all

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non-cash earnings or losses from Investments by the Borrower in Centaur, Shemin Acquisition Corp. and/or Linguaphone.

Consolidated Net Worth:  The excess of Consolidated Total Assets over Consolidated Total Liabilities.

Consolidated Total Assets.  All assets of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles and classified as such on the consolidated balance sheet of the Borrower and its Subsidiaries.

Consolidated Total Debt Service.  For any fiscal period with respect to the Borrower and its Subsidiaries, the sum of (a) Consolidated Total Interest Expense for such period, plus (b) any and all scheduled repayments of principal in respect of Indebtedness of the Borrower and its Subsidiaries made or required to be made during such period other than the prepayment of Indebtedness owed by the Borrower to Webster Bank; provided, that for the purpose of calculating the Fixed Charge Coverage Ratio only (x) any and all interest required to be paid or accrued and any and all scheduled repayments of principal in respect of Non-Recourse Debt incurred by the Borrower or any of its Subsidiaries which is secured by any Non-Recourse Mortgage on Real Estate which is Cash Flow Positive for the fiscal period with respect to which the Fixed Charge Coverage Ratio is being determined, shall be excluded from clauses (a) and (b) hereof so long as the Borrower or such Subsidiary is not in default under any of such Indebtedness at the time that the Fixed Charge Coverage Ratio is being calculated; otherwise, all such interest and all such scheduled repayments of principal on such Indebtedness during such fiscal period shall be included in such calculation and (y) any and all interest in respect of Indebtedness incurred by the Borrower or such Subsidiary in connection with any construction projects of the Borrower or its Subsidiaries which is capitalized in accordance with generally accepted accounting principles shall also be excluded from the calculation of “Consolidated Total Interest Expense”.

Consolidated Total Interest Expense.  For any period, (a) for the purpose of calculating the Debt Service Coverage Ratio, the aggregate amount of interest paid or required to be paid in cash or property by the Borrower and its Subsidiaries during such period on all Indebtedness of the Borrower and its Subsidiaries outstanding during all or any part of such period and (b) for all other purposes, the aggregate amount of interest required to be paid or accrued by the Borrower and its Subsidiaries during such period on all Indebtedness of the Borrower and its Subsidiaries outstanding during all or any part of such period, in the case of clauses (a) and (b) whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of interest in respect of any Capitalized Lease or any Synthetic Lease.

Consolidated Total Liabilities.  All liabilities of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles and classified as such on the consolidated balance sheet of the Borrower and its Subsidiaries.

Conversion Request.  A notice given by the Borrower to the Bank of the Borrower’s election to convert or continue a Loan in accordance with §2.7.

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Credit Agreement.  This Credit Agreement, including the Schedules and Exhibits hereto.

Culbro.  Culbro Homes II, Inc.

Cullman Group.  The individuals composing the Reporting Persons with respect to the Schedule 13D filed with the Securities and Exchange Commission on July 14, 1997.

Debt Service Coverage Ratio.  As at any date of determination, the ratio of (a) the result of (i) EBITDA for the Debt Service Reference Period ended on such date, minus (ii) Distributions made by the Borrower during such Debt Service Reference Period, to (b) the sum of (i) Consolidated Total Debt Service for such Debt Service Reference Period, plus (ii) cash taxes paid by the Borrower and its Subsidiaries during such Debt Service Reference Period other than (x) any cash taxes paid by the Borrower with respect to income earned prior to December 1, 2001 and (y) any cash taxes paid by the Borrower prior to December 31, 2002 in connection with the sale of the service centers to Shemin Nurseries, Inc.

Debt Service Reference Period.  As of any date of determination, the period of four (4) consecutive fiscal quarters of the Borrower and its Subsidiaries ending on the relevant date.

Default.  See §13.1.

Distribution.  The declaration or payment of any dividend or other distribution on or in respect of any shares of any class of capital stock of the Borrower other than dividends payable solely in shares of common stock of the Borrower; the purchase, redemption, or other retirement of any shares of any class of capital stock of the Borrower, directly or indirectly through a Subsidiary of the Borrower or otherwise or the return of capital by the Borrower to its shareholders.

Dollars or $.  Dollars in lawful currency of the United States of America.

Drawdown Date.  The date on which any Loan is made or is to be made, and the date on which any Loan is converted or continued in accordance with §2.7.

EBITDA.  With respect to any fiscal period, an amount equal to the sum of (a) Consolidated Net Income (or Loss) for such fiscal period, plus (b) in each case to the extent deducted in the calculation of Consolidated Net Income (or Loss) and without duplication, (i) depreciation and amortization for such fiscal period, plus (ii) income tax expense for such fiscal period, plus (iii) Consolidated Total Interest Expense for such fiscal period, plus (iv) any other non-cash charges for such fiscal period, all as determined in accordance with generally accepted accounting principles.  For the purpose of calculating the Fixed Charge Coverage Ratio only, any operating income from any Real Estate owned by the Borrower or any of its Subsidiaries which is encumbered by a Non-Recourse Mortgage as to which no default exists at the time that the Fixed Charge Coverage Ratio is being determined and which is Cash Flow Positive for the fiscal period as to which the Fixed Charge Coverage Ratio is being determined shall be excluded from the calculation of “EBITDA” up to and including the amount necessary to satisfy the corresponding debt service for the relevant

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period in respect of the Indebtedness incurred by the Borrower or such Subsidiary which is secured by such Non-Recourse Mortgage (including all principal and interest).

Environmental Indemnity Agreements.  The Environmental Indemnity Agreements, dated or to be dated on or prior to the Closing Date, by and between the Bank and each of the Borrower and River Bend and each in form and substance satisfactory to the Bank.

Environmental Laws.  See §7.15(a).

EPA.  See §7.15(b).

ERISA.  The Employee Retirement Income Security Act of 1974.

Eurocurrency Reserve Rate.  For any day with respect to a LIBOR Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against “Eurocurrency Liabilities” (as that term is used in Regulation D), if such liabilities were outstanding.  The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate.

Event of Default.  See §13.1.

Fixed Charge Coverage Ratio.  As at any date of determination, the ratio of (a) the result of (i) EBITDA for the Reference Period ended on such date, minus (ii) Distributions made by the Borrower during such Reference Period, to (b) the sum of (i) Consolidated Total Debt Service for the Reference Period ended on such date, plus (ii) cash taxes paid by the Borrower and its Subsidiaries during such Reference Period other than any cash taxes paid by the Borrower with respect to income earned prior to December 1, 2001.

Generally accepted accounting principles.  (a) When used in §10, whether directly or indirectly through reference to a capitalized term used therein, means (i) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal period ended on the Balance Sheet Date, and (ii) to the extent consistent with such principles, the accounting practice of the Borrower reflected in its financial statements and the notes thereto for the year ended on the Balance Sheet Date, and (b) when used in general, other than as provided above, means principles that are (i) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (ii) consistently applied with past financial statements of the Borrower adopting the same principles, provided that in each case referred to in this definition of “generally accepted accounting principles” a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied.

Guarantors.  Collectively, Imperial, River Bend and any Subsidiary Guarantor.

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Guaranties.  Collectively, the Guaranties made by each of the Guarantors in favor of the Bank, and each in form and substance satisfactory to the Bank.

Hazardous Substances.  See §7.15(b).

Imperial.  Imperial Nurseries, Inc., a Delaware corporation and wholly-owned Subsidiary of the Borrower.

Indebtedness.  As to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication:

(a)every obligation of such Person for money borrowed,

(b)every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses,

(c)every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person,

(d)every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith),

(e)every obligation of such Person under any Capitalized Lease,

(f)every obligation of such Person under any lease (a “Synthetic Lease”) treated as an operating lease under generally accepted accounting principles and as a loan or financing for U.S. income tax purposes,

(g)all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively “receivables”), whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith,

(h)every obligation of such Person (an “equity related purchase obligation”) to purchase, redeem, retire or otherwise acquire for value any shares of capital stock of any class issued by such Person, any warrants, options or other rights to acquire any such shares or similar interests, or any rights measured by the value of such shares, warrants, options or other rights,

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(i)every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (a “derivative contract”),

(j)every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law,

(k)every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clauses (a) through (j) (the “primary obligation”) of another Person (the “primary obligor”), in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (ii) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation.

The “amount” or “principal amount” of any Indebtedness at any time of determination represented by (u) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with generally accepted accounting principles, (v) any Capitalized Lease shall be the principal component of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (w) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than the Borrower or any of its wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (x) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount, (y) any derivative contract shall be the maximum amount of any termination or loss payment required to be paid by such Person if such derivative contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred and (z) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price.

Interest Payment Date.  (a) As to any Base Rate Loan, the last day of the calendar month with respect to interest accrued during such calendar month, including, without limitation, the calendar month which includes the Drawdown Date of such Base Rate Loan; and (b) as to any LIBOR Rate Loan in respect of which the Interest Period is (i) 3 months or less, the last day of such Interest Period and (ii) more than 3 months, the date that is 3

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months from the first day of such Interest Period and, in addition, the last day of such Interest Period.

Interest Period.  With respect to each Loan, (a) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the periods set forth below, as selected by the Borrower in a Loan Request or as otherwise required by the terms of this Credit Agreement (i) for any Base Rate Loan, the last day of the calendar month; (ii) for any LIBOR Rate Loan, 1, 2, 3 or 6 months; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(a)if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day, that Interest Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding LIBOR Business Day;

(b)if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day;

(c)if the Borrower shall fail to give notice as provided in §2.7, the Borrower shall be deemed to have requested a conversion of the affected LIBOR Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto;

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

(e)any Interest Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.

Interest Rate Agreement.  Any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate futures contract, interest rate option agreement or other similar agreement or arrangement to which the Borrower is a party, designed to protect the Borrower against fluctuations in interest rates.

Investments.  All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock, membership interests or similar interests or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness) of, any Person.  In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be equal to the maximum amount to be paid under such guaranty with respect to the principal amount of the

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obligations actually covered by such guaranty and still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital; and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof.

Letter of Credit.  See §4.1.1.

Letter of Credit Application.  See §4.1.1.

Letter of Credit Fee.  See §4.6.

LIBOR Business Day.  Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in the London interbank market.

LIBOR Lending Office.  Initially, the office of the Bank, if any, that shall be making or maintaining LIBOR Rate Loans.

LIBOR Rate.  For any Interest Period with respect to a LIBOR Rate Loan, the rate of interest equal to (a) the rate determined by the Bank at which Dollar deposits for such Interest Period are offered based on information presented on Telerate Page 3750 as of 11:00 a.m. London time on the second LIBOR Business Day prior to the first day of such Interest Period, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate.  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 upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in Dollars for a period of time comparable to such LIBOR Rate Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the second LIBOR Business Day prior to the first day of such Interest Period as selected by the Bank.  The principal London office of each of the four major London banks will be requested to provide a quotation of its 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 Dollars to leading European banks for a period of time comparable to such Interest Period offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the second LIBOR Business Day prior to the first day of such Interest Period.  In the event that the Bank is unable to obtain any such quotation as provided above, it will be considered that LIBOR Rate pursuant to a LIBOR Rate Loan cannot be determined.

LIBOR Rate Loans.  All or any portion of the Loans bearing interest calculated by reference to the LIBOR Rate.

Loan Documents.  This Credit Agreement, the Note, the Guaranties, the Letter of Credit Applications, the Letters of Credit, the Environmental Indemnity Agreements, the Security Documents and any document, agreement and/or instrument executed and/or delivered in connection therewith.

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Linguaphone.  Linguaphone Group Plc.

Loan Request.  See §2.6.

Loans.  Revolving credit loans made or to be made by the Bank to the Borrower pursuant to §2.

Material Adverse Effect.  With respect to any event or occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding):

(a) a material adverse effect on the business, properties, condition (financial or otherwise), Collateral, operations or income of the Borrower and its Subsidiaries, taken as a whole;

(b) an adverse effect on the ability of the Borrower and its Subsidiaries taken as a whole, to perform any of their respective Obligations under any of the Loan Documents to which it is a party; or

(c) any impairment of the validity, binding effect or enforceability of this Credit Agreement or any of the other Loan Documents, any impairment of the rights, remedies or benefits available to the Bank under any Loan Document or any impairment of the attachment, perfection or priority of any lien, mortgage or security interest of the Bank under the Security Documents.

Maturity Date.  February 8, 2005.

Maximum Drawing Amount.  The maximum aggregate amount that the beneficiaries may at any time draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit.

Mortgages.  The Open-End Mortgage and Security Agreements, dated or to be dated on or prior to the Closing Date, from the Borrower and River Bend to the Bank with respect to the fee interests of the Borrower and River Bend and each in form and substance satisfactory to the Bank.

Non-Recourse Debt.  Any Indebtedness of the Borrower or any of its Subsidiaries the holder of which has the right to collect such Indebtedness from the proceeds of a lien on Real Estate owned by the Borrower or such Subsidiary but has no right to attach or execute upon any other asset of the Borrower, such Subsidiary or any other Subsidiary of the Borrower in order to collect such Indebtedness unless an event or circumstance described therein has occurred.

Non-Recourse Mortgage.  Any mortgage, deed of trust or similar instrument that encumbers any Real Estate owned by the Borrower or any of its Subsidiaries which secures Non-Recourse Debt.

Note Record.  A Record with respect to the Note.

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Note.  See §2.4.

Obligations.  All indebtedness, obligations and liabilities of the Borrower and its Subsidiaries to the Bank, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Credit Agreement or any of the other Loan Documents or any Interest Rate Agreement or in respect of any of the Loans made or Reimbursement Obligations incurred or any of the Note, Letter of Credit Applications, Letters of Credit, interest rate protection arrangement or other instruments at any time evidencing any thereof.

Outstanding.  With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination.

Permitted Liens.  Liens, security interests and other encumbrances permitted by §9.2.

Person.  Any individual, corporation, limited liability company, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof.

RCRA.  See §7.15(a).

Real Estate.  All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries.

Record.  The grid attached to the Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Bank with respect to any Loan referred to in the Note.

Reference Period.  For the period ending June 1, 2002, the period of two (2) consecutive fiscal quarters ending on June 1, 2002. For the period ending August 31, 2002, the period of three (3) consecutive fiscal quarters ending on August 31, 2002.  With respect to any other date of determination, the period of four (4) consecutive fiscal quarters of the Borrower and its Subsidiaries ending on the relevant date.

Reimbursement Obligation.  The Borrower’s obligation to reimburse the Bank on account of any drawing under any Letter of Credit as provided in §4.2.

Released Property.  Real Estate that is included in the Collateral as to which the lien held by the Bank is released by the Bank at the request or with the consent of the Borrower.

River Bend.  River Bend Associates, Inc., a Connecticut corporation and wholly-owned Subsidiary of the Borrower.

SARA.  See §7.15(a).

SEC.  The Securities and Exchange Commission or any governmental authority succeeding to any of its principal functions.

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Security Documents.  The Mortgages, the Assignments of Leases and Rents and all other instruments and documents, including without limitation Uniform Commercial Code financing statements, required to be executed or delivered pursuant to any Security Document.

Subordinated Debt.  Unsecured Indebtedness of the Borrower to any of its Subsidiaries that is expressly subordinated and made junior to the payment and performance in full of the Obligations, and evidenced as such by a written instrument containing subordination provisions in form and substance reasonably satisfactory to the Bank.

Subsidiary.  Any corporation, limited liability company, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock (other than Walden Woods Conservancy).

Subsidiary Guarantor.  Any Subsidiary of the Borrower that guaranties the Obligations pursuant to the terms of a Guaranty substantially in the form of Exhibit B attached hereto.  Contemporaneously with the execution and delivery of such guaranty, the Borrower shall deliver to the Bank appropriate corporate backup documentation and a legal opinion, in each case, in form and substance satisfactory to the Bank, as to each such guaranty.

Synthetic Lease.  As defined in paragraph (f) of the definition of “Indebtedness”.

Type.  As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.

Uniform Customs.  With respect to any Letter of Credit, either the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 or any successor version thereto adopted by the Bank in the ordinary course of its business as a letter of credit issuer and in effect at the time of issuance of such Letter of Credit, or the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, or any successor code of standby letter of credit practices among banks adopted by the Bank in the ordinary course of its business as a standby letter of credit issuer and in effect at the time of issuance of such Letter of Credit.

Unpaid Reimbursement Obligation.  Any Reimbursement Obligation for which the Borrower does not reimburse the Bank on the date specified in, and in accordance with, §4.2.

Voting Stock.  Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, limited liability company, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency.

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1.2.  Rules of Interpretation.

(a)           A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement.

(b)           The singular includes the plural and the plural includes the singular.

(c)           A reference to any law includes any amendment or modification to such law.

(d)           A reference to any Person includes its permitted successors and permitted assigns.

(e)           Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer.

(f)            The words “include”, “includes” and “including” are not limiting.

(g)           All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the State of Connecticut, have the meanings assigned to them therein, with the term “instrument” being that defined under Article 9 of the Uniform Commercial Code.

(h)           Reference to a particular “§” refers to that section of this Credit Agreement unless otherwise indicated.

(i)            The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement.

(j)            Unless otherwise expressly indicated, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding,” and the word “through” means “to and including.”

(k)           This Credit Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements are, however, cumulative and are to be performed in accordance with the terms thereof.

(l)            This Credit Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Bank and the Borrower and are the product of discussions and negotiations among all parties.  Accordingly, this Credit Agreement and the other Loan Documents are not intended to be construed against the Bank merely on account of the Bank’s involvement in the preparation of such documents.

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2.  THE REVOLVING CREDIT FACILITY.

2.1.  Commitment to Lend. Subject to the terms and conditions set forth in this Credit Agreement, the Bank agrees to lend to the Borrower and the Borrower may borrow, repay, and reborrow from time to time from the Closing Date up to but not including the Maturity Date upon notice by the Borrower to the Bank given in accordance with §2.6, such sums as are requested by the Borrower, provided that the sum of the outstanding amount of the Loans (after giving effect to all amounts requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time exceed the Commitment.  Each request for a Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in §11 and §12, in the case of the initial Loans to be made on the Closing Date, and §12, in the case of all other Loans, have been satisfied on the date of such request.

2.2.  Commitment Fee. The Borrower agrees to pay to the Bank a commitment fee calculated at the rate of one-quarter of one percent (0.25%) per annum of the average daily amount during each calendar quarter or portion thereof from the Closing Date to the Maturity Date by which the Commitment minus the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the outstanding amount of Loans during such calendar quarter.  The commitment fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter commencing on the first such date following the date hereof, with a final payment on the Maturity Date or any earlier date on which the Commitment shall terminate.

2.3.  Reduction of Commitment. The Borrower shall have the right at any time and from time to time upon three (3) Business Days prior written notice to the Bank to reduce by $100,000 or an integral multiple thereof or terminate entirely the Commitment, whereupon the Commitment shall be reduced in accordance with the amount specified in such notice or, as the case may be, terminated.  Upon the effective date of any such reduction or termination, the Borrower shall pay to the Bank the full amount of any commitment fee then accrued on the amount of the reduction.

2.4.  The Revolving Credit Note. The Loans shall be evidenced by a promissory note of the Borrower in the original principal amount of $19,380,000 (the “Note”), dated as of the Closing Date and completed with appropriate insertions.  The Borrower irrevocably authorizes the Bank to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal on the Bank’s Note, an appropriate notation on the Bank’s Note Record reflecting the making of such Loan or (as the case may be) the receipt of such payment.  The outstanding amount of the Loans set forth on the Bank’s Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to the Bank, but the failure to record, or any error in so recording, any such amount on the Bank’s Note Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Note to make payments of principal of or interest on the Note when due.

2.5.  Interest on Loans. Except as otherwise provided in §5.10,

(a)           Each Loan which is a Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the

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Interest Period with respect thereto at the rate per annum equal to the Base Rate plus the Applicable Margin.

(b)           Each Loan which is a LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the LIBOR Rate determined for such Interest Period plus the Applicable Margin.

(c)           The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto.

2.6.  Requests for Loans. The Borrower shall give to the Bank written notice (or telephonic notice confirmed in a writing) of each Loan requested hereunder (a “Loan Request”) (a) no later than 2:00 p.m. (Hartford time) on the proposed Drawdown Date of any Base Rate Loan and (b) no less than three (3) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR Rate Loan.  Each such notice shall specify (i) the principal amount of the Loan requested, (ii) the proposed Drawdown Date of such Loan, (iii) the Interest Period for such Loan, if a Libor Rate Loan, and (iv) the Type of such Loan.  Each Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Bank on the proposed Drawdown Date.  Each Loan Request shall be in a minimum aggregate amount of $100,000 or integral multiples of $25,000 in excess thereof.

2.7.  Conversion Options.

2.7.1.  Conversion to Different Type of Loan.The Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type, provided that (a) with respect to any such conversion of a Loan to a Base Rate Loan, the Borrower shall give the Bank written notice of such election no later than 2:00 p.m. (Hartford time) on the day of such election; (b) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Bank at least three (3) LIBOR Business Days prior written notice of such election; (c) with respect to any such conversion of a LIBOR Rate Loan into a Loan of another Type, such conversion shall only be made on the last day of the Interest Period with respect thereto and (d) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing.  All or any part of outstanding Loans of any Type may be converted into a Loan of another Type as provided herein, provided that (a) any partial conversion shall be in an aggregate principal amount of $100,000 or a whole multiple of $25,000 in excess thereof and (b) with respect to LIBOR Rate Loans, there shall be no more than six (6) separate Interest Periods in effect at any one time.  Each Conversion Request relating to the conversion of a Loan to a LIBOR Rate Loan shall be irrevocable by the Borrower.

2.7.2.  Continuation of Type of Loan.Any Loan of any Type may be continued as a Loan of the same Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in §2.7.1; provided that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest

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Period relating thereto ending during the continuance of any Default or Event of Default of which officers of the Bank active upon the Borrower’s account have actual knowledge.  In the event that the Borrower fails to provide any such notice with respect to the continuation of any LIBOR Rate Loan or as such, then such LIBOR Rate Loan shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto.

2.7.3.  LIBOR Rate Loans.Any conversion to or from LIBOR Rate Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all LIBOR Rate Loans having the same Interest Period shall not be less than $500,000 or a whole multiple of $50,000 in excess thereof.

3.  REPAYMENT OF THE REVOLVING CREDIT LOANS.

3.1.  Maturity. The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon.

3.2.  Mandatory Repayments of Loans. If at any time the sum of the outstanding amount of the Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Commitment, then the Borrower shall immediately pay the amount of such excess to the Bank for application:  first, to any Unpaid Reimbursement Obligations; second, to the Loans; and third, to provide to the bank cash collateral for Reimbursement Obligations as contemplated by §4.2(b) and (c).

3.3.  Optional Repayments of Loans. The Borrower shall have the right, at its election, to repay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium (but subject to §5.9).  The Borrower shall give the Bank, no later than 11:00 a.m., Hartford, Connecticut time, prior written notice of any proposed prepayment pursuant to this §3.3 of Base Rate Loans, and at least three (3) LIBOR Business Days notice of any proposed prepayment pursuant to this §3.3 of LIBOR Rate Loans, in each case specifying the proposed date of prepayment of Loans and the principal amount to be prepaid.  Each such partial prepayment of the Loans shall be in an integral multiple of $100,000, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of prepayment and shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans and then to the principal of LIBOR Rate Loans.

4.  LETTERS OF CREDIT.

4.1.  Letter of Credit Commitments.

4.1.1.  Commitment to Issue Letters of Credit.Subject to the terms and conditions hereof and the execution and delivery by the Borrower of a letter of credit application on the Bank’s customary form (a “Letter of Credit Application”), the Bank in reliance upon the representations and warranties of the Borrower contained herein, agrees, in its sole and absolute discretion, to issue, extend and renew for the account of the Borrower one or more standby letters of credit (individually, a “Letter

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of Credit”), in such form as may be requested from time to time by the Borrower and agreed to by the Bank; provided, however, that, after giving effect to such request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed $500,000 at any one time and (b) the sum of (i) the Maximum Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and (iii) the amount of all Loans outstanding shall not exceed the Commitment  Notwithstanding the foregoing, the Bank shall not issue any Letter of Credit to support or secure any Indebtedness of the Borrower or any of its Subsidiaries to the extent that such Indebtedness was incurred prior to the proposed issuance date of such Letter of Credit, unless in any such case the Borrower demonstrates to the satisfaction of the Bank that (x) such prior incurred Indebtedness were then fully secured by a prior perfected and unavoidable security interest in collateral provided by the Borrower or such Subsidiary to the proposed beneficiary of such Letter of Credit or (y) such prior incurred Indebtedness were then secured or supported by a letter of credit issued for the account of the Borrower or such Subsidiary and the reimbursement obligation with respect to such letter of credit was fully secured by a prior perfected and unavoidable security interest in collateral provided to the issuer of such letter of credit by the Borrower or such Subsidiary.

4.1.2.  Letter of Credit Applications.Each Letter of Credit Application shall be completed to the reasonable satisfaction of the Bank.  In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement, then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern.

4.1.3.  Terms of Letters of Credit.Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (a) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (b) have an expiry date no later than the date which is fourteen (14) days (or, if the Letter of Credit is confirmed by a confirmer or otherwise provides for one or more nominated persons, forty-five (45) days) prior to the Maturity Date.  Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs.

4.2.  Reimbursement Obligation of the Borrower. In order to induce the Bank to issue, extend and renew each Letter of Credit in the Bank’s sole and absolute discretion, the Borrower hereby agrees to reimburse or pay to the Bank, with respect to each Letter of Credit issued, extended or renewed by the Bank hereunder,

(a)           except as otherwise expressly provided in §4.2(b) and (c), on each date that any draft presented under such Letter of Credit is honored by the Bank, or the Bank otherwise makes a payment with respect thereto, (i) the amount paid by the Bank under or with respect to such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Bank in connection with any payment made by the Bank under, or with respect to, such Letter of Credit,

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(b)           upon the reduction (but not termination) of the Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Bank as cash collateral for all Reimbursement Obligations, and

(c)           upon the termination of the Commitment, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with §13, an amount equal to the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Bank as cash collateral for all Reimbursement Obligations.

Interest on any and all amounts remaining unpaid by the Borrower under this §4.2 at any time from the date such amounts become due and payable (whether as stated in this §4.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Bank on demand at the rate specified in §5.10 for overdue principal on the Loans.

4.3.  Letter of Credit Payments. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Bank shall notify the Borrower of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment.  The responsibility of the Bank to the Borrower shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit.

4.4.  Obligations Absolute. The Borrower’s obligations under this §4 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Bank or any beneficiary of a Letter of Credit.  The Borrower further agrees with the Bank that the Bank shall not be responsible for, and the Borrower’s Reimbursement Obligations under §4.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower against the beneficiary of any Letter of Credit or any such transferee.  The Bank shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit.  The Borrower agrees that any action taken or omitted by the Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon the Borrower and shall not result in any liability on the part of the Bank to the Borrower.

4.5.  Reliance by Issuer. To the extent not inconsistent with §4.4, the Bank shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be

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genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Bank.

4.6.  Letter of Credit Fee. The Borrower shall pay a fee (in each case, a “Letter of Credit Fee”) to the Bank in the amount of the Bank’s customary letter of credit fees per annum of the face amount of such Letter of Credit.  Such Letter of Credit Fees shall be due and payable quarterly in arrears.  In respect of each Letter of Credit, the Borrower shall also pay to the Bank, at such other time or times as such charges are customarily made by the Bank, the Bank’s customary issuance, amendment, negotiation or document examination and other administrative fees as in effect from time to time.

5.  CERTAIN GENERAL PROVISIONS.

5.1.  Closing Fee. On the Closing Date, the Borrower agrees to pay to the Bank a closing fee in the amount of $69,800.00.

5.2.  Funds for Payments.

5.2.1.  Payments to Bank.All payments of principal, interest, Reimbursement Obligations, commitment fees, Letter of Credit Fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Bank, at 777 Main Street, Hartford, Connecticut 06115 or at such other location in the Connecticut, area that the Bank may from time to time designate, in each case in immediately available Dollars, on or before 11:00 a.m. (Hartford, Connecticut time) on the due date thereof.  The Bank shall be entitled (but shall not be obligated) to charge any account of the Borrower with the Bank for any sum due and payable by the Borrower to the Bank hereunder or under any of the other Loan Documents.  All payments shall be applied first to the payment of all fees, expenses and other amounts due to the Bank (excluding principal and interest), then to accrued interest, and the balance on account of outstanding principal.

5.2.2.  No Offset, etc. All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding.  If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Bank, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Bank to receive the same net amount which it would have received on such due date had no such obligation been imposed upon the Borrower.  The Borrower will deliver promptly to the Bank certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document.

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5.3.  Computations. All computations of interest on the Loans and of commitment fees, Letter of Credit Fees or other fees shall, unless otherwise expressly provided herein, be based on a 360-day year and paid for the actual number of days elapsed.  Except as otherwise provided in the definition of the term “Interest Period” with respect to LIBOR Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension.  The outstanding amount of the Loans as reflected on the Note Record from time to time shall be considered correct and binding on the Borrower, absent manifest error.

5.4.  Inability to Determine LIBOR Rate. In the event, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Bank shall determine that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate that would otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan during any Interest Period, the Bank shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower) to the Borrower.  In such event (a) any Loan Request or Conversion Request with respect to LIBOR Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans, (b) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Base Rate Loan, and (c) the obligations of the Bank to make LIBOR Rate Loans shall be suspended until the Bank determines that the circumstances giving rise to such suspension no longer exist, whereupon the Bank shall so notify the Borrower.

5.5.  Illegality. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for the Bank to make or maintain LIBOR Rate Loans, the Bank shall forthwith give prompt notice of such circumstances to the Borrower and thereupon (a) the commitment of the Bank to make LIBOR Rate Loans or convert Loans of another Type to LIBOR Rate Loans shall forthwith be suspended and (b) the Bank’s Loans then outstanding as LIBOR Rate Loans, if any, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period as may be required by law.  The Borrower hereby agrees promptly to pay the Bank, upon demand by the Bank, any additional amounts necessary to compensate the Bank for any costs incurred by the Bank in making any conversion in accordance with this §5.5, including any interest or fees payable by the Bank to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder.

5.6.  Additional Costs, etc. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to the Bank by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall:

(a)           subject the Bank to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan

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Documents, any Letters of Credit, the Bank’s Commitment or the Loans (other than taxes based upon or measured by the income or profits of the Bank), or

(b)           materially change the basis of taxation (except for changes in taxes on income or profits) of payments to the Bank of the principal of or the interest on any Loans or any other amounts payable to the Bank under this Credit Agreement or any of the other Loan Documents, or

(c)           impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of the Bank, or

(d)           impose on the Bank any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, the Loans, the Bank’s Commitment, or any class of loans, letters of credit or commitments of which any of the Loans or the Bank’s Commitment forms a part, and the result of any of the foregoing is:

(i)            to increase the cost to the Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans or the Bank’s Commitment or any Letter of Credit, or

(ii)           to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to the Bank hereunder on account of the Bank’s Commitment, any Letter of Credit or any of the Loans, or

(iii)          to require the Bank to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by the Bank from the Borrower hereunder,

then, and in each such case, the Bank shall give prompt notice thereof to the Borrower, and the Borrower will, upon demand made by Bank at any time and from time to time and as often as the occasion therefor may arise, pay to the Bank such additional amounts as will be sufficient to compensate the Bank for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum.

5.7.  Capital Adequacy. If after the date hereof the Bank determines that (a) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (b) compliance by the Bank or any corporation controlling the Bank with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on the Bank’s commitment with

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respect to any Loans to a level below that which the Bank could have achieved but for such adoption, change or compliance (taking into consideration the Bank’s then existing policies with respect to capital adequacy and assuming full utilization of such entity’s capital) by any amount deemed by the Bank to be material, then the Bank shall notify the Borrower of such fact.  To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, the Borrower and the Bank shall thereafter attempt to negotiate in good faith, within thirty (30) days of the day on which the Borrower receives such notice, an adjustment payable hereunder that will adequately compensate the Bank in light of these circumstances.  If the Borrower and the Bank are unable to agree to such adjustment within thirty (30) days of the date on which the Borrower receives such notice, then commencing on the date of such notice (but not earlier than the effective date of any such increased capital requirement), the fees payable hereunder shall increase by an amount that will, in the Bank’s reasonable determination, provide adequate compensation.  The Bank shall allocate such cost increases among its customers in good faith and on an equitable basis.

5.8.  Certificate. A certificate setting forth any additional amounts payable pursuant to §§5.6 or 5.7 and a brief explanation of such amounts which are due, submitted by the Bank to the Borrower, shall be conclusive, absent manifest error, that such amounts are due and owing.

5.9.  Indemnity. The Borrower shall pay to Bank, upon request of Bank, such amount or amounts as shall be sufficient (in the reasonable opinion of Bank) to compensate it for any loss, cost, or expense incurred as a result of:  (a) any payment of a LIBOR Rate Loan on a date other than the last day of the Interest Period for such Loan; (b) any failure by Borrower to borrow a LIBOR Rate Loan on the date specified by Borrower’s written notice; and/or (c) any failure by Borrower to pay a LIBOR Rate Loan on the date for payment specified in Borrower’s written notice. Without limiting the foregoing, Borrower shall pay to Bank 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 LIBOR Rate Election (as defined below) as to which the prepayment is made, shall be subtracted from the LIBOR Rate 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 LIBOR 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 LIBOR Rate Election as to which prepayment is made.  The resulting amount shall be the yield maintenance fee due to Bank upon the prepayment of a LIBOR Rate Loan.  Each reference in this paragraph to “LIBOR Rate Election” shall mean the election by Borrower of the LIBOR Rate.  If by reason of an Event of Default, Bank elects to declare the Note to be immediately due and payable, then any yield maintenance fee with respect to a LIBOR Rate Loan shall become due and payable in the same manner as though Borrower had exercised such right of prepayment.

5.10.  Interest After Default.

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5.10.1.  Overdue Payments.If a payment of principal (but only with respect to principal due and owing on the Maturity Date) and/or interest due hereunder or under the Note is not made within ten (10) days of when due, the Borrower shall pay a late payment charge to the Bank equal to three and one-half percent (3.5%) of the amount then due and owing.  Nothing contained herein shall affect Bank’s right to demand the Obligations upon the occurrence of an Event of Default.

5.10.2.  Interest After Default.While a Default or Event of Default is continuing, amounts payable under any of the Loan Documents shall bear interest (compounded monthly and payable on demand) at a rate per annum which is equal to (i) the rate of interest in effect on such amounts immediately preceding such Default or Event of Default and (ii) two percent (2%) until such amount is paid in full or (as the case may be) such Default or Event of Default has been waived in writing by the Bank (after as well as before judgement).

6.  COLLATERAL SECURITY.

6.1.  Security of Borrower. The Obligations shall be secured by a perfected first priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in the Collateral, pursuant to the terms of the Security Documents.

7.  REPRESENTATIONS AND WARRANTIES.

The Borrower represents and warrants to the Bank as follows:

7.1.  Authority.

7.1.1.  Incorporation; Good Standing.The Borrower and its Subsidiaries (a) are corporations duly organized, validly existing and in good standing under the laws of their states of incorporation, (b) have all requisite corporate power to own their property and conduct their business as now conducted and as presently contemplated, and (c) are in good standing as foreign corporations, and are duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a Material Adverse Effect.

7.1.2.  Authorization.The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby (a) are within the corporate authority of such Person, (b) have been duly authorized by all necessary corporate proceedings, (c) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower or any of its Subsidiaries is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower or any of its Subsidiaries and (d) do not conflict with any provision of the corporate charter, bylaws, articles of organization or operating agreement of, or any agreement or other instrument binding upon, the Borrower or any of its Subsidiaries.

7.1.3.  Enforceability.The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or

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is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

7.2.  Governmental Approvals. The execution, delivery and performance by the Borrower and any of its Subsidiaries of this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than filing any Security Document to perfect the security interest granted therein and those already obtained.

7.3.  Title to Properties; Leases. Except as indicated on Schedule 7.3 hereto and as indicated on the title policies received by the Bank with respect to the Collateral, the Borrower and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens.

7.4.  Financial Statements and Projections.

7.4.1.  Fiscal Year.The Borrower and each of its Subsidiaries has a fiscal year which is 52 or 53 weeks ending on the Saturday nearest to November 30th of each calendar year.

7.4.2.  Financial Statements.There has been furnished to the Bank a consolidated balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date, and a consolidated statement of income of the Borrower and its Subsidiaries for the fiscal quarter then ended, certified by the Borrower’s Chief Financial Officer. Such balance sheet and statement of income have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Borrower and its Subsidiaries as at the close of business on the date thereof and the results of operations for the fiscal year then ended.  There are no contingent liabilities of the Borrower or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Borrower which were not disclosed or reserved against in such balance sheet or the notes related thereto.  The Bank acknowledges that financial statements of the Borrower issued prior to the Closing Date may require restatement.  This potential restatement would be for the amounts reported as equity income from Centaur and the related balance sheet effects.

7.5.  No Material Changes, etc. Since the Balance Sheet Date there has been no event or occurrence which has had a Material Adverse Effect.  Since the Balance Sheet Date, the Borrower has not made any Distributions.

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7.6.  Litigation. Except as set forth in Schedule 7.6 hereto, there are no actions, suits, proceedings or investigations of any kind pending or, to the Borrower’s knowledge, threatened against the Borrower or any of its Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, would, in the aggregate, have a Material Adverse Effect, or result in any substantial liability not adequately covered by insurance or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrower and its Subsidiaries, or which question the validity of this Credit Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto.

7.7.  No Materially Adverse Contracts, etc. Neither the Borrower nor any of its Subsidiaries is subject to any charter, corporate, or other legal restriction, or any judgment, decree, order, rule or regulation that has or will have in the future a Material Adverse Effect.  Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement that has or will have, in the judgment of the Borrower’s officers, a Material Adverse Effect.

7.8.  Compliance with Other Instruments, Laws, etc. Neither the Borrower nor any of its Subsidiaries is in violation of any provision of its charter documents, operating agreement, bylaws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, including, without limitation, ERISA, in any of the foregoing cases in a manner that would result in the imposition of substantial penalties or have a Material Adverse Effect.

7.9.  Tax Status. The Borrower and its Subsidiaries (a) have made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (b) have paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) have set aside on their books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrower know of no basis for any such claim.

7.10.  No Event of Default. No Default or Event of Default has occurred and is continuing.

7.11.  Intentionally Omitted.

7.12.  Absence of Financing Statements, etc. Except as described in the title policies with respect to the Collateral and except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of the Borrower or any of its Subsidiaries or any rights relating thereto.

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7.13.  Certain Transactions. Except as set forth on Schedule 7.13 and except for arm’s length transactions pursuant to which the Borrower or any of its Subsidiaries makes payments upon terms no less favorable than the Borrower or such Subsidiary could obtain from third parties, none of the officers, members, directors, or employees of the Borrower or any of its Subsidiaries is presently a party to any transaction with the Borrower or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, member, director or such employee or, to the knowledge of the Borrower, any corporation, limited liability company, partnership, trust or other entity in which any officer, member, director, or any such employee has a substantial interest or is an officer, member, director, trustee or partner.

7.14.  Use of Proceeds.

7.14.1.  General. The proceeds of the Loans shall be used (a) to refinance existing Indebtedness of the Borrower and Imperial to the Bank, (b) for real estate development by the Borrower, (c) for working capital and general corporate purposes of the Borrower and (d) to make capital contributions and/or loans to Imperial or any other Subsidiary Guarantor for the working capital and general corporate purposes of Imperial and such Subsidiary Guarantor; provided that no more than an amount equal to the Commitment outstanding at such time of determination minus $5,000,000 shall be used for the purposes set forth in clauses (a), (b) and (c) of this section 7.14.1.  The Borrower will obtain Letters of Credit solely for working capital and general corporate purposes.

7.14.2.  Regulations U and X. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any “margin security” or “margin stock” as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.

7.15.  Environmental Compliance. The Borrower has determined that:

(a)           neither the Borrower, its Subsidiaries nor any operator of the Collateral or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (hereinafter “Environmental Laws”), which violation would have a Material Adverse Effect;

(b)           neither the Borrower nor any of its Subsidiaries has received written notice from any third party including, without limitation, any federal, state or local governmental authority, (i) that any one of them has been identified by the United

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States Environmental Protection Agency (“EPA”) as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C. §6903(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws (“Hazardous Substances”) which any one of them has generated, transported or disposed of has been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that the Borrower or any of its Subsidiaries conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party’s incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances;

(c)           except as set forth on Schedule 7.15 attached hereto: (i) no portion of the Collateral has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Collateral; (ii) in the course of any activities conducted by the Borrower, its Subsidiaries or operators of its properties, no Hazardous Substances have been generated or are being used on the Collateral except in accordance with applicable Environmental Laws; (iii) there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the properties of the Borrower or its Subsidiaries, which releases would have a material adverse effect on the value of any of the Collateral or adjacent properties; (iv) to the best of the Borrower’s knowledge, there have been no releases on, upon, from or into any real property in the vicinity of any of the Collateral which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Collateral; and (v) in addition, any Hazardous Substances that have been generated on any of the Collateral have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower’s knowledge, operating in compliance with such permits and applicable Environmental Laws; and

(d)           Neither the Borrower nor any of its Subsidiaries is subject to any applicable environmental law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby with respect to the Collateral.

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7.16.  Subsidiaries, etc.Schedule 7.16 sets forth the Subsidiaries of the Borrower.  Except as set forth on Schedule 7.16 hereto, neither the Borrower nor any Subsidiary of the Borrower is engaged in any joint venture or partnership with any other Person.

7.17.  Bank Accounts.Schedule 7.17 sets forth the account numbers of all bank accounts of the Borrower or any of its Subsidiaries.

7.18.  Chief Executive Office. The chief executive office of the Borrower is at One Rockefeller Plaza, New York, New York 10020.  The Borrower keeps its books and records at 204 West Newberry Road, Bloomfield, Connecticut 06002.

7.19.  Insurance. The Borrower and each of its Subsidiaries maintain with financially sound and reputable insurers insurance with respect to their properties and businesses against such casualties and contingencies as are in accordance with sound business practices.

8.  AFFIRMATIVE COVENANTS OF THE BORROWER.

The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or the Bank has any obligation to make any Loans or any obligation to issue, extend or renew any Letters of Credit:

8.1.  Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the commitment fees and all other amounts provided for in this Credit Agreement and the other Loan Documents to which the Borrower or any of its Subsidiaries is a party, all in accordance with the terms of this Credit Agreement and such other Loan Documents.

8.2.  Maintenance of Office. The Borrower will maintain its chief executive office at One Rockefeller Plaza, New York, New York 10020 or at such other place in the United States of America as the Borrower shall designate upon written notice to the Bank, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents to which the Borrower is a party may be given or made.

8.3.  Records and Accounts. The Borrower will (a) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles, (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves, and (c) at all times engage PricewaterhouseCoopers LLP or any other nationally-recognized independent certified public accounting firm reasonably satisfactory to the Bank as the independent certified public accountants of the Borrower and its Subsidiaries and will not permit more than thirty (30) days to elapse between the cessation of such firm’s (or any successor firm’s) engagement as the independent certified public accountants of the Borrower and its Subsidiaries and the appointment in such capacity of a successor firm as shall be reasonably satisfactory to the Bank.

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8.4.  Financial Statements, Certificates and Information. The Borrower will deliver to the Bank:

(a)           as soon as practicable, but in any event not later than one hundred (100) days after the end of each fiscal year of the Borrower (unless the Borrower is granted an extension by the SEC for the filing of its 10K for such fiscal year, then for such additional period of time as granted in such extension but in any event not later than one hundred fifteen (115) days after the end of each fiscal year of the Borrower), the consolidated balance sheet of the Borrower and its Subsidiaries and the consolidating balance sheet of the Borrower and its Subsidiaries, each as at the end of such year, and the related consolidated statements of income and consolidated statements of cash flow and consolidating statements of income and consolidating statements of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated and consolidating statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and with respect to the consolidated balance sheet and related consolidated statements of income and consolidated statements of cash flow, certified without qualification by a nationally-recognized independent certified public accounting firm reasonably satisfactory to the Bank together with a written statement from such accountants to the effect that they have read a copy of this Credit Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided, that such accountants shall not be liable to the Bank for failure to obtain knowledge of any Default or Event of Default;

(b)           as soon as practicable, but in any event not later than fifty (50) days after the end of each of the fiscal quarters of the Borrower (unless the Borrower is granted an extension by the SEC for the filing of its 10Q for such fiscal quarter, then for such additional period of time as granted in such extension but in any event not later than sixty five (65) days after the end of each fiscal quarter of the Borrower), copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries and the unaudited consolidating balance sheet of the Borrower and its Subsidiaries, each as at the end of such quarter, and the related consolidated statements of income and consolidated statements of cash flow and consolidating statements of income and consolidating statements of cash flow for the portion of the Borrower’s fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officers of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries on the date thereof (subject to year-end adjustments and the absence of footnotes);

(c)           promptly upon the filing thereof, copies of all reports on Forms 10-K and 10-Q which the Borrower shall file with the Securities and Exchange Commission;

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(d)           with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officers of the Borrower in substantially the form of Exhibit A hereto (the “Compliance Certificate”) and setting forth in reasonable detail computations evidencing compliance with the covenants contained in §10 and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date;

(e)           not later than sixty (60) days after the commencement of each fiscal year, annual projections of the Borrower and its Subsidiaries for such fiscal year, updating those projections previously delivered to the Bank and prepared in form and detail consistent with those previously delivered to the Bank; and

(f)            from time to time such other financial data and information (including accountants, management letters) as the Bank may reasonably request.

8.5.  Notices.

8.5.1.  Defaults.The Borrower will promptly notify the Bank in writing of the occurrence of any Default or Event of Default.  If any Person shall give any notice or take any other action in respect of a Default under this Credit Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Borrower or any of its Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, the Borrower shall forthwith give written notice thereof to the Bank, describing the notice or action and the nature of the claimed Default.

8.5.2.  Environmental Events.The Borrower will promptly give notice to the Bank (a) of any material violation of any Environmental Law that the Borrower or any of its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (b) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a written notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that would have a Material Adverse Effect.

8.5.3.  Notification of Claim against Collateral.The Borrower will, promptly (but in any event within three (3) Business Days) upon becoming aware thereof, notify the Bank in writing of any setoff, claims (including, with respect to the Real Estate, environmental claims), withholdings or other defenses to which any of the Collateral, or the Bank’s rights with respect to the Collateral, are subject.

8.5.4.  Notice of Litigation and Judgments.The Borrower will, and will cause each of its Subsidiaries to, give notice to the Bank in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or becomes a party involving an uninsured claim against the Borrower or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect and stating the

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nature and status of such litigation or proceedings.  The Borrower will, and will cause each of its Subsidiaries to, give notice to the Bank, in writing, in form and detail satisfactory to the Bank, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Borrower or any of its Subsidiaries in an amount in excess of $100,000.

8.6.  Existence; Maintenance of Properties. The Borrower will do or cause to be done all things necessary in its reasonable business judgment to preserve and keep in full force and effect its corporate existence, rights and franchises and those of its Subsidiaries.  It (a) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (b) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (c) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in related businesses except, in the cases of clauses (a), (b) or (c) such failures that would not have a Material Adverse Effect; provided that nothing in this §8.6 shall prevent the Borrower from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of the Borrower, desirable in the conduct of its or their business and that do not in the aggregate have a Material Adverse Effect.

8.7.  Insurance. The Borrower will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Documents.

8.8.  Taxes. The Borrower will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided further that the Borrower and each Subsidiary of the Borrower will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor.

8.9.  Inspection of Properties and Books, etc. The Borrower shall permit the Bank or any of the Bank’s other designated representatives, to visit and inspect any of the Collateral of the Borrower or any of its Subsidiaries, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to

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be advised as to the same by, its and their officers, all at such reasonable times and intervals  after reasonable notice to the Borrower (unless a Default or Event of Default shall have occurred and be continuing, whereupon no such notice shall be required) as the Bank may reasonably request.

8.10.  Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will, and will cause each of its Subsidiaries to, comply with (a) the applicable laws and regulations wherever its business is conducted, including ERISA and all Environmental Laws, except where such noncompliance would not reasonably be expected to have a Material Adverse Effect, (b) the provisions of its charter documents, operating agreement, articles or organization and by-laws, (c) all agreements and instruments by which it or any of its properties may be bound, except where such noncompliance would not reasonably be expected to have a Material Adverse Effect and (d) all applicable decrees, orders, and judgments, except where such noncompliance would not reasonably be expected to have a Material Adverse Effect.  If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower or any of its Subsidiaries may fulfill any of their obligations hereunder or any of the other Loan Documents to which the Borrower or such Subsidiary is a party, the Borrower will, or (as the case may be) will cause such Subsidiary to, immediately take or cause to be taken all reasonable steps within the power of the Borrower or such Subsidiary to obtain such authorization, consent, approval, permit or license and furnish the Bank with evidence thereof.

8.11.  Use of Proceeds. The Borrower will use the proceeds of the Loans and obtain the Letters of Credit solely for the purposes set forth in §7.14.

8.12.  Depository Bank. The Borrower will, and will cause each of its Subsidiaries to, maintain its primary operating and depository bank account at the Bank.

8.13.  Further Assurances. The Borrower will, and will cause each of its Subsidiaries to, cooperate with the Bank and execute such further instruments and documents as the Bank shall reasonably request to carry out to its reasonable satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents.

9.  CERTAIN NEGATIVE COVENANTS OF THE BORROWER.

The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or the Bank has any obligation to make any Loans or any obligations to issue, extend or renew any Letters of Credit:

9.1.  Restrictions on Indebtedness. The Borrower will not, nor will it permit any of its Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than:

(a)           Indebtedness to the Bank arising under any of the Loan Documents;

(b)           endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business;

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(c)           Indebtedness in respect of Interest Rate Agreements;

(d)           Indebtedness incurred in connection with the acquisition after the date hereof of any real or personal property by the Borrower or such Subsidiary or under any Capitalized or Synthetic Leases, provided that the aggregate principal amount of such Indebtedness of the Borrower and its Subsidiaries shall not exceed the aggregate amount of $250,000 at any one time;

(e)           Non-Recourse Debt incurred after the Closing Date so long as prior to incurring such Indebtedness the Borrower has provided the Bank with evidence of compliance with the financial covenants set forth in §10 hereof both before and (on a pro forma basis, based on the most recent financial statements delivered to the Bank before the incurrence of such Indebtedness) after giving effect to incurring such Indebtedness;

(f)            Indebtedness existing on the date hereof and listed and described on Schedule 9.1 hereto and any refinancings, refundings, renewals or extensions thereof, provided, with respect to each such refinancing, refunding, renewal or extension, that the maximum aggregate principal amount of each such Indebtedness does not exceed the maximum principal amount of the refinanced, refunded, renewed or extended Indebtedness, is used for similar business purposes, and is not subject to restrictions on Distribution that are more restrictive than those to which the refinanced, refunded, renewed or extended Indebtedness was subject;

(g)           unsecured Indebtedness of the Borrower consisting of guaranties of Indebtedness incurred by its Subsidiaries permitted under §§9.1(d) and (f);

(h)           unsecured Indebtedness of the Borrower to its Subsidiaries not to exceed $500,000 in the aggregate at any time;

(i)            unsecured Indebtedness of the Borrower to Culbro in the form of a one time loan from Culbro to the Borrower in an amount not to exceed $5,000,000;

(j)            Subordinated Debt;

(k)           unsecured Indebtedness of the Borrower consisting of guaranties of Indebtedness incurred by its Subsidiaries permitted under §9.1(e) but only on terms and conditions reasonably satisfactory to the Bank; and

(l)            (i) unsecured Indebtedness of Imperial to the Borrower, (ii) unsecured Indebtedness of Subsidiary Guarantors (other than Imperial) to the Borrower not to exceed $1,000,000 to any individual Subsidiary Guarantor at any time and $5,000,000 to all such Subsidiary Guarantors in the aggregate at any time and (iii) other unsecured Indebtedness of Subsidiaries of the Borrower (other than Subsidiary Guarantors) to the Borrower not to exceed $1,000,000 to any individual Subsidiary of the Borrower at any time and $2,000,000 to all such Subsidiaries of the Borrower in the aggregate any time; provided that the amount of such Indebtedness outstanding at any time under clauses (ii) and (iii) hereof shall not exceed $5,000,000 in the aggregate at any time.

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9.2.  Restrictions on Liens. The Borrower will not, nor will it permit any of its Subsidiaries to, (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; (e) sell, assign, pledge or otherwise transfer any “receivables” as defined in clause (g) of the definition of the term “Indebtedness,” with or without recourse; or (f) enter into or permit to exist any arrangement or agreement, enforceable under applicable law, which directly or indirectly prohibits the Borrower or any of its Subsidiaries from creating or incurring any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest other than in favor of the Bank under the Loan Documents and other than customary anti-assignment provisions in leases and licensing agreements entered into by the Borrower or such Subsidiary in the ordinary course of its business, provided that the Borrower or any of its Subsidiaries may create or incur or suffer to be created or incurred or to exist:

(i)  liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue, except those being contested in good faith and by appropriate proceedings in accordance with the terms of this Credit Agreement;

(ii)  deposits or pledges made in connection with, or to secure payment of, workmen’s compensation, unemployment insurance, old age pensions or other social security obligations;

(iii)  liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties in existence less than 120 days from the date of creation thereof in respect of obligations not overdue;

(iv)  encumbrances on Real Estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord’s or lessor’s liens under leases to which the Borrower or a Subsidiary of the Borrower is a party, and other minor liens or encumbrances none of which in the opinion of the Borrower interferes materially with the use of the property affected in the ordinary conduct of business of the Borrower and its Subsidiaries, which defects do not have a Material Adverse Effect;

(v)  liens existing on the date hereof and listed on Schedule 9.2 hereto;

(vi)  purchase money security interests in or purchase money mortgages on real or personal property acquired after the date hereof to secure purchase money

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Indebtedness of the type and amount permitted by §9.1(d), incurred in connection with the acquisition of such property, which security interests or mortgages cover only the real or personal property so acquired and liens in favor of lessors under any Capitalized or Synthetic Lease on the assets subject to such Capitalized or Synthetic Lease permitted by §9.1(d);

(vii)  Non-Recourse Mortgages on Real Estate other than the Collateral to secure Non-Recourse Debt, provided that such mortgages do not secure any Indebtedness except for such Non-Recourse Debt. Upon ten (10) Business Days prior written notice by Borrower to Bank and so long as no Default or Event of Default has occurred and is continuing (or would result therefrom), the Bank agrees to release the lien and security interests of the applicable Mortgages and other Loan Documents on any Real Estate of the Borrower or any of its Subsidiaries to be secured by such Non-Recourse Mortgage.  Contemporaneously with any such release, the Commitment shall be automatically and permanently reduced by the applicable Commitment Reduction Amount;

(viii)  liens on each piece of Collateral which is Real Estate as and to the extent permitted by the Mortgage applicable thereto;

(ix)  liens on Real Estate other than Collateral consisting of leases entered into in the ordinary course of business consistent with past practices; and

(x)  liens in favor of the Bank under the Loan Documents.

9.3.  Restrictions on Investments. The Borrower will not, nor will it permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in:

(a)           marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower;

(b)           demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $1,000,000,000;

(c)           securities commonly known as “commercial paper” issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than “P 1” if rated by Moody’s Investors Service, Inc., and not less than “A 1” if rated by Standard and Poor’s Rating Group;

(d)           Investments consisting of the Guaranties;

(e)           extensions of trade credit in the ordinary course of business;

(f)            So long as no Default or Event of Default has occurred and is continuing, Investments by the Borrower in any Subsidiary consisting solely of transfers of Real Estate other than Collateral;

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(g)           So long as no Default or Event of Default has occurred and is continuing, Investments by the Borrower and/or any Subsidiary Guarantor in any Subsidiary Guarantor consisting solely of transfers of any Collateral so long as such Subsidiary Guarantor assumes all of the Borrower’s obligations under the Security Documents and Environmental Indemnity Agreement applicable to such Collateral;

(h)           an Investment by Culbro in the Borrower consisting of a one time loan by Culbro to the Borrower in an amount not to exceed $5,000,000;

(i)            Investments (other than transfers of Real Estate) (i) by the Borrower in Imperial, (ii) by the Borrower in an amount not to exceed $1,000,000 in any individual Subsidiary Guarantor (other than Imperial) at any time and in an aggregate amount not to exceed $5,000,000 in all Subsidiary Guarantors (other than Imperial) at any time and (iii) by the Borrower in an amount not to exceed $1,000,000 in any individual Subsidiary (other than Subsidiary Guarantors) at any time and in an aggregate amount not to exceed $2,000,000 in all Subsidiaries (other than Subsidiary Guarantors) at any time; provided, that the amount of Investments outstanding under clauses (ii) and (iii) hereof shall not exceed $5,000,000 in the aggregate at any time; and

(j)            Investments existing on the date hereof and listed on Schedule 9.3 hereto.

9.4.  Distributions. The Borrower will not make any Distributions; provided, that so long as no Default or Event of Default has occurred or is continuing (or would result therefrom), the Borrower may make Distributions during any fiscal quarter in an amount not to exceed fifty percent (50%) of the Borrower’s Consolidated Net Income for the immediately preceding fiscal quarter.

9.5.  Merger, Consolidation and Disposition of Assets.

9.5.1.  Mergers and Acquisitions.The Borrower will not, nor will it permit any of its Subsidiaries to, become a party to any merger or consolidation without the prior written consent of the Bank, such consent not to be unreasonably withheld, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices), except the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower, or the merger or consolidation of two or more Subsidiaries of the Borrower.

9.5.2.  Disposition of Assets.The Borrower will not, nor will it permit any of its Subsidiaries to, become a party to or agree to or effect any disposition of any assets; provided, that the Borrower and its Subsidiaries may dispose of assets for an amount equal to the fair value of such asset, determined by board of directors of the Borrower or such Subsidiary, in each case in the ordinary course of business consistent with past practices and the Borrower and any of its Subsidiaries may dispose of Collateral upon ten (10) Business Days prior written notice by Borrower to Bank so long as no Default or Event of Default has occurred and is continuing (or would result therefrom).  The Bank agrees to release its mortgage on any Real Estate

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of the Borrower or any of its Subsidiaries to be sold.  Contemporaneously with any such release, the Commitment shall be automatically and permanently reduced by the applicable Commitment Reduction Amount.  In addition to the foregoing, the Bank agrees that the Borrower shall have the right, without the consent of the Bank, to subdivide in accordance with all applicable laws and regulations (hereinafter, the “Subdivision”) the portions of the Real Estate located in Bloomfield, Connecticut and known by the street address of 310-350 West Newberry Road into separate and distinct parcels substantially in accordance with the plan of subdivision entitled “310-350 West Newberry Road  Subdivision Plan prepared for Griffin Land   Parcel 6002 — West Newberry Road & Griffin Road South  Bloomfield, Connecticut” prepared by Alford Associates, Inc. and dated January 21, 2002, Sheets 1 of 3, Sheet 2 of 3, and Sheet 3 of 3 (the “Subdivision Plan”), so that following the Subdivision, 310-350 West Newberry Road will be comprised of three separate and distinct parcels known by the street addresses of (i) 310-330 West Newberry Road (the “310-330 Parcel”), (ii) 340 West Newberry Road (the “340 Parcel”), and (iii) 350 West Newberry Road (the “350 Parcel”).  Notwithstanding the foregoing, the Borrower shall not be entitled to undertake the Subdivision if it would  cause the 310-330 Parcel or the 340 Parcel to be in violation or non-conformance in any respect with applicable planning, zoning, land use or building laws or regulations or if it would materially adversely affect access or utilities to the 310-330 Parcel or 340 Parcel.  The Bank further agrees that, upon the written request of the Borrower following the occurrence of the Subdivision, the Bank shall release the lien and security interests of its mortgage on the 350 Parcel and any easements and other rights appurtenant to the 350 Parcel granted pursuant to the Subdivision and benefiting the 350 Parcel.  The Bank agrees that there shall be no Commitment Reduction Amount attributable to the aforesaid release of the 350 Parcel.  The Bank further agrees that, in connection with the subsequent release of any or both of the 310-330 Parcel and/or the 340 Parcel as permitted by the terms of this Agreement, such release shall include a release of any lien the Bank may have on any easements and other rights appurtenant to and benefiting such released parcel.

9.6.  Sale and Leaseback. The Borrower will not, nor will it permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that the Borrower or any Subsidiary of the Borrower intends to use for substantially the same purpose as the property being sold or transferred without the prior written consent of the Bank, such consent not to be unreasonably withheld.

9.7.  Compliance with Environmental Laws. The Borrower will not, nor will it permit any of its Subsidiaries to, (a) use any of the Real Estate or any portion thereof for the handling, processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances on, upon or into the Real Estate or (e) otherwise conduct

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any activity at any Real Estate or use any Real Estate, in each case of clauses (a) through (e) hereof in any manner that would violate any Environmental Law or bring such Real Estate in violation of any Environmental Law.

9.8.  Fiscal Year.The Borrower will not, nor will it permit any of its Subsidiaries to, change the date of the end of its fiscal year from that set forth in §7.4.1.

9.9.  Transactions with Affiliates.Except as set forth on Schedule 7.13, the Borrower will not, nor will it permit any of its Subsidiaries to, engage in any transaction with any Affiliate (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Affiliate or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any such Affiliate has a substantial interest or is an officer, director, trustee or partner, on terms more favorable to such Person than would have been obtainable on an arm’s-length basis.

9.10.  Subordinated Debt.The Borrower will not, and will not permit any of its Subsidiaries to, amend, supplement or otherwise modify the terms of any of the Subordinated Debt or prepay, redeem or repurchase any of the Subordinated Debt without the prior written consent of the Bank.

10.  FINANCIAL COVENANTS OF THE BORROWER.

The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or the Bank has any obligation to make any Loans or any obligation to issue, extend or renew any Letters of Credit:

10.1.  Net Worth. As of the end of each fiscal quarter of the Borrower, the Borrower will not permit Consolidated Net Worth to be less than an amount equal to (a) the sum of (i) $95,000,000, plus (ii) on a cumulative basis, seventy-five percent (75%) of positive Consolidated Net Income for each fiscal year of the Borrower commencing with the fiscal year ending November 30, 2002, less (b) the aggregate of any reductions after the Balance Sheet Date in the value, as included in the Consolidated Total Assets of the Borrower’s Investment in Centaur and/or Linguaphone, including any reduction in the value of Centaur and/or Linguaphone as the result of any currency fluctuation after the Balance Sheet Date.

10.2.  Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed Charge Coverage Ratio to be less than (a) 1.10:1.00 as of the last day of each fiscal quarter of the Borrower ending on and after June 1, 2002 through and including March 1, 2003 and (b) 1.25:1.00 as of the last day of each fiscal quarter of the Borrower ending after March 1, 2003.

10.3.  Liabilities to Net Worth. The Borrower will not permit the ratio of (a) Consolidated Total Liabilities to (b) Consolidated Net Worth to exceed 0.75:1.00 at any time.

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10.4.  Consolidated Net Loss. The Borrower will not permit the Consolidated Net Loss to be greater than $1,500,000 for the fiscal quarter ending March 1, 2002.

11.  CLOSING CONDITIONS.

The obligations of the Bank to make the initial Loans and to issue any initial Letters of Credit shall be subject to the satisfaction of the following conditions precedent on or prior to the Closing Date:

11.1.  Loan Documents etc.

11.1.1.  Loan Documents.Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to the Bank.  The Bank shall have received a fully executed copy of each such document.

11.2.  Certified Copies of Charter Documents. The Bank shall have received from the Borrower and each of its Subsidiaries a copy, certified by a duly authorized officer or member of such Person, as the case may be, to be true and complete on the Closing Date, of each of (a) its charter or other incorporation documents as in effect on such date of certification, and (b) its by-laws as in effect on such date.

11.3.  Corporate Action. All corporate action necessary for the valid execution, delivery and performance by the Borrower and each of its Subsidiaries of this Credit Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Bank shall have been provided to the Bank.

11.4.  Validity of Liens. The Security Documents shall be effective to create in favor of the Bank a legal, valid and enforceable first (except for Permitted Liens entitled to priority under applicable law) security interest in and lien upon the Collateral.  All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Bank to protect and preserve such security interests shall have been duly effected.  The Bank shall have received evidence thereof in form and substance satisfactory to the Bank.

11.5.  Certificates of Insurance. The Bank shall have received a certificate of insurance from an independent insurance broker dated as of the Closing Date, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the insurance obtained in accordance with the provisions of the Security Documents.

11.6.  Opinion of Counsel. The Bank shall have received a favorable legal opinion addressed to the Bank, dated as of the Closing Date, in form and substance satisfactory to the Bank, from counsel to the Borrower and its Subsidiaries.

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12.  CONDITIONS TO ALL BORROWINGS.

The obligations of the Bank to make any Loan, and to issue, extend or renew any Letter of Credit, in each case whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent:

12.1.  Representations True; No Event of Default. Each of the representations and warranties of any of the Borrower and its Subsidiaries contained in this Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that do not have a Material Adverse Effect, and to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing.

12.2.  No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of the Bank would make it illegal for the Bank to make such Loan or to participate in the issuance, extension or renewal of such Letter of Credit or in the reasonable opinion of the Bank would make it illegal for the Bank to issue, extend or renew such Letter of Credit.

12.3.  Governmental Regulation. The Bank shall have received such statements in substance and form reasonably satisfactory to the Bank as the Bank shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System.

12.4.  Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Credit Agreement, the other Loan Documents and all other documents incident thereto shall be satisfactory in substance and in form to the Bank and its counsel, and the Bank and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Bank may reasonably request.

13.  EVENTS OF DEFAULT; ACCELERATION; ETC.

13.1.  Events of Default and Acceleration. If any of the following events (“Events of Default” or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, “Defaults”) shall occur:

(a)           the Borrower shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment;

(b)           the Borrower or any of its Subsidiaries shall fail to pay any interest on the Loans, the commitment fee, any Letter of Credit Fee or other sums due hereunder

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or under any of the other Loan Documents when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment and such failure continues for a period of five (5) Business Days;

(c)           the Borrower or any of its Subsidiaries shall fail to comply with any of its covenants contained in §§8.1, 8.2, 8.4, 8.5.1, 8.7, 8.8, 8.9, 8.11, 8.12, 9 or 10;

(d)           the Borrower or any of its Subsidiaries shall fail to comply with any of its covenants contained in §§8.5.2, 8.5.3 or 8.5.4 for fifteen (15) days after the sooner to occur of written notice of such failure has been given to the Borrower by the Bank or the date on which such failure first becomes known to any officer of the Borrower;

(e)           the Borrower or any of its Subsidiaries shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this §13.1) for sixty (60) days after the sooner to occur of written notice of such failure has been given to the Borrower by the Bank or the date on which such failure first becomes known to any officer of the Borrower;

(f)            any representation or warranty of the Borrower or any of its Subsidiaries in this Credit Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated;

(g)           the Borrower or any of its Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any Capitalized Leases in an amount in excess of $100,000, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received or in respect of any Capitalized Leases, in an amount in excess of $100,000, for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof;

(h)           the Borrower or any of its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or of any substantial part of the assets of the Borrower or any of its Subsidiaries or shall commence any case or other proceeding relating to the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries and the Borrower or any of its

42

Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within sixty (60) days following the filing thereof;

(i)            a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower or any Subsidiary of the Borrower in an involuntary case under federal bankruptcy laws as now or hereafter constituted;

(j)            there shall remain in force, undischarged, unsatisfied and unstayed, for more than sixty (60) days, whether or not consecutive, any final judgment against the Borrower or any of its Subsidiaries that, with other outstanding final judgments, undischarged, against the Borrower or any of its Subsidiaries exceeds in the aggregate $100,000;

(k)           if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded or the Bank’s security interests, mortgages or liens in a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Bank, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower or any of its Subsidiaries party thereto or any of their respective officers, members or stockholders, as the case may be, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof;

(l)            the Borrower or any of its Subsidiaries shall be indicted for a state or federal crime, or any civil or criminal action shall otherwise have been brought or threatened against the Borrower or any of its Subsidiaries, a punishment for which in any such case could include the forfeiture of any assets of the Borrower or such Subsidiary having a fair market value in excess of $100,000; or

(m)          a Change of Control shall occur;

then, and in any such event, so long as the same may be continuing, the Bank may, by notice in writing to the Borrower declare all amounts owing with respect to this Credit Agreement, the Note and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in §§13.1(h), 13.1(i) or 13.1(k), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Bank.

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13.2.  Termination of Commitment. If any one or more of the Events of Default specified in §13.1(h), §13.1(i) or §13.1(k) shall occur, any unused portion of the credit hereunder shall forthwith terminate and the Bank shall be relieved of all further obligations to make Loans to the Borrower and the Bank shall be relieved of all further obligations to issue, extend or renew Letters of Credit.  If any other Event of Default shall have occurred and be continuing, the Bank may, by notice to the Borrower, terminate the unused portion of the credit hereunder, and upon such notice being given such unused portion of the credit hereunder shall terminate immediately and the Bank shall be relieved of all further obligations to make Loans and issue, extend or renew Letters of Credit.  No termination of the credit hereunder shall relieve the Borrower or any of its Subsidiaries of any of the Obligations.

13.3.  Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Bank shall have accelerated the maturity of the Loans pursuant to §13.1, the Bank, if owed any amount with respect to the Loans or the Reimbursement Obligations, may, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to the Bank are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Bank.  No remedy herein conferred upon the Bank is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law.

14.  SETOFF.

The Borrower hereby grants to Bank a lien, security interest and right of setoff as security for all liabilities and obligations to Bank, 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 Bank or any entity under the control of FleetBoston Financial Corporation or in transit to any of them.  At any time, without demand or notice, the Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Loans.  ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

15.  EXPENSES AND INDEMNIFICATION.

15.1.  Expenses. The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in

44

respect thereto) payable by the Bank (other than taxes based upon the Bank’s net income) on or with respect to the transactions contemplated by this Credit Agreement (the Borrower hereby agreeing to indemnify the Bank with respect thereto), (c) the reasonable fees, expenses and disbursements of the Bank’s counsel or any local counsel to the Bank incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, any amendments, modifications, approvals, consents or waivers hereto or hereunder, or the cancellation of any Loan Document upon payment in full in cash of all of the Obligations or pursuant to any terms of such Loan Document for providing for such cancellation, (d) the fees, expenses and disbursements of the Bank or any of its affiliates reasonably incurred by the Bank or such affiliate in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, (e) any fees, costs, expenses and bank charges, including bank charges for returned checks, reasonably incurred by the Bank in establishing, maintaining or handling agency accounts, lock box accounts and other accounts for the collection of any of the Collateral; (f) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys’ fees and costs, which attorneys may be employees of the Bank, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by the Bank in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or any of its Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Bank’s or the Bank’s relationship with the Borrower or any of its Subsidiaries and (g) all reasonable fees, expenses and disbursements of the Bank incurred in connection with UCC searches, UCC filings or mortgage recordings. The amount of all such reasonable fees and expenses shall, until paid, bear interest at the rate applicable to principal hereunder (including any default rate) and be an Obligation secured by the Collateral.

15.2.  Indemnification. The Borrower agrees to indemnify and hold harmless the Bank and its affiliates from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (a) any actual or proposed use by the Borrower or any of its Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (b) the reversal or withdrawal of any provisional credits granted by the Bank upon the transfer of funds from lock box, bank agency or concentration accounts or in connection with the provisional honoring of checks or other items, (c) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower or any of its Subsidiaries comprised in the Collateral, (d) the Borrower or any of its Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents or (e) with respect to the Borrower and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such

45

investigation, litigation or other proceeding.  In litigation, or the preparation therefor, the Bank and its affiliates shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel.  If, and to the extent that the obligations of the Borrower under this §15.2 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law.

15.3.  Survival. The covenants contained in this §15 shall survive payment or satisfaction in full of all other Obligations.

16.  TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.

The Bank agrees, on behalf of itself and each of its affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Borrower or any of its Subsidiaries pursuant to this Credit Agreement that is identified by such Person as being confidential at the time the same is delivered to the Bank, provided that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this §16, (b) to the extent required by statute, rule, regulation or judicial process, (c) to counsel for the Bank, (d) to bank examiners or any other regulatory authority having jurisdiction over the Bank, or to auditors or accountants, (e) in connection with any litigation to which the Bank is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, (f) to a Subsidiary or affiliate of the Bank or (g) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant agrees to be bound by the provisions of §18.3.

17.  SURVIVAL OF COVENANTS, ETC.

All covenants, agreements, representations and warranties made herein, in the Note, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Bank, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Bank of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Credit Agreement or the Note or any of the other Loan Documents remains outstanding or the Bank has any obligation to make any Loans or the Bank has any obligation to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement.  All statements contained in any certificate or other paper delivered to the Bank at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower or such Subsidiary hereunder.  Upon receipt of an affidavit of an officer of Bank as to the loss, theft, destruction or mutilation of the Note 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

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of the 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.

18.  ASSIGNMENT AND PARTICIPATION.

18.1.  Conditions to Assignment by Bank. The Bank may assign all or a portion of its interests, rights and obligations under this Credit Agreement (including all or a portion of the Commitment and the same portion of the Loans at the time owing to it, the Note held by it and the risk relating to any Letters of Credit).  In addition, the Bank may at any time pledge or assign all or any portion of its rights under the Loan Documents including any portion of the 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 assignment or enforcement thereof shall release Bank from its obligations under any of the Loan Documents nor shall any such pledge or assignment be at any cost or expense to the Borrower or its Subsidiaries.

18.2.  Participations. The Bank may sell participations to one or more banks or other entities in all or a portion of the Bank’s rights and obligations under this Credit Agreement and the other Loan Documents; provided that any such sale or participation shall not affect the rights and duties of the Bank hereunder to the Borrower and shall be at no cost or expense to the Borrower and its Subsidiaries.

18.3.  Disclosure. The Borrower agrees that in addition to disclosures made in accordance with standard and customary banking practices the Bank may disclose information obtained by the Bank pursuant to this Credit Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (a) to treat in confidence such information unless such information otherwise becomes public knowledge, (b) not to disclose such information to a third party, except as required by law or legal process and (c) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation.

18.4.  Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of the Bank.

19.  NOTICES, ETC.

Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Note or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows:

(a)           if to the Borrower, at 90 Salmon Brook Street, Granby, Connecticut  06035, Attention: Anthony Galici, or at such other address for notice as the Borrower shall last have furnished in writing to the Person giving the notice; and

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(b)           if to the Bank, at 777 Main Street, Hartford, Connecticut 06115, Attention: Matthew E. Hummel, Senior Vice President, or such other address for notice as the Bank shall last have furnished in writing to the Person giving the notice.

Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof.

20.  GOVERNING LAW.

THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF CONNECTICUT AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF CONNECTICUT (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).  THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CONNECTICUT OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN §19.  THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

21.  HEADINGS.

The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof.

22.  COUNTERPARTS.

This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument.  In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

23.  ENTIRE AGREEMENT, ETC.

The Loan Documents are intended by the parties as the final, complete and exclusive statement of the transactions evidenced by the Loan Documents. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superceded by the Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in the Loan Documents.  Neither this Credit

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Agreement, nor any of the other Loan Documents or any term hereof or thereof may be changed, waived, discharged or terminated, except as provided in §25.

24.  WAIVER OF JURY TRIAL.

BORROWER AND BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF BANK RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.  THE BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK TO ACCEPT THIS CREDIT AGREEMENT AND MAKE THE LOANS.

25.  CONSENTS, AMENDMENTS, WAIVERS, ETC.

Any consent or approval required or permitted by this Credit Agreement to be given by the Bank may be given, and any term of this Credit Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower or any of its Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrower and the written consent of the Bank.  No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon.  No course of dealing or delay or omission on the part of the Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto.  No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances.

26.  PREJUDGMENT REMEDY WAIVER.

THE BORROWER ACKNOWLEDGES THAT THE FINANCING EVIDENCED HEREBY IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES.  THE BORROWER HEREBY WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING OR

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COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE BANK MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER.  MORE SPECIFICALLY, THE BORROWER ACKNOWLEDGES THAT THE BANK’S ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT. §52-278F, ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER.  THE BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE BANK ACKNOWLEDGES BORROWER’S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.  THE BORROWER FURTHER WAIVES ITS RIGHTS TO REQUEST THAT BANK POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT THE BORROWER AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY BANK.

27.  USURY.

All agreements between the Borrower and the Bank 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 the Bank 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 Credit 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 the Borrower and the Bank in the execution, delivery and acceptance of this Credit 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 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 the Bank 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 the Borrower and the Bank.

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28.  SEVERABILITY.

The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction.

IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as of the date first set forth above.

GRIFFIN LAND & NURSERIES, INC.
By:	/s/ Anthony J. Galici
	Anthony J. Galici Vice President 204 West Newberry Road Bloomfield, CT  06002
FLEET NATIONAL BANK
By:	/s/ Matthew E. Hummel
	Matthew E. Hummel Senior Vice President

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EX-23.2

Exhibit 23.2

EXHIBIT 23.2 REPORT OF INDEPENDENT ACCOUNTANTS ON

FINANCIAL STATEMENT SCHEDULES

To the Stockholders and Directors of Griffin Land & Nurseries, Inc.

            Our audits of the consolidated financial statements referred to in our report dated February 22, 2002 appearing in the 2001 Annual Report to Stockholders of Griffin Land & Nurseries, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a)(2) of the Form 10-K.  In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/  PricewaterhouseCoopers LLP

February 22, 2002

Hartford, Connecticut