-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NwRSuee8dlnXKPWrMVzMrHjbn0f/biavqGnCfpPZBGsotdnXZH97fdBAMC+KW7Br 3oPqEkl8oEq8L7uKB37x2Q== 0000927016-99-001828.txt : 19990507 0000927016-99-001828.hdr.sgml : 19990507 ACCESSION NUMBER: 0000927016-99-001828 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19990415 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIGHT RESOURCE CORP CENTRAL INDEX KEY: 0000895651 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HEALTH SERVICES [8000] IRS NUMBER: 043181524 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21068 FILM NUMBER: 99612037 BUSINESS ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 BUSINESS PHONE: 5084296916 MAIL ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 FORMER COMPANY: FORMER CONFORMED NAME: NEWVISION TECHNOLOGY INC DATE OF NAME CHANGE: 19940224 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 ______________ Date of Report (Date of earliest event reported): April 15, 1999 -------------- Sight Resource Corporation -------------------------- (Exact name of registrant as specified in its charter) Delaware 0-21068 04-3181524 - ------------------ --------------------- --------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 100 Jeffrey Avenue, Holliston, Massachusetts 01746 -------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (508) 429-6916 -------------- - -------------------------------------------------------------------------------- Sight Resource Corporation Index Item Page No. ----------------------------------------------- -------- Item 2. Acquisition or Disposition of Assets 3 Item 5. Other Events 3 Item 7. Financial Statements and Exhibits 4 Item 8. Change in Fiscal Year 5 Signatures 6 Exhibit Index 7 2 Item 2. Acquisition or Disposition of Assets. On April 22, 1999, a wholly-owned subsidiary of the Registrant, Kent Acquisition Corporation ("KAC"), completed its acquisition of all of the issued and outstanding shares of capital stock of Kent Optical Company, a Michigan corporation ("Kent"), Custom Optics, Inc., a Michigan corporation ("Custom"), Kent-N.W. Grand Rapids, Inc., a Michigan corporation ("Kent-N.W."), Kent- Hackley, Inc., a Michigan corporation ("Kent-Hackley"), Source Optical Supply, Inc., a Michigan corporation ("Source," and collectively with Kent, Custom, Kent-N.W. and Kent-Hackley, the "Companies"), pursuant to a Stock Purchase and Sale Agreement (the "Purchase Agreement") by and among KAC, the Registrant, the Companies and the stockholders of the Companies dated as of April 1, 1999 (the "Acquisition"). In consideration for all the issued and outstanding stock of the Companies, KAC paid $5,200,000 in cash provided pursuant to a term loan from Fleet National Bank, more particularly described in Item 5 to this Form 8-K, issued promissory notes in the aggregate amount of $1,000,000 and arranged for the issuance of 160,000 unregistered shares of Common Stock of the Registrant. The Companies are privately held primary eye care chains that operate eye care centers in Michigan. The Registrant intends to continue the business operated by the Companies. The purchase price for the Acquisition was determined by negotiation between the parties based , in part, upon a multiple of the Companies' earnings. This Acquisition was accounted for under the purchase method of accounting. The Purchase Agreement and the press release dated April 23, 1999, filed as Exhibits 2.1 and 99.8, respectively, are incorporated herein by reference. Item 5. Other Events. On April 15, 1999, the Registrant entered into a Loan Agreement (the "Loan Agreement") with Fleet National Bank (the "Bank") pursuant to which the Registrant may borrow up to $7,000,000 on a term loan basis, up to $3,000,000 on a revolving credit basis and up to $10,000,000 on an acquisition credit basis, subject to certain performance criteria, which loans are secured by all of the assets of the Registrant and its wholly-owned subsidiaries. On April 22, 1999, the Registrant borrowed $7,000,000 pursuant to the term loan and $975,000 pursuant to the revolving line of credit to refinance existing debt and finance the acquisition of the Companies by KAC, a wholly owned subsidiary of the Registrant. Other amounts borrowed under the Loan Agreement in the future are expected to be used to finance future acquisitions, provide ongoing working capital and for other general corporate purposes. The Loan Agreement and the press release dated April 23, 1999, filed as Exhibits 99.1 and 99.9, respectively, are incorporated herein by reference. 3 Item 7. Financial Statements and Exhibits. (a) Financial statements of businesses acquired. The financial statements of ------------------------------------------- the businesses acquired by the Registrant, as described in Item 2 of this Form 8-K, are not included herein. The Registrant intends to file such financial statements in an amendment to this Form 8-K not later than 60 days after May 7, 1999. (b) Pro forma financial information. The pro forma financial information of ------------------------------- the businesses acquired by the Registrant, as described in Item 2 of this Form 8-K, are not included herein. The Registrant intends to file such pro forma financial information in an amendment to this Form 8-K not later than 60 days after May 7, 1999. (c) Exhibits. -------- Exhibit No. Description ----------- ----------- 2.1 Stock Purchase and Sale Agreement by and among Kent Optical Company, Custom Optics, Inc., Kent-N.W. Grand Rapids, Inc., Kent-Hackley, Inc., Source Optical Supply, Inc., the stockholders of such companies, Kent Acquisition Corporation and Sight Resource Corporation, dated as of April 1, 1999. 99.1 Loan Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.2 $7,000,000 Term Loan Note between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.3 $3,000,000 Secured Revolving Line Note between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.4 $10,000,000 Secured Acquisition Term Note between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.5 Borrower Security Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.6 Borrower Stock Pledge Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.7 Trademark Security Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 4 99.8 Press Release dated April 23, 1999, re: Acquisition. 99.9 Press Release dated April 23, 1999, re: Loan Agreement. Item 8. Change in Fiscal Year. On April 22, 1999, the Board of Directors of the Registrant authorized a change in the Registrant's fiscal year end from the end of the calendar year (December 31) to the last Saturday of the calendar year which, for the current fiscal year, will be December 25, 1999. The transition period covering such change in fiscal year end will be covered by the Registrant's Form 10-Q for the first quarter of 1999. 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SIGHT RESOURCE CORPORATION Date: May 4, 1999 By: /s/ William T. Sullivan ----------------------- William T. Sullivan President 6 EXHIBIT INDEX ------------- Exhibit Number Description - ------ ----------- 2.1 Stock Purchase and Sale Agreement by and among Kent Optical Company, Custom Optics, Inc., Kent-N.W. Grand Rapids, Inc., Kent-Hackley, Inc., Source Optical Supply, Inc., the stockholders of such companies, Kent Acquisition Corporation and Sight Resource Corporation, dated as of April 1, 1999. 99.1 Loan Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.2 $7,000,000 Term Loan Note between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.3 $3,000,000 Secured Revolving Line Note between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.4 $10,000,000 Secured Acquisition Term Note between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.5 Borrower Security Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.6 Borrower Stock Pledge Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.7 Trademark Security Agreement by and between Sight Resource Corporation and Fleet National Bank, dated as of April 15, 1999. 99.8 Press Release dated April 23, 1999, re: Acquisition. 99.9 Press Release dated April 23, 1999, re: Loan Agreement. 7 EX-2.1 2 STOCK PURCHASE AND SALES AGREEMENT EXHIBIT 2.1 ================================================================================ STOCK PURCHASE AND SALE AGREEMENT By and Among KENT ACQUISITION CORP., KENT OPTICAL COMPANY, CUSTOM OPTICS, INC., KENT-N.W. GRAND RAPIDS, INC., KENT-HACKLEY, INC. AND SOURCE OPTICAL SUPPLY, INC. and THE STOCKHOLDERS OF KENT OPTICAL COMPANY, CUSTOM OPTICS, INC., KENT-N.W. GRAND RAPIDS, INC., KENT-HACKLEY, INC. AND SOURCE OPTICAL SUPPLY, INC. ________________________ dated as of April 1, 1999 =============================================================================== TABLE OF CONTENTS PAGE ---- ARTICLE I PURCHASE AND SALE OF THE SHARES............................... 2 SECTION 1.01 Purchase and Sale of the Shares....................... 2 SECTION 1.02 Purchase Price........................................ 3 SECTION 1.03 Purchase Price Adjustments............................ 4 SECTION 1.04 Closing............................................... 5 SECTION 1.05 Further Assurances.................................... 5 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS................ 5 SECTION 2.01 Title to Shares....................................... 6 SECTION 2.02 Seller's Authority to Execute and Perform Agreement..................................... 6 SECTION 2.03 Purchase For Investment; Residence.................... 6 SECTION 2.04 Capitalization........................................ 7 SECTION 2.05 Organization and Qualification........................ 7 SECTION 2.06 Subsidiaries.......................................... 7 SECTION 2.07 Corporate Power and Authority......................... 7 SECTION 2.08 Validity, Etc......................................... 8 SECTION 2.09 Financial Statements.................................. 8 SECTION 2.10 Absence of Undisclosed Liabilities.................... 8 SECTION 2.11 Absence of Adverse Change; Conduct of Business.............................................. 9 SECTION 2.12 Inventories........................................... 10 SECTION 2.13 Receivables........................................... 10 SECTION 2.14 Taxes................................................. 10 SECTION 2.15 Litigation............................................ 11 SECTION 2.16 Certain Practices..................................... 12 SECTION 2.17 Compliance with Law................................... 12 SECTION 2.18 Licenses and Permits.................................. 12 SECTION 2.19 Labor and Employee Relations.......................... 12 SECTION 2.20 Certain Employees..................................... 12 SECTION 2.21 Employee Benefits..................................... 13 SECTION 2.22 Tangible Properties................................... 13 SECTION 2.23 Owned Premises........................................ 14 SECTION 2.24 Leased Premises....................................... 15 SECTION 2.25 Environmental Matters................................. 15 SECTION 2.26 Insurance............................................. 15 SECTION 2.27 Outstanding Commitments............................... 15 SECTION 2.28 Intellectual Property................................. 16 SECTION 2.29 Significant Customers and Suppliers................... 16 SECTION 2.30 Banks, Brokers and Proxies............................ 16 SECTION 2.31 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons......................... 16 SECTION 2.32 Transactions With Affiliates.......................... 17 SECTION 2.33 Records............................................... 17 i TABLE OF CONTENTS PAGE ---- SECTION 2.34 Medicare and Medicaid Programs........................ 17 SECTION 2.35 Fraud and Abuse....................................... 17 SECTION 2.36 Disclosure............................................ 17 SECTION 2.37 Year 2000 Compliance.................................. 18 SECTION 2.38 Dissolution of Jackson Optical, Inc................... 18 ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND SRC............. 18 SECTION 3.01 Organization.......................................... 18 SECTION 3.02 Buyer Power and Authority............................. 18 SECTION 3.03 Validity, Etc......................................... 18 SECTION 3.04 Financial Statements of SRC........................... 19 SECTION 3.05 Absence of Material Adverse Change.................... 19 SECTION 3.06 The Payment Shares.................................... 19 SECTION 3.07 SRC SEC Documents..................................... 19 ARTICLE IV COVENANTS OF THE SELLERS..................................... 20 SECTION 4.01 Best Efforts Cooperation.............................. 20 SECTION 4.02 Access................................................ 20 SECTION 4.03 Insurance............................................. 20 SECTION 4.04 Compliance with Laws.................................. 20 SECTION 4.05 Keeping of Books and Records.......................... 20 SECTION 4.06 Actions Prior to Closing.............................. 21 SECTION 4.07 Notice of Changes..................................... 21 SECTION 4.08 Preservation of Business.............................. 21 SECTION 4.09 Litigation............................................ 21 SECTION 4.10 Continued Effectiveness of Representations and Warranties........................ 21 SECTION 4.11 No Negotiations....................................... 22 SECTION 4.12 Resignations.......................................... 22 ARTICLE V COVENANTS OF THE BUYER AND SRC................................ 22 SECTION 5.01 Cooperation........................................... 22 SECTION 5.02 Continued Effectiveness of Representations and Warranties........................ 22 SECTION 5.03 Registration of Shares................................ 22 ARTICLE VI MUTUAL COVENANTS............................................. 22 SECTION 6.01 Non-Competition....................................... 23 SECTION 6.02 Leases................................................ 23 SECTION 6.03 Reserved.............................................. 23 SECTION 6.04 Employment Agreement.................................. 23 ARTICLE VII CONDITIONS TO THE BUYER'S OBLIGATIONS....................... 23 SECTION 7.01 Consents.............................................. 23 SECTION 7.02 Representations and Warranties True................... 23 SECTION 7.03 Performance........................................... 23 SECTION 7.04 No Adverse Change..................................... 24 SECTION 7.05 Opinion of Counsel.................................... 24 SECTION 7.06 Resignations.......................................... 24 SECTION 7.07 No Actions, Suits or Proceedings...................... 24 SECTION 7.08 Investigation Satisfactory............................ 24 ii TABLE OF CONTENTS PAGE ---- SECTION 7.09 Management Agreements................................. 24 SECTION 7.10 Closing Documents..................................... 24 SECTION 7.11 No Material Adverse Economic Event.................... 25 SECTION 7.12 Financing Commitment.................................. 25 SECTION 7.13 Tax and Accounting.................................... 25 ARTICLE VIII CONDITIONS TO THE SELLERS OBLIGATIONS...................... 25 SECTION 8.01 Representations and Warranties to be True and Correct...................................... 25 SECTION 8.02 Performance........................................... 25 SECTION 8.03 No Actions, Suits or Proceedings...................... 25 SECTION 8.04 Closing Documents..................................... 26 SECTION 8.05 Tax and Accounting.................................... 26 SECTION 8.06 Other Agreements...................................... 26 SECTION 7.07 No Actions, Suits or Proceedings...................... 26 SECTION 8.08 Investigation Satisfactory............................ 26 SECTION 8.09 No Material Adverse Economic Event.................... 26 ARTICLE IX INDEMNIFICATION.............................................. 26 SECTION 9.01 Survival.............................................. 26 SECTION 9.02 Sellers' Indemnification of Buyer..................... 27 SECTION 9.03 Indemnification by Buyer.............................. 27 SECTION 9.04 Claims for Indemnification............................ 27 ARTICLE X TERMINATION................................................... 28 SECTION 10.01 Termination.......................................... 28 SECTION 10.02 Effect of Termination................................ 30 ARTICLE XI SRC GUARANTEE................................................ 30 SECTION 11.01 Guarantee............................................ 30 SECTION 11.02 Reserved............................................. 31 SECTION 11.03 Certain Bankruptcy Events............................ 31 ARTICLE XII MISCELLANEOUS............................................... 31 SECTION 12.01 Notices.............................................. 31 SECTION 12.02 Entire Agreement..................................... 32 SECTION 12.03 Modifications and Amendments......................... 32 SECTION 12.04 Waivers and Consents................................. 32 SECTION 12.05 Assignment........................................... 33 SECTION 12.06 Parties in Interest.................................. 33 SECTION 12.07 Governing Law........................................ 33 SECTION 12.08 Arbitration.......................................... 33 SECTION 12.09 Severability......................................... 33 SECTION 12.10 Interpretation....................................... 33 SECTION 12.11 Headings and Captions................................ 34 SECTION 12.12 Enforcement.......................................... 34 SECTION 12.13 Reliance............................................. 34 SECTION 12.14 Expenses............................................. 34 SECTION 12.15 No Broker or Finder.................................. 34 SECTION 12.16 Publicity............................................ 34 SECTION 12.17 Confidentiality...................................... 35 SECTION 12.18 Counterparts......................................... 35 iii Exhibits - -------- 1.02(a) Form of Escrow Agreement 1.02(b) Form of Promissory Note 6.01 Form of Non-Competition Agreement 6.02 Form of Real Estate Lease 6.04(a) Form of Employment Agreement (Westra) 6.04(b) Form of Employment Agreement (Cress) 6.04(c) Form of Employment Agreement (Almy) 6.04(d) Form of Employment Agreement (Burmeister) 7.05 Form of Opinion of McNeil Grafton Schedules - --------- 1.02 Purchase Price Allocation 2.01 Title to Shares 2.04 Capitalization 2.08 Validity, etc. 2.09 Financial Statement 2.11 Absence of Adverse Change; Conduct of Business 2.14 Taxes 2.15 Litigation 2.18 Licenses and Permits 2.20 Certain Employees 2.21 Employee Benefits 2.22 Tangible Properties 2.23 Owned Premises 2.24 Leased Premises 2.26 Insurance 2.27 Outstanding Commitments 2.28 Intellectual Property 2.29 Customers and Suppliers 2.30 Banks, Brokers and Proxies 2.31 Guaranties of Indebtedness of Other Persons 2.32 Transactions with Affiliates 2.37 Year 2000 Compliance STOCK PURCHASE AND SALE AGREEMENT This Stock Purchase and Sale Agreement (this "Agreement") is entered into as of the 1st day of April, 1999 by and among Kent Acquisition Corp. (the "Buyer"), a Delaware corporation and wholly owned subsidiary of Sight Resource Corporation, a Delaware Corporation ("SRC"), SRC (with respect to certain of the provisions herein), Kent Optical Company, a Michigan corporation ("Kent"), Custom Optics, Inc., a Michigan corporation ("Custom"), Kent - N.W. Grand Rapids, Inc., a Michigan corporation ("Kent - N.W."), Kent-Hackley, Inc., a Michigan corporation ("Kent Hackley") and Source Optical Supply, Inc., a Michigan corporation ("Source" and collectively with Kent, Custom, Kent - N.W. and Kent-Hackley, the "Companies"), and Timothy D. Westra ("Westra"), John C. Cress ("Cress"), Gerald Almy ("Almy"), Steven Burmeister ("Burmeister"), Dennis Toussaint ("Toussaint") and BACOVAST, L.L.C. ("BACOVAST" and collectively with Westra, Cress, Almy, Burmeister and Toussaint, the "Sellers"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Sellers are the owners of all of the issued and outstanding shares of capital stock of every kind and description of the Companies (said shares being herein referred to as the "Shares"); and WHEREAS, the Sellers desire to sell the Shares and the Buyer desires to purchase the Shares upon the terms and conditions set forth herein; and WHEREAS, the Buyer, the Companies and the Sellers desire to enter into certain other agreements for their mutual benefit; NOW THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, intending to be legally bound, the parties hereby agree as follows: ARTICLE I PURCHASE AND SALE OF THE SHARES --------- ------------------------------- SECTION 1.01 Purchase and Sale of the Shares. On the basis of the ------------------------------- representations, warranties and undertakings set forth in this Agreement, and on the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined in Section 1.04), each Seller shall sell his, her or its Shares to the Buyer, and the Buyer shall purchase such Shares from each Seller, free and clear of all claims, charges, liens, contracts, rights, options, security interests, mortgages, encumbrances and restrictions of every kind and nature (collectively, the "Claims"). SECTION 1.02 Purchase Price. The purchase price for the Shares (the -------------- "Purchase Price") is the amount per Share set forth on Schedule 1.02, for an ------------- aggregate of $7,000,000 for all of the 2 Shares, which will be paid as follows: (a) $5,200,000, subject to adjustment herein, will be paid by wire transfer at the Closing in accordance with instructions provided by the Sellers (the "Cash Portion"), (b) $175,000 will be deposited in escrow (the "Escrow Fund") from the proceeds of the Cash Adjustment (as defined in Section 1.03(b) hereto) pursuant to an escrow agreement (the "Escrow Agreement") in substantially the form of Exhibit 1.02(a) hereto to --------------- facilitate any adjustment of the Purchase Price pursuant to Section 1.03(a) herein, provided, however, in the event that the proceeds of the Cash -------- Adjustment (as defined in Section 1.03 hereto) are insufficient to fully fund the Escrow Fund, an amount equal to the deficiency in the Escrow Fund shall be deducted from the Cash Portion and shall be deposited into the Escrow Fund pursuant to the Escrow Agreement, (c) Buyer will execute and deliver a promissory note (the "Note") in the form of Exhibit 1.02(b) --------------- attached hereto to each of Westra and Cress, which together will amount to an aggregate principal amount of $1,000,000, and (d) Buyer will arrange for the issuance by SRC to each of Westra and Cress of an amount of shares that will together amount to an aggregate of 160,000 unregistered shares (the "Payment Shares") of the Common Stock, par value $.01 per share of SRC (the "SRC Common Stock"). Unless the per share Market Price, as defined below, reaches $5.00 during any period of time between the first anniversary of the Closing and the second anniversary of the Closing each of Westra and Cress shall be entitled to receive additional consideration in an amount equal to (a) the difference between $5.00 and the greater of (i) the Market Price on the Closing Date or (ii) the Market Price on the second anniversary of the Closing Date, multiplied by (b) the number of Payment Shares then held by each of Westra and Cress (the "Make Whole Payment"). At the Buyer's sole discretion, the Make Whole Payment may be satisfied by the Buyer in cash or by the issuance of additional unregistered shares of SRC Common Stock valued at the Market Price on the second anniversary of the Closing Date and equal to the cash value of the Make Whole Payment (the "Make Whole Shares"). In the event that the Make Whole Payment is satisfied by Make Whole Shares and unless the per share Market Price reaches $5.00 during any period of time between the third anniversary of the Closing and the fourth anniversary of the Closing, each of Westra and Cress shall be entitled to receive additional consideration in the form of a cash payment (the "Second Make Whole Payment"), equal to (x) the difference between $5.00 and the greater of (A) the Market Price on the Closing Date or (B) the Market Price on the fourth anniversary of the Closing Date, multiplied by (y) the number of Payment Shares and Make Whole Shares then held by each of Westra and Cress; provided, however, the Second Make Whole Payment shall not exceed an aggregate of fifty thousand dollars ($50,000) to each of Westra and Cress. In the event that (1) either of Westra or Cress sell Payment Shares or Make Whole Shares at a per share purchase price in excess of $5.00 or (2) the per share market price of the SRC Common Stock exceeds $5.00 at any time between the first anniversary of the Closing and the second anniversary of the Closing or between the third anniversary of the Closing and the fourth anniversary of the Closing, then any Make Whole Payment or Second Make Whole Payment shall be reduced in accordance with the calculations set forth below. In the case of (1) above, the Make Whole Payment or Second Make Whole Payment, as applicable, shall be reduced by an amount equal to (i) the difference between the per share purchase price and $5.00 multiplied by (ii) the number of Payment Shares or Make Whole Shares sold. In the case of (2) above and if no Payment Shares or Make Whole Shares are sold, then the Make Whole Payment or Second Make Whole Payment, as applicable, shall be reduced by an amount equal to (i) the difference between the highest per share market price at any time between the first anniversary of the Closing and the second anniversary of the Closing, in the case of the Make Whole Payment, or 3 between the third anniversary of the Closing and the fourth anniversary of the Closing, in the case of the Second Make Whole Payment, and $5.00 multiplied by (ii) the number of Payment Shares or Make Whole Shares then held by each of Westra and Cress, as applicable. "Market Price" shall mean the average of the closing prices (or, if there is no closing price, then the average of the daily bid and asked prices) of the SRC Common Stock on the Nasdaq National Market System ("NASDAQ") (or on any exchange on which the SRC Common Stock is then traded) for the period of twenty (20) consecutive trading days ending two business days prior to the applicable date of measurement. SECTION 1.03 Purchase Price Adjustments. -------------------------- (a) The parties acknowledge and agree that the Purchase Price has been established with reference in part to the Net Worth (as defined below) and aggregate Cash and Short Term Investments (as defined below) of the Companies as of December 31, 1998, as reflected on the Base Balance Sheet (as defined in Section 2.09 herein). As promptly as practicable, but in any event within sixty (60) days after the Closing, the Buyer shall deliver to the Sellers a statement of the Net Worth as of the Closing Date and Cash and Short Term Investments of the Companies determined by the average of the Cash and Short Term Investments as of March 31, 1999 and April 30, 1999 (the "Closing Statement"), which shall be prepared by the Buyer in accordance with OCBOA (as defined in Section 2.09 herein) on a basis consistent with the Base Balance Sheet and shall be audited and reported on by KPMG Peat Marwick LLP ("Buyer's Accountant"). For purposes of this Agreement, the term "Net Worth" shall mean total assets less total liabilities, and the term "Cash and Short Term Investments" shall mean cash, money market and short term investments. The Closing Statement shall be conclusive and binding upon the parties hereto, unless the Sellers object in writing to any item or items shown on the Closing Statement within fifteen (15) business days after delivery to the Sellers of the Closing Statement (the "Objection Period"). During the Objection Period, the Sellers may request that all work papers of Buyer's Accountant which were used in the preparation of the Closing Statement be mailed or, to the extent commercially reasonable, transmitted by facsimile to Sellers' accountants. If Buyer and the Sellers shall be unable to resolve any dispute with respect to the Closing Statement within twenty (20) business days after delivery of the Sellers' written objections, the matter or matters in dispute shall be submitted (at the equal expense of Buyer and the Sellers) to such firm of independent certified public accountants as Buyer on the one hand and the Sellers on the other hand may mutually agree. The decision of such firm of independent certified public accountants shall be conclusive and binding upon Buyer and Sellers. (i) If the Net Worth of the Companies as of the Closing Date conclusively determined as set forth above is less than $800,000 there shall be refunded to Buyer from the Escrow Fund in accordance with the terms of the Escrow Agreement an amount equal to the difference between $800,000 and the Net Worth as stated on the Closing Statement together with all interest earned thereon and (ii) if the Cash and Short Term Investments held by the Companies as determined by the average of the Cash and Short Term Investments as of March 31, 1999 and April 30, 1999 conclusively determined as set forth above is less than $125,000 there shall be refunded to Buyer 4 from the Escrow Fund in accordance with the terms of the Escrow Agreement an amount equal to the difference between $125,000 and the Cash and Short Term Investments as stated on the Closing Statement together with all interest earned thereon. If such difference exceeds the amount of the Escrow Fund, the Sellers shall refund to Buyer the amount held in the Escrow Fund and promptly pay to Buyer the amount of such excess by wire transfer of immediately available funds to an account designated by Buyer. (b) If the Cash and Short Term Investments held by the Companies as determined by the average of the Cash and Short Term Investments as of March 31, 1999 and April 30, 1999 is projected to exceed $125,000 (such projection to occur two business days prior to Closing), then the Cash Portion of the Purchase Price shall be increased by the aggregate amount of fifty percent of the Cash and Short Term Investments projected to exceed $125,000 (the "Cash Adjustment"); provided, however, any such Cash Adjustment shall be subject to adjustment in accordance with provisions of Section 1.03(a) herein and provided, further, that the first $175,000 of the Cash Adjustment shall be deposited in the Escrow Fund pursuant to the Escrow Agreement. SECTION 1.04 Closing. Subject to the satisfaction or waiver by the parties ------- of each of the conditions set forth in Articles VII and VIII of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts at 10 o'clock a.m., on April 23, 1999, or such other location, date and time as may be agreed upon by the parties (such date and time being referred to as the "Closing Date"). At the Closing, in addition to the satisfaction or waiver of each of the conditions set forth in Articles VII and VIII herein, the parties shall deliver such further documents, resolutions, certificates and instruments as any party or his, her or its counsel reasonably requests to facilitate the consummation of the transactions contemplated hereby. SECTION 1.05 Further Assurances. At any time and from time to time after the ------------------ Closing Date, at the request of the Buyer and without further consideration, each Seller will execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation as may be reasonably requested in order to more effectively transfer, convey and assign to the Buyer and to confirm the Buyer's title to the Shares. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS ---------- --------------------------------------------- A. As an inducement to the Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, each Seller, severally, and not jointly and severally, hereby represents and warrants to and agrees with the Buyer with respect to the Shares listed next to the name of such Seller on Schedule 2.01 hereto that: - ------------- SECTION 2.01 Title to Shares. Such Seller owns the Shares beneficially and --------------- of record in the manner specified on Schedule 2.01 hereto, free and clear of all ------------- Claims. There is no restriction affecting the ability of such Seller to transfer the legal and beneficial title and ownership of the Shares to the Buyer and, upon delivery thereof to the Buyer pursuant to the terms of this Agreement 5 and of payment of the Purchase Price at the Closing, the Buyer will acquire record and beneficial title to the Shares free and clear of all Claims. Such Seller does not have outstanding any power of attorney. SECTION 2.02 Seller's Authority to Execute and Perform Agreement. Such --------------------------------------------------- Seller has the full legal right and power and all authority and approval required by law to enter into this Agreement and to perform his, her or its obligations hereunder. Said Seller has duly executed and delivered this Agreement, and this Agreement is the legal, valid and binding obligation of said Seller enforceable in accordance with its terms. On the Closing Date, neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the performance of this Agreement in compliance with its terms and conditions by such Seller will (a) conflict with or result in any violation of any trust agreement, certificate of incorporation, by-law, judgment, decree, order, statute or regulation applicable to such Seller or to the Shares of such Seller, or any breach of any agreement to which such Seller is a party or by which such Seller or his, her or its Shares is bound, or constitute a default thereunder, or result in the creation of any Claim of any kind or nature on, or with respect to, his, her or its Shares, or (b) result in any violation of, or be in conflict with, or constitute a default under, any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Seller. B. As an inducement to the Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, Westra and Cress, jointly and severally, hereby represent and warrant to the Buyer as follows: SECTION 2.03 Purchase For Investment; Residence. Such Seller is acquiring ---------------------------------- the shares of SRC Common Stock and the Note issuable hereunder for investment for his, her or its own account and not with a view to the distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). Such Seller understands that the shares of SRC Common Stock and the Note issuable hereunder have not been registered under the Securities Act and may not be sold or transferred without such registration or an exemption therefrom. Such Seller is sufficiently experienced in financial and business matters to be capable of evaluating the risk of investment in SRC Common Stock and the Note issuable hereunder and to make an informed decision relating thereto. Such Seller has the financial capability for making the investment, can afford a complete loss of the investment, and the investment is a suitable one for such Seller. Such Seller is an Accredited Investor as defined in Regulation D under the Securities Act. Prior to the execution and delivery of this Agreement such Seller has had the opportunity to ask questions of and receive answers from representatives of SRC concerning the finances, operations, business and prospects of SRC. Such Seller is a resident of the State of Michigan. SECTION 2.04 Capitalization. The authorized, issued and outstanding capital -------------- stock of each of the Companies on the date hereof is, and will on the Closing Date be, as set forth on Schedule 2.04. All of the Shares are duly authorized, ------------- validly issued, fully paid and non-assessable and were issued in full compliance with all federal, state and local rules, laws and regulations. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of each of the Companies are as set forth in each of the Companies' Articles of Incorporation, as amended, correct and complete copies of which have 6 been provided to the Buyer, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions are valid, binding and enforceable in accordance with all applicable laws. There are, and at the Closing Date there will be, no shares held in the corporate treasury of any of the Companies and no shares reserved for issuance. Except as set forth on Schedule 2.04, as of the date hereof, there are, and as of the Closing Date - ------------- there will be, no outstanding subscriptions, options, warrants, rights, calls or convertible securities, or other commitments of any nature relating to shares of the capital stock of any of the Companies. As of the date hereof, there is, and as of the Closing Date the Companies will have, no obligation (contingent or other) to purchase, redeem or otherwise acquire any of their equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. SECTION 2.05 Organization and Qualification. Each of the Companies is a ------------------------------ corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of each of the Companies' businesses or the character of the properties owned or leased by each of the Companies requires such licensing or qualification. SECTION 2.06 Subsidiaries. None of the Companies (a) owns of record or ------------ beneficially, directly or indirectly, (i) any shares of capital stock or securities convertible into capital stock of any other corporation or (ii) any participating interest in any partnership, joint venture or other non-corporate business enterprise or (b) controls, directly or indirectly, any other entity. SECTION 2.07 Corporate Power and Authority. Each of the Companies has the ----------------------------- corporate power and authority to own and hold its properties and to carry on its business as presently conducted and contemplated to be conducted and to execute, deliver and perform this Agreement and the other documents and instruments contemplated hereby. The execution, delivery and performance of this Agreement and the documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by each of the Companies. This Agreement and each of the other agreements, documents and instruments to be executed and delivered by the Companies have been duly executed and delivered by, and constitute the legal, valid and binding obligation of, each of the Companies enforceable against each of such Companies in accordance with their terms. SECTION 2.08 Validity, Etc. Except as set forth on Schedule 2.08, neither -------------- ------------- the execution and delivery of this Agreement and the other documents and instruments contemplated hereby, the consummation of the transactions contemplated hereby or thereby, nor the performance of this Agreement and such other agreements in compliance with the terms and conditions hereof and thereof will (a) violate, conflict with or result in any breach of any trust agreement, Articles of Incorporation, bylaw, judgment, decree, order, statute or regulation applicable to the Sellers or any of the Companies, (b) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, (c) violate, conflict with or result in a breach, default or termination or give rise to any right of termination, cancellation or acceleration of the maturity of any payment date of any of the obligations of any of the Companies or increase or otherwise offset the obligations of the Companies under any law, rule, regulation, judgment, decree, 7 order, governmental permit, license or order or any of the terms, conditions or provisions of any mortgage, indenture, note, license, agreement or other instrument or obligation related to the Companies or any of their assets or the consummation of the transactions contemplated hereby or thereby, (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to any of the Companies or (e) result in the creation of any Claim upon the Shares or any assets of the Companies. SECTION 2.09 Financial Statements. The Companies have previously furnished -------------------- to the Buyer, and attached hereto as Schedule 2.09, the final combined balance ------------- sheet of the Companies (the "Base Balance Sheet") as at December 31, 1998 (the "Balance Sheet Date"), as at December 31, 1997 and as at December 31, 1996 and any related statements of income and cash flow and notes thereto. All such financial statements (the "Financial Statements") have been prepared in accordance with a version of the Other Comprehensive Basis of Accounting ("OCBOA") that is generally a tax basis of accounting used by the Companies to file their income tax returns on an accrual basis, consistently applied. The Financial Statements were prepared from the books and records of each of the Companies, which books and records are complete and correct and accurately reflect all transactions of each of the Companies' businesses. The Financial Statements fairly present the financial position of each of the Companies as of the dates thereof, and the results of its operations and cash flows for the periods ended on the dates thereof. The Financial Statements reflect reserves appropriate and adequate for all known material liabilities and reasonably anticipated losses consistent with the requirements of OCBOA, consistently applied. Since the date of the Base Balance Sheet, (a) there has been no change in the assets, liabilities or financial condition of the assets of any of the Companies from that reflected in the Base Balance Sheet except for changes in the ordinary course of business consistent with past practice and which have not been material or adverse and (b) none of the business, prospects, financial condition, operations, property or affairs of any of the Companies has been materially or adversely affected by any occurrence or development, individually or in the aggregate, whether or not insured against. SECTION 2.10 Absence of Undisclosed Liabilities. Except as and to the extent ---------------------------------- of the amounts specifically reflected or reserved against in the Base Balance Sheet, none of the Companies has any liabilities or obligations of any nature whatsoever, due or to become due, accrued, absolute, contingent or otherwise except for liabilities and obligations incurred since the date of the Base Balance Sheet in the ordinary course of business and consistent with past practice. The Sellers do not know of, and have no reason to know of, any basis for the assertion against any of the Companies of any liability or obligation not fully reflected or reserved against in the Base Balance Sheet or incurred in the ordinary course of business and consistent with past practice since the date thereof. None of the Companies is bound by any agreement, or subject to any charter or other corporate restriction or any legal requirement, which has, or in the future can reasonably be expected to have, a material adverse effect on any of the Companies' business. SECTION 2.11 Absence of Adverse Change; Conduct of Business. Except as set ---------------------------------------------- forth on Schedule 2.11, since the Balance Sheet Date, the Companies have ------------- conducted their businesses only in the usual and ordinary course consistent with past practice, there have been no material adverse changes in the businesses of the Companies and there are no known conditions or developments or contingencies of any kind existing or which, so far as reasonably can be foreseen by the Sellers, 8 may result in any such change. Without limiting the foregoing, except as set forth on Schedule 2.11, since the Balance Sheet Date, there has not been, ------------- occurred or arisen: (a) any material adverse change in the working capital, financial condition, assets, liabilities, business or prospects of any of the Companies; (b) any loan, advance, agreement, arrangement or transaction between any of the Companies and any employees of the Companies or their affiliates; (c) any mortgage or pledge of, or any lien placed on, any assets of the Companies, tangible or intangible; (d) any material transaction (which shall mean any transaction or series of transactions totaling $10,000 or more) except in the ordinary of business consistent with past practice; (e) any declaration, setting aside or payment of any dividend or other distribution on or in respect of any shares of the Companies' capital stock, or any issuance or direct or indirect redemption, retirement, purchase or other acquisition by any of the Companies of any shares of their capital stock or other securities; (f) any change by any of the Companies in accounting methods, principles or practices; (g) any change in the charter or by-laws of any of the Companies; and (h) any understanding entered into with respect to any commitment (contingent or otherwise) to do any of the foregoing. SECTION 2.12 Inventories. All of the Companies' inventory reflected on the ----------- Base Balance Sheet or thereafter acquired (and not subsequently sold in the ordinary course of business) consist of items of a quality and quantity usable or saleable in the ordinary course of the Companies' businesses as first quality goods at prices having a value equal to the amounts reflected on the Base Balance Sheet or, with respect to after-acquired inventory, at least equal to the cost thereof plus markups consistent with past practice. Each item of such inventory is valued on the Base Balance Sheet at the lower of cost or market, by the first-in first-out method, in accordance with OCBOA, consistently applied. ------------------ Such inventory reflects write-downs to realizable values in the case of items which are below standard quality or have become obsolete or unsaleable (except at prices less than cost) through regular distribution channels in the ordinary course of business of the Companies. SECTION 2.13 Receivables. All receivables (whether notes, accounts or ----------- otherwise) of the Companies (a) have arisen only from bona fide transactions in the ordinary course of business consistent with past practice, (b) represent valid obligations, and (c) shall be fully collected in the 9 aggregate face amounts thereof within a reasonable time after the issuance thereof, except for an allowance of approximately $34,500 for doubtful accounts with respect to accounts receivable computed in a manner consistent with OCBOA and as reflected in the Base Balance Sheet, and (d) are owned by the Companies free of all Claims. SECTION 2.14 Taxes. Except as set forth on Schedule 2.14, each of the ----- ------------- Companies has filed on a timely basis all returns, declarations, reports, claims for refunds and information returns or statements relating to Taxes (which shall mean all taxes including, without limitation, any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Sec. 59A of the Internal Revenue Code of 1986, as amended (the "Code")), customs duties, capital stock franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not), including all schedules or attachments thereto, and including any amendment thereof ("Tax Returns") and tax reports required to be filed on or before the date hereof with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed and all such Tax Returns were correct and complete in all respects. Except as set forth on Schedule 2.14, all Taxes which have become due ------------- or payable or required to be collected by the Companies or as otherwise attributable to any periods ending on or before the date hereof or the Closing Date and all interest and penalties thereon, whether disputed or not, have been paid or will be paid in full on or prior to the Closing Date (whether or not shown on any Tax Return). Except as set forth on Schedule 2.14, none of the Companies is currently the ------------- beneficiary of any extension of time within which to file any Tax Return. No claim has been made by an authority in a jurisdiction where each of the Companies does not file Tax Returns that they are or may be subject to taxation by that jurisdiction. There are no tax liens pending or threatened against the assets, properties or business of any of the Companies. None of the Companies has taken or failed to take any action which could create any tax lien on any of its assets. Except as set forth on Schedule 2.14, the Companies have withheld ------------- and paid all Taxes required to have been withheld and paid by them. No Seller or director or officer (or employee responsible for tax matters) of any of the Companies expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. Except as set forth on Schedule 2.14, there is no dispute or claim concerning any Tax Liability (which - ------------- shall mean any liability, whether known or unknown, whether assessed or unassessed, whether accrued or unaccrued, and whether due or to become due) of any of the Companies either (A) claimed or raised by any authority in writing or (B) as to which any of the Sellers and the directors and officers (and employees responsible for tax matters) of any of the Companies has knowledge. Schedule -------- 2.14 lists all federal, state, local and foreign income tax returns filed with - ---- respect to the Companies for taxable periods ended on or after the Balance Sheet Date, indicates those tax returns that have been audited, and indicates those tax returns that currently are the subject of audit. The Sellers have delivered to the Buyer correct and complete copies of all federal and state income tax returns, examination reports, and statements of deficiencies assessed against or agreed to by the Companies since the Balance Sheet Date. 10 Schedule 2.14 lists all tax agreements which now exist or have existed within - ------------- the past five years between any of the Companies and any taxing jurisdiction. None of the Companies has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a tax assessment or deficiency. None of the Companies has filed a consent under Code Sec. 341(f) concerning collapsible corporations. None of the Companies has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Sec. 280G. None of the Companies has been a United States real property holding corporation within the meaning of Code Sec. 897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii). All of the Companies have disclosed on their federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income tax within the meaning of Code Sec. 6661. None of the Companies is a party to any tax allocation or sharing agreement. None of the Companies has ever been (nor has any liability for unpaid Taxes because it once was) a member of an affiliated group. SECTION 2.15 Litigation. Except as set forth on Schedule 2.15, there is no ---------- ------------- (a) action, suit, claim, proceeding or investigation pending or, to the best of the Sellers' knowledge, threatened against or affecting any of the Companies (whether or not such Company is a party or prospective party thereto), at law or in equity, or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (b) arbitration proceeding relating to any of the Companies or (c) governmental inquiry pending or threatened against, involving or affecting any of the Companies, and there is no basis for any of the foregoing. There are no outstanding orders, writs, judgments, injunctions or decrees of any court, governmental agency or arbitration tribunal against, involving or affecting any of the Companies, and there are no facts or circumstances which may result in the institution of any action, suit, claim or legal, administrative or arbitration proceeding or investigation against, involving or affecting any of the Companies or the transactions contemplated hereby. SECTION 2.16 Certain Practices. None of the Companies nor any of their ----------------- directors, officers or employees has, directly or indirectly, given or agreed to give any significant rebate, gift or similar benefit to any supplier, customer, governmental employee or other person who was, is or may be in a position to help or hinder any of the Companies (or assist in connection with any actual or proposed transaction) which (a) could subject any of the Companies or the Buyer to any damage or penalty in any civil, criminal or governmental litigation or proceeding, or (b) if not continued in the future, could have an adverse effect on any of the Companies. SECTION 2.17 Compliance with Law. None of the Companies nor any Seller is ------------------- subject to any judgment, order, writ, injunction, or decree that adversely affects, individually or in the aggregate, its business, operations, properties, assets or condition (financial or otherwise). To the knowledge of the Sellers, each of the Companies has complied with and is not in default under, all laws, ordinances, legal requirements, rules, regulations and orders applicable to it, its operations, properties, assets, products and services. There is no existing law, rule, regulation or order, and the Sellers are not aware of any proposed law, rule, regulation or order, whether Federal or state, which would prohibit or materially restrict any of the Companies or the Buyer from, or otherwise 11 materially adversely affect any of the Companies or the Buyer in, conducting each of the Companies' businesses in any jurisdiction in which such businesses are now conducted or proposed to be conducted. SECTION 2.18 Licenses and Permits. Schedule 2.18 lists all licenses, -------------------- ------------- permits, pending applications, consents, approvals and authorizations of or from any public or governmental agency, used in or otherwise necessary in the conduct of each of the Companies' businesses (collectively, the "Permits") each of which will remain in full force and effect following the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. SECTION 2.19 Labor and Employee Relations. None of the Companies is a party ---------------------------- to or bound by any collective bargaining agreement with any labor organization, group or association covering any of their employees, and none of the Companies nor any Seller has knowledge of any attempt to organize any of the Companies' employees. There are no pending or threatened charges of unfair labor practices or of employment discrimination or of any other wrongful action with respect to any aspect of employment of any person employed or formerly employed by any of the Companies. None of the Companies has experienced any work stoppages during the last three years, and to the best of the Sellers' knowledge, no work stoppage is planned. SECTION 2.20 Certain Employees. Set forth in Schedule 2.20 is a list of the ----------------- ------------- names of all of the Companies' employees and consultants, together with the title or job classification of each such person and the base annual and the total compensation paid to each such person in fiscal year 1997 and anticipated to be paid in fiscal year 1998. Except as specifically described on Schedule -------- 2.20, none of such persons has a written employment agreement with any of the - ---- Companies which is not terminable on notice by such Company without cost or other liability to such Company. To the knowledge of the Companies, no person listed on Schedule 2.20 has an oral employment agreement or understanding with ------------- any of the Companies. No person listed on Schedule 2.20 has indicated to any ------------- officer of the Company employing such person that he or she intends to terminate his or her employment with such Company or seeks a material change in his or her duties or status. SECTION 2.21 Employee Benefits. Except as set forth on Schedule 2.21 ----------------- ------------- attached hereto, each of the Companies has not established, does not maintain, and is not obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on Schedule 2.21 (individually "Company Plan," and collectively ------------- "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Code, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those federal agencies responsible for the administration of such laws. No act or failure to act by any of the Companies has resulted in a "prohibited 12 transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. The Companies have not previously made, are not currently making, and are not obligated in any way to make, any contributions to any multi- employer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (a) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (b) the value of plan liabilities in excess of plan assets is disclosed on the Base Balance Sheet. The Company has made all required Form 5500 filings and required reporting with respect to the Company Plans on a timely basis. A true, correct and complete copy of each Company Plan has been provided to the Buyer. SECTION 2.22 Tangible Properties. Schedule 2.22 contains a true and complete ------------------- ------------- list of all tangible personal property owned by or leased to the Companies (the "Tangible Personal Property"), by location. Each item of the Companies' tangible personal property which has a value in excess of $1,000 is included on such list. Except as shown on Schedule 2.22, all of the Companies have good and ------------- marketable title free and clear of all Claims to the Tangible Personal Property listed as owned by the Companies. With respect to Tangible Personal Property leased by the Companies as lessee, all leases, conditional sale contracts, franchises or licenses pursuant to which the Companies may hold or use (or permit others to hold or use) such Tangible Personal Property are valid and in full force and effect, and there is not under any of such instruments any existing default or event of default or event which with notice or lapse of time or both would constitute such a default. The Companies' possession and use of such property has not been disturbed and no claim has been asserted against any of the Companies adverse to their rights in such leasehold interests. The Tangible Personal Property is adequate and usable for the purposes for which it is currently used and has been properly maintained and repaired and each item of Tangible Personal Property, whether owned or leased, is in good operating condition and repair and has been properly maintained. During the past three (3) years, there has not been any interruption of the operations of the Companies' businesses due to the condition of any of the Tangible Personal Property other than in the ordinary course of business consistent with past practice. SECTION 2.23 Owned Premises. Schedule 2.23 sets forth descriptions of all -------------- ------------- real estate owned by the Companies, and all buildings and other structures located on such real estate. Said real estate is hereinafter referred to as the "Property" or the "Properties". Each of the Companies has good and marketable title in fee simple to all Properties and holds sufficient rights in and to all easements or other rights necessary for perpetual access thereto, and owns outright all buildings and other structures, improvements and fixtures thereon, in each case free and clear of all Claims or other interests or rights of third parties, except those which do not and will not have an adverse effect on the Properties. There are no encroachments from any of the Properties onto adjoining real property, and there are no encroachments from any adjoining real property onto any of the Properties, except those which do not and will not have an adverse effect on the Properties. Each structure located on the Properties is structurally sound, adequately maintained and is in good condition and repair consistent with the uses to which it is presently being put. All structures, improvements and fixtures on the Properties and the current uses of the Properties conform to any and all federal, state and local laws, reclamation laws, zoning, land use, subdivision, wetlands, building, health and safety and other ordinances, laws, rules and regulations, except for those the 13 nonconformance with which do not or would not have an adverse effect on the Properties. No notice from any governmental body or other person has been served upon, or received by, any of the Companies or any of the Sellers claiming any violation of any such ordinance, law, rule or regulation, or requiring any substantial work, repairs, reclamation, construction, alterations or installation on or in connection with such Properties which has not been complied with or that any right of access or other right enjoyed by any of the Companies is being modified or terminated. There are no violations of any covenant, restriction or other agreement or understanding, oral or written, affecting or relating to title or use of the Properties and no such covenant, restriction, agreement or understanding could cause a forfeiture or reversion of title or abridge the use thereof. There are no pending or threatened condemnation or similar proceedings or assessments affecting any of the Properties, lawsuits by adjoining landowners or others, nor to the best of the Sellers' knowledge, is any such lawsuit contemplated by any person, nor is any condemnation or assessment contemplated by any governmental authority. None of the Properties has been designated with any state or local authority for use solely as "agricultural land", "open space", "conservation land" or similar designation. There are no violations of any material covenant, restriction or other agreement or understanding, oral or written, affecting or relating to title or use of the Properties and no such covenant, restriction, agreement or understanding could reasonably be expected to cause a forfeiture or reversion of title. There are no pending or threatened condemnation or similar proceedings or assessments affecting any of the Properties, nor to the best of the Sellers' knowledge, is any such condemnation or assessment contemplated by any governmental authority. SECTION 2.24 Leased Premises. Schedule 2.24 sets forth a true and complete --------------- ------------- list and description of each parcel of real property leased by the Companies (the "Leased Parcels"). Except as set forth on Schedule 2.24, each lease ------------- covering a Leased Parcel is in full force and effect (there existing no default under any such lease or event which, with the lapse of time or notice or otherwise, would constitute a default), conveys the leased real estate purported to be conveyed thereunder, and is and will be following the Closing enforceable by the Companies in accordance with its terms. All of the Companies have the right to use the Leased Parcels in accordance with the terms of such leases free and clear of all Claims or other interests or rights of third parties. SECTION 2.25 Environmental Matters. The Companies and all premises occupied --------------------- and used by them are in compliance with all applicable laws, rules, regulations, orders, ordinances, judgments and decrees of all governmental authorities (federal, state, and local). The Companies have received no notice of, and the Sellers have no knowledge of any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans of the Companies or the Companies' predecessors, either collectively, individually or severally, which may interfere with or prevent continued compliance, or which may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing, or investigation, based on or related to the disposal, storage, handling, manufacture, processing, distribution, use, treatment, or transport, or the emission, discharge, release or threatened release into the environment, of any Substance. As used in this Section 2.25, the term "Substance" shall mean any pollutant, hazardous substance, hazardous material, hazardous waste or toxic waste, as defined in any presently enacted federal, state or local statute or any regulation that has been promulgated pursuant thereto. 14 SECTION 2.26 Insurance. The Companies are, and will be through the Closing, --------- insured in respect of their properties, assets and businesses against risks normally insured against by companies in similar lines of business under similar circumstances. Schedule 2.26 correctly describes (by type, carrier, policy ------------- number, limits, premium, and expiration date) the insurance coverage carried by the Companies, which insurance will remain in full force and effect with respect to all events occurring prior to the Closing. The Companies have not failed to give any notice or present any claim under any such policy or binder in due and timely fashion, have not received notice of cancellation or non-renewal of any such policy or binder, are not aware of any threatened or proposed cancellation or non-renewal of any such policy or binder, nor are aware of any insurance premiums which will be materially increased in the future. There are no outstanding claims under any such policy which have gone unpaid for more than 45 days, or as to which the insurer has disclaimed liability. SECTION 2.27 Outstanding Commitments. Schedule 2.27 sets forth a ----------------------- ------------- description of all existing contracts, agreements, understandings, commitments, licenses and franchises (collectively "Agreements"), whether written or oral, relating to the Companies which involve amounts in excess of $10,000. Each of the Companies has delivered or made available to the Buyer true, correct and complete copies of all of the Agreements specified on Schedule 2.27 which are in ------------- writing, and Schedule 2.27 contains an accurate and complete description of all ------------- Agreements which are not in writing. Each of the Companies has paid in full all amounts due as of the date hereof under each Agreement and as of the Closing Date will have satisfied in full all of its liabilities and obligations thereunder due in the ordinary course of business consistent with past practice prior to the Closing. All of the Agreements are in full force and effect. The Companies and each other party thereto have performed all the obligations required to be performed by them to date, have received no notice of default and are not in default (with due notice or lapse of time or both) under any Agreement. SECTION 2.28 Intellectual Property. Schedule 2.28 sets forth a list of --------------------- ------------- all recipes, patents, inventions, know-how, show-how, designs, trade secrets, copyrights, maskrights, trademarks, tradenames, servicemarks, manufacturing processes, formulae, trade secrets, technology or the like, and all applications for any of the foregoing, (collectively, "Intellectual Property") owned, controlled or used by any of the Companies or of which any of the Companies is a licensor or licensee, together in each case with a brief description of the nature of such right. Each of the Companies owns or possesses adequate licenses or other rights to use all Intellectual Property necessary or desirable to the conduct of its business as conducted and as proposed to be conducted, and no Claim is pending or, to the best of the Sellers' knowledge, threatened to the effect that the operations of the Companies infringe upon or conflict with the asserted rights of any other person under any Intellectual Property, and there is no basis for any such claim (whether or not pending or threatened). None of the Companies' Intellectual Property rights will be impaired by the consummation of the transactions contemplated hereby, and all of such rights will be enforceable immediately after the Closing without the consent or agreement of any other party. SECTION 2.29 Significant Customers and Suppliers. Set forth on Schedule ----------------------------------- -------- 2.29 is a list of the ten largest customers and ten largest suppliers of each of - ---- the Companies for the most recent 15 twelve-month period, together with the amount of sales or purchases attributable to such customers or suppliers expressed in dollars. SECTION 2.30 Banks, Brokers and Proxies. Schedule 2.30 sets forth: (a) -------------------------- ------------- the name of each bank, investment manager, trust company and stock or other broker with which any of the Companies maintains an account or from which they borrow money; (b) the names of all persons authorized by each of the Companies to effect transactions therewith, or to have access to any safe deposit box or vault; and (c) all proxies, powers of attorney, agency agreements or other like instruments to act on behalf of the Companies or the Sellers in matters concerning the business or affairs of the Companies. SECTION 2.31 Assumptions, Guaranties, Etc. of Indebtedness of Other ------------------------------------------------------ Persons. Except as set forth on Schedule 2.31, the Companies have not assumed, - ------- ------------- guaranteed, endorsed or otherwise become directly or contingently liable on any indebtedness of any other person (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor, or otherwise to assure the creditor against loss), except for guaranties by endorsement of negotiable instruments for deposit or collection in the ordinary course of business. SECTION 2.32 Transactions With Affiliates. Except as set forth on ---------------------------- Schedule 2.32, no director, officer or employee of any of the Companies, or - ------------- member of the family of any such person, or any corporation, partnership, trust or other entity in which any such person, or any member of the family of any such person, has a substantial interest or is an officer, director, trustee, partner or holder of any equity interest, is a party to any transaction with any of the Companies. None of the Companies, Sellers, officers, supervisory employees or directors of any of the Companies owns directly or indirectly on an individual or joint basis any material interest in, or serves as an officer or director or in another similar capacity of, any competitor or supplier of any of the Companies. SECTION 2.33 Records. The minute books, stock certificate books and stock ------- transfer ledgers of each of the Companies are complete and correct in all respects with respect to the matters set forth therein and complete and correct copies of such records have been delivered to the Buyer. SECTION 2.34 Medicare and Medicaid Programs. Each of the Companies and ------------------------------ each doctor and licensed employee of the Companies (the "Medical Personnel") are qualified for participation in the Medicare and Medicaid programs and are parties to provider agreements for such programs, which are in full force and effect with no defaults having occurred thereunder. The Companies, the Sellers and each of the Medical Personnel has timely filed all claims and other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims and reports are complete and accurate and there is no liability to any payor with respect thereto. There are no pending appeals or other proceedings of any kind relating to Medicare or Medicaid claim determinations or other reports required to be filed by the Companies, the Sellers or the Medical Personnel. None of the Companies, the Sellers or any of the Medical Personnel has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare or Medicaid programs. 16 SECTION 2.35 Fraud and Abuse. Each of the Companies and all persons and --------------- entities providing professional services for them have not, to the best of knowledge of the Sellers, engaged in any activities that are prohibited under Section 1320a-7b or Section 1395nn of Title 42 of the United States Code or the regulations promulgated thereunder, or related state or local statutes or regulations, or which are prohibited by rules of professional conduct. SECTION 2.36 Disclosure. All documents and schedules delivered or to be ---------- delivered by or on behalf of the Companies or the Sellers to the Buyer in connection with this Agreement and the transactions contemplated hereby are true, correct and complete. Neither this Agreement, nor any Schedule or Exhibit to this Agreement contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which made, not misleading. SECTION 2.37 Year 2000 Compliance. Except as set forth on Schedule 2.37, -------------------- ------------- each of the Companies' management information systems, office automation systems and internal LAN network management systems is year 2000 compliant. Except as set forth on Schedule 2.37, all of the computer software programs utilized by ------------- each of the Companies is year 2000 compliant. Schedule 2.37 sets forth the cost ------------- to the Companies to become year 2000 compliant. As used herein, the term "year 2000 compliant" means, with respect to information technology, that the information technology accurately processes date/time data (including, but not limited to, calculating, comparing, and sequencing) from, into, and between the twentieth and twenty-first centuries, and the years 1999 and 2000 and leap year calculations, to the extent that other information technology, used in combination with the information technology being acquired, properly exchanges date/time data with it. [SECTION 2.38 Dissolution of Jackson Optical, Inc. Jackson Optical, Inc., ------------------------------------ a Michigan corporation ("Jackson"), will be dissolved and all assets and liabilities of Jackson shall be distributed to and/or assumed by Source free and clear of all claims, liens, encumbrances and voting interests. All liabilities of Jackson to be assumed by Source have been reflected in the Base Balance Sheet of the Corporation previously provided to Buyer as set forth in Schedule 2.09. ------------- ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND SRC ----------- ----------------------------------------------- The Buyer and SRC hereby represent and warrant to the Sellers as follows: SECTION 3.01 Organization. Each of SRC and Buyer is duly incorporated, ------------ validly existing and in good standing under the laws of the State of Delaware and is duly qualified to transact business as a foreign corporation in each jurisdiction in which the failure to so qualify would have a material adverse impact on the Buyer's ability to purchase the Shares. SECTION 3.02 Buyer Power and Authority. Each of SRC and Buyer has the ------------------------- corporate power and authority to execute, deliver and perform this Agreement and the other documents and instruments contemplated hereby. The execution, delivery and performance of this Agreement and 17 the documents contemplated hereby and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by each of SRC and Buyer. This Agreement, and each of the other agreements, documents and instruments to be executed and delivered by Buyer or SRC, as applicable, have been duly executed and delivered by, and constitute the valid and binding obligation of Buyer or SRC enforceable against Buyer or SRC in accordance with their terms, as applicable. SECTION 3.03 Validity, Etc. Neither the execution and delivery of this ------------- Agreement and the other documents and instruments contemplated hereby, the consummation of the transactions contemplated hereby or thereby, nor the performance of this Agreement and such other agreements in compliance with the terms and conditions hereof and thereof will (a) conflict with or result in any breach of any trust agreement, certificate of incorporation, bylaw, judgment, decree, order, statute or regulation applicable to Buyer or SRC, as applicable, (b) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, except for the consent of Fleet National Bank or (c) result in a breach of or default (or give rise to any right of termination, cancellation or acceleration) under any law, rule or regulation or any judgment, decree, order, governmental permit, license or order or any of the terms, conditions or provisions of any mortgage, indenture, note, license, agreement or other instrument to which Buyer or SRC is a party. SECTION 3.04 Financial Statements of SRC The financial statements of SRC --------------------------- and the related notes contained in its Report on Form 10-K for the fiscal year ended December 31, 1998 (the "Report") present fairly the financial position of SRC as of the dates indicated, and the results of its operations and cash flows for the periods therein specified. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified, except as disclosed in such Report. SECTION 3.05 Absence of Material Adverse Change Since December 31, 1998, ---------------------------------- there has been no material adverse change in the business or financial condition of SRC, and there is no condition or development or contingency of any kind existing (other than (i) changes in the ordinary course of business consistent with prior practice, (ii) activities of competitors in the ordinary course of their respective businesses and (iii) changes of a general economic and political nature) which, so far as reasonably can be foreseen by SRC, would, individually or in the aggregate, reasonably be expected to have any material adverse change in the business or financial condition of SRC. SECTION 3.06 The Payment Shares Neither SRC nor the Buyer has sold any of ------------------ the Payment Shares or other securities of SRC, offered any of such securities for sale, solicited any offers to purchase any of such securities, or otherwise approached or negotiated (nor will SRC or the Buyer sell, offer, solicit or otherwise approach or negotiate) in respect thereof, in such manner as would result in bringing the Payment Shares, or any part thereof, within the provisions of Section 5 of the Securities Act. Assuming the accuracy and completeness of the representations and warranties of Westra and Cress contained in Section 2.03 herein, the sale and transfer of the Payment Shares to Westra and Cress is exempt from registration under the 18 Securities Act pursuant to Section 4(2) of the Securities Act and such sale and transfer are also exempt from registration and qualification under applicable state securities and blue sky laws. SECTION 3.07 SRC SEC Documents. True, correct and complete copies of all ----------------- forms, reports, schedules, statements, and other documents filed by SRC up to March 31, 1999, under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or the Securities Act (such documents, as amended since the time of filing, collectively, the "SRC SEC Documents") are available on the Securities and Exchange Commission ("SEC") EDGAR Database at www.sec.gov. The SRC SEC Documents, including, without limitation, any financial statements or schedules included therein, at the time filed (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of mailing, respectively) complied as to form in all materials respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. The financial statements of SRC included in the SRC SEC Documents at the time filed (and, in the case of registration statements and proxy statements, on the date of effectiveness and the date of mailing, respectively) complied as to form in all materials respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. ARTICLE IV COVENANTS OF THE SELLERS ---------- ------------------------ The Sellers covenant and agree with the Buyer as follows: SECTION 4.01 Best Efforts Cooperation. The Sellers shall use their best ------------------------ efforts in good faith to perform and fulfill and to cause each of the Companies to perform and fulfill, all conditions and obligations to be fulfilled or performed by them hereunder, to the end that the transactions contemplated hereby will be fully and timely consummated. SECTION 4.02 Access. Until the Closing, the Sellers shall give and shall ------ cause each of the Companies to give the Buyer, its attorneys, accountants, financial and other advisors and other authorized representatives complete access, as Buyer may reasonably request and consistent with the uninterrupted operation of each of the Companies' business, to the Companies' offices, properties, customers, suppliers, employees, products, technology, business and financial records, contracts, business plans, budgets and projections, agreements, commitments and other documents and information concerning the Companies and persons employed by or doing business with the Companies. Following the Closing, the Sellers shall provide the Buyer with access to any and all records relating to the Companies that remain in the possession of third parties. SECTION 4.03 Insurance. Each of the Companies shall maintain with --------- financially sound and reputable insurers, insurance against such casualties and contingencies and of such types and in such amounts as is customary for companies similarly situated. SECTION 4.04 Compliance with Laws. Each of the Companies shall conduct -------------------- its business in compliance with all applicable laws, rules, regulations and orders. 19 SECTION 4.05 Keeping of Books and Records. Each of the Companies shall ---------------------------- keep adequate records and books of account, in which complete entries will be made in accordance with OCBOA consistently applied, reflecting all financial transactions and in which all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. SECTION 4.06 Actions Prior to Closing. Each of the Companies shall (a) ------------------------ conduct its Business pending the Closing only in the ordinary and usual course of business consistent with past practice; (b) maintain and keep its properties in good condition; (c) use all reasonable efforts to maintain in accordance with good business practice its present employees and its relationships with suppliers and customers so that they will be preserved for Buyer after the Closing; and (d) prior to the Closing, obtain all consents, waivers, approvals, authorizations or orders required in connection with the authorization, execution and delivery of this Agreement by the Companies. Except as expressly contemplated by this Agreement or as consented to in writing by the Buyer, during the period from the date of this Agreement to the Closing Date, each of the Companies shall not, (a) issue, sell or pledge additional shares of capital stock of any class (including the Shares) or securities convertible into any such shares, including the declaration of any dividends; (b) repurchase, reacquire or agree to repurchase or reacquire any of its shares of capital stock of any class; (c) propose or adopt any amendments to the Articles of Incorporation or bylaws of such Company; (d) incur any obligation or liability or enter into any transaction, not in the ordinary course of business; (e) incur any indebtedness for borrowed money; (f) make or agree to make any loans to, or repay any loans from, any of its officers, directors or employees; and (g) agree in writing or orally to take any of the foregoing actions or any other action which would have made any representation or warranty in this Agreement untrue. SECTION 4.07 Notice of Changes. Until the Closing, the Sellers shall ----------------- notify the Buyer of any material change in the business of any of the Companies as soon as it becomes apparent to the Sellers that any such change has or may occur. SECTION 4.08 Preservation of Business. Until the Closing, each of the ------------------------ Companies will, and the Sellers will cause them to, use their best efforts to preserve their business organization intact, and to preserve their goodwill. Following the Closing, each of the Companies shall maintain its existing relationship with Charter Management Group, Inc. and will make available to the Buyer and assist the Buyer in retaining the same employees of Charter Management Group, Inc. who were leased to the Companies immediately prior to the Closing, unless otherwise permitted by the Buyer. SECTION 4.09 Litigation. The Sellers will promptly notify the Buyers of ---------- any lawsuits, claims, proceedings or investigations which are threatened or commenced against or by any of the Companies, the Sellers or their affiliates, or against any employee, consultant or director of the Companies. SECTION 4.10 Continued Effectiveness of Representations and Warranties. --------------------------------------------------------- From the date hereof up to and including the Closing Date, the Sellers will advise the Buyer promptly in writing 20 of any condition or circumstance occurring which could cause any representations or warranties of the Sellers to become untrue in any material respect. SECTION 4.11 No Negotiations. Until April 23, 1999, or the earlier --------------- termination of this Agreement in accordance with its terms, none of the Companies, the Sellers nor any of their affiliates, advisors, agents or investment bankers shall, directly or indirectly, initiate discussions with, engage in negotiations with, or provide any information to any corporation, partnership, person or other entity or group involving the possible sale, directly or indirectly, transfer or joint venture of any of the Companies, their businesses or assets, or the capital stock of any of the Companies (an "Acquisition Proposal") to any person or entity other than the Buyer. The Companies shall promptly notify the Buyer upon receipt of any offer or indication that any person is considering making an offer with respect to an Acquisition Proposal or any request for information relative to any of the Companies or for access to the properties, books and records of any of the Companies, and will promptly reject any such offer or request. SECTION 4.12 Resignations The Sellers will, to the extent that Buyer so ------------ requests, cause the officers and directors of all of the Companies and the trustees and administrators of each Employee Plan to resign on or before the Closing Date. ARTICLE V COVENANTS OF THE BUYER AND SRC --------- ------------------------------ SECTION 5.01 Cooperation. The Buyer shall use its best efforts in good ----------- faith to perform and fulfill all conditions and obligations to be fulfilled or performed by it hereunder to the end that the transactions contemplated hereby will be fully and timely consummated. SECTION 5.02 Continued Effectiveness of Representations and Warranties. --------------------------------------------------------- From the date hereof up to and including the Closing Date, the Buyer will advise the Sellers promptly in writing of any condition or circumstance occurring which could cause any representations or warranties of the Buyer to become untrue in any material respect. SECTION 5.03 Registration of Shares. In the event that any Make Whole ---------------------- Payment shall be satisfied by the issuance of shares of SRC Common Stock, SRC shall use its best efforts to cause to be effective at the time of the issuance of such SRC Common Stock a registration statement on Form S-3 under the Securities Act to permit the resale of such SRC Common Stock issued to Westra and Cress. ARTICLE VI MUTUAL COVENANTS ---------- ---------------- SECTION 6.01 Non-competition. At the Closing, each of Toussaint and --------------- Bacovast will enter into a Non-competition and Confidentiality Agreement with Buyer in substantially the form of Exhibit 6.01 attached hereto (the "Non- ------------ competition Agreements"). 21 SECTION 6.02 Leases. At the closing, the Sellers will, to the extent that ------ the Buyer so requests, enter into a real estate lease agreement with the Buyer in the form of Exhibit 6.02 attached hereto (the "New Leases") for any ------------ properties owned by any of the Sellers and leased to any of the Companies for use in their businesses as of the date hereof. SECTION 6.03 Reserved. -------- SECTION 6.04 Employment Agreements. At the Closing, Buyer and each of --------------------- Westra, Cress, Almy and Burmeister will enter into an employment agreement in substantially the form of Exhibit 6.04 attached hereto (the "Employment ------------ Agreements"). ARTICLE VII CONDITIONS TO THE BUYER'S OBLIGATIONS ----------- ------------------------------------- The obligation of the Buyer to pay the Purchase Price on the Closing Date and to consummate the other transactions contemplated hereby is subject to the satisfaction, on or before the Closing Date, of the following conditions each of which may be waived by the Buyer in its sole discretion: SECTION 7.01 Consents. All requisite governmental approvals and consents -------- of third parties identified on Schedule 2.08 shall have been obtained and ------------- delivered to Buyer. SECTION 7.02 Representations and Warranties True. All of the ----------------------------------- representations and warranties of the Sellers contained in this Agreement or in any Schedules or other documents attached hereto or referred to herein or delivered pursuant hereto or in connection with the transactions contemplated hereby shall be true, correct and complete in all respects on and as of the date hereof and on and as of the Closing Date, as if made on and as of the Closing Date. On the Closing Date, the Sellers shall have executed and delivered to the Buyer a certificate, in form and substance satisfactory to the Buyer and its counsel, to such effect. SECTION 7.03 Performance. The Sellers shall have performed and complied ----------- with all covenants and agreements contained herein required to be performed or complied with by them prior to or at the Closing Date. The Sellers shall have executed and delivered to the Buyer a certificate, in form and substance satisfactory to the Buyer and its counsel, in writing to such effect and to the further effect that all of the conditions set forth in this Article VII have been satisfied. SECTION 7.04 No Adverse Change. No adverse change shall have occurred or ----------------- be threatened in the condition (financial or other) of any of the Companies, the results of their operations, properties, assets, liabilities or businesses. SECTION 7.05 Opinion of Counsel. The Buyer shall have received the ------------------ opinion of McNeil Grafton, in substantially the form attached hereto as Exhibit ------- 7.05. - ---- SECTION 7.06 Resignations. The Buyer shall have received copies of the ------------ written resignations delivered to each of the Companies from the officers and directors of such Companies. 22 SECTION 7.07 No Actions, Suits or Proceedings. As of the Closing Date, no -------------------------------- action, suit, investigation or proceeding brought by any person, corporation, governmental agency or other entity shall be pending or, to the knowledge of the parties to this Agreement, threatened, before any court or governmental body (a) to restrain, prohibit, restrict or delay the consummation of the transactions contemplated hereby, or (b) which has or may have a material adverse effect on the condition, financial or otherwise, or prospects of any of the Companies. No order, decree or judgment of any court or governmental body shall have been issued restraining, prohibiting, restricting or delaying, the consummation of the transactions contemplated by this Agreement. No insolvency proceeding affecting any of the Companies or any of the Sellers shall be pending. SECTION 7.08 Investigation Satisfactory. The Buyer shall be satisfied in -------------------------- all respects with the results of its investigation of the properties, prospects and affairs of each of the Companies. SECTION 7.09 Management Agreements. The Sellers shall have entered into --------------------- the (a) Non-competition Agreements, (b) New Leases, and (c) Employment Agreements, as applicable. SECTION 7.10 Closing Documents. The Sellers shall have delivered: (a) the ----------------- Certificates representing the Shares, duly endorsed to the Buyer; (b) a copy of the resolutions of each of the Companies, certified by each of their Secretaries, authorizing and approving the execution, delivery and performance of this Agreement and the transactions contemplated hereby and the acts of the officers and employees of each of the Companies in carrying out the terms and provisions hereof; and (c) all of the books, data, documents, instruments and other records relating to each of the Companies including without limitation the original incorporation documents, foreign qualifications, bylaws, minute books, stock record books, contracts and agreements referred to in Section 2.33. SECTION 7.11 No Material Adverse Economic Event. There shall not have ---------------------------------- occurred (a) any general suspension of trading in, or limitation on prices for, or other extraordinary event affecting securities on NASDAQ, (b) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or (c) any material limitation (whether or not mandatory) by any governmental authority on, or any other event which might affect the extension of credit by, lending institutions, or (d) in the case of any of the foregoing existing on the Closing Date a material acceleration or worsening thereof. SECTION 7.12 Financing Commitment. The Buyer shall have executed -------------------- definitive loan documents with Fleet National Bank or a similar banking institution for adequate financing to fund the transactions contemplated hereby. SECTION 7.13 Tax and Accounting. The tax and accounting consequences of ------------------ the transactions contemplated hereby shall be acceptable to the Buyer. 23 ARTICLE VIII CONDITIONS TO THE SELLERS' OBLIGATIONS ------------ -------------------------------------- The obligation of the Sellers to sell the Shares to Buyer and to consummate the other transactions contemplated hereby is subject to the satisfaction, on or before the Closing Date, of the following conditions, each of which may be waived by the Sellers in their sole discretion: SECTION 8.01 Representations and Warranties to be True and Correct. The ----------------------------------------------------- representations and warranties contained in Article III shall be true, complete and correct, on and as of the Closing Date, as if made on and as of such date, and the Buyer shall have delivered to the Sellers a certificate, in form and substance satisfactory to the Sellers and their counsel, to such effect. SECTION 8.02 Performance. The Buyer shall have performed and complied ----------- with all agreements contained herein required to be performed or complied with by it prior to or at the Closing Date, and the Buyer shall have delivered a certificate to the Sellers, in form and substance satisfactory to the Sellers and its counsel to such effect. SECTION 8.03 No Actions, Suits or Proceedings. As of the Closing Date, no -------------------------------- action, suit, investigation or proceeding brought by any person, corporation, governmental agency or other entity shall be pending or, to the knowledge of the parties to this Agreement, threatened, before any court or governmental body to restrain, prohibit, restrict or delay the consummation of the transactions contemplated hereby. No order, decree or judgment of any court or governmental body shall have been issued restraining, prohibiting, restricting or delaying, the consummation of the transactions contemplated by this Agreement. No insolvency proceeding affecting the Buyer shall be pending. SECTION 8.04 Closing Documents. The Buyer shall have delivered the ----------------- Purchase Price and all of the resolutions, certificates, documents and instruments required by this Agreement. SECTION 8.05 Tax and Accounting. The tax and accounting consequences of ------------------ the transactions contemplated hereby shall be acceptable to the Seller. SECTION 8.06 Other Agreements. The Buyer shall have entered into the (a) ---------------- Non-competition Agreements, (b) New Leases, (c) Employment/Non-competition Agreements and (d) Employment Agreements. SECTION 8.07 No Actions, Suits or Proceedings. As of the Closing Date, no -------------------------------- action, suit, investigation or proceeding brought by any person, corporation, governmental agency or other entity shall be pending or, to the knowledge of the parties to this Agreement, threatened, before any court or governmental body (a) to restrain, prohibit, restrict or delay the consummation of the transactions contemplated hereby, or (b) which has or may have a material adverse effect on the condition, financial or otherwise, or prospects of the Buyer or SRC. No order, decree or judgment of any court or governmental body shall have been issued restraining, prohibiting, restricting or delaying, the consummation of the transactions contemplated by this Agreement. No insolvency proceeding affecting either the Buyer or SRC shall be pending. 24 SECTION 8.08 Investigation Satisfactory. The Sellers shall be satisfied -------------------------- in all respects with the results of their investigation of the properties, prospects and affairs of each of the Buyer and SRC. SECTION 8.09 No Material Adverse Economic Event. There shall not have ---------------------------------- occurred (a) any general suspension of trading in, or limitation on prices for, or other extraordinary event affecting securities on NASDAQ, (b) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or (c) any material limitation (whether or not mandatory) by any governmental authority on, or any other event which might affect the extension of credit by, lending institutions, or (d) in the case of any of the foregoing existing on the Closing Date a material acceleration or worsening thereof. ARTICLE IX INDEMNIFICATION ---------- --------------- SECTION 9.01 Survival. All representations and warranties in this -------- Agreement, or in any instrument or document furnished in connection with this Agreement or the transactions contemplated hereby, shall survive the Closing and any investigation at any time made by or on behalf of any party for a period of three (3) years. All such representations and warranties shall expire on the third anniversary of the Closing Date, except that (a) claims, if any, asserted in writing prior to such third anniversary identified as a claim for indemnification pursuant to this Article IX shall survive until finally resolved and satisfied in full, and (b) claims, if any, which are environmental in nature, which are based upon fraud by the Seller, which relate to title to the Shares or title to the assets of the Company, which assert tax liability or which are in connection with Section 9.02(c) below shall survive for the full period of the applicable statute of limitations, and until finally resolved and satisfied in full if asserted on or prior to such date. All covenants and agreements contained herein shall survive until fully performed in accordance with their terms. SECTION 9.02 Sellers' Indemnification of Buyer. Each of Westra and --------------------------------- Cress, jointly and severally, hereby agree to indemnify and hold harmless the Buyer against any and all losses, liabilities, claims, judgments, assessments, damages and expenses (including in the case of (c) below all costs of correcting any operation or other defect that may violate the requirements of any applicable law), including, but not limited to, reasonable attorneys' fees and expenses actually incurred by the Buyer ("Damages") arising directly out of (a) any breach of any representation, warranty, covenant, or agreement of the Sellers contained in this Agreement, (b) negligence, willful misconduct or fraud in connection with the conduct of the Business prior to the Closing or (c) the Kent 401(k) profit sharing plan or the Kent Flex Plan, each described in Schedule 2.21 hereto; provided, however, that (a) each Seller, severally, agrees - ------------- -------- ------- to indemnify and hold harmless the Buyer against any Damages arising directly out of any breach of the representations and warranties and agreements contained in Sections 2.01 and 2.02 herein, (b) any claim for indemnification hereunder shall be asserted prior to the expiration of the survival period set forth in Section 9.01 and (c) no claim for indemnification hereunder, other than a claim pursuant to clause (c) of this Section 9.02, shall be asserted against the first $50,000 of Damages arising hereunder. 25 SECTION 9.03 Indemnification by Buyer. Buyer shall indemnify and hold ------------------------ harmless Sellers against any and all Damages arising directly out of (a) any breach of any representation, warranty, covenant, or agreement of Buyer contained in this Agreement or (b) any corporate liabilities of the Companies which have been assumed by the Buyer as a result of the transactions contemplated hereunder and for which the Sellers have been found to be individually liable, provided, however, that (a) any claim for indemnification -------- ------- hereunder shall be asserted prior to the expiration of the survival period set forth in Section 9.01, (b) no claim for indemnification hereunder shall be asserted against the first $50,000 of Damages arising hereunder and (c) after the Closing, the rights of the Seller under this Section 9.03 shall be the sole remedies of the Seller for any breach of this Agreement. SECTION 9.04 Claims for Indemnification. -------------------------- (a) In the event of the occurrence of any event which any party asserts is an indemnifiable event pursuant to this Article IX, the party claiming indemnification (the "Indemnified Party") shall provide prompt notice to the party required to provide indemnification (the "Indemnifying Party"), specifying in detail the facts and circumstances with respect to such claim and the basis for which indemnification is available hereunder. If such event involves the claim of any third party, the Indemnifying Party shall have the right to control the defense or settlement of such claim; provided, however, that (a) the Indemnified Party shall be entitled to participate in the defense of such claim at its own expense, (b) the Indemnifying Party shall obtain the prior written approval of the Indemnified Party (which approval shall not be unreasonably withheld or delayed) before entering into any settlement of such claim if, pursuant to or as a result of such settlement, injunctive or other non-monetary relief would be imposed against the Indemnified Party, (c) the Indemnifying Party shall not be entitled to control (but shall be entitled to participate at its own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, and shall assume all expense with respect to the defense or settlement of any claim to the extent such claim seeks an order, injunction or other equitable relief against the Indemnified Party which, if successful, could materially interfere with the business, operations, assets, condition (financial or otherwise) or prospects of the Indemnified Party, provided that the Indemnified Party shall provide written notice to the Indemnifying Party of its election to assume control over the defense of such claim pursuant to this Section 9.04 if the Indemnifying Party is entitled but fails to assume control over the defense of a claim as provided in this Section 9.04, provided that the Damages associated with such claim are covered by the indemnity provisions of Section 9.02 or 9.03 the Indemnified Party shall have the right to defend such claim, provided further that the Indemnified Party shall obtain the prior written approval of the Indemnifying Party (which approval shall not be unreasonably withheld or delayed) before entering into any settlement of such claim if, pursuant to or as a result of such settlement, injunctive or other non-monetary relief would be imposed against the Indemnifying Party. In the event that the Indemnifying Party shall be obligated to indemnify the Indemnified Party pursuant to this Article IX, the Indemnifying Party shall, upon payment of such indemnity in full, be subrogated to all rights of the Indemnified Party with respect to the claim to which such indemnification relates. 26 (b) All claims for indemnification by Buyer shall first be satisfied by a pro rata reduction in the outstanding principal and interest due under the Notes, to the extent that amounts remain outstanding under the Notes. ARTICLE X TERMINATION --------- ----------- SECTION 10.01 Termination. This Agreement may be terminated and the ----------- transactions contemplated hereby may be abandoned at any time prior to the Closing: A. By mutual written consent duly authorized by the Board of Directors of the Buyer and by the Sellers; B. By the Buyer or the Sellers if: (i) any court of competent jurisdiction or other governmental body shall have issued an order, decree or ruling, or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby, provided that this Agreement shall not be terminated pursuant to this paragraph unless the party terminating this Agreement has utilized its reasonable best efforts to oppose the issuance of such order, decree or ruling or the taking of such action; (ii) the Closing has not occurred on or prior to April 23, 1999, for any reason other than the breach of any provision of this Agreement by the party terminating this Agreement; or (iii) the other party breaches any of its representations, warranties or covenants hereunder in any material respect and such breach is not cured within five (5) days, provided that the party seeking termination is not in material breach of any of its representations, warranties or covenants hereunder. C. By the Buyer if: (i) Any of the conditions set forth in Article VII hereof has not been satisfied on or before April 23, 1999 or shall have become incapable of fulfillment and shall not have been waived by the Buyer, for any reason other than a breach by the Buyer of any of its representations, warranties or agreements hereunder; or (ii) If in the Buyer's good faith judgment there is any inaccuracy in any representations or breach of any warranty contained 27 therein, or any failure by the Seller to perform any commitment, covenant or condition contained in this Agreement, or there exists any error, misstatement or omission with regard to any of the Exhibits, Schedules or other documents referred to herein, or the Buyer in its sole judgment is not satisfied with the results of its investigation or the contents of any of the Exhibits, Schedules, information or other documents, or with the results of its examination of the business and condition (financial or otherwise) of any of the Companies. D. By the Sellers if any of the conditions set forth in Article VIII hereof has not been satisfied on or before April 23, 1999, or shall have become incapable of fulfillment and shall not have been waived by the Sellers, for any reason other than a breach by any Seller of any of their representations, warranties or agreements hereunder; Upon the occurrence of any of the events specified in this Section 10.01 (other than paragraph A hereof), written notice of such event shall forthwith be given to the other parties to this Agreement, whereupon this Agreement shall terminate. SECTION 10.02 Effect of Termination. In the event of the termination and --------------------- abandonment of this Agreement pursuant to Section 10.01, this Agreement, except for the provisions of Articles IX, X and XI shall forthwith become void and be of no effect, without any liability on the part of any party or its directors, officers or shareholders. Nothing in this Section 10.02 shall relieve any party to this Agreement of liability for breach of this Agreement. If the Sellers or any of the Companies fails to fulfill its obligations hereunder for any reason not excused by an express provision of this Agreement, then the Buyer shall, in addition to any other remedies that it may have, have the right to bring an action in any court of competent jurisdiction to obtain specific performance of this Agreement, it being understood that the parties agree that failure of the Sellers to consummate the purchase and sale of the Shares or failure of the Sellers or any of the Companies to perform any of their obligations contemplated by this Agreement (except for a failure excused by an express provision of this Agreement) would cause irreparable injury to the Buyer and that money damages would not provide an adequate remedy to the Buyer. The Sellers and each of the Companies therefore waive all objections to the award of equitable relief for such failure. ARTICLE XI SRC GUARANTEE ---------- ------------- SECTION 11.01 Guarantee. --------- (a) SRC hereby irrevocably and unconditionally guarantees (the "Guarantee") to the Sellers the obligations of the Buyer under the Notes, the Make Whole Payment, the Second Make Whole Payment and the payment obligations of the Employment Agreements (each an 28 "Obligation" and collectively the "Obligations"). Failing payment when due of any amount so guaranteed for whatever reason, SRC shall be obligated, to pay the same. (b) SRC hereby agrees, to the fullest extent permitted by applicable law, that its obligations with regard to this Guarantee shall be unconditional. SRC hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Buyer, any right to require a proceeding first against the Buyer or right to require the prior disposition of the assets of the Buyer to meet its obligations, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged (except to the extent released pursuant to Section 11.02 herein) except by complete performance of the Obligations. (c) It is the intention of SRC and the Buyer that the Obligations shall not be in excess of the maximum amount permitted by applicable law. Accordingly, if the obligations in respect of the Guarantee would be annulled, avoided or subordinated to the creditors of SRC by a court of competent jurisdiction in a proceeding actually pending before such court as a result of a determination both that such Guarantee was made by SRC without fair consideration and, immediately after giving effort thereto, SRC was insolvent or unable to pay its debts as they mature or left with an unreasonably small capital, then the obligations of SRC under such Guarantee shall be reduced by such court if and to the extent such reduction would result in the avoidance of such annulment, avoidance or subordination. For purposes of this paragraph, "fair consideration," "insolvency," "unable to pay its debts as they mature," "unreasonably small capital" and the effective times of reductions, if any, required by this paragraph shall be determined in accordance with applicable law. SECTION 11.02 Reserved. -------- SECTION 11.03 Certain Bankruptcy Events. ------------------------- SRC hereby covenants and agrees, to the fullest extent that it may do so under applicable law, that in the event of the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Buyer, SRC shall not file (or join in any filing of), or otherwise seek to participate in the filing of, any motion or request seeking to stay or to prohibit (even temporarily) execution on the Guarantee and hereby waives and agrees not to take the benefit of any such stay or execution, whether the bankruptcy law permits or otherwise. ARTICLE XII MISCELLANEOUS ----------- ------------- SECTION 12.01 Notices. All notices, requests, consents and other ------- communications hereunder shall be in writing, shall be addressed to the receiving party's address set forth below or to such other address as a party may designate by notice hereunder, and shall be either (a) delivered by hand, (b) made by telex, telecopy or facsimile transmission, (c) sent by recognized overnight courier, or (d) sent by registered or certified mail, return receipt requested, postage prepaid. 29 If to the Buyer: With a copy to: Sight Resource Corporation Mintz, Levin, Cohn, Ferris, 100 Jeffrey Avenue Glovsky and Popeo, P.C. Holliston, MA 01746 One Financial Center Attn: President Boston, MA 02111 Fax: (508) 429-6023 Attn: Lewis Geffen, Esquire If to the Sellers: With a copy to: As set forth on the signature page hereof. Same as for the Companies. If to the Companies: With a copy to: c/o Kent Optical Company McNeil Grafton 1095 Third Street, Suite #10 20 S. Fifth Street, P.O. Box 185 Muskegon, MI 49441 Grand Haven, MI 49417 Phone: Phone: (616) 847-1000 Fax: Fax: (616) 847-1619 Attn: Timothy D. Westra Attn: Douglas J. McNeil, Esquire All notices, requests, consents and other communications hereunder shall be deemed to have been received (a) if by hand, at the time of the delivery thereof to the receiving party at the address of such party set forth above, (b) if made by telex, telecopy or facsimile transmission, at the time that receipt thereof has been acknowledged by electronic confirmation or otherwise, (c) if sent by overnight courier, on the next business day following the day such notice is delivered to the courier service, or (d) if sent by registered or certified mail, on the fifth business day following the day such mailing is made. SECTION 12.02 Entire Agreement. This Agreement together with the Exhibits ---------------- and Schedules hereto and the other documents executed in connection herewith (together, the "Documents") embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in the Documents shall affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement. SECTION 12.03 Modifications and Amendments. The terms and provisions of ---------------------------- this Agreement may be modified or amended only by written agreement executed by all parties hereto. SECTION 12.04 Waivers and Consents. No failure or delay by a party hereto -------------------- in exercising any right, power or remedy under this Agreement, and no course of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of the party. No single or partial exercise of any right, power or remedy under this Agreement by a party hereto, nor any abandonment or discontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any other right, power or 30 remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand on a party not expressly required under this Agreement shall entitle the party receiving such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand. The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent. SECTION 12.05 Assignment. Neither this Agreement, nor any right ---------- hereunder, may be assigned by any of the parties hereto without the prior written consent of the other parties, except that the Buyer may assign all or part of its rights and obligations under this Agreement to one or more direct or indirect subsidiaries or affiliates (in which event, representations and warranties relating to the Buyer shall be appropriately modified). SECTION 12.06 Parties in Interest. This Agreement shall be binding upon ------------------- and inure solely to the benefit of each party hereto and their permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Nothing in this Agreement shall be construed to create any rights or obligations except among the parties hereto, and no person or entity shall be regarded as a third-party beneficiary of this Agreement. SECTION 12.07 Governing Law. This Agreement and the rights and ------------- obligations of the parties hereunder shall be construed in accordance with and governed by the internal laws of the State of Michigan, without giving effect to the conflict of law principles thereof. SECTION 12.08 Arbitration. Any controversy, dispute or claim arising out ----------- of or in connection with this Agreement, or the breach, termination or validity hereof, shall be settled by final and binding arbitration, to be conducted in the first instance in Boston, Massachusetts, in the second instance in Grand Rapids, Michigan and thereafter alternating between such locations, pursuant to the then-obtaining Commercial Rules of the American Arbitration Association. The decision or award of the arbitration panel shall be final, and judgment upon such decision or award may be entered in any competent court or application may be made to any competent court for judicial acceptance of such decision or award and an order of enforcement. The arbitration panel shall allocate the costs of the arbitration to any of the parties as it sees fit, and shall have the discretion to require a party to pay the attorney's fees incurred by another party in connection with the arbitration. SECTION 12.09 Severability. In the event that any court of competent ------------ jurisdiction shall finally determine that any provision, or any portion thereof, contained in this Agreement shall be void or unenforceable in any respect, then such provision shall be deemed limited to the extent that 31 such court determines it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall determine any such provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall nevertheless remain in full force and effect. SECTION 12.10 Interpretation. The parties hereto acknowledge and agree -------------- that: (a) each party and its counsel reviewed and negotiated the terms and provisions of this Agreement (except with respect to the disclosure schedules regarding the business of the Companies which are the sole responsibility of the Sellers) and have contributed to its revision; (b) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement; and (c) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement. SECTION 12.11 Headings and Captions. The headings and captions of the --------------------- various subdivisions of this Agreement are for convenience of reference only and shall in no way modify, or affect, or be considered in construing or interpreting the meaning or construction of any of the terms or provisions hereof. SECTION 12.12 Enforcement. Each of the parties hereto acknowledges and ----------- agrees that the rights acquired by each party hereunder are unique and that irreparable damage would occur in the event that any of the provisions of this Agreement to be performed by the other party were not performed in accordance with their specific terms or were otherwise breached. Accordingly, in addition to any other remedy to which the parties hereto are entitled at law or in equity, each party hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement by the other party and to enforce specifically the terms and provisions hereof in any federal or state court to which the parties have agreed hereunder to submit to jurisdiction. SECTION 12.13 Reliance. The parties hereto agree that, notwithstanding -------- any right of any party to this Agreement to investigate the affairs of any other party to this Agreement, the party having such right to investigate shall have the right to rely fully upon the representations and warranties of the other party expressly contained in this Agreement and on the accuracy of any schedule or other document attached hereto or referred to herein or delivered by such other party or pursuant to this Agreement. SECTION 12.14 Expenses. Each of the parties hereto shall pay its own fees -------- and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated; provided, however, that all expenses in excess of -------- $25,000 billed to or incurred by each of the Companies in connection with this Agreement and the transactions contemplated hereby after March 1, 1999 shall be borne by the Sellers and not the Companies. SECTION 12.15 No Broker or Finder. Each of the parties hereto represents ------------------- and warrants to the other that no broker, finder or other financial consultant has acted on its behalf in connection with this Agreement or the transactions contemplated hereby in such a way as to create any liability 32 on the other. Each of the parties hereto agrees to indemnify and save the other harmless from any claim or demand for commission or other compensation by any broker, finder, financial consultant or similar agent claiming to have been employed by or on behalf of such party and to bear the cost of legal expenses incurred in defending against any such claim. SECTION 12.16 Publicity. No party shall issue any press release or --------- otherwise make any public statement with respect to the execution of, or the transactions contemplated by, this Agreement without the prior written consent of the other party, except as may be required by law. The parties recognize that the Buyer is a subsidiary of a publicly held company which is obligated under the federal or state securities laws, rules or regulations to make disclosures of material events affecting it. Upon advice by counsel that Buyer or SRC is required to make such an announcement by the federal or state securities laws, rules or regulations, Buyer or SRC may make such announcement. Buyer agrees to promptly inform each of the Companies of such advice and, if practicable, give each of the Companies an opportunity to comment upon the form of any such announcement. SECTION 12.17 Confidentiality. Each party acknowledges and agrees that --------------- any information or data it has acquired from the other party, not otherwise properly in the public domain, was received in confidence. Each party hereto agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Agreement (including obtaining financing and conducting due diligence), or use to the detriment of the disclosing party or for the benefit of any other person or persons, or misuse in any way, any confidential information of the disclosing party concerning the subject matter hereof, including any trade or business secrets of the disclosing party and any technical or business materials that are treated by the disclosing party as confidential or proprietary, including without limitation information (whether in written, oral or machine-readable form) concerning: general business operations; methods of doing business, servicing clients, client relations, and of pricing and making charge for services and products; financial information, including costs, profits and sales; marketing strategies; business forms developed by or for the disclosing party; names of suppliers, personnel, customers, clients and potential clients; negotiations or other business contacts with suppliers, personnel, customers, clients and potential clients; form and content of bids, proposals and contracts; the disclosing party's internal reporting methods; technical and business data, documentation and drawings; software programs, however embodied; manufacturing processes; inventions; diagnostic techniques; and information obtained by or given to the disclosing party about or belonging to third parties. SECTION 12.18 Counterparts. This Agreement may be executed in one or more ------------ counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 33 IN WITNESS WHEREOF, the Buyer, each of the Companies and the Sellers have executed this Stock Purchase and Sale Agreement as of the day and year first above written. The Buyer: --------- ATTEST: KENT ACQUISITION CORP. ________________________ By: /s/ William T. Sullivan ------------------------------------- Its: President ------------------------------------- SRC (with respect to Article III, --- Section 5.03 and Article XI only) ATTEST SIGHT RESOURCE CORPORATION ________________________ By: /s/ William T. Sullivan ---------------------------------- Its: President ------------------------------------- The Companies: ------------- ATTEST: KENT OPTICAL COMPANY /s/ Deana R. Olsen By: /s/ Timothy D. Westra - ------------------- ----------------------------------- Its: President ---------------------------------- ATTEST: CUSTOM OPTICS, INC. /s/ Deana R. Olsen By: /s/ Timothy D. Westra - ------------------- ----------------------------------- Its: President ----------------------------------- ATTEST: KENT - N.W. GRAND RAPIDS, INC. /s/ Deana R. Olsen By: /s/ Timothy D. Westra - ------------------- ----------------------------------- Its: President ----------------------------------- 34 ATTEST: KENT-HACKLEY, INC. /s/ Deana R. Olsen By: /s/ Timothy D. Westra - ------------------- ----------------------------------- Its: President ----------------------------------- ATTEST: SOURCE OPTICAL SUPPLY, INC. /s/ Deana R. Olsen By: /s/ Timothy D. Westra - ------------------- ----------------------------------- Its: President ------------------------ The Sellers: ----------- ATTEST: s/ Deana R. Olsen By: /s/ Timothy D. Westra - ------------------ ----------------------------------- Timothy D. Westra Address: 19081 Elizabeth Court Spring Lake, MI 49456 ATTEST: s/ Deana R. Olsen By: /s/ John C. Cress - ------------------ ------------------------------- John C. Cress Address: 4226 Vineyard Muskegon, MI 49441 ATTEST: s/ Deana R. Olsen By: /s/ Gerald Almy - ------------------ ----------------------------- Gerald Almy Address: 7460 Bridle Path, SE Grand Rapids, MI 49546 [Signature Page to Stock Purchase and Sale Agreement] 35 ATTEST: s/ Deana R. Olsen By: /s/ Steven Burmeister - ------------------ ----------------------------------- Steven Burmeister Address: 6131 Lake Harbor Road Muskegon, MI 49441 ATTEST: s/ Deana R. Olsen By: /s/ Dennis Toussaint - ------------------ ---------------------------------- Dennis Toussaint Address: 10371 Portage Road Kalamazoo, MI 49002 ATTEST: BACOVAST, L.L.C. s/ Douglas J. McNeil By: /s/ Timothy D. Westra - --------------------- ----------------------------------- Its:: /s/ Timothy D. Westra ----------------------------------- Pursuant to Power of Attorney in Source Optical Shareholder Agreement [Signature Page to Stock Purchase and Sale Agreement] 36 LIST OF OMITTED EXHIBITS AND SCHEDULES: Listed below are all the schedules and exhibits that are omitted from Exhibit 2.1 in this Form 8-K. The Registrant agrees to furnish supplemental copies of any omitted exhibit or schedule listed below to the Commission upon request. Exhibits - -------- 1.02(a) Form of Escrow Agreement 1.02(b) Form of Promissory Note 6.01 Form of Non-Competition Agreement 6.02 Form of Real Estate Lease 6.04(a) Form of Employment Agreement (Westra) 6.04(b) Form of Employment Agreement (Cress) 6.04(c) Form of Employment Agreement (Almy) 6.04(d) Form of Employment Agreement (Burmeister) 7.05 Form of Opinion of McNeil Grafton Schedules - --------- 1.02 Purchase Price Allocation 2.01 Title to Shares 2.04 Capitalization 2.08 Validity, etc. 2.09 Financial Statement 2.11 Absence of Adverse Change; Conduct of Business 2.14 Taxes 2.15 Litigation 2.18 Licenses and Permits 2.20 Certain Employees 2.21 Employee Benefits 2.22 Tangible Properties 2.23 Owned Premises 2.24 Leased Premises 2.26 Insurance 2.27 Outstanding Commitments 2.28 Intellectual Property 2.29 Customers and Suppliers 2.30 Banks, Brokers and Proxies 2.31 Guaranties of Indebtedness of Other Persons 2.32 Transactions with Affiliates 2.37 Year 2000 Compliance 37 EX-99.1 3 LOAN AGREEMENT Exhibit 99.1 LOAN AGREEMENT -------------- LOAN AGREEMENT made this 15th day of April, 1999 by and between Fleet National Bank, a national banking association organized and existing under the laws of the United States of America with a principal place of business at One Federal Street, Boston, MA 02110 (hereinafter referred to as the "Bank") and Sight Resource Corporation, a Delaware corporation with a principal place of business at 100 Jeffrey Avenue, Holliston, MA 01746 (hereinafter sometimes referred to as the "Agent Borrower"), Cambridge Eye Associates, Inc., a Delaware corporation with a principal place of business at 1 Highland Avenue, Unit 3B, Malden, MA, Douglas Vision World, Inc., a Delaware corporation with a principal place of business at 1 Highland Avenue, Unit 3B, Malden, MA, E.B. Brown Opticians, Inc., a Delaware corporation with a principal place of business at 1549 E. 30th Street, Cleveland, Ohio, Eyeglass Emporium, Inc., a Delaware corporation with a principal place of business at 100 Jeffrey Avenue, Holliston, MA 01746, Kent Acquisition Corp. (whose name will be changed to Kent Optical Company in conjunction with the execution of this Agreement), a Delaware corporation with a principal place of business at 100 Jeffrey Avenue, Holliston, MA 01746, Shawnee Optical, Inc., a Delaware corporation with a principal place of business at 2203 W. 38th Street, Erie, PA, and Vision Plaza, Corp., a Delaware corporation with a principal place of business at 3301 Veterans Memorial Boulevard, Suite 54E, Metarie, Louisiana (each of the foregoing corporations, including the Agent Borrower shall be referred herein both individually and collectively as the "Borrower"). For value received and in consideration of the granting by the Bank of financial accommodations to Borrower, Borrower represents and warrants to and agrees with the Bank as follows: ARTICLE I --------- DEFINITIONS AND RULES OF INTERPRETATION --------------------------------------- For purposes of this Agreement, the following terms shall have the following meanings: 1.01 "Acquisition Line" shall mean the non-revolving line of credit established pursuant to this Agreement in the maximum principal amount of the Commitment Amount. 1.02 "Acquisition Term Loan" shall mean the Loan or Loans evidencing an Advance under the Acquisition Line. 1.03 "Acquisition Term Note" shall mean the promissory note or notes evidencing an Advance under the Acquisition Line, in the form of Rider A attached hereto. 1.04 "Adjusted Libor" shall mean an interest rate per annum determined by Bank pursuant to the following formula: Adjusted Libor = Libor ------------------------------ 1.00 - Reserve Rate 1.05 "Advance" shall mean any sum of money loaned by the Bank to the Borrower pursuant to this Agreement. 1.06 "Affiliate" shall mean any Person (i) which directly or indirectly controls, or is controlled by or is under common control with the Borrower or a subsidiary, (ii) which directly or indirectly beneficially holds or owns ten percent (10%) or more of any class of voting stock of the Borrower or any subsidiary, or (iii) ten percent (10%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Borrower or a subsidiary. 1.07 "Agent Borrower" shall mean Sight Resource Corporation. 1.08 "Availability Period" shall mean that period commencing with the date of this Agreement and ending on the Termination Date. 1.09 "Bank" shall mean and refer to Fleet National Bank, its successors and assigns. 1.10 "Banking Day" shall mean a day on which banks are open for business in Boston, Massachusetts, and if the applicable "Banking Day" relates to a Libor Loan, a day on which dealings are carried on and banks are open for business in the relevant Interbank Market. 1.11 "Borrower" shall mean each of the entities listed above and their successors and permitted assigns or any entity which subsequently becomes a party to this Agreement as a co-obligor. 1.12 "Borrowing Base" shall have the meaning set forth in Section 2.01 hereof. 1.13 "Borrowing Date" shall mean any day upon which an Advance is made. 1.14 "Cash Flow" shall mean, for any period, the sum of earnings before interest and taxes, plus depreciation and amortization, less permitted dividends, less taxes paid in the applicable period, less unfinanced capital expenditures paid in the applicable period. 1.15 "Collateral" shall mean all collateral for the Loans, whether pursuant to security agreements or otherwise. 1.16 "Commitment Amount" shall mean Ten Million ($10,000,000.00) Dollars. 1.17 "Credit Limit" shall mean Three Million ($3,000,000.00) Dollars. 1.18 "Debt Service" shall mean, for any period, the sum of the current maturities of all long-term debt (including subordinated debt) and all interest expense. 1.19 "Default" shall mean an Event of Default or an event which, with the passage of time or the giving of notice or both, would constitute an Event of Default. 1.20 "Dollars" or "$" shall mean currency of the United States of America. 2 1.21 "Eligible Accounts Receivable" shall have the meaning set forth in Section 2.03 hereof. 1.22 "Eligible Inventory" shall have the meaning set forth in Section 2.04 hereof. 1.23 "Eurocurrency Liabilities" shall have the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. 1.24 "Eurodollars" shall mean Dollars acquired by Bank through the purchase or other acquisition of deposits denominated in Dollars and made with any bank or branch of a bank (including any branch of the Bank) located outside the United States of America. 1.25 "Event of Default" is defined in Article X of this Agreement. 1.26 "Financing Agreements" shall mean this Agreement and all documents executed in conjunction herewith, whether now or in the future, including, without limitation, collateral documents, notes, and subordination agreements required to be executed by Borrower or any Third Party in connection with the loan arrangements between the Borrower and the Bank. 1.27 "GAAP" or "generally accepted accounting principles" shall mean generally accepted accounting principles which are (1) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and (2) such that insofar as the use of accounting principles is pertinent, certified public accountants would be able to deliver an unqualified opinion as to financial statements in which such principles have been properly applied. 1.28 "Indebtedness" shall mean (i) all liabilities for borrowed money, for the deferred purchase price of property or services, and under leases which are or should be, under generally accepted accounting principles, recorded as capital leases, in respect of which a person or entity is directly or indirectly, absolutely or contingently liable as obligor, guarantor, endorser or otherwise, or in respect of which such person or entity otherwise assures a creditor against loss, (ii) all liabilities of the type described in (i) above which are secured by (or for which the holder has an existing right, contingent or otherwise, to be secured by) any lien upon property owned by such person or entity, whether or not such person or entity has assumed or become liable for the payment thereof, and (iii) all other liabilities or obligations which would, in accordance with generally accepted accounting principles, be classified as liabilities of such person or entity. 1.29 "Interbank Market" shall mean, with respect to any Libor Loan, the London Interbank Eurodollar market. 1.30 "Interest Payment Date" shall mean the first Banking Day of each month commencing on the first Banking Day of the first month next succeeding the date hereof, through the Termination Date (as the same may be extended from time to time by Bank, in its sole discretion). 3 1.31 "Interest Period" shall mean: (a) with respect to each Libor Loan, a period commencing on the Borrowing Date of such Advance, and ending one, two, three, or six months thereafter, as the case may be, as determined in accordance with the provisions of this Agreement provided that (i) any Interest Period which would otherwise end on a day which is not a Banking Day, shall end and the next Interest Period shall commence on the next preceding or the next succeeding day which is a Banking Day as determined in good faith by the Bank in accordance with the then current bank practices in the relevant Interbank Market, and (ii) no Interest Period for a Libor Loan shall end after the Termination Date; (b) with respect to the Prime Rate Loan(s), a period commencing on the Borrowing Date of an Advance and ending on the date of repayment of such Advance. 1.32 "Libor" shall mean, with respect to a Libor Loan, the rate per annum at which deposits in Dollars are offered to Bank or Bank's representative or agent for delivery on the Borrowing Date for such Advance, in the Interbank Market at 11:00 a.m., local time, two Banking Days prior to such Borrowing Date for a period equal to the Interest Period chosen by Borrower with respect to such Advance and in an amount substantially equal to the principal amount of such Advance. The Bank shall give prompt notice to the Borrower of the Libor determined for each Advance and such notice shall be conclusive and binding, absent manifest error, for all purposes. 1.33 "Libor Loan(s)" shall mean, when used in the singular, any Advance under the Revolving Loan on which the interest rate is calculated by reference to Libor and, when used in the plural, shall mean all such Advances. 1.34 "Loan(s)" shall mean the aggregate of the unpaid principal balance of all Advances. 1.35 "Margin" shall mean: (i) with respect to each Prime Rate Loan, zero (0%) percent; and (ii) with respect to each Libor Loan, two and one-half (2.5%) percent until Profitability is achieved and two (2%) percent thereafter. 1.36 "Maturity Date" shall mean the date on which an Interest Period expires. 1.37 "Net Worth" shall mean, as of any date, the total consolidated stockholders' equity (including preferred stock) which would appear on the balance sheet of Borrower, prepared in accordance with generally accepted accounting principles consistently applied. 1.38 "Obligations" shall mean all debts, liabilities and Indebtedness of Borrower to Bank hereunder including, without limitation, all interest, fees, charges, expenses and overdrafts, and also including, without limitation, all obligations and liabilities which Bank may incur or become liable for, on account of, or as a result of any transactions between Bank and Borrower hereunder. 4 1.39 "Person" shall mean any individual, corporation (including a business trust), partnership, trust, unincorporated association, joint stock company, limited liability company or other legal entity or organization and any government or agent or political subdivision thereof. 1.40 "Prime Rate" shall mean the rate of interest announced by the Bank in Boston, Massachusetts, from time to time as its "Prime Rate", it being understood that such rate is a reference rate, and not necessarily the lowest rate of interest charged by Bank. 1.41 "Prime Rate Loan(s)" shall mean, when used in the singular, any Advance under the Revolving Loan on which the interest rate is calculated by reference to the Prime Rate and, when used in the plural, shall mean all such Advances. 1.42 "Profitability" shall mean the time at which Borrower submits a covenant compliance certificate demonstrating net income after taxes of at least $1 on a consolidated basis for a period of three (3) months ending at the end of the quarterly fiscal period ending March 31, 1999 (or the three (3) month period ending at the end of any subsequent quarterly period if "Profitability" is not achieved as of March 31, 1999). 1.43 "Reserve Rate" shall mean the rate (expressed as a decimal) at which Bank would be required to maintain reserves under REGULATION D of the Board of Governors of the Federal Reserve System against Eurodollar Liabilities if such liabilities were outstanding. 1.44 "Revolving Loan" shall mean the discretionary revolving line of credit established pursuant to this Agreement in the maximum principal amount of the Credit Limit. 1.45 "Revolving Line Note" shall mean the note of even date in the maximum principal amount of $3,000,000.00 evidencing the Advances under the Revolving Loan. 1.46 "Termination Date" shall mean May 31, 2001. 1.47 "Term Loan" shall mean the loan from the Bank to the Borrower in the original principal amount of Seven Million ($7,000,000.00) Dollars. 1.48 "Term Note(s)" shall mean the promissory note evidencing the Term Loan. 1.49 "Third Party" shall mean any Person who has executed and delivered, or who in the future may execute and deliver, to Bank any agreement, instrument, or document, pursuant to which such Person has become a co-obligor with respect to of the Obligations and/or has granted Bank a security interest in or lien on some or all of such Person's real or personal property to secure the payment of the Obligations. 1.50 "Transaction Documents" shall mean all agreements, instruments, notes and documents executed in conjunction with the Loans, whether now existing or hereafter arising. 1.51 For purposes of this Agreement, the following rules of interpretation shall be used: 5 (i) 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 Agreement. (ii) The singular includes the plural and the plural includes the singular. (iii) A reference to any law includes any amendment or modification to such law. (iv) A reference to any Person includes its permitted successors and permitted assigns. (v) Accounting terms capitalized but 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. (vi) All capitalized 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 Commonwealth of Massachusetts shall have the meanings assigned to them therein. ARTICLE II ---------- AMOUNT AND TERMS OF CREDIT AND INTEREST --------------------------------------- THE REVOLVING LOAN ------------------ 2.01 Subject to the terms and conditions of this Agreement, the Bank hereby establishes a revolving line of credit of up to $3,000,000.00 to be advanced as hereinafter provided. The Bank may, in its discretion, from time to time, make Advances comprising the Revolving Loan to the Agent Borrower upon the Agent Borrower's request; provided, however, that no Advance will be made if, after giving effect to the Agent Borrower's request for such Advance, the outstanding principal balance of the Revolving Loan would exceed the lesser of: (a) the Credit Limit; or (b) the sum of: (i) eighty percent (80%) of the face amount of the sum of the Eligible Accounts Receivable of each Borrower less than ninety (90) days from the invoice date thereof, plus (ii) the lesser of: (x) $2,000,000.00 or (y) thirty percent (30%) of the value (determined at the lower of cost or market value) of the sum of the Eligible current Inventory of each Borrower (the sum of (i) plus (ii) is hereinafter called the "Borrowing Base"). 6 2.02 If at any time the aggregate Advances under the Revolving Loan exceed the Borrowing Base, the Borrower shall immediately, on demand, pay to the Bank an amount sufficient to reduce the aggregate amount of such Advances to an amount less than the Borrowing Base. 2.03 For purposes of the Borrowing Base calculation set forth above, Eligible Accounts Receivable are those which are owing to the Borrower which met the following specifications at the time it came into existence and continues to meet the same until collected in full: (i) The account arose from the performance of services or an outright sale of goods by Borrower, such goods have been shipped to the account debtor, and Borrower has possession of, or has delivered to Bank, shipping and delivery receipts evidencing such shipment. (ii) The account is not subject to any prior assignment, claim, lien, or security interest, and Borrower will not make any further assignment thereof or create any further security interest therein (except in favor of Bank) nor permit Borrower's rights therein to be reached by attachment, levy, garnishment or other judicial process. (iii) The account is not subject to set-off, credit, allowance or adjustment by the account debtor, except discount allowed for prompt payment and the account debtor has not complained as to its liability thereon and has not returned any of the goods from the sale of which the account arose. (iv) The account arose in the ordinary course of Borrower's business and did not arise from the performance of services or a sale of goods to a supplier or employee of the Borrower. (v) No notice of bankruptcy or insolvency of the account debtor has been received by or is actually known by the Borrower. (vi) The account is not owed by an account debtor whose principal place of business is outside the United States of America, unless such account is supported by a letter of credit reasonably acceptable to the Bank in all respects. (vii) The account is not owed by an entity which is a parent, brother/sister, subsidiary or affiliate of any of the entities constituting the Borrower. (viii) The account debtor is not located in the State of New Jersey or Minnesota unless Borrower has filed and shall file all legally required Notice of Business Activities Report(s) with the New Jersey Division of Taxation or the Minnesota Department of Revenue. (ix) The account is not evidenced by a promissory note. 7 (x) The account did not arise out of any sale made on a bill and hold, dating or delayed shipment basis. (xi) The account did not arise out of a contract with the United States government or any department, agency or instrumentality thereof, unless the Borrower has complied with the Federal Assignment of Claims Act. (xii) The Bank in its reasonable banking judgement exercised in good faith does not deem the account to be unacceptable for any reason. 2.04 For purposes of the Borrowing Base calculations set forth above, Eligible Inventory means Borrower's finished goods which are initially and at all times until sold new and unused, in first-class condition, merchantable and saleable through normal trade channels; at a location which has been identified in writing to the Bank; subject to a perfected security interest in favor of Bank; owned by Borrower free and clear of any lien except in favor of Bank; not obsolete; not scrap, waste, defective goods and the like; have been produced by Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders promulgated thereunder; and have not been designated by Bank in its reasonable banking judgement exercised in good faith as unacceptable for any reason upon notice to Borrower. 2.05 Bank shall not be required to make an Advance under the Revolving Loan unless Bank shall have received from the Borrower a request in the form of Exhibit A attached hereto for such Advance (herein a "Notice of Borrowing"), which request complies with the requirements of this Section 2.05. Each Notice of Borrowing shall designate (a) the Borrowing Date for the requested Advance, (b) the amount of the Advance, which amount shall be no less than One Hundred Thousand ($100,000.00) Dollars if the Advance will be a Libor Loan, and provided that no more than eight (8) Libor Loans shall be outstanding at any one time; and (c) if such Notice of Borrowing requests a Libor Loan, it must state the Interest Period. Each Notice of Borrowing must be received by Bank (x) before 12:00 p.m. (Boston time) on the designated Borrowing Date if the Advance will be a Prime Rate Loan; and (y) not less than two Banking Days prior to the Borrowing Date if the Advance will be a Libor Loan. A Notice of Borrowing may be transmitted by telephone, telecopier, telex, cable, overnight courier, hand delivery or mail. If a Notice of Borrowing is transmitted by telephone, telecopier, telex, or cable, the Borrower shall immediately mail to Bank written confirmation thereof. 2.06 After receipt from the Borrower of any Notice of Borrowing which requests a Libor Loan, Bank shall determine if it is able to make such Advance (or if it is unable to do so for reasons described in this Section 2.06 only) and will notify the Borrower upon confirmation of its ability to do so. If Bank determines in good faith that, by reason of circumstances affecting the Interbank Market, adequate and reasonable methods do not exist for ascertaining the Libor which would otherwise be applicable to such Advance then Bank shall so notify the Borrower on or before 4:00 p.m. on the Banking Day prior to the Borrowing Date specified in the Notice of Borrowing, and in such event, Bank shall not be obligated to make such Advance and the Notice of Borrowing shall be deemed to have been withdrawn by the Borrower with Bank's consent and substituted with a request for a Prime Rate Loan in an amount equal to the requested Libor Loan. 8 2.07 Except as otherwise provided in Section 2.06 above, any Notice of Borrowing requesting a Libor Loan shall be irrevocable and binding upon the Borrower. In the event the Borrower fails to borrow the Advance requested on the Borrowing Date specified in such Notice of Borrowing, the Borrower shall indemnify Bank against any and all losses and reasonable expenses incurred by Bank by reason of such failure including, without limiting the generality of the foregoing, all losses and reasonable expenses incurred by reason of the liquidation, disposition or reemployment of deposits or other funds acquired by Bank to fund such Advance including, without limitation, compensation provided for in Section 2.24 of this Agreement. 2.08 All net proceeds of each Advance shall be credited to any demand deposit account maintained by the Borrower with Bank or the loan account established pursuant to this Revolving Loan (the "Loan Account"), the specified amount and account to be designated by the Borrower in the Notice of Borrowing issued with respect to such Advance. 2.09 No Advances of new money shall be available to the Borrower after the Termination Date. 2.10 The Borrower shall pay interest on the unpaid principal balance of each Prime Rate Loan from the Borrowing Date for such Advance at a variable per annum rate equal to the Prime Rate in effect from time to time. Interest accrued under this Section 2.10 shall be paid monthly in arrears on each Interest Payment Date. 2.11 The Borrower shall pay interest on the aggregate unpaid principal balance of each Libor Loan from the Borrowing Date for such Advance through and including the Maturity Date chosen by the Borrower with respect to such Advance at a per annum rate equal to the aggregate of the Adjusted Libor plus Margin, and shall pay all interest accrued but unpaid under this Section 2.11 on the sooner to occur of the Interest Payment Date or such Maturity Date. 2.12 If a Libor Loan is not repaid in full on its Maturity Date, then such Advance shall bear interest at the rate described in Section 2.10 from and after such Maturity Date through the Termination Date and thereafter, as set forth in Section 2.13 until paid in full. 2.13 From and after the occurrence of an Event of Default and acceleration of the Borrower's Obligations to the Bank under this Agreement, at the option of the Bank: (a) all Prime Rate Loans shall bear interest at a variable per annum rate equal to the aggregate of the Prime Rate in effect from time to time plus four percent (4%) until paid in full; and (b) each Libor Loan shall bear interest at the rate established therefor pursuant to Section 2.11 until such Advance's Maturity Date, and thereafter at the rate set forth in clause (a) of this Section 2.13 until paid in full. 2.14 Each rate of interest determined hereunder by reference to the Prime Rate shall change effective as of the opening of business on each day on which a change in the Prime Rate becomes effective. 2.15 All interest, fees and other charges payable under this Agreement shall be computed on the basis of a year of three hundred sixty (360) days for the actual number of days elapsed. 9 2.16 If the Bank shall have determined in good faith at its reasonable discretion that the adoption of any applicable law, rule or regulation regarding capital requirements for banks or bank holding companies, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive of such entity regarding capital adequacy (whether or not having the force of law) has the effect of reducing the return on the Bank's capital to a level below that which the Bank could have achieved (taking into consideration the Bank's policies with respect to capital adequacy immediately before such adoption, change or compliance and assuming that the Bank's capital was fully utilized prior to such adoption, change or compliance) but for such adoption, change or compliance as a consequence of its commitment to make Advances hereunder by any amount deemed by the Bank in good faith to be material: (i) the Bank shall promptly after its determination of such occurrence give written notice thereof to the Borrower; and (ii) the Borrower shall pay to the Bank as an additional fee from time to time on demand such amount as the Bank certifies to be the amount that will reasonably compensate it for such reduction (attributable to the Credit Limit under this Agreement). A certificate of the Bank claiming compensation under this Section 2.16 shall be conclusive in the absence of manifest error. Such certificate shall set forth the nature of the occurrence giving rise to such compensation, the additional amount or amounts to be paid to it hereunder and the method by which amounts were determined. In determining such amount, the Bank may use any reasonable averaging and attribution methods. 2.17 In consideration of the Bank establishing the Revolving Loan, the Borrower shall pay the Bank a fee equal to one-quarter of one (.25%) percent of the Credit Limit, such fee to be payable at closing and on the anniversary date of the closing in each year that the Revolving Loan remains in effect. 2.18 Any Prime Rate Loan may be repaid in whole or in part at any time without premium or penalty. 2.19 Each Libor Loan shall be repaid in full on its Maturity Date. 2.20 Except as otherwise provided herein with respect to Bank's rights following the occurrence of an Event of Default, no Libor Loan may be repaid prior to its Maturity Date unless Borrower shall indemnify Bank for all losses and reasonable expenses resulting from such prepayment as more particularly described in Section 2.07 hereof. 2.21 Any Advance under the Revolving Loan (whether a Prime Rate Loan or a Libor Loan) may be repaid with the proceeds of another Advance under the Revolving Loan (whether a Prime Rate Loan or a Libor Loan), subject to the terms of Section 2.01. Accordingly, the Borrower may convert a Prime Rate Loan to a Libor Loan, a Libor Loan to a Prime Rate Loan, Prime Rate Loans may be repaid with the proceeds of another Prime Rate Loan and a Libor Loan may be repaid with the proceeds of another Libor Loan, but in all cases subject to the terms of Section 2.01 hereof. 10 2.22 Borrower hereby authorizes and directs Bank to pay all principal, interest, fees, and other charges due from Borrower to Bank hereunder by (i) charging such amounts against any general demand deposit account of the Borrower maintained with the Bank as a condition for establishing the financing arrangements with the Borrower; or (ii) debiting the Loan Account in the amount of such sums due and treating the same as an Advance to the Borrower under the Revolving Loan, which Advance shall accrue interest as a Prime Rate Loan; provided, however, the Bank shall have no obligation to do so unless (i) sufficient funds are on deposit in such demand deposit accounts; and/or (ii) such Advance would not exceed the lesser of the Borrowing Base or the Commitment Amount and/or (iii) no Default exists. The provisions of this Section 2.22 shall not limit the rights of the Bank under Section 2.24 of this Agreement or the obligation of the Borrower to pay interest as provided elsewhere in this Agreement. 2.23 Notwithstanding any other provision of this Agreement, (a) if the introduction of or any change in any law or regulation (or change in the interpretation thereof) applicable to Bank or any foreign branch, agent or correspondent thereof shall make it unlawful, or (b) if any central bank or other governmental authority having jurisdiction over Bank or any such branch, agent or correspondent, shall assert that it is unlawful, for Bank to perform its obligations hereunder or for any such branch, agent or correspondent to act on behalf of Bank to make Libor Loans to the Borrower or to continue to fund or maintain Libor Loans to the Borrower hereunder, or (c) if Bank determines after making all reasonable efforts, that deposits of the relevant amount and for the relevant Advances to the Borrower are not available to Bank in the Interbank Market, then, on notice thereof by Bank to the Borrower, the obligation of the Bank to the Borrower to make future Libor Loans shall terminate. If, as a result of any of the foregoing described events, Bank is prohibited from maintaining Libor Loans, the Bank shall, upon the happening of such event, notify the Borrower and the Borrower shall, in the case of each Libor Loan, on the Maturity Date of such Libor Loan (or, in any event, if the Bank so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), either prepay such Libor Loan or convert such Libor Loan into a Prime Rate Loan. 2.24 If, due to payments made by the Borrower pursuant to this Agreement or due to the acceleration of the maturity of the Loans pursuant to Article X hereof or due to any other reason, including, without limitation, by reason of a payment made pursuant to Section 2.20 of this Agreement, Bank receives payments of principal of any Libor Loan prior to the Maturity Date for such Advance, the Borrower shall, upon demand by Bank, pay to Bank any amounts reasonably required to compensate Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss, costs or expenses reasonably incurred by reason of the liquidation of reemployment of deposits or other funds acquired by Bank to fund or maintain such Advances. 2.25 Whenever any payment of interest, charges or fees to be made hereunder shall be stated to be due on a day other than a Banking Day, such payment shall be made on the next succeeding Banking Day (except as provided in the definition of Maturity Date) and such next succeeding Banking Day shall be utilized in the computation of the payment of such interest, charges and other fees. 11 2.26 Borrower shall pay to Bank on demand any and all reasonable counsel fees and other reasonable expenses incurred by Bank in connection with the preparation, enforcement or amendment of this Agreement, or of any documents relating thereto, and any and all expenses, including, but not limited to, all reasonable attorneys' fees and expenses, and all other expenses of like or unlike nature which may be expended by Bank to obtain or enforce payment or in the prosecution or defense of any action or concerning any matter growing out of or connected with the subject matter of this Agreement, or the Obligations or any of Bank's rights or interests therein or thereto, including, without limiting the generality of the foregoing, any reasonable counsel fees or expenses incurred in any bankruptcy or insolvency proceedings of Borrower. ARTICLE III ----------- THE TERM LOAN ------------- 3.01 Subject to the terms and conditions of this Agreement, the Bank will make the Term Loan to the Borrower on the date of execution of this Agreement in the original principal amount of Seven Million ($7,000,000.00) Dollars, as evidenced by the Term Note. 3.02 Interest on the principal balance of the Term Loan shall be payable at the rate equal to the Adjusted Libor plus two and three-quarters percent (2.75%) until Profitability is achieved and Adjusted Libor plus two and one- quarter (2.25%) percent thereafter, (or in either case a comparable interest rate swap as more particularly described in the Term Note. Interest shall be computed on the basis of a 360-day year, for the actual number of days elapsed. Default interest shall be charge in accordance with the provisions of the Term Note. 3.03 The principal balance of the Term Loan shall be payable in eighty four (84) consecutive monthly installments of $83,333.00 per month, commencing six (6) months from the date of the Term Note. 3.04 The Term Loan shall be subject to a prepayment premium as described in the Term Note. 3.05 In consideration of the Bank establishing the Term Loan, the Borrower shall pay a facility fee equal to one-half of one (.50%) percent of the original principal balance of the Term Note at the time of execution thereof. 3.06 The Borrower hereby directs the Bank to debit its demand deposit account(s) with the Bank in satisfaction of any payments required with respect to the Term Loan. ARTICLE IV ---------- THE ACQUISITION LINE -------------------- 12 4.01 Subject to and upon the conditions of this Agreement, during the Availability Period, at the request of the Borrower, the Bank may make Advances to the Borrower in an aggregate amount not to exceed the Commitment Amount. 4.02 All Advances under the Acquisition Line shall bear interest, at the Borrower's option, at either a variable rate of the Bank's Prime Rate or at a fixed rate equivalent to Adjusted Libor plus two and three-quarters (2.75%) percent until Profitability is achieved and Adjusted Libor plus two and one- quarter (2.25%) percent thereafter for 30-day Libor contracts, or at a comparable interest swap rate established at the time of any proposed Advance under the Acquisition Line. 4.03 All Advances under the Acquisition Line shall be evidenced by separate Acquisition Term Notes to be executed at the time of such Advance. 4.04 Each Advance under the Acquisition Line shall be payable with interest only for the first 6 months and then fully amortized on a straight-line basis over a seven year term thereafter, provided that no Acquisition Term Note shall have a maturity date beyond November 30, 2008. 4.05 Advances under the Acquisition Line bearing interest in relation to Libor or at a fixed rate swap shall be subject to possible make-whole premiums, in accordance with the terms of Section 2.24 hereof. 4.06 The proceeds of the Acquisition Line shall be used by the Borrower to acquire new companies within its existing lines of business. 4.07 Any Advances under the Acquisition Line shall be subject to the following conditions precedent: (i) The absence of an Event of Default under this Agreement at the time of any proposed Advance; (ii) Prior Bank approval of the proposed structure and terms of any acquisition in which the purchase price exceeds $750,000.00, provided that acquisitions for less than $750,000.00 shall not require Bank approval but shall require prior notice to the Bank; (iii) The additional debt to be incurred must be adequately serviced by existing, trailing four quarters of earnings before interest and taxes plus depreciation and amortization on a consolidated basis; (iv) All financial covenants contained in this Agreement must be achievable on a pro-forma basis and the "acquisition criteria" set forth in Section C8 of the Commitment Letter from the Bank to the Borrower dated March 10, 1999 must be adhered to in all respects; (v) Any future seller debt must be subordinated to the Loans upon terms and conditions reasonably satisfactory to the Bank and must be unsecured. 13 (vi) Borrower shall provide a pro-forma balance sheet, income statement and statement of cash flows at the time of any proposed Advance and after giving effect to the proposed acquisition. 4.08 In consideration of the Bank establishing the Acquisition Line, the Borrower shall pay a facility fee at closing of one half of one (.50%) percent of the Commitment Amount. Additionally, the Acquisition Line will be subject to an unused line fee equal to one half of one (.50%) percent of the difference between (x) the Commitment Amount and (y) the average daily balance outstanding under Acquisition Line. That percentage shall decrease to one quarter of one (.25%) percent of the difference between (x) and (y) upon the Borrower achieving Profitability. The unused line fee will be calculated and payable quarterly in arrears. Any Advances under the Acquisition Line shall also be subject to an advance fee equal to one-quarter of one (.25%) percent of the amount of any such Advance, payable at the time of such Advance. ARTICLE V --------- WARRANTIES AND REPRESENTATIONS BY EACH BORROWER ----------------------------------------------- 5.01 Bank enters into this Agreement in reliance upon the warranties and representations of the Borrower set forth in this Article, each of which is acknowledged by each entity constituting a Borrower to be material. Each such warranty and representation shall be deemed to have been newly made on each Borrowing Date except to the extent that, on or prior thereto, Bank shall have received from the Borrower notice of a change with respect thereto, which change is not a breach of this Agreement. 5.02 Borrower has no places of business other than that shown at the beginning of this Agreement, unless other places of business are listed on Schedule "A", annexed hereto, in which event Borrower represents that Borrower has additional places of business at those locations set forth on Schedule "A" (as such schedule shall be updated from time to time). 5.03 Each Borrower's principal executive office and the offices where Borrower keeps its records are those shown at the beginning of this Agreement. 5.04 Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and shall hereafter remain in corporate good standing as a corporation in that state, and is duly qualified as a foreign corporation and is in corporate good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the condition (financial or otherwise), business, operations, properties or prospects of the Borrower, and shall hereafter remain duly qualified and in good standing in every other state in which the failure to so qualify would have a material adverse effect on the condition (financial or otherwise), business, operations, properties or prospects of the Borrower. 5.05 Borrower's exact legal name is as set forth in this Agreement and except with respect to Kent Acquisition Corp., Borrower will not change Borrower's legal name, without giving Bank at least ten (10) days' prior written notice of the same. 14 5.06 The execution, delivery and performance of this Agreement, and any other document executed in connection herewith, are within the Borrower's corporate powers, have been duly authorized, are not in contravention of law or the terms of the Borrower's charter, by-laws or other incorporation papers, or of any material indenture, agreement or undertaking to which the Borrower is a party or by which it or any of its properties may be bound. 5.07 All charter or other incorporation papers and all amendments thereto of Borrower have been duly filed and are in proper order. To the Borrower's knowledge, all capital stock issued by Borrower and outstanding was and is properly issued and all books and records of Borrower, including but not limited to its minute books, by-laws and books of account, are accurate and up to date and will be so maintained. 5.08 Borrower owns all of the assets reflected in the most recent of Borrower's financial statements provided to Bank, except assets sold or otherwise disposed of in the ordinary course of business or as Borrower has otherwise advised Bank, and such assets together with any assets acquired since such date, are free and clear of any lien, pledge, security interest, charge, mortgage or encumbrance of any nature whatsoever, except: (i) the security interests and other encumbrances on Borrower's assets listed on Schedule "B" annexed hereto or (ii) those capital leases (if any) set forth on Schedule "C" annexed hereto. 5.09 To the Borrower's knowledge, Borrower has made or filed all tax returns, reports and declarations relating to any material tax liability required by any jurisdiction to which they are subject or has received lawful extensions of the filing of the same; has paid all taxes shown or determined to be due thereon except those being contested in good faith and which Borrower has, prior to the date of such contest, identified in writing to Bank as being contested; and have made adequate provision for the payment of all taxes so contested. 5.10 Borrower (i) is subject to no charter, corporate or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction which could have a material adverse effect on its financial condition, business or prospects, and (ii) is in compliance with its charter documents and by-laws, all material contractual requirements by which it or any of its properties may be bound and (in all material respects) all applicable laws, rules and regulations (including without limitation those relating to environmental protection) other than laws, rules or regulations the validity or applicability of which Borrower is contesting in good faith or provisions of any of the foregoing the failure to comply with which cannot reasonably be expected to materially adversely affect Borrower's financial condition, business or prospects. 5.11 There is no action, suit, proceeding or investigation pending or, to Borrower's knowledge, threatened against or affecting it or any of its assets before or by any court or other governmental authority which, if determined adversely to Borrower, would have a material adverse effect on its financial condition, business or prospects except as otherwise disclosed to Bank. 15 ARTICLE VI ---------- AFFIRMATIVE COVENANTS --------------------- 6.01 The Borrower will, duly and punctually, pay all interest, principal, fees and other charges becoming due to Bank and will duly and punctually perform all things on its part to be done or performed under the Financing Agreements or pursuant to any instrument, document or agreement executed pursuant thereto. 6.02 Borrower agrees to keep all of its insurable assets insured with coverage and in amounts not less than that usually carried by one engaged in a like business and in any event not less than that reasonably required by Bank. 6.03 Borrower will at all times keep accurate and complete records of Borrower's Inventory, Accounts and other assets, and Bank, or any of its agents, shall have the right to call at Borrower's place or places of business at intervals to be determined by Bank, and without hindrance or delay, to inspect, audit, check, and make extracts and/or copies from any copies of the books, records, journals, orders, receipts, correspondence which relate to Borrower's Accounts, and other assets or other transactions between the parties thereto and the general financial condition of Borrower. Prior to the occurrence of an Event of Default, Bank shall give Borrower not less than forty-eight (48) hours prior notice of any intended inspection or audit and shall conduct such inspection or audit during normal business hours. 6.04 Borrower will maintain its corporate existence in good standing and comply in all material respects, with all laws and regulations of the United States or of any state or states thereof or of any political subdivision thereof, or of any governmental authority which may be applicable to it or to its business. 6.05 Borrower will pay all real and personal property taxes, assessments and charges and all franchises, income, unemployment, old age benefits, withholding, sales and other taxes assessed against it, or payable by it at such times and in such manner as to prevent any penalty from accruing or any lien or charge from attaching to its property. Notwithstanding the foregoing, Borrower may contest in good faith the payment of any such taxes, provided that Borrower establishes adequate reserves to cover the payment of any such taxes. 6.06 Borrower will immediately notify Bank upon receipt of notification of any potential or known release or threat of release of hazardous materials, hazardous waste, hazardous or toxic substance or oil from any site operated by Borrower or of the incurrence of any expense or loss in connection therewith or with the Borrower's obtaining actual knowledge of any investigation or action by any governmental authority in connection with the assessment, containment or removal of any hazardous material or oil from any site operated by Borrower. As used herein, the terms "hazardous waste," "hazardous or toxic substance," "hazardous material" or "oil" shall have the same meanings as defined and used in any of the following (the "Acts"): the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et -- seq.; the Federal Resource Conservation and Recovery Act, 42 U.S.C. Sections - ---- 6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Sections ------- 1801 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; ------- ------- M.G.L.A. c. 21E (Massachusetts Oil and Hazardous Material Release Prevention Act); M.G.L.A. c. 21C (Massachusetts Hazardous Waste Management Act); and/or the regulations adopted and publications promulgated pursuant to any of the Acts, as the same may be amended from time to time. 16 6.07 Except for Bank's gross negligence or willful misconduct, Borrower will indemnify and save Bank harmless from all loss, costs, damage, liability or expenses (including, without limitation, court costs and reasonable attorneys' fees) that Bank may sustain or incur by reason of enforcing the Obligations, or in the prosecution or defense of any action or proceeding concerning any matter growing out of or in connection with this Agreement and/or any other documents now or hereafter executed in connection with this Agreement and/or the Obligations. This indemnity shall survive the repayment of the Obligations and the termination of Bank's agreement to make Loans available to Borrower and the termination of this Agreement. 6.08 All Advances by Bank to Borrower under the Revolving Loan constitute one general revolving fluctuating loan, and all Indebtedness of Borrower to Bank under this Agreement constitute one general Obligation. It is distinctly understood and agreed that all of the rights of Bank contained in this Agreement shall likewise apply, insofar as applicable, to any modification of or supplement to this Agreement. Any Default of this Agreement by Borrower shall constitute, likewise, a default by Borrower of any Notes in which the Borrower is a maker and the Bank a holder, and any default by Borrower of any such Notes shall constitute a Default under this Agreement. The entire Obligation of Borrower to Bank shall become due and payable when payments become due and payable hereunder upon termination of this Agreement. Similarly, any default by Borrower under any other agreement or Note with Bank shall constitute a default of this Agreement and a default of this Agreement shall constitute a default of any other agreement or Note with Bank. ARTICLE VII ----------- NEGATIVE COVENANTS ------------------ 7.01 (Minimum Net Worth). Borrower (on a consolidated basis) will not ----------------- permit its Net Worth to be less than $25,000,000.00 as at the end of any fiscal quarter of Borrower commencing with the fiscal quarter ending March 31, 1999. The minimum Net Worth figure shall increase annually (commencing with the fiscal quarter ending March 31, 2000) by an amount equal to 50% of the prior year's net income after taxes, without deduction for any losses sustained. 7.02 (Minimum Indebtedness to Net Worth Ratio). Borrower (on a --------------------------------------- consolidated basis) will not permit its total Indebtedness to be more than 100% of its Net Worth as at the end of any fiscal quarter of Borrower, commencing with the fiscal quarter ending March 31, 1999. 7.03 (Minimum Debt Service Coverage Ratio). Borrower (on a consolidated ----------------------------------- basis) will not permit its Cash Flow to be less than 125% of its Debt Service for the twelve month period ending on the last day of any fiscal quarter of Borrower, commencing with the fiscal quarter ending March 31, 1999. 17 7.04 (Maximum Funded Debt Coverage Ratio). Borrower (on a consolidated ----------------------------------- basis) will not permit the principal amount of outstanding Loans for the twelve month period ending on the last day of any fiscal quarter of Borrower to be more than three hundred fifty (350%) percent of the Borrower's earnings before interest and taxes plus depreciation and amortization for the applicable period. 7.05 (Minimum Net Profit). Borrower will not permit its consolidated net -------------------- income after taxes to be less than one dollar ($1) in each of the first three fiscal quarters of each fiscal year of Borrower and on an annual basis (except that for the second quarter of 1999 (June 30, 1999)) $347,222.00 of deferred financing expenses shall be excluded from the net profit calculation. Each of the first three quarters of each fiscal year and the annual calculation shall be separate and distinct tests. 7.06 (Minimum EBITDA and net income after taxes as a percentage of ------------------------------------------------------------- budget): Borrower (on a consolidated basis) shall not permit its EBITDA and net - -------- income after taxes to be less than the following amounts as at the end of the following fiscal quarters:
Minimum EBITDA Minimum Net Income Fiscal Quarter Ending after taxes - ------------------------- ------------------ --------------------- ----------- $850,000.00 $210,000.00 March 31, 1999 $1,100,000.00 $285,000.00 June 30, 1999 $1,135,000.00 $300,000.00 September 30, 1999 $620,000.00 N/A December 31, 1999
7.07 Borrower will not at any time create, permit to be created or suffer to exist any lien, encumbrance or security interest of any kind upon any of its assets, now owned or hereafter acquired, except liens and encumbrances set forth on Schedule "B" annexed hereto, and except: (i) liens for taxes assessments and other governmental charges not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the Borrower's books in accordance with GAAP; (ii) carrier's, warehousemen's, mechanic's, materialmen's, repairmen's or other like liens arising in the ordinary course of business which are not overdue for a period of more than 90 days or which are being contested in good faith and by appropriate proceedings; (iii) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (iv) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business of the Borrower; (v) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business;(vi) liens which were in existence at closing and which secured obligations reflected on the Borrower's financial statements; (vii) liens pursuant to capitalized leases incurred in the ordinary course of business and (viii) purchase money security interests in acquired assets. 7.08 Borrower will not at any time pay any dividends on or make any distribution on account of any class of Borrower's capital stock in cash or in property (other than additional 18 shares of such stock) or redeem, purchase or otherwise acquire, directly or indirectly any such stack unless Borrower remains in compliance with this Agreement after giving effect to such dividend, redemption or purchase. 7.09 Borrower will not have outstanding at any time loans or advances to Borrower's directors, officers and employees in excess of $750,000.00 in the aggregate, excluding advances to officers or employees with respect to expenses incurred by them in the ordinary course of their duties which are properly reimbursable by Borrower. 7.10 Borrower will not at any time assume, guaranty, endorse or otherwise become directly or contingently liable in respect of any Indebtedness (except guarantees by endorsement of instruments for deposit or collection in the ordinary course of business and guarantees in favor of Bank) of any Person, except as set forth in Schedule 7.10 hereof. 7.11 Borrower will not at any time (i) use any loan proceeds to purchase or carry any "margin stock" (as defined in Regulation U of the Board of Governors of the Federal Reserve System) or (ii) invest in or purchase any stock or securities of any individual, partnership, trust or other corporation except (x) readily marketable direct obligations of, or obligations guaranteed by, the United States of America or any agency thereof, (y) time deposits with or certificates of deposit issued by Bank or (z) pursuant to Advances under the Acquisition Line. 7.12 Borrower (except the Agent Borrower with respect to its own stock) will not at any time (except with Bank's prior consent) sell, transfer or otherwise dispose of any stock of any Borrower or any subsidiary of Borrower without prior consent of Bank. 7.13 Borrower will not at any time (except with Bank's prior consent) (a) merge or consolidate with or into any corporation, (b) convey, lease or sell all or any material portion of its property or assets or business to any Person, or (c) convey, lease, trade or sell any of its assets to any Person for less than the fair market value thereof, except for obsolescent equipment or equipment or other assets of minimal value to Borrower. 7.14 All future Indebtedness to officers, stockholders, directors, employees, associates or selling parties as a result of acquisitions under the Acquisition Line shall be subordinated to the Obligations on terms and conditions reasonably satisfactory to Bank. 19 ARTICLE VIII ------------ BORROWER'S REPORTS ------------------ 8.01 Agent Borrower will furnish Bank as soon as available, and in any event within forty-five (45) days after the close of each of the first three quarterly periods of its fiscal year, on a consolidated and consolidating basis with its subsidiaries, internally prepared financial statements, including a balance sheet as of the end of such period, a statement of income and retained earnings for the period commencing at the end of the previous fiscal year and ending with the end of such quarter and a statement of cash flows for such period, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, and all prepared in accordance with generally accepted accounting principles consistently applied, and certified by the Chief Financial Officer of the Agent Borrower (subject to year end adjustment). 8.02 Agent Borrower will furnish Bank, annually, as soon as available, and in any event within one hundred and twenty (120) days after the end of each fiscal year of Agent Borrower, on a consolidated and consolidating basis with its subsidiaries, a balance sheet as of the end of such fiscal year, a statement of income and retained earnings for such fiscal year, and a statement of cash flows for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, and all prepared in accordance with generally accepted accounting principles consistently applied, accompanied by an unqualified opinion thereon by an accounting firm or other independent public accountants selected by the Borrower and reasonably acceptable to Bank. 8.03 Agent Borrower will furnish Bank, annually, as soon as available and not more than 120 days after the end of each fiscal year, its financial projections for the next succeeding year in form and substance reasonably satisfactory to Bank. 8.04 Agent Borrower shall deliver to Bank notice of non-compliance with the provisions of this Agreement promptly upon learning of such non-compliance, or if any representation or warranty contained herein is no longer true and accurate in any material respect. 8.05 Agent Borrower shall also deliver to Bank a Covenant Compliance Certificate in the form of Exhibit "B" attached hereto indicating its compliance or lack thereof with the financial covenants set forth in Article VII. Such Covenant Compliance Certificate shall be furnished to the Bank simultaneously with the submission of financial statements required hereunder. 8.06 Agent Borrower shall furnish the Bank monthly, within twenty (20) days after the close of each fiscal month with a borrowing base certificate, accounts receivable aging and inventory designation, each such certificate, aging and designation to be in such form and certified by such officers of the Agent Borrower as the Bank may request from time to time. 8.07 In addition to the foregoing, the Borrower promptly shall provide the Bank with such other and additional information concerning the Borrower, the operation of the Borrower's business, and the Borrower's financial condition, including financial reports and statements furnished to its stockholders, and as the Bank may from time to time reasonably request from the 20 Borrower so as not to unreasonably disrupt Borrower's business or operations. All financial information provided to the Bank by the Borrower shall be prepared in accordance with generally accepted accounting or auditing principles (as applicable) applied consistently in the preparation thereof and with prior periods to fairly reflect the financial conditions of the Borrower at the close of, and its results of operations for, the periods in question. ARTICLE IX ---------- CONDITIONS TO CONTINUING ADVANCES --------------------------------- 9.01 The obligation of Bank to make each Advance to the Borrower is subject to the continuing satisfaction of the conditions set forth in this Article IX. 9.02 Bank shall have received the following documents in form and substance reasonably satisfactory to the Bank prior to the first Advance hereunder: (i) the certified resolutions of the Board of Directors of the Borrower approving and authorizing the execution, delivery and performance by the Borrower of its obligations under this Agreement and under each of the other Financing Agreements; (ii) a certificate of the Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement; (iii) the certified charter and by-laws of the Borrower; (iv) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and all other Financing Agreements; and (v) such other documents, instruments, certificates and other agreements as Bank shall reasonably request. 9.03 The representations and warranties contained in this Agreement shall have been correct in all material respects as of the date on which made and shall also be correct in all material respects and as of the date of each Advance with the same effect as if made on the date of such Advance except to the extent that (i) the facts upon which such representations and warranties are based may in the ordinary course be changed by the transactions permitted or contemplated hereby, (ii) such representations and warranties relate expressly to an earlier date or (iii) such representations and warranties are or have not been current as a result of changes for which the Borrower has notified the Bank and such changes do not constitute a breach of the terms of this Agreement. 9.04 The Borrower shall have performed and complied with all terms and conditions herein required to be performed or complied with by it prior to or at the time of the Advance and at such Advance there shall exist and be continuing no Default. 9.05 All corporate action of the Borrower necessary for the valid execution, delivery and performance by the Borrower of this Agreement and all other Financing Agreements shall have been duly and effectively taken. 9.06 Bank shall have received a Notice of Borrowing from the Borrower as required by Section 2.04 and, the giving of such Notice of Borrowing shall be deemed a representation and warranty by the Borrower on the date of such Advance that all conditions set forth in this Article IX have been satisfied. 21 9.07 No change shall have occurred in any law, regulations thereunder or interpretations thereof, which in the reasonable opinion of Bank would make it illegal for Bank to made the Advances at the rates provided for hereunder. ARTICLE X --------- EVENTS OF DEFAULT ----------------- 10.01 The occurrence of any one or more of the following events with respect to the Agent Borrower or any other Borrower shall constitute an Event of Default: 10.02 The failure to make, when due, any payment of principal or interest under this Agreement, the Financing Agreements, the Term Note or any Acquisition Notes and the expiration of five (5) days after notice from Bank of such nonpayment. 10.03 Default in the observance of any of the covenants or agreements of Borrower contained in Section 7.01, 7.02, 7.03, 7.04, 7.05 or 7.06 of this Agreement. 10.04 Default in the observance of any of the material covenants or agreements of Borrower contained in this Agreement or the Financing Agreements (other than those specified in Sections 8.01, 8.02, 10.02 or 10.03 above or in the payment of any fee, cost or expense payable to Bank under the Financing Agreements), which is not remedied within the earlier of thirty (30) days after (i) written notice thereof by Bank to Borrower, or (ii) the date Borrower was required to give notice to Bank under Section 8.04. 10.05 The determination by Bank that any representation or warranty now or hereafter made by the Borrower to Bank under this Agreement or in any documents, instrument, agreement, or paper delivered by Borrower pursuant to this Agreement was not true or accurate when given in any material respect. 10.06 The occurrence of any event such that any Indebtedness for borrowed money of the Borrower to any lender other than Bank, in excess of One Million ($1,000,000.00) Dollars is accelerated. 10.07 Any act by, against, or relating to the Borrower, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other person, pursuant to court action or otherwise, over all, or any material part of the Borrower's property (and if involuntary, the expiration of ninety (90) days from the date of such act without a stay or dismissal in that period). 10.08 The granting of any trust mortgage or execution of an assignment for the benefit of the creditors of the Borrower, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for the Borrower; the failure by the Borrower to generally pay the uncontested debts of the Borrower as they mature; adjudication of bankruptcy or insolvency relative to the Borrower; the entry of an order for relief or similar order with 22 respect to the Borrower in any proceeding pursuant to Title 11 of the United States Code entitled "Bankruptcy" (hereinafter the "Bankruptcy Code") or any other federal bankruptcy law (and if involuntary, the expiration of ninety (90) days from the date of such filing without a stay or dismissal within that time period); the filing of any complaint, application, or petition by or against the Borrower initiating any matter in which the Borrower is or may be granted any relief from the debts of the Borrower pursuant to the Bankruptcy Code or any other insolvency statute or procedure (and if involuntary, the expiration of ninety (90) days from the date of such filling without a stay or dismissal within that time period); the calling or sufferance of a meeting of creditors of the Borrower; the meeting by the Borrower of a formal or informal creditor's committee; the offering by or entering into by the Borrower of any composition, extension or any other arrangement seeking relief or extension for a material portion of the debts of the Borrower, or the initiation of any other judicial or non-judicial proceeding or agreement by, against or including the Borrower which seeks or intends to accomplish a reorganization or arrangement with creditors. 10.09 The entry of any final judgment(s) in excess of $250,000.00 Dollars against any Borrower. 10.10 The occurrence of any material (in excess of $250,000.00) uninsured loss, theft, damage or destruction to any material asset(s) of the Borrower. 10.11 The termination of existence, dissolution, or liquidation of the Borrower, or the ceasing to carry on actively any substantial part of Borrower's current business. 10.12 The occurrence of an Event of Default in any other Indebtedness of Borrower to Bank, whether now existing or hereafter arising and the expiration of any applicable grace period. Upon the occurrence of an Event of Default, Bank may declare any obligation Bank may have hereunder to be canceled, declare all Obligations and Indebtedness of Borrower to Bank to be due and payable and proceed to enforce payment of the Obligations and Indebtedness and to exercise any and all of the rights and remedies afforded to Bank under the terms of this Agreement or otherwise. 23 ARTICLE XI ---------- NOTICE ------ 11.01 All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including overnight courier, telecopier, telegraphic, telex or cable communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered to the addresses set forth in Section 11.02 below. All such notices and communications shall, when mailed, telecopied (with confirmed receipt), telegraphed, telexed or cabled, be effective when deposited in the mails, telecopied, delivered to the telegraph company, confirmed by telex answer back or delivered to the cable company, respectively. 11.02 The addresses to which such communications shall be sent are as follows: (a) If intended for any Borrower, to: Sight Resource Corporation 100 Jeffrey Avenue Holliston, MA 01746 Attn: William T. Sullivan, Chief Executive Officer FAX: (508)-429-6023 With a copy to: Lewis J. Geffen, Esq. and Mary-Laura Greely, Esq. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. One Financial Center Boston, MA 02111 FAX: 617-542-2241 (b) If intended for Bank, to: Fleet National Bank One Federal Street Boston, MA 02110-2010 Attn: Mr. Gregory P. Buscone, Vice President FAX: (617) 346-0415 with copies to: Brian T. Garrity, Esq. Shapiro, Israel & Weiner, P.C. 100 North Washington Street Boston, MA 02114 FAX: (617) 742-2355 11.03 The addresses and telecopier numbers set forth herein may be changed by notice hereunder. 24 ARTICLE XII ----------- CONSENT TO JURISDICTION AND JURY TRIAL WAIVER --------------------------------------------- 12.01 BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. Borrower hereby certifies that neither Bank nor any of its representatives, agents or counsel has represented, expressly or otherwise, that Bank would not, in the event of any such suit, action or proceeding, seek to enforce this waiver of right to trial by jury. Borrower acknowledges that Bank has been induced to enter into this Agreement by, among other things, this waiver. Borrower acknowledges that Borrower has read the provisions of this Agreement and in particular, this Section 12.01; has consulted legal counsel; understands the right Borrower is granting in this Agreement and is waiving in this Section 12.01 in particular; and makes the above waiver knowingly, voluntarily and intentionally. 12.02 Borrower and Bank agree that any action or proceeding to enforce or arising out of this Agreement may be commenced in any court of the Commonwealth of Massachusetts sitting in the county of Suffolk, or in the United States District Court for the District of Massachusetts. ARTICLE XIII ------------ MISCELLANEOUS ------------- 13.01 The Borrower will, from time to time, execute and deliver to Bank all such other and further instruments and documents and take or cause to be taken all such other and further action as Bank may reasonably request in order to effect in Bank all rights contemplated in this Agreement. 13.02 The Borrower may take any action herein prohibited or omit to perform any act required to be performed by the Borrower upon obtaining Bank's prior written consent to each such action, or omission to act. No waiver on Bank's part on any one occasion shall be deemed a waiver on any other occasion. Bank shall not be deemed to have waived any of its rights hereunder unless such waiver shall be in writing and duly signed by an authorized officer of Bank, which shall include any vice president or more senior officer of Bank. 13.03 This Agreement may be amended only by an instrument in writing and duly signed by the Borrower and an authorized officer of Bank which shall include any vice president or more senior officer of Borrower. 13.04 All covenants, agreements, representations and warranties contained in this Agreement shall bind the Borrower, its successors and assigns, and shall inure to Bank's benefit and the benefit of Bank's successors and assigns, whether expressed or not. 25 13.05 All rights of Bank hereunder shall be cumulative. Bank shall not be required to have recourse to any property of the Borrower before enforcing its rights or remedies against the Borrower. The Borrower hereby waives presentment and protest of any instrument and any notice thereof. 13.06 If any provision of this Agreement or any other Financing Agreement shall be held to be illegal or unenforceable, such illegality or unenforceability shall relate solely to such provision and shall not affect the remainder of this Agreement. 13.07 This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. 13.08 This Agreement shall take effect as an instrument under seal. 13.09 The captions herein contained are inserted as a matter of convenience only and such captions do not form a part of this Agreement and shall not be utilized in the construction hereof. 13.10 In the event that the Borrower fails to make any payment or take any action required by this Agreement, Bank may, but shall not be required to, make such payment or take, or cause to be taken, such action. If Bank chooses to make any such payment or to take or cause to be taken any such action, the amount of such payment and the cost of such action shall become one of the Obligations, shall be payable upon demand and, until paid in full, shall bear interest at the rate established pursuant to the terms of this Agreement. 13.11 Calculation of Adjusted Libor, as well as all other fees and charges payable with respect to each Libor Loan shall be made and paid as though Bank had actually funded the relevant Libor Loan through the purchase of a Eurodollar deposit at Libor in an amount equal to the amount of the Libor Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore agent or office of Bank to a domestic office of Bank in the United States of America, provided, however, that Bank may fund each Libor Loan in any manner it sees fit in accordance with applicable law and the foregoing assumptions shall be nevertheless used for the calculation of the Libor Rate and such other fees and charges. 13.12 All Obligations hereunder shall be the joint and several Obligations of each Borrower hereunder and Bank may look to any Borrower for the satisfaction of any such Obligations. This relationship is more particularly described in the Agented Borrowing Agreement among the Agent Borrower, each Borrower and the Bank of even date, which Agented Borrowing Agreement is incorporated herein as if set forth in full herein. 13.13 Bank may at any time pledge all or any portion of its rights under the Financing Agreements including any portion of the promissory notes 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 enforcement thereof shall release Bank from its obligations under any of the Financing Agreements. 26 13.14 Bank shall have the unrestricted right in the event of additional financing arrangements with Borrower not in contemplation at the time of the execution of this Agreement at any future time and from time to time, and without the consent of Borrower, but with written notice to Borrower to grant to one or more banks or other financial institutions (each a "Participant") participating interests in Bank's obligation to lend hereunder and/or any or all of the Loans held by Bank hereunder. In the event of any such grant by Bank of a participating interest to a Participant, Bank shall remain responsible for the performance of its obligations hereunder and Borrower shall continue to deal solely and directly with Bank in connection with Bank's rights and obligations hereunder. Bank may furnish any information concerning Borrower in its possession from time to time to prospective Participants, provided that Bank shall require any such prospective Participant to agree in writing to maintain the confidentiality of such information. 13.15 Upon receipt of an affidavit of an officer of Bank as to the loss, theft, destruction or mutilation of the Revolving Line Note, Term Note or any Acquisition Term Notes or any other security document which is not of public record, and, in the case of any such loss, theft, destruction or mutilation, upon surrender and cancellation of such note or other security document, Borrower will issue, in lieu thereof, a replacement note or other security document in the same principal amount thereof and otherwise of like tenor. ARTICLE XIV ----------- SECURITY, CROSS COLLATERALIZATION AND CROSS TERMINATION ------------------------------------------------------- 14.01 The Loans by the Bank hereunder are secured pursuant to the respective Security Agreements (All Assets) of each Borrower hereunder. The Bank may look to all Collateral for the satisfaction of the Borrowers' Obligations to the Bank under this Agreement and under the Financing Agreements without any requirement to marshall any assets. Upon termination of the Revolving Loan, other than from internally generated funds, all Obligations of the Borrower to the Bank shall be due and payable in full. IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be executed as an instrument under seal as of the day and year first above written. Witness: FLEET NATIONAL BANK (As to all) /s/ Brian T. Garrity By: /s/ Gregory P. Buscone - ------------------------ --------------------------------------- Brian T. Garrity Gregory P. Buscone, Vice President 27 SIGHT RESOURCE CORPORATION By: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, Chief Executive Officer CAMBRIDGE EYE ASSOCIATES, INC. By: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, President DOUGLAS VISION WORLD, INC. By: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, President E.B. BROWN OPTICIANS, INC. By: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, President EYEGLASS EMPORIUM, INC. By: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, President KENT ACQUISITION CORP. By:: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, President SHAWNEE OPTICAL, INC. By: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, President VISION PLAZA CORP. By: /s/ William T. Sullivan ---------------------------------------- William T. Sullivan, President 28 SCHEDULES The following Schedules to the within Loan Agreement are respectively described in the section indicated. Those Schedules in which no information has been inserted shall be deemed to read "None". SCHEDULE "A" ------------ Borrower's Places of Business (Section 5.02) Address Property Located at Such Address - ------------------------------------ ------------------------------------------ 29 SCHEDULE "B" ------------ Other Encumbrances and Liens (Section 5.08) Secured Party Description Payment Terms and or Mortgagee of Collateral Dates of Maturity - ------------ ------------- ----------------- 30 SCHEDULE "C" ------------ Leases (Section 5.08) Lessor Description of Property Date of Lease and Term Rental Payable - ------ ----------------------- ---------------------- -------------- 31 EXHIBIT A --------- _______________, 199__ Fleet National Bank One Federal Street Boston, Massachusetts 02110 Attn: Mr. Gregory P. Buscone Vice President Re: Loan Agreement between Fleet National Bank (the "Bank") and Sight Resource Corporation (the "Agent Borrower") and others dated April 15, 1999 (the "Agreement") Gentlemen: In accordance with Section 2.04 of the Agreement, the Borrower hereby requests the following Advance: (1) Borrowing Date: ______________________ (2) Interest Rate Type (LIBOR, or Prime) _______________________ (3) Amount of Advance*: _______________________ (4) Interest Period: _______________________ (1, 2, 3, or 6 months for LIBOR Loans) The Borrower hereby certifies that all representations and warranties contained in the Agreement are true and accurate in all material respects on the date of this Notice of Borrowing as though such representations or warranties had been made on this date (except to the extent such representation or warranty expressly relates to an earlier date). All capitalized terms used herein which are defined in the Agreement shall have the meanings set forth in the Agreement. Very truly yours, SIGHT RESOURCE CORPORATION (For itself and on behalf of all of the Borrowers) By:_____________________________________ *minimum of $100,000.00 for LIBOR Loans. 32 EXHIBIT B --------- TO LOAN AGREEMENT COMPLIANCE CERTIFICATE ---------------------- Sight Resource Corporation (the "Agent Borrower") hereby certifies to Fleet National Bank (the "Bank") pursuant to the Loan Agreement between Agent Borrower and others and Bank dated April 15, 1999, as may be amended from time to time ("Loan Agreement") that: A. General ------- 1. Capitalized terms not defined herein shall have the meanings set forth in the Loan Agreement. 2. The Borrower has complied in all material respects with all the terms, covenants and conditions to be performed or observed by it contained in the Loan Agreement and the Financing Agreements to which Borrower is a party. 3. Neither on the date hereof nor, if applicable, after giving effect to the Advance made on the date hereof, does there exist an Event of Default or an event which would with notice or the lapse of time, or both, constitute an Event of Default. 4. The representations and warranties contained in the Loan Agreement and in any certificate, document or financial or other statement furnished at any time thereunder are true, correct and complete in all material respects with the same effect as though such representations and warranties had been made on the date hereof, except to the extent that any such representation and warranty relates solely to an earlier date (in which case such representation and warranty shall be true, correct and complete on and as of such earlier date). B. Financial Covenants: ------------------- As of the date hereof or, for such period as may be designated below, the computations, ratios and calculations as set forth below in accordance with Sections 7.01, 7.02, 7.03, 7.04, 7.05, and 7.06 of the Loan Agreement are true and correct: (a) (Section 7.01) Net Worth as of ________, 19__: ------------ (i) Net Worth = $__________________ (ii) Minimum amount required pursuant to the Loan Agreement as at the end of each fiscal quarter of Borrower = $25,000.00 at March 31, 1999 and thereafter plus 50% of the prior year's net income at March 31 in each subsequent fiscal year (commencing March 31, 2000) 33 (b) (Section 7.02) Indebtedness to Net Worth as of _____________, 199__: ------------ (i) Net Worth = $__________________ (ii) Aggregate Indebtedness (Consolidated) $__________________ (iii) (ii) as a percentage of (i) = ______% (iv) Maximum Percentage Permitted Pursuant to Loan Agreement = 100% as at the end of each fiscal quarter of Borrower (c) (Section 7.03) Cash Flow to Debt Service for the Twelve (12) month ------------ period ending ______________, 199__: (i) Earnings before Interest and Taxes = $__________________ (ii) Depreciation = $__________________ (iii) Amortization = $__________________ (iv) Dividends Paid or Payable = $__________________ (v) Cash Flow equals (i) plus (ii) plus (iii) less (iv) = $___________________ (vi) Total payments of the current maturities of all capital leases = $___________________ (vii) Total payments of the current maturities of principal on long-term liabilities = $___________________ (viii) Total Interest Expense = $___________________ 34 (ix) Debt Service equals (vi) plus (vii) plus (viii) = $___________________ (x) (v) as a Percentage of (ix) (Cash Flow to Debt Service) = _____________% (xi) Minimum Percentage required pursuant to the Loan Agreement = 125% as at the end of each fiscal quarter of Borrower (d) (Section 7.04) Aggregate Advances to Cash Flow for the twelve month period ending ___________, 19___: (i) Aggregate Advances = $_____________ (ii) Cash Flow (from Section 7.03(v) above) = $_____________ (iii) (i) as a percentage of (ii) = ___________ % (iv) Maximum percentage permitted pursuant to the Loan Agreement = 350% as at the end of the twelve month period ending on the last day of any fiscal quarter of Borrower (e) (Section 7.05) Borrowers' profit for the twelve month period ending ------------- __________, 19____: (i) Consolidated Net Income = $_____________ (ii) Minimum amount required under the Agreement = $1.00 as at the end of any of the first three fiscal quarters of each fiscal year and annually for each fiscal year (except that for the calculation for March 31, 1999, deferred finance charges shall be excluded from the calculation of net income). (f) (Section 7.06) Borrowers EBITDA and net income after taxes for the fiscal quarter ending _________, 199___: 35 (i) EBITDA = $_____________ (ii) Net Income = $_____________ (iii) Minimum EBITDA and net income required: Minimum EBITDA Minimum Net Income Fiscal Quarter Ending after taxes -------------- ------------------ --------------------- ----------- $850,000.00 $210,000.00 March 31, 1999 $1,100,000.00 $285,000.00 June 30, 1999 $1,135,000.00 $300,000.00 September 30, 1999 $620,000.00 N/A December 31, 1999 IN WITNESS WHEREOF, the undersigned, duly authorized officer of Sight Resource Corporation has executed and delivered this Certificate in the name and on behalf of itself and each Borrower ________________, 199__. SIGHT RESOURCE CORPORATION By:_______________________________ Its: 36 EX-99.2 4 SECURED TERM LOAN Exhibit 99.2 SECURED TERM NOTE $7,000,000.00 April 15, 1999 Boston, Massachusetts For value received, the undersigned jointly and severally promise to pay to Fleet National Bank ("Bank"), or order, at its office at One Federal Street, Boston, Massachusetts 02110, or at such other place as may be designated in writing by the holder hereof, the principal sum of Seven Million ($7,000,000.00) Dollars in eighty-four (84) consecutive monthly installments, as follows: $83,333.00 on November 1, 1999 and the same amount (except the last installment, which shall be in the amount of the remaining outstanding principal balance) on the 1st day of each month thereafter until this note is paid in full. Interest shall be charged on the said principal sum outstanding at a rate equal to the Adjusted Libor plus two and three-quarters percent (2.75%) as defined in the undersigneds' Loan Agreement with the Bank of even date (the "Loan Agreement"), adjusted every month as provided below. Interest on the aggregate principal balance owing to the Bank at the close of each day shall be payable monthly in arrears commencing on the 1st day of the month next succeeding the date hereof, and continuing on the 1st day of each month thereafter until such principal balance is fully and finally paid. Notwithstanding the foregoing interest provisions, the undersigned shall have the benefit of, and be subject to the terms of, that certain ISDA Master Swap Agreement between the undersigned and the Bank dated April 15, 1999 (the "Swap Agreement"). The Adjusted Libor shall be calculated on the date hereof, and recalculated on the numerically corresponding day of each month thereafter, provided that if such day is not a Banking Day, then the Adjusted Libor shall be recalculated on the next preceding or the next succeeding day which is a Banking Day as determined in good faith by the Bank in accordance with the then current bank practices in the relevant Interbank Market (such date hereinafter referred to as an "Adjustment Date"). Interest shall be computed on the basis of the actual number of days elapsed over a year of 360 days. Each Adjusted Libor interest rate calculated hereunder on an Adjustment Date shall become the applicable interest rate until the next Adjustment Date. If this note is not paid in full on the date of maturity or upon the exercise by the holder of its rights in the event of the undersigned's default, interest on unpaid balances shall thereafter be payable at an interest rate per annum equal to five (5%) percent greater than the rate of interest specified herein. If the entire amount of any required principal and/or interest is not paid in full within ten (10) days after the same is due, the undersigned shall pay to the Bank a late fee equal to five (5%) percent of the required payment. In no event, however, shall the outstanding principal advances evidenced by this note bear interest rate in excess of the maximum interest permitted by applicable law. In the event of prepayment of this note, whether by acceleration or otherwise, the undersigned shall pay to Bank any amounts required to compensate Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss, costs or expenses incurred by reason of the liquidation or redeployment of deposits or other funds acquired by Bank to fund or maintain the loan evidenced by this note. The provisions of this paragraph, however, shall be subject in all respects to the provisions of the Swap Agreement. At the option of the holder, this note shall become immediately due and payable without notice or demand upon the occurrence at any time of (i) the failure to pay in full and when due any installment of principal or interest hereunder; or (ii) one or more Events of Default as defined in the Loan Agreement and the expiration of any applicable grace period. Any and all deposits or other sums at any time or times credited by or due from the holder to, and all securities or other property in possession of the holder for safekeeping or otherwise and belonging to, any maker, indorser, or guarantor of this note are and shall be subject to a security interest in favor of the holder to secure payment of this note and the payment and performance of any and all other liabilities and obligations, direct or indirect, absolute or contingent, due or to become due or that may hereafter be contracted, of said respective maker, indorser, or guarantor to the holder. Upon any of the events specified above or upon non-payment of this note or any of such liability or obligation whenever due, and at any time or times thereafter, without any demand or notice, except to such extent as notice may be required by applicable law, the holder may sell or dispose of any or all such securities or other property and may exercise any and all the rights accorded the holder by the Massachusetts Uniform Commercial Code. The holder may apply or set off such deposits or other sums at any time whether or not the liability of the maker, indorser or guarantor is then due. The provisions of this paragraph are cumulative to, and not exclusive of, any other rights that the holder has with respect to such deposits, sums, securities or other property under other agreements or applicable principles of law. The holder shall have no duty to take steps to preserve rights against prior parties as to such securities or other property. Every maker, indorser, and guarantor of this note, or the obligation represented by this note, waives presentment, demand, notice, protest, and all other demands or notices in connection with the delivery, acceptance, indorsement, performance, default, or enforcement of this note, assents to any and all extensions or postponements of the time of payment or any other indulgence, to any substitution, exchange, or release of collateral, and/or to the addition or release of any other party or person primarily or secondarily liable, and generally waives all suretyship defenses and defenses in the nature thereof. The undersigned will pay all costs and expenses of collection, including attorneys' fees, incurred or paid by the holder in enforcing this note or the obligations hereby evidenced, to the extent permitted by law. No delay or omission of the holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by the holder of any payment after acceleration shall not be deemed a waiver of such acceleration. A waiver on one occasion shall 2 not operate as a bar to or waiver of any such right or remedy on any future occasion. The holder need not enter payments of principal or interest upon this note but may maintain a record thereof on a separate ledger maintained by the holder. The word "holder" as used in this note shall mean the payee or indorsee of this note who is in possession of it or the bearer if this note is at the time payable to bearer. THE UNDERSIGNED AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THAT THE UNDERSIGNED OR THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. THE UNDERSIGNED HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE UNDERSIGNED ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION. All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Loan Agreement. This Note is issued pursuant to the Loan Agreement, which more explicitly describes the rights and obligations of the undersigned and the Bank. All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this note shall be deemed to be under seal. Witness: SIGHT RESOURCE CORPORATION /s/ Brian T. Garrity By: /s/ William T. Sullivan - --------------------------- -------------------------- Brian T. Garrity William T. Sullivan, President (As to all) CAMBRIDGE EYE ASSOCIATES, INC. By: /s/ William T. Sullivan -------------------------------- William T. Sullivan, President 3 DOUGLAS VISION WORLD, INC. By: /s/ William T. Sullivan ------------------------------------ William T. Sullivan, President E.B. BROWN OPTICIANS, INC. By: /s/ William T. Sullivan ------------------------------------ William T. Sullivan, President EYEGLASS EMPORIUM, INC. By: /s/ William T. Sullivan ------------------------------------ William T. Sullivan, President SHAWNEE OPTICAL, INC. By: /s/ William T. Sullivan ------------------------------------ William T. Sullivan, President VISION PLAZA CORP. By: /s/ William T. Sullivan ------------------------------------ William T. Sullivan, President - -------------------------------------------------------------------------------- THIS NOTE IS SECURED PURSUANT A SECURITY AGREEMENT (ALL ASSETS) FROM EACH OF THE MAKERS OF THIS NOTE, ALL OF EVEN DATE HEREWITH. - -------------------------------------------------------------------------------- 4 EX-99.3 5 SECURED REVOLVING LINE NOTE Exhibit 99.3 SECURED REVOLVING LINE NOTE $3,000,000.00 April 15, 1999 Boston, Massachusetts On May 31, 2001, for value received, the undersigned, jointly and severally promise to pay to the order of Fleet National Bank (the "Bank") at the office of Bank at One Federal Street, Boston, Massachusetts 02110, or such other place as the Bank shall designate, Three Million ($3,000,000.00) Dollars, or such lesser principal amount advanced to the undersigned by the Bank under the revolving line of credit established pursuant to a Loan Agreement of even date (the "Agreement"), which remains outstanding, together with interest thereon as follows: (i) on outstanding principal designated as a Prime Rate Loan pursuant to Section 2.05 of the Agreement, interest shall accrue from the date thereof, payable monthly in arrears on the first day of each calendar month prior to the due date thereof, and upon the due date thereof, at a fluctuating interest rate per annum equal to the Bank's Prime Rate in effect from time to time. Each change in such interest rate shall take effect simultaneously with the corresponding change in such Prime Rate. "Prime Rate" shall mean the rate of interest announced by the Bank in Boston, Massachusetts, from time to time as its Prime Rate, it being understood that such rate is a reference rate and not necessarily the lowest rate of interest charged by Bank, (ii) on outstanding principal designated as a Libor Loan pursuant to Section 2.05 of the Agreement, interest shall accrue from the Borrowing Date for such Advance through and including the Maturity Date chosen by the undersigned with respect to such Advance, at a fixed interest rate per annum equal to the aggregate of the Adjusted Libor plus Margin, and shall be payable on the sooner of the first day of each month or the Maturity Date. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. This note shall, at the option of the Bank, become immediately due and payable without notice or demand upon the occurrence of any Event of Default under the Agreement, subject to any applicable grace periods set forth therein. If this note is not paid in full on the date of maturity or upon the exercise by the holder of its rights in the event of the undersigned default, interest on unpaid balances shall thereafter be payable at an interest rate per annum equal to four (4%) percent greater than the rate of interest specified herein. Any and all deposits or other sums at any time or times credited by or due from the holder to, and all securities or other property in possession of the holder for safekeeping or otherwise and belonging to, any maker, indorser, or guarantor of this note are and shall be subject to a security interest in favor of the holder to secure payment of this note and the payment and performance of any and all other liabilities and obligations, direct or indirect, absolute or contingent, due or to become due or that may hereafter be contracted, of said respective maker, indorser, or guarantor to the holder. Upon any of the events specified above or upon non-payment of this note or any of such liability or obligation whenever due, and at any time or times thereafter, without any demand or notice, except to such extent as notice may be required by applicable law, the holder may sell or dispose of any or all such securities or other property and may exercise any and all the rights accorded the holder by the Massachusetts Uniform Commercial Code. Upon the occurrence of an Event of Default under the Agreement the holder may apply or set off such deposits or other sums at any time whether or not the liability of the maker, indorser or guarantor is then due. The provisions of this paragraph are cumulative to, and not exclusive of, any other rights that the holder has with respect to such deposits, sums, securities or other property under other agreements or applicable principles of law. The holder shall have no duty to take steps to preserve rights against prior parties as to such securities or other property. Every maker, indorser, and guarantor of this note, or the obligation represented by this note, waives presentment, demand, notice, protest, and all other demands or notices in connection with the delivery, acceptance, indorsement, performance, default, or enforcement of this note, assents to any and all extensions or postponements of the time of payment or any other indulgence, to any substitution, exchange, or release of collateral, and/or to the addition or release of any other party or person primarily or secondarily liable, and generally waives all suretyship defenses and defenses in the nature thereof. The undersigned will pay all reasonable costs and expenses of collection, including reasonable attorneys' fees, incurred or paid by the holder in enforcing this note or the obligations hereby evidenced, to the extent permitted by law. No delay or omission of the holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by the holder of any payment after acceleration shall not be deemed a waiver of such acceleration. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion. The holder need not enter payments of principal or interest upon this note but may maintain a record thereof on a separate ledger maintained by the holder. The word "holder" as used in this note shall mean the payee or indorsee of this note who is in possession of it or the bearer if this note is at the time payable to bearer. 2 THE UNDERSIGNED AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THAT THE UNDERSIGNED OR THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. THE UNDERSIGNED HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE UNDERSIGNED ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION. All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Agreement. This Note is issued pursuant to the Agreement, which more explicitly describes the rights and obligations of the undersigned and the Bank. In the event of prepayment of this note, whether by acceleration or otherwise, all principal amounts prepaid with respect to Libor Loans shall be subject to "make whole" prepayment provisions as more particularly described in the Agreement. All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts and this note shall be deemed to be under seal. If the entire amount of any required principal and/or interest is not paid in full within ten (10) days after the same is due, the undersigned shall pay to the Bank a late fee equal to four (4%) percent of the required payment. The undersigned hereby authorizes the Bank to debit its loan account created pursuant to the Agreement for any payments required hereunder, whether principal, interest or fees. This note is issued pursuant to the Agreement, to which reference may be had with respect to the rights and obligations of the undersigned and the Bank pursuant thereto. WITNESS: SIGHT RESOURCE CORPORATION /s/ Brian T. Garrity By: /s/ William T. Sullivan - --------------------- -------------------------- Brian T. Garrity William T. Sullivan, President (As to all) 3 CAMBRIDGE EYE ASSOCIATES, INC. By:/s/ William T. Sullivan --------------------------------- William T. Sullivan, President DOUGLAS VISION WORLD, INC. By:/s/ William T. Sullivan --------------------------------- William T. Sullivan, President E.B. BROWN OPTICIANS, INC. By:/s/ William T. Sullivan -------------------------- William T. Sullivan, President EYEGLASS EMPORIUM, INC. By:/s/ William T. Sullivan -------------------------- William T. Sullivan, President KENT ACQUISITION CORP. By:/s/ William T. Sullivan -------------------------- William T. Sullivan, President SHAWNEE OPTICAL, INC. By:/s/ William T. Sullivan -------------------------- William T. Sullivan, President 4 VISION PLAZA CORP. By:/s/ William T. Sullivan -------------------------- William T. Sullivan, President - ------------------------------------------------------------------------------- THIS NOTE IS SECURED PURSUANT TO SECURITY AGREEMENT (ALL ASSETS) FROM EACH OF THE MAKERS OF THIS NOTE, ALL OF EVEN DATE HEREWITH. - ------------------------------------------------------------------------------- 5 EX-99.4 6 SECURED ACQUISITION TERM NOTE Exhibit 99.4 RIDER A SECURED ACQUISITION TERM NOTE $__________ ________, 1999/200__ Boston, Massachusetts For value received, the undersigned jointly and severally promise to pay to Fleet National Bank ("Bank"), or order, at its office at One Federal Street, Boston, Massachusetts 02110, or at such other place as may be designated in writing by the holder hereof, the principal sum of [the principal amount of the Advance under the Acquisition Line) ($_____________) Dollars in eighty-four (84) consecutive monthly installments, as follows: [1/84th of the amount of the Advance] on [The 1st day of the 6th month following the date of the Advance] and the same amount (except the last installment, which shall be in the amount of the remaining outstanding principal balance) on the 1st day of each month thereafter until this note is paid in full. Interest shall be charged on the said principal sum outstanding at a rate equal to the Adjusted Libor plus two and three-quarters percent (2.75%) prior to the undersigned achieving Profitability and Adjusted Libor plus two and one-quarter (2.25%) percent thereafter as those terms are defined in the undersigneds' Loan Agreement with the Bank of even date (the "Loan Agreement"), adjusted every month as provided below. Interest on the aggregate principal balance owing to the Bank at the close of each day shall be payable monthly in arrears commencing on the 1st day of the month next succeeding the date hereof, and continuing on the 1st day of each month thereafter until such principal balance is fully and finally paid. Notwithstanding the foregoing interest provisions, the undersigned shall have the benefit of, and be subject to the terms of, that certain ISDA Master Swap Agreement between the undersigned and the Bank dated April ___, 1999 (the "Swap Agreement"). The Adjusted Libor shall be calculated on the date hereof, and recalculated on the numerically corresponding day of each month thereafter, provided that if such day is not a Banking Day, then the Adjusted Libor shall be recalculated on the next preceding or the next succeeding day which is a Banking Day as determined in good faith by the Bank in accordance with the then current bank practices in the Interbank Market (such date hereinafter referred to as an "Adjustment Date"). Interest shall be computed on the basis of the actual number of days elapsed over a year of 360 days. Each Adjusted Libor interest rate calculated hereunder on an Adjustment Date shall become the applicable interest rate until the next Adjustment Date. If this note is not paid in full on the date of maturity or upon the exercise by the holder of its rights in the event of the undersigned's default, interest on unpaid balances shall thereafter be payable at an interest rate per annum equal to four (4%) percent greater than the rate of interest specified herein. If the entire amount of any required principal and/or interest is not paid in full within ten (10) days after the same is due, the undersigned shall pay to the Bank a late fee equal to four (4%) percent of the required payment. In no event, however, shall the outstanding principal advances evidenced by this note bear interest rate in excess of the maximum interest permitted by applicable law. In the event of prepayment of this note, whether by acceleration or otherwise, the undersigned shall pay to Bank any amounts required to compensate Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss, costs or expenses incurred by reason of the liquidation or redeployment of deposits or other funds acquired by Bank to fund or maintain the loan evidenced by this note. The provisions of this paragraph, however, shall be subject in all respects to the provisions of the Swap Agreement. At the option of the holder, this note shall become immediately due and payable without notice or demand upon the occurrence at any time of one or more Events of Default as defined in the Loan Agreement and the expiration of any applicable grace period. Any and all deposits or other sums at any time or times credited by or due from the holder to, and all securities or other property in possession of the holder for safekeeping or otherwise and belonging to, any maker, indorser, or guarantor of this note are and shall be subject to a security interest in favor of the holder to secure payment of this note and the payment and performance of any and all other liabilities and obligations, direct or indirect, absolute or contingent, due or to become due or that may hereafter be contracted, of said respective maker, indorser, or guarantor to the holder. Upon any of the events specified above or upon non-payment of this note or any of such liability or obligation whenever due, and at any time or times thereafter, without any demand or notice, except to such extent as notice may be required by applicable law, the holder may sell or dispose of any or all such securities or other property and may exercise any and all the rights accorded the holder by the Massachusetts Uniform Commercial Code. Upon the occurrence of an Event of Default under the Loan Agreement the holder may apply or set off such deposits or other sums at any time whether or not the liability of the maker, indorser or guarantor is then due. The provisions of this paragraph are cumulative to, and not exclusive of, any other rights that the holder has with respect to such deposits, sums, securities or other property under other agreements or applicable principles of law. The holder shall have no duty to take steps to preserve rights against prior parties as to such securities or other property. Every maker, indorser, and guarantor of this note, or the obligation represented by this note, waives presentment, demand, notice, protest, and all other demands or notices in connection with the delivery, acceptance, indorsement, performance, default, or enforcement of this note, assents to any and all extensions or postponements of the time of payment or any other indulgence, to any substitution, exchange, or release of collateral, and/or to the addition or release of any other party or person primarily or secondarily liable, and generally waives all suretyship defenses and defenses in the nature thereof. The undersigned will pay all reasonable costs and expenses of collection, including reasonable attorneys' fees, incurred or paid by the holder in enforcing this note or the obligations hereby evidenced, to the extent permitted by law. 2 No delay or omission of the holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by the holder of any payment after acceleration shall not be deemed a waiver of such acceleration. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion. The holder need not enter payments of principal or interest upon this note but may maintain a record thereof on a separate ledger maintained by the holder. The word "holder" as used in this note shall mean the payee or indorsee of this note who is in possession of it or the bearer if this note is at the time payable to bearer. THE UNDERSIGNED AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THAT THE UNDERSIGNED OR THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. THE UNDERSIGNED HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE UNDERSIGNED ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION. All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Loan Agreement. This Note is issued pursuant to the Loan Agreement, which more explicitly describes the rights and obligations of the undersigned and the Bank. All rights and obligations hereunder shall be governed by the law of the Commonwealth of Massachusetts and this note shall be deemed to be under seal. Witness: SIGHT RESOURCE CORPORATION /s/ Brian T. Garrity By: /s/ William T. Sullivan - --------------------- ------------------------------------ Brian T. Garrity William T. Sullivan, President (As to all) CAMBRIDGE EYE ASSOCIATES, INC. By: /s/ William T. Sullivan ------------------------------- William T. Sullivan, President 3 DOUGLAS VISION WORLD, INC. By: /s/ William T. Sullivan ------------------------------- William T. Sullivan, President E.B. BROWN OPTICIANS, INC. By: /s/ William T. Sullivan ------------------------------- William T. Sullivan, President EYEGLASS EMPORIUM, INC. By: /s/ William T. Sullivan ------------------------------- William T. Sullivan, President SHAWNEE OPTICAL, INC. By: /s/ William T. Sullivan ------------------------------- William T. Sullivan, President VISION PLAZA CORP. By: /s/ William T. Sullivan ------------------------------- William T. Sullivan, President - ------------------------------------------------------------------------------- THIS NOTE IS SECURED PURSUANT A SECURITY AGREEMENT (ALL ASSETS) FROM EACH OF THE MAKERS OF THIS NOTE, ALL OF EVEN DATE HEREWITH. - ------------------------------------------------------------------------------- 4 EX-99.5 7 SECURITY AGREEMENT Exhibit 99.5 SECURITY AGREEMENT (All Assets) Sight Resource Corporation, a Delaware corporation with a principal place of business at 100 Jeffrey Avenue, Holliston, MA 01746, on behalf of itself and any successors or assigns (the "Borrower"), and Fleet National Bank, a national banking association with a usual place of business at One Federal Street, Boston, Massachusetts 02110, its successors and assigns (the "Bank"), are the parties to this Agreement. In consideration of the Bank's extending or having extended loans and/or other financial considerations to the Borrower on this date or on one or more occasions, the Borrower agrees with the Bank as follows: SECTION 1. THE SECURITY INTEREST: As security for the payment and performance of all Liabilities (as defined below) now existing or hereafter arising of the Borrower to the Bank, whether arising by future advances or otherwise, the Borrower hereby grants a security interest to the Bank in the following property, wherever located, and in all proceeds and products of such property: 1.01 ALL INVENTORY of the Borrower now existing or hereafter arising; meaning all goods, merchandise, raw materials, supplies, goods in process, finished goods, and other tangible personal property held by the Borrower for processing, sale, or other business purpose, or to be used or consumed in the Borrower's business. 1.02 ALL ACCOUNTS AND ACCOUNTS RECEIVABLE of the Borrower now existing or hereafter arising; meaning all accounts, accounts receivable, papers, notes, drafts, acceptances, and all other debts, obligations, and liabilities in whatever form owing to the Borrower from any person, firm, corporation, or any other legal entity ("Account Debtors"). 1.03 ALL DOCUMENTS of the Borrower now existing or hereafter arising; meaning all documents of title, including bills of lading, dock warrants, dock receipts, warehouse receipts, and orders for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in the possession of it is entitled to receive, hold, and dispose of the document and goods it covers. 1.04 ALL INSTRUMENTS of the Borrower now existing or hereafter arising; meaning all negotiable instruments, securities, and any other writings which evidence a right to payment of money and are not themselves security agreements or leases and are of a type which are in the ordinary course of business transferred by delivery with any necessary endorsement or assignment. 1.05 ALL CHATTEL PAPER of the Borrower now existing or hereafter arising; meaning a writing or writings which evidence both a monetary obligation and a security interest in or a lease of specific goods. 1.06 ALL GENERAL INTANGIBLES, including, but not limited to, choses in action of the Borrower now existing or hereafter arising, meaning any personal property other than goods, accounts, chattel papers, documents, and instruments, including, but not limited to, general intangibles of the following description or type: goodwill, literary rights, contract rights and rights to performance, copyrights, trade-marks, patents, computer programs, access codes, source codes, trade secrets, customer lists and all tax refunds. 1.07 ALL INVESTMENT PROPERTY of the Borrower, where located, now or hereafter existing or hereafter acquired including all securities (whether certificated or not), security entitlements, security accounts, financial assets and related rights, together with all proceeds of any of the foregoing. 1.08 ALL OTHER GOODS of the Borrower, wherever located, now existing or hereafter acquired; meaning all motor vehicles, equipment, machinery, and other tangible personal property, whether fixtures or not, any and all records relating to any of the Collateral (as defined below) and all attachments and accessories thereto and substitutes therefor. It is the Borrower's express intention that the continuing grant of this security interest remain as security for payment and performance of all of its Liabilities, whether now existing, or which may hereinafter be incurred by future advances, or otherwise, and whether or not such Liabilities are related to any transactions described in this Agreement, by class or kind, or whether or not contemplated by the parties at the time of the granting of this security interest. The notice of the continuing grant of this security interest therefore shall not be required to be stated on the face of any document representing any of the Borrower's Liabilities nor otherwise identify it as being secured hereby. If any Liability of the Borrower shall be or become excused, the Borrower hereby expressly hypothecates his, her, its, or their ownership interest in the Collateral to the extent required to satisfy such Liabilities, without restriction or limitation. Any such Liabilities will include all advances by the Bank whether or not the advances are made pursuant to commitments. SECTION 2. DEFINITIONS: All types of Collateral mentioned in Section 1 shall have the meanings given to them under Chapter 106 of the Massachusetts General Laws unless specifically defined otherwise in that section or elsewhere in this Agreement. In addition, as used herein, the following terms shall have the following respective meanings: 2.01 LIABILITIES means all liabilities of the Borrower to the Bank of every kind and description, including those arising under a Loan Agreement with the Bank of even date (the "Loan Agreement"), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, regardless of how they arise or by what agreement or instrument they may be evidenced, including those arising under this Agreement, or whether evidenced by any agreement or instrument, including obligations to perform acts and refrain from taking action as well as obligations to pay money. 2 2.02 COLLATERAL means any and all property of the Borrower in which the Bank now has, by this Agreement, or hereafter acquires a security interest and specifically includes without limitation all inventory, accounts, documents, instruments, chattel paper, general intangibles, investment property and other goods, as those terms are defined in Section 1 hereof. SECTION 3. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS: To induce the Bank to enter into this Agreement the Borrower represents, warrants, agrees, and covenants that: 3.01 BORROWER OWNS ASSETS: The Borrower owns all its assets (excluding leased assets), including the Collateral, as represented on any papers furnished to the Bank and has and will have the exclusive right and authority to grant security interests therein. 3.02 ASSETS FREE OF ENCUMBRANCES: All the Borrower's assets, including the Collateral, are and will be kept in good condition and clear of all security interests, mortgages, liens, and encumbrances, except those granted or allowed under this Agreement and those set forth on the attached Schedule A, and the Borrower has marketable title to all Collateral and shall defend the same against the claims and demands of all persons. The Bank has the right but not the duty to discharge any liability giving rise to a lien on Collateral, including any liens of any taxing authority, and the Borrower shall repay the Bank immediately for all amounts paid by the Bank to discharge such liabilities. 3.03 LOCATION OF COLLATERAL: Tangible Collateral, including, but not limited to, equipment, inventory, and fixtures, and if the Bank permits the Borrower to retain possession thereof, instruments, documents, and chattel paper, will be kept in the possession of the Borrower at its place of business named above, or those set forth on the attached Schedule A. The location or locations of such Collateral shall not be changed without providing written notice thereof to the Bank. Immediately upon the Bank's request, whether or not the Borrower is in default with respect to any Liability to the Bank, the Borrower will turn over to the Bank all instruments, documents and chattel paper which are Collateral under this Agreement. 3.04 RECORDS AND INFORMATION WITH RESPECT TO BORROWER AND COLLATERAL: (a) The Borrower will furnish all information, financial or otherwise, that a duly authorized lending officer of the Bank deems reasonably necessary to properly inform the Bank with respect to Collateral or the condition of the Borrower. The Borrower will inform the Bank immediately in the event of any material change in the Borrower's financial condition or in the event of any material breach of this Agreement or in the event that any of the representations and warranties herein contained do not continue to be true and correct in any material respect as though continuously made to the Bank. 3 (b) The Borrower will execute upon the request of the Bank such financing statements and like papers as the Bank deems reasonably necessary to properly protect Collateral and its security interest therein and will pay the cost of filing them in such offices as the Bank requests. 3.05 FIXTURES: If any machinery, equipment, or other property serving as Collateral under this Agreement is or will be attached to any real estate, the Borrower will, upon Bank's request, furnish the Bank with a description of such real estate with a disclaimer, signed by all persons having an interest in said real estate, of any interest in the Collateral which has or may have priority over the Bank's interest, and will notify the Bank in writing of any intended sale, mortgage, or conveyance of such real estate, and will give written notice of the terms and conditions of this Agreement to any prospective purchaser, mortgagee, or grantee of such real estate. 3.06 LIABILITIES OWING TO BORROWER: Any liabilities in whatever form owing to the Borrower from any person, firm, or other legal entity serving as Collateral are and will be good and valid indebtedness not subject to any defenses, set-offs, claims, counter-claims, or agreements under which any deduction or discount may be made thereon, except as specified to the Bank on a statement or invoice made available to the Bank on or prior to the date hereof or from time to time hereafter. 3.07 RETURNED MERCHANDISE: The Bank may in its unfettered discretion charge to the Borrower the amount represented to be owing on any liability, in whatever form owing to the Borrower, from whatever source, if said liability serves as Collateral under this Agreement, and if any merchandise giving rise to any such liability is returned, and until such debit is made, Borrower shall hold any such returned merchandise segregated in trust for the Bank subject to its exclusive disposition. 3.08 TAXES: The Borrower will pay any sales or other taxes which may become due and payable with respect to a sale or other transaction giving rise to any Collateral, unless such tax is being contested in good faith by appropriate proceedings with appropriate reserves established. 3.09 CHATTEL PAPER: The Borrower agrees to label all chattel paper serving as Collateral under this Agreement with the words, "Subject to the security interest of (the Bank)", naming the Bank. 3.10 INSURANCE: (a) The Borrower agrees at its own expense to keep all Collateral insured in accordance with the requirements of the Loan Agreement. (b) The Bank shall have no risk, liability, or responsibility in connection with payment or non-payment of any loss, the sole obligation of the Bank being to 4 credit the Borrower's loan account with the net proceeds of any insurance payments received on account of any loss. 3.11 SALE OF COLLATERAL: Unless otherwise specifically provided by this Agreement or the Loan Agreement, the Borrower will not sell any Collateral without the prior written consent of the Bank. Notwithstanding, provided the Borrower is not in default hereunder the Borrower shall have the right to sell inventory, which may be Collateral, in the ordinary course of its business. A sale in the ordinary course of business shall not include a transfer in total or partial satisfaction of a debt, other than a debt which has arisen solely as a result of prepayment or deposit by customers of the Borrower for items of inventory subsequently to be purchased or delivered. Borrower shall also be entitled to sell (or trade in) obsolete equipment or inventory so long as Borrower receives therefor a sum (or credit) substantially equal to such equipment's or inventory's fair value. 3.12 BANK'S RIGHT TO POSSESSION: (a) Unless otherwise provided by law, at any time after the occurrence of an Event of Default hereunder, the Bank shall have the right to the immediate possession of all Collateral and its products and proceeds, and in its sole discretion may operate and use said Collateral, complete work in process, and sell Collateral without being liable to the Borrower on account of any losses, damage, or depreciation that may occur as a result thereof so long as the Bank shall act in good faith, in a commercially reasonable manner. (b) Unless otherwise provided by law, at any time after the occurrence of an Event of Default hereunder, the Bank may, at the expense of the Borrower, maintain possession of the Borrower's premises by the use of a custodian or custodians, or in such other manner as the Bank may determine. (c) Unless otherwise provided by law, at any time after the occurrence of an Event of Default hereunder, the Bank may at all times, at the expense of the Borrower, enter upon any premises on which Collateral may be situated and remove any such Collateral to such other places as the Bank determines. (d) Unless otherwise provided by law, the Bank may at any time, after the occurrence of an Event of Default hereunder, transfer any Collateral into its own name or that of its nominee and may at any time after demand or the occurrence of an Event of Default hereunder receive the income thereon and hold the same as security for Liabilities or apply it to principal or interest due on the Liabilities. 5 SECTION 4. COLLECTION: 4.01 (a) The Bank may at any time and from time to time after the occurrence of an Event of Default hereunder require the Borrower to establish a "lock box" arrangement with the Bank for the receipt of Account Debtor remittances. (b) The Bank may at any time after the occurrence of an Event of Default hereunder, notify Account Debtors, on any Collateral, or require the Borrower to notify such Account Debtors, that they shall make all payments on their account or accounts with the Borrower directly to the Bank; or require the Borrower to hold all proceeds received from collection in trust for the Bank without commingling the same with other funds of the Borrower, and to turn the same over to the Bank immediately upon receipt the identical form received, at which time the Bank may at its option either apply such proceeds to the Liabilities of the Borrower, in accordance with Section 4.03, or release such proceeds to the Borrower for use in its business. (c) The Bank has the right at any time after the occurrence of an Event of Default hereunder, directly or through its agent, to collect proceeds directly from Account Debtors, on any Collateral and for that purpose to do all acts and things necessary or incident thereto, including the right to sue on such accounts, and to sell, transfer, set over, compromise, discharge, or extend the whole or any part of the accounts. 6 (d) Borrower does hereby make, constitute and appoint any officer or agent of Bank as Borrower's true and lawful attorney-in-fact, with power to endorse the name of Borrower or any of Borrower's officers or agents upon any notices, checks, drafts, money orders, or other instruments of payment (including payments payable under any policy of insurance on the Collateral) or Collateral that may come into possession of the Bank in full or part payment of any amounts owing to Bank; to sign and endorse the name of Borrower or any of Borrower's officers or agents upon any warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and any instruments or documents relating thereto, or to Borrower's rights therein; to give written notice to such office or officials of the United States Post Office to effect such change or changes of address so that all mail addressed to the Borrower may be delivered directly to the Bank; granting unto Borrower's said attorney full power to do any and all things necessary to be done in and about the premises as fully and effectually as Borrower might or could do, and hereby ratifying all that said attorney shall lawfully do or cause to be done by virtue hereof. Neither the Bank nor the attorney shall be liable for any acts or omissions nor for any errors of judgment or mistake, except for their gross negligence or willful misconduct. This power of attorney shall be irrevocable for the term of this Agreement and all transactions hereunder and thereafter as long as Borrower may be indebted to Bank. With the exception of the power granted to the Bank to endorse checks, drafts, and any other form of payment, which right may be exercised at any time and from time to time, the Bank will not exercise any of the powers granted hereunder absent the occurrence of an Event of Default hereunder. 4.02 Until the Bank exercises the rights contained in Section 4.01 following an Event of Default hereunder, the Borrower may continue to collect proceeds from Account Debtors on any Collateral and use the proceeds in any lawful manner not inconsistent with the terms of this Agreement. 4.03 In the event that the Bank exercises the rights contained in Section 4.01 following an Event of Default hereunder, the Bank shall credit to the Borrower the proceeds obtained from Account Debtors of the Borrower, such credits to be entered within two (2) business days after receipt of the proceeds. Such credits, however, are conditional upon final payment to the Bank at its office in cash or solvent credits of the items giving rise to them, and, if any item is not so paid, the amount of any credit given with respect to any of the Borrower's Liabilities shall be reversed or, in the discretion of the Bank, it shall be charged to any deposit accounts of the Borrower with the Bank, whether or not the item is returned. SECTION 5. DEFAULT AND ACCELERATION: 7 5.01 Any or all of the Liabilities of the Borrower to the Bank shall, at the option of the Bank and notwithstanding any time or credit allowed by any instrument evidencing a Liability, be immediately due and payable without notice or demand upon the occurrence of any of the following events of default (each an "Event of Default" hereunder): (a) The occurrence of an Event of Default under the Loan Agreement following the expiration of any applicable grace period; (b) An injunction or attachment against property of the Borrower remains undischarged for a period of thirty (30) days; (c) The security interest granted to the Bank in the Collateral shall, at any time after the execution and delivery of this Agreement, for any reason, ceases (i) to create a valid and perfected first priority security interest in the Collateral including, without limitation, the occurrence of any event which would cause a lien creditor, as that term is defined in Section 9-301 of the Code, to take priority over advances made by Bank; (ii) this Agreement shall cease to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by the Borrower; or (iii) any guarantor of the Liabilities denies it has any further liability or obligation with respect to such Liabilities or terminates its guaranty or fails to honor any of its Liabilities under such guaranty. 5.02 Upon the occurrence of any Events of Default set forth in Section 5.01, the Bank shall have all the rights and remedies of a secured party under Chapter 106, Article 9, of the Massachusetts General Laws, in addition to all other rights and remedies mentioned in this Agreement. Unless otherwise provided by law, the Bank may require the Borrower to assemble any tangible personal property constituting Collateral and make it available to the Bank at a place to be designated by the Bank which is reasonably convenient to both parties. 5.03 The Borrower hereby grants to the Bank a nonexclusive irrevocable license in connection with the Bank's exercise of its rights hereunder, to use, apply and affix any trademark, trade name, logo or the like in which the Borrower now or hereafter has rights, which license may be used solely by the Bank upon the occurrence of any Event of Default. SECTION 6. EXPENSES: 6.01 The Borrower shall pay or reimburse the Bank on demand for all reasonable out-of-pocket expenses which the Bank may incur in connection with this Agreement and the preparation thereof, the making of any loan in connection herewith, or the collection of the Borrower's Liabilities secured under this Agreement, including but not limited to reasonable attorney's fees, and reasonable fees and expenses related to the perfection and protection of any security interest granted by 8 the Borrower; or the Bank, if it chooses, may charge any of the Borrower's funds on deposit with the Bank. SECTION 7. GOVERNING LAW, MODIFICATION, AND WAIVERS: 7.01 This Agreement, including modifications or additions thereto, will be governed, interpreted, and construed in accordance with the laws of the Commonwealth of Massachusetts. 7.02 The rights, remedies, powers, privileges and discretions of the Bank hereunder shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. 7.03 Any determination that any provision of this Agreement or any application thereof is invalid, illegal or unenforceable in any respect in any instance shall not affect the validity, legality and enforceability of such provision in any other instance, nor the validity, legality or enforceability of any other provision of this Agreement. 7.04 No modification of this Agreement will be binding unless in writing and signed by a duly authorized lending officer of the Bank. 7.05 Any default by the Borrower may be waived by the Bank in writing signed by a duly authorized lending officer of the Bank, but no such waiver shall extend to any subsequent default or any other default. 7.06 No delay on the part of the Bank in exercising any of the rights granted or referred to in this Agreement shall be held to constitute a waiver. SECTION 8. NOTICE, ASSIGNMENT, TERMINATION: 8.01 Unless otherwise provided for by law, any demand, notice, or other communication to the Borrower that the Bank may elect to give shall be effective if sent in accordance with the terms of the Loan Agreement. 8.02 If at any time or times by assignment or otherwise the Bank assigns this Agreement, such assignment shall carry with it the Bank's powers and rights under this Agreement and the transferee shall become vested with said powers and rights whether or not they are specifically referred to in the transfer. If and to the extent the Bank retains any other Liability or Collateral, the Bank will continue to have the rights and powers herein set forth with respect thereto. 8.03 This Agreement shall continue until all Liabilities of the Borrower to the Bank have been satisfied. 9 8.04 Any obligations the Bank may have to the Borrower, whether now existing or hereafter arising, run only to the Borrower and may not be assigned or transferred by said Borrower without the written consent of a duly authorized officer of the Bank. SECTION 9. HEADINGS: SEAL: 9.01 Headings preceding the text of the several sections hereof are for the convenience of reference only and shall not constitute a part of this Agreement nor shall they affect its meaning, construction, or effect. 9.02 It is intended that this Agreement take effect as a sealed instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as a sealed instrument this 15th day of April, 1999. WITNESS: FLEET NATIONAL BANK (As to Both) /s/ Brian T. Garrity By: /s/ Gregory P. Buscone - --------------------- -------------------------------------------- Witness Gregory P. Buscone, Vice President SIGHT RESOURCE CORPORATION By: /s/ William T. Sullivan -------------------------------------------- William T. Sullivan, Chief Executive Officer 10 SCHEDULE A ENCUMBRANCES ------------ SECURED PARTY OR LESSOR: COLLATERAL: - ----------------------- ---------- ADDITIONAL LOCATIONS -------------------- 11 EX-99.6 8 SECURITY AGREEMENT EXHIBIT 99.6 SECURITY AGREEMENT (Pledged Collateral) In consideration of loans heretofore, now, or hereafter made to Sight Resource Corporation (hereinafter called the "Pledgor") by Fleet National Bank (hereinafter called the "Bank"), and to secure payment of any liability or obligation of the Pledgor to the Bank, direct or indirect, primary or secondary, now existing or hereafter arising (said liabilities and obligations hereby secured being hereinafter called "Obligations"), the Pledgor assigns, transfers and delivers to the Bank the collateral described on Exhibit A attached hereto and made a part hereof, together with any additions to or substitutions for said property and any and all proceeds of the same, all of which shall hereinafter be referred to as "Collateral". Upon an event of default hereunder, or upon default in the payment or performance of any of the Obligations as set forth and more particularly described as an "Event of Default" under that certain Loan Agreement between Bank and Pledgor of even date (the "Loan Agreement"), or upon the occurrence of any event which would entitle the Bank to accelerate the maturity of any of the Obligations in each case beyond any applicable grace periods, and at any time or times thereafter, without any demand or notice, except as may be required by applicable law, the Bank may sell or otherwise dispose of any or all of the Collateral and may exercise any and all rights and remedies accorded to it by Article 9 of the Massachusetts Uniform Commercial Code, as amended from time to time, or otherwise accorded by law, all as the Bank or any authorized person acting for it may determine, including, without limitation of the foregoing, bidding and/or becoming purchaser at any public sale, free from any right of redemption, which the Pledgor hereby waives and releases, and no purchaser shall be responsible for the application of the purchase money. The Pledgor agrees that five (5) days notice will be deemed reasonable, if any is required. The Bank at its option, upon any event of default hereunder or under the Loan Agreement may, but shall have no obligation to do so, demand, sue for, collect, or make any compromise or settlement it deems desirable with reference to the Collateral, including, without limitation, the exercise of all rights of a secured party or mortgagee as to any security for any Collateral. The Bank shall have no duty as to collection or protection of any Collateral or any income or distribution thereon nor as to the preservation of any rights, including, without limitation, rights against prior parties, beyond safekeeping of the Collateral or as otherwise required by law. The Bank may apply any and all proceeds of the Collateral, however arising, and other amounts collected or received in the exercise of its rights hereunder to the Obligations, whether or not then due, and may exercise said rights, without regard to the existence of any other security for any Obligation. The Pledgor hereby waives notice of any and all advances, extensions or renewals, and of any default hereunder or as to any Obligation except as provided under the Loan Agreement, as well as presentment, demand, notice, and protest as to any and all Obligations and also all Obligations of the Pledgor hereunder; and the Pledgor agrees that any Collateral may be exchanged or surrendered from time to time without notice to or further assent from the Pledgor and without in any manner releasing the Bank's rights in any other Collateral and the Pledgor hereby waives all suretyship defenses generally. No delay or omission by the Bank in exercising or enforcing any of its rights, powers, privileges, remedies, immunities or discretions (all of which are hereinafter collectively referred to as the "Bank's rights and remedies") hereunder shall constitute a waiver thereof; and no waiver by the Bank of any default of the Borrower hereunder shall operate as a waiver of any other default hereunder. No term or provision hereof shall be waived, altered or modified except with the prior written consent of the Bank, which consent makes explicit reference to this Agreement. Except as provided in the preceding sentence, no other agreement or transaction, of whatsoever nature, entered into between the Bank and the Borrower at any time (whether before, during or after the effective date or term of this Agreement), shall be construed in any particular as a waiver, modification or limitation of any of the Bank's rights and remedies under this Agreement (nor shall anything in this Agreement be construed as a waiver, modification or limitation of any of the Bank's rights and remedies under any such other agreement or transaction), but all of the Bank's rights and remedies not only under the provisions of this Agreement but also of any such other agreement or transaction shall be cumulative and not alternative or exclusive, and may be exercised by the Bank at such time or times and in such order of preference as the Bank in its sole discretion may determine. If any provision of this Agreement or portion of such provision or the application thereof to any person or circumstance shall to any extent be held invalid or unenforceable, the remainder of this Agreement (or the remainder of such provision) and the application thereof to other persons or circumstances shall not be affected thereby. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, and shall remain in full force and effect (and the Bank shall be entitled to rely thereon, notwithstanding payment of all Obligations of the Borrower to the Bank at any time or times) until terminated as to future transactions by written notice from either party to the other party of the termination hereof; provided that any such termination shall not release or affect any Collateral in which the Bank already has a security interest or any Obligations incurred or rights accrued hereunder prior to the effective date of such notice (as hereinafter defined) of such termination. Notwithstanding any such termination, the Bank shall have a security interest in all Collateral to secure the payment and performance of Obligations arising after such termination as a result of commitments or undertakings made or entered into by the Bank prior to such termination. The Bank may transfer and assign this Agreement and deliver the Collateral to the assignee, who shall thereupon have all the rights of the Bank; and the Bank shall then be relieved and discharged of any responsibility or liability with respect to this Agreement and the Collateral. This Agreement is intended to take effect as a sealed instrument and has been executed or completed and is to be performed in the Commonwealth of Massachusetts, and it and all transactions hereunder or pursuant hereto shall be governed as to interpretation, validity, effect, 2 rights, duties and remedies of the parties hereunder and in all other respects by the domestic laws of the Commonwealth of Massachusetts. Witness our hands this 15th day of April, 1999. WITNESS: PLEDGOR: SIGHT RESOURCE CORPORATION Address: 100 Jeffrey Avenue Holliston, MA 01746 /s/ Brian T. Garrity By: /s/ William T. Sullivan - ----------------------------- ------------------------------------ (As to Both) Brian T. Garrity William T. Sullivan, Chief Executive Officer FLEET NATIONAL BANK By: /s/ Gregory P. Buscone ---------------------------------- Gregory P. Buscone, Vice President 3 EXHIBIT A --------- COLLATERAL 4 EX-99.7 9 TRADEMARK SECURITY AGREEMENT EXHIBIT 99.7 TRADEMARK SECURITY AGREEMENT ---------------------------- THIS SECURITY AGREEMENT is entered into as of April 15, 1999, by and between Sight Resource Corporation, a Delaware corporation having its principal place of business at 100 Jeffrey Avenue, Holliston, Massachusetts 01746 (the "Borrower"), and Fleet National Bank, a national banking association organized and exiting under the laws of the United States of America with a usual place of business at One Federal Street, Boston, Massachusetts 02110 ("Bank"). NOW THEREFORE, in consideration of the premises, Borrower hereby agrees with Bank as follows: 1. Grant of Security Interest. Borrower hereby grants to Bank a first priority security interest in, and conditionally assigns, but does not transfer title to Bank, all of Borrower's right, title and interest in and to the following (collectively, the "Collateral") to secure payment and performance of all obligations of Borrower to Bank whether such obligations are direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including without limitation, those liabilities of Borrower to Bank pursuant to a Loan Agreement of even date between Bank and Borrower (the "Loan Agreement") (collectively, the "Obligations"). The Collateral shall consist of the following: (a) Each of the trademarks, and rights and interests protectible as trademarks, which are presently, or in the future may be, owned, created, acquired or used (whether pursuant to a license or otherwise) by Borrower, in whole or in part, and all trademark rights with respect thereto throughout the world, including all proceeds thereof (including license royalties and proceeds of infringement suits), and rights to renew and extend such trademarks and trademark rights; (b) All of Borrower's right, title and interest, in and to the trademarks and trademark registrations listed on Schedule A attached hereto, as the same may be updated hereafter from time to time; (c) All of Borrower's right, title and interest to register trademark claims under any state or federal trademark law or regulation of any foreign country, and to apply for, renew and extend the trademark registrations and trademark rights, the right (without obligation) to sue or bring opposition or cancellation proceedings in the name of Borrower or in the name of Bank for past, present and future infringements of the trademarks, registrations or trademark rights and all rights (but not obligations) corresponding thereto in the United States and any foreign country, and the associated goodwill; (d) All general intangibles relating to the Collateral; and (e) All proceeds of any and all of the foregoing (including, without limitation, license royalties and proceeds of infringement suits) and, to the extent not otherwise included, all payments under insurance, or any indemnity, warranty or guaranty payable by reason of loss or damage to or otherwise with respect to the Collateral. 2. Warranties and Representations. Borrower hereby warrants and represents to Bank the following: (a) A true and complete schedule setting forth all federal and state trademark registrations owned or controlled by Borrower or licensed to Borrower, together with a summary description and full information in respect of the filing or issuance thereof and expiration dates is set forth on Schedule A; (b) To the best of Borrower's knowledge, each of the trademarks and trademark registrations is valid and enforceable, and Borrower is not presently aware of any past, present or prospective claim by any third party that any of the trademarks are invalid or unenforceable, or that the use of any trademarks violates the rights of any third person, or of any basis for any such claims; (c) To the best of Borrower's knowledge, Borrower is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of the trademarks and trademark registrations free and clear of any liens, charges and encumbrances, including, without limitation, pledges, assignments, licenses, shop rights and covenants by Borrower not to sue third persons; (d) Borrower has used and will continue to use proper statutory notice in connection with its use of each of the trademarks; (e) Borrower has used and will continue to use consistent standards of high quality (which may be consistent with Borrower's past practices) in the manufacture, sale and delivery of products and services sold or delivered under or in connection with the trademarks, including, to the extent applicable, in the operation and maintenance of its merchandising operations, and will continue to maintain the validity of the trademarks; (f) Except for the filing of financing statements with the Secretary of the Commonwealth of Massachusetts, the Town Clerk of Holliston, Massachusetts and the City Clerk of Malden, Massachusetts under the Uniform Commercial Code and filings with the United States Patent and Trademark Office necessary to perfect the security interests created hereunder, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either for the grant by Borrower of the security interest hereunder or for the execution, delivery or performance of this Agreement by Borrower or for the perfection of or the exercise by Bank of its rights hereunder to the Collateral in the United States. 3. After-Acquired Trademark Rights. If Borrower shall obtain rights to any new trademarks, the provisions of this Agreement shall automatically apply thereto. Borrower shall give prompt notice in writing to Bank with respect to any such new trademarks or renewal or extension of any trademark registration. Borrower shall bear any reasonable expenses incurred in connection with future applications for trademark registration. 2 4. Litigation and Proceedings. Borrower shall commence and diligently prosecute in its own name, as the real party in interest, for its own benefit, and its own expense, such suits, administrative proceedings or other actions for infringement or other damages as are in its reasonable business judgment necessary to protect the Collateral. Borrower shall provide to Bank any information with respect thereto requested by Bank. Bank shall provide at Borrower's expense all necessary cooperation in connection with any such suit, proceeding or action, including, without limitation, joining as a necessary party. Following Borrower's becoming aware thereof, Borrower shall notify Bank of the institution of, or any adverse determination in, any proceeding in the United States Patent and Trademark Office, or any United States, state or foreign court regarding Borrower's claim of ownership in any of such trademarks, its right to apply for the same, or its right to keep and maintain such trademark rights. 5. Power of Attorney. Borrower grants Bank a power of attorney (which shall not be exercised absent the occurrence of an Event of Default hereunder), having the full authority, and in the place of Borrower and in the name of Borrower, from time to time in Bank's discretion to take any action and to execute any instrument which Bank may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, as may be subject to the provisions of the Loan Agreement: (a) To endorse Borrower's name on all applications, documents, papers and instruments necessary for Bank to use or maintain the Collateral; (b) To ask, demand, collect, sue for, recover, impound, receive and give acquittance and receipts for money due or to become due under or in respect of any of the Collateral; (c) To file any claims or take any action or institute any proceedings that Bank may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce Bank's rights with respect to any of the Collateral and to assign, pledge, convey or otherwise transfer title in or dispose of the Collateral to any person. 7. Right to Inspect. Borrower grants to Bank and its employees and agents the right to visit Borrower's plants and facilities which manufacture, inspect or store products sold under any of the trademarks, and to inspect the products and quality control records relating thereto at reasonable times during regular business hours upon reasonable prior notice. 8. Events of Default. Any of the following events shall be an Event of Default: (a) Borrower fails to make any payment of principal or interest or any other payment on any Obligation when due and payable (beyond any applicable grace period), by acceleration or otherwise; and (b) the occurrence of an Event of Default as that term is defined in the Loan Agreement after the expiration of any applicable grace period or termination for any reason of the Loan Agreement. 3 9. Specific Remedies. Upon the occurrence of any Event of Default: (a) Bank may cease advancing money or extending credit to or for the benefit of Borrower under the Loan Agreement or under any other agreement between Borrower and Bank. (b) Bank may declare all Obligations to be due and payable immediately, whereupon they shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by Borrower; (c) Bank may set off against the Obligations all Collateral, balances, credits, deposits, accounts or moneys of Borrower then or thereafter held with Bank, including amounts represented by certificates of deposit; (d) Bank may notify licensees to make royalty payments on license agreements directly to Bank; (e) Bank may sell or assign the Collateral and associated goodwill at public or private sale for such amounts, and at such time or times as Bank deems advisable. Any requirement of reasonable notice of any disposition of the Collateral shall be satisfied if such notice is sent to Borrower ten (10) days prior to such disposition. Borrower shall be credited with the net proceeds of such sale only when they are actually received by Bank, and Borrower shall continue to be liable for any deficiency remaining after the Collateral is sold or collected; (f) If the sale is to be a public sale, Bank shall also give notice of the time and place by publishing a notice one time at least ten (10) calendar days before the date of the sale in a newspaper of general circulation in the county in which the sale is to be held; and (g) To the maximum extent permitted by applicable law, Bank may be the purchaser of any or all of the Collateral and associated goodwill at any public sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any public sale, to use and apply all or any part of the Obligations as a credit on account of the purchase price of any Collateral payable by Bank at such sale. 10. Governing Law. All acts and transactions hereunder and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts. 4 IN WITNESS WHEREOF, the Borrower and Bank have caused this Agreement to be executed by their duly authorized officers as of the date first above written. FLEET NATIONAL BANK By: /s/ Gregory T. Buscone ---------------------------------- Gregory P. Buscone, Vice President SIGHT RESOURCE CORPORATION By: /s/ William T. Sullivan ---------------------------------- William T. Sullivan, Chief Executive Officer 5 COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. April 15, 1999 Then personally appeared the above-named, Gregory P. Buscone, Vice President, and acknowledged the foregoing instrument to be the free act and deed of Fleet National Bank, before me, /s/ Brian T. Garrity --------------------------------------- Brian T. Garrity, Notary Public My commission expires: October 12, 2001 COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. April 15, 1999 Then personally appeared the above-named, William T. Sullivan, Chief Executive Officer, and acknowledged the foregoing instrument to be the free act and deed of Sight Resource Corporation, before me, /s/ Brian T. Garrity --------------------------------------- Brian T. Garrity, Notary Public My commission expires: October 12, 2001 6 SCHEDULE A TO A TRADEMARK SECURITY AGREEMENT BETWEEN SIGHT RESOURCE CORPORATION (Borrower) AND FLEET NATIONAL BANK (Bank) DATED: April 15, 1999 REGISTERED TRADEMARKS (USA) --------------------------- Trademark Registration No. Issue Date - --------- ---------------- ---------- REGISTRATION PENDING FOR TRADEMARKS (USA) ----------------------------------------- Trademark Serial No. Filing Date - --------- ---------- ----------- 7 EX-99.8 10 NEWS RELEASE EXHIBIT 99.8 NEWS RELEASE April 23, 1999 SIGHT RESOURCE ACQUIRES KENT OPTICAL, CHAIN WITH 28 LOCATIONS IN MICHIGAN With fourth Mid-West acquisition, Company now operates 130 retail eye care centers (Holliston, Massachusetts) - Sight Resource Corporation (NASDAQ: VISN), a leading provider of primary eye care services and managed vision care programs, today announced that it has acquired Kent Optical Company, Inc., a privately- held primary eye care chain with operations in central and southwest Michigan. Terms of the acquisition were not disclosed. The Company's seventh acquisition, Kent Optical is the second completed by Sight Resource in 1999 and its fourth acquisition in the Mid-West. Sight Resource now operates 130 retail eye care centers with annualized revenues of approximately $70 million, placing it among the top fifteen chains in the United States in sales and number of locations. Founded in 1965, Kent Optical's headquarters are located in Muskegon, Michigan. With 28 retail eye care centers generating approximately $10 million in annualized revenues, Kent Optical is a prominent name in a region that includes locations in Battle Creek, Grand Rapids, Kalamazoo and Muskegon. In addition to its traditional retail optical business, the company operates a successful safety eyewear business that has been well received by large manufacturers in the region. Kent's President, Tim Westra, and Vice President and Director of Optometry, Dr. John C. Cress, will remain with Sight Resource in senior management roles. William T. Sullivan, President and Chief Executive Officer of Sight Resource Corporation, stated, "Kent Optical is yet another profitable addition to our growing company. We believe that we can grow Kent's market share and expand its presence outside its current region. I am very pleased that Tim Westra and Dr. John Cress have agreed to stay on and work with us to accomplish these objectives. Tim and John have built an excellent business and collectively we plan to utilize our resources to grow our business." Sight Resource provides a complete range of primary eye care products and services through its primary eye care centers, managed care programs, laser vision correction centers and integrated networks of opticians, optometrists and ophthalmologists. The Company's wholly-owned subsidiaries include Cambridge Eye Doctors in Massachusetts and New Hampshire, E.B. Brown Opticians in Ohio and Pennsylvania, Eyeglass Emporium in Indiana, Shawnee Optical in Ohio and Pennsylvania, Vision Plaza in Louisiana and Mississippi, Vision World in Rhode Island, and now Kent Optical in Michigan. CONTACT: Nils Bonde-Henriksen, Manager of Corporate Communications, 508-429- 6916, ext. 111 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements contained in this news release which are not historical fact are forward-looking statements based upon management's current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and additional factors affecting the Company's business are described in the Company's Form 10-K for the fiscal year ended December 1998 filed with the Securities and Exchange Commission. EX-99.9 11 NEWS RELEASE EXHIBIT 99.9 NEWS RELEASE April 23, 1999 SIGHT RESOURCE OBTAINS NEW $20 MILLION CREDIT FACILITY FROM FLEET NATIONAL BANK (Holliston, Massachusetts) - Sight Resource Corporation (NASDAQ: VISN), a leading provider of primary eye care services and managed vision care programs, today announced that it has obtained a new $20 million credit facility from Fleet National Bank, Boston, Massachusetts. The credit facility will be used to finance future acquisitions, refinance existing debt, provide working capital and for other general corporate purposes. The $20 million credit facility includes a $3 million revolving line of credit, a term loan of $7 million and an acquisition line of credit of $10 million. In conjunction with obtaining the new credit facility from Fleet National Bank, the Company intends to take a first quarter, non-recurring non-cash charge of approximately $323,000 for unamortized deferred financing costs associated with the Company's prior credit facility. William T. Sullivan, President and Chief Executive Officer of Sight Resource Corporation, stated, "We are very pleased that Fleet National Bank has demonstrated its support for our business strategy. Our new management team has worked diligently to improve existing performance, demonstrate the merits of our acquisition strategy and earn the confidence of our new partners at Fleet. We believe that this credit facility will play an important role in allowing us to continue to implement our acquisition strategy and meet our growth plans for 1999." Sight Resource provides a complete range of primary eye care products and services through its primary eye care centers, managed care programs, laser vision correction centers and integrated networks of opticians, optometrists and ophthalmologists. The Company's wholly-owned subsidiaries include Cambridge Eye Doctors in Massachusetts and New Hampshire, E.B. Brown Opticians in Ohio and Pennsylvania, Eyeglass Emporium in Indiana, Shawnee Optical in Ohio and Pennsylvania, Vision Plaza in Louisiana and Mississippi, and Vision World in Rhode Island. CONTACT: Nils Bonde-Henriksen, Manager of Corporate Communications, 508-429- 6916, ext. 111 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements contained in this news release which are not historical fact are forward-looking statements based upon management's current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and additional factors affecting the Company's business are described in the Company's Form 10-K for the fiscal year ended December 1998 filed with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----